UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 ¨
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¨ 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 (S) 240.14a-11(c) or (S) 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)
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x | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6 (i) (4) and 0-11. |
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Notes:
Reg. (S) 240.14a-101
SEC 1913 (399)
WHIRLPOOL CORPORATION
Administrative Center
2000 North M-63
Benton Harbor, Michigan 49022-2692
To Our Stockholders:
It is my pleasure to invite you to attend the 2010 Whirlpool Corporation annual meeting of stockholders to be held on Tuesday, April 20, 2010 at 8:00 a.m., Chicago time, at 120 East Delaware Place, 8th Floor, Chicago, Illinois.
The formal notice of the meeting follows on the next page. At the meeting, stockholders will vote on the election of five directors and two management proposals, and will transact any other business that may properly come before the meeting. In addition, we will discuss Whirlpools 2009 performance and the outlook for this year, and answer your questions.
A financial supplement containing important financial information about Whirlpool is contained in Part II of this booklet. We have also included with this booklet an annual report that includes summary financial and other important information.
We are pleased to once again furnish proxy materials to our stockholders on the Internet. We believe this approach provides our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our annual meeting.
Your vote is important. We urge you to please vote your shares now 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 following the procedures described in Part I of this booklet.
Your vote is important and much appreciated!
JEFF M. FETTIG Chairman of the Board and Chief Executive Officer |
March 1, 2010 |
NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS |
The 2010 annual meeting of stockholders of WHIRLPOOL CORPORATION will be held at 120 East Delaware Place, 8th Floor, Chicago, Illinois on Tuesday, April 20, 2010, at 8:00 a.m., Chicago time, for the following purposes:
1. | to elect five persons to Whirlpools Board of Directors; |
2. | to ratify the appointment of Ernst & Young LLP as Whirlpools independent registered public accounting firm for 2010; |
3. | to approve the 2010 Omnibus Stock and Incentive Plan; and |
4. | to transact such other business as may properly come before the meeting. |
A list of stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose relevant to the meeting during ordinary business hours for at least ten days prior to April 20, 2010 at Whirlpools Administrative Center, 2000 North M-63, Benton Harbor, Michigan 49022-2692.
By Order of the Board of Directors
DANIEL F. HOPP Senior Vice President, Corporate Affairs, General Counsel and Corporate Secretary |
March 1, 2010 |
TABLE OF CONTENTS |
Page | ||
Part I Proxy Statement |
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1 | ||
1 | ||
Stockholder Proposals and Director Nominations for 2011 Meeting |
5 | |
5 | ||
11 | ||
20 | ||
25 | ||
26 | ||
27 | ||
28 | ||
45 | ||
46 | ||
46 | ||
48 | ||
51 | ||
54 | ||
54 | ||
57 | ||
59 | ||
65 | ||
Human Resources Committee Interlocks and Insider Participation |
66 | |
67 | ||
Matters Relating to Independent Registered Public Accounting Firm |
68 | |
69 | ||
70 | ||
71 | ||
Annex A Whirlpool Corporation 2010 Omnibus Stock and Incentive Plan |
A-1 |
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Part II Financial Supplement |
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F-1 | ||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
F-2 | |
F-22 | ||
F-23 | ||
F-24 | ||
F-25 | ||
F-26 | ||
F-60 | ||
Report by Management on the Consolidated Financial Statements |
F-61 | |
Managements Report on Internal Control Over Financial Reporting |
F-62 | |
F-63 | ||
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting |
F-64 | |
F-65 |
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PROXY STATEMENT
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on April 20, 2010:
This Proxy Statement and the Accompanying Annual Report are Available at:
www.whirlpoolcorp.com/annualreportandproxy
Among other things, this proxy statement contains information regarding: the date, time and location of the meeting, the matters being submitted to the stockholders and how to vote in person. To obtain directions to attend the annual meeting and vote in person, please contact Investor Relations at (269) 923-2641 or via e-mail at investor_relations@whirlpool.com.
INFORMATION ABOUT WHIRLPOOL CORPORATION |
Whirlpool Corporation is the worlds leading manufacturer and marketer of major home appliances. We manufacture in 12 countries and market products in nearly every country around the world under brand names such as Whirlpool, Maytag, KitchenAid, Jenn-Air, Roper, Estate, Admiral, Amana, Bauknecht, Ignis, Brastemp, Consul, and Acros. We have approximately 67,000 employees worldwide. Our headquarters are located in Benton Harbor, Michigan, and our address is 2000 North M-63, Benton Harbor, Michigan 49022-2692. Our telephone number is (269) 923-5000.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING |
Our 2010 annual meeting of stockholders will be held on Tuesday, April 20, 2010, at 8:00 a.m., Chicago time, at 120 East Delaware Place, 8th Floor, Chicago, Illinois. All stockholders as of the record date, or their duly appointed proxies, may attend the meeting. If you attend, please note that you may be asked to present valid picture identification. Please also note that if you hold your shares in street name (that is, through a broker or other nominee), you will need to bring a copy of your voting instruction card or brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting. Cameras, recording devices, cell phones, and other electronic devices will not be permitted at the meeting other than those operated by Whirlpool or its designees.
Information about this proxy statement
Why you received this proxy statement. You have received these proxy materials because our Board is soliciting your proxy to vote your shares at the annual meeting. This proxy statement includes information we are required to provide to you under the rules of the Securities and Exchange Commission and which is designed to assist you in voting your shares. On or about March 10, 2010, we intend to mail to our stockholders of record as of the close of business on February 22, 2010, a notice containing instructions on how to access this proxy statement and our annual report online. If you own our common stock in more than one account, such as individually and also jointly with your spouse, you may receive more than one notice or set of these proxy materials. To serve you more efficiently and reduce costs, we
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encourage you to have all your accounts registered in the same name and address by contacting our transfer agent, Computershare Trust Company, N.A., Shareholder Services, at P.O. Box 43069, Providence, Rhode Island 02940-3069; phone number: 877-453-1504; TDD/TTY for hearing impaired: 800-952-9245.
Notice of Electronic Availability of Proxy Statement and Annual Report. As permitted by Securities and Exchange Commission rules, we are making this proxy statement and our annual report available to our stockholders electronically via the Internet. On or about March 10, 2010, we intend to mail to our stockholders a notice containing instructions on how to access this proxy statement and our annual report and vote online. If you receive a notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The notice also instructs you on how you may submit your proxy over the Internet. If you receive a notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the notice.
Householding. The Securities and Exchange Commissions rules permit us to deliver a single notice or set of annual meeting materials to one address shared by two or more of our stockholders. This delivery method is referred to as householding and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one notice or set of annual meeting materials to multiple stockholders who share an address, unless we received contrary instructions from the impacted stockholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the notice or annual meeting materials, as requested, to any stockholders at the shared address to which a single copy of those documents was delivered. If you prefer to receive separate copies of the notice or annual meeting materials, contact Broadridge Financial Solutions, Inc. at 800-542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you are currently a stockholder sharing an address with another stockholder and wish to receive only one copy of future notices or annual meeting materials for your household, please contact Broadridge at the above phone number or address.
Who can vote
The record date for determining stockholders entitled to vote at the annual meeting is February 22, 2010. Each of the approximately 74,929,500 shares of Whirlpool common stock issued and outstanding on that date is entitled to one vote at the annual meeting.
Information about voting and revocation of proxies
A notice containing instructions on how to access this proxy statement electronically, cannot be used to vote your shares. The notice does, however, provide instructions on how to vote by Internet, or by requesting and returning a paper proxy card or voting instruction card.
If your shares are held in your name, you have the right to vote in person at the meeting. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you
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are also invited to attend the meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a legal proxy from your broker or nominee that holds your shares, giving you the right to vote the shares at the meeting.
Whether you hold shares directly as a stockholder of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker or nominee. In most cases, you will be able to do this by using the Internet, by telephone, or by mail if you received a printed set of the proxy materials.
By Internet - If you have Internet access, you may submit your proxy by following the instructions provided in the notice of electronic availability, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card.
By Telephone - If you have Internet access, you may obtain instructions on voting by telephone by following the Internet access instructions provided in the notice of electronic availability. If you received printed proxy materials, your proxy card or voting instruction card will provide instructions on voting by telephone.
By Mail - If you received printed proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your broker, nominee or trustee, and mailing it in the enclosed envelope.
If you do not specify how you want to vote your shares on your proxy card or voting instruction card, or by voting over the Internet or telephone, we will vote them FOR the nominees named for director and FOR each of the two management proposals.
If you are a stockholder of record, you may revoke your proxy at any time before it is exercised in any of three ways: (1) by submitting written notice of revocation to Whirlpools Corporate Secretary, Daniel F. Hopp; (2) by submitting another proxy via the Internet, by telephone, or by mail that is later dated and, if by mail, that is properly signed; or (3) by voting in person at the meeting. If your shares are held in street name, you must contact your broker or nominee to revoke your proxy.
If you participate in the Whirlpool 401(k) Retirement Plan and hold shares of Whirlpool stock in your plan account as of the record date, you will receive a request for voting instructions from the plan trustee (Vanguard) with respect to your plan shares. If you hold Whirlpool shares outside of the plan, you will vote those shares separately. You are entitled to direct Vanguard how to vote your plan shares. If you do not provide voting instructions to Vanguard by 11:59 p.m. Eastern time on April 15, 2010, the Whirlpool shares in your plan account will be voted by Vanguard in the same proportion as the shares held by Vanguard for which voting instructions have been received from other participants in the Plan. You may revoke your previously provided voting instructions by filing with Vanguard either a
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written notice of revocation or a properly executed proxy bearing a later date prior to the deadline for voting plan shares.
Confidentiality of votes
Whirlpools Board has adopted a policy requiring all stockholder votes to be kept confidential from management except when disclosure is required by law and in other limited circumstances.
Quorum
Stockholders representing at least 50% of the common stock issued and outstanding as of the record date 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 or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or nominee does not have discretionary voting power and has not received instructions from the beneficial owner.
Required vote
Item 1 (Election of Directors). For more information on director elections, see Board of Directors and Corporate Governance Majority Voting for Directors; Director Resignation Policy later in this proxy statement. For the election of directors (provided the number of nominees does not exceed the number of directors to be elected), each director must receive the majority of the votes cast with respect to that director (number of shares voted for a director must exceed the number of votes cast against that director).
Item 2 (Ratification of Ernst & Young LLP) and Item 3 (2010 Omnibus Stock and Incentive Plan). The affirmative vote of a majority of the outstanding common stock present in person or represented by proxy at the annual meeting and entitled to vote is required to approve the ratification of Ernst & Young (Item 2), the 2010 Omnibus Stock and Incentive Plan (Item 3), and any other matter that may properly come before the meeting.
Abstentions and Broker non-votes
Abstentions will have no effect on the election of directors (Item 1). Abstentions will be treated as being present and entitled to vote on the other Items presented at the annual meeting and, therefore, will have the effect of votes against such proposals. If you do not provide your broker or other nominee with instructions on how to vote your street name shares, your broker or nominee will not be permitted to vote them on non-routine matters (a broker non-vote) such as Items 1 and 3. Shares subject to a broker non-vote will not be considered entitled to vote with respect to Items 1 and 3, and will not affect the outcome on those Items. Please note that this year the rules regarding how brokers may vote your shares have changed. Brokers may no longer vote your shares on the election of directors in the absence of your specific instructions as to how to vote. We encourage you to provide instructions to your broker regarding the voting of your shares.
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Other business
If any nominee named herein for election as a director is not available to serve, the accompanying proxy will be voted in favor of the remainder of those nominated and 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 covered in this proxy statement. 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.
Solicitation costs
Whirlpool will pay the expenses of the solicitation of proxies. We expect to pay fees of approximately $12,500 plus certain expenses for assistance by Georgeson Inc. in the solicitation of proxies. Proxies may be solicited by directors, officers, and Whirlpool employees and by Georgeson Inc. personally and by mail, telegraph, telephone, or other electronic means.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2011 MEETING |
Our annual meeting of stockholders is generally held the third Tuesday in April. Any stockholder proposal that you intend to have us include in our proxy statement for the annual meeting of stockholders in 2011 must be received by us by November 10, 2010, and must otherwise comply with the Securities and Exchange Commissions rules in order to be eligible for inclusion in the proxy statement and proxy form relating to this meeting. Other proposals or a nomination for director to be submitted from the floor of the annual meeting of stockholders in 2011 must be received by the Corporate Secretary of Whirlpool personally or by registered or certified mail by January 19, 2011 and satisfy the procedures set forth in Whirlpools By-laws.
ITEM 1 DIRECTORS AND NOMINEES FOR ELECTION AS DIRECTORS |
As the worlds leading manufacturer and marketer of major home appliances with revenues of $17 billion and global operations, we believe our Board should be composed of individuals with sophistication and experience in many substantive areas that impact our business. We believe experience, qualifications, or skills in the following areas are most important: international operations; marketing/branded consumer products; manufacturing; sales and distribution; legal/regulatory and government affairs; accounting, finance, and capital structure; strategic planning and leadership of complex organizations; human resources and development practices; design, innovation, and engineering; and board practices of other major corporations. These areas are in addition to the personal qualifications described in the section entitled Director Nominations to be Considered by the Board later in this proxy statement. We believe that all our current Board members possess the professional and personal qualifications necessary for board service, and have highlighted particularly
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noteworthy attributes for each Board member in the individual biographies below. In addition, length of service on our Board has provided several directors with significant exposure to both our business and the industry in which we compete.
We currently have 12 directors on the Board. The directors are currently divided into three classes, with each class serving for a three-year period. Beginning with the 2010 annual meeting, directors who are elected will serve until our next annual meeting of stockholders and will need to stand for reelection annually. The Board recommends a vote FOR the election of each of the directors nominated below.
Nominees for a term to expire in 2011 | ||
MICHAEL F. JOHNSTON, 62, has served as a director since 2003. Mr. Johnston retired from Visteon Corporation, an automotive components supplier, in 2008. At Visteon, he served as Chairman of the Board, Chief Executive Officer, President, and Chief Operating Officer at various times since 2000. In May 2009, Visteon filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. Before joining Visteon, Mr. Johnston held various positions in the automotive and building services industry. Mr. Johnston is also a director of Flowserve Corporation (since 1997). As a result of these and other professional experiences, Mr. Johnston possesses particular knowledge and experience in manufacturing and design, innovation, and engineering that strengthen the Boards collective qualifications, skills, and experience. | ||
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WILLIAM T. KERR, 68, has served as a director since 2006 after serving eight years on the board of Maytag Corporation. Mr. Kerr has been President and Chief Executive Officer of Arbitron, Inc., a media and marketing services company, since January 2010 and a director of Arbitron since May 2007. From January 1998 to January 2010, Mr. Kerr was Chairman of the Board of Directors of Meredith Corporation, a diversified media company, and since 1991 held various other positions at Meredith, including Chief Executive Officer, President, and Chief Operating Officer, and was a director of Meredith from 1994 to February 2010. Mr. Kerr is also a director of Interpublic Group of Companies, Inc. (since 2006), and previously served as a director of The Principal Financial Group (2001 to 2010), and Storage Technology Corporation (1998 to 2005). As a result of these and other professional experiences, Mr. Kerr possesses particular knowledge and experience in marketing/branded consumer products and board practices of other major corporations that strengthen the Boards collective qualifications, skills, and experience. | ||
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WILLIAM D. PEREZ, 62, has served as a director since 2009. Mr. Perez has been a Senior Advisor to Greenhill & Co., Inc., a global investment banking firm, since January 2010. Prior to joining Greenhill & Co., Inc., Mr. Perez was President and Chief Executive Officer of the WM. Wrigley Jr. Company from 2006 to 2008, and President, Chief Executive Officer, and a member of the Board of Nike, Inc. from 2004 to 2006, after spending 34 years at S.C. Johnson at various positions, including Chief Executive Officer and President. Mr. Perez is also a director of Johnson & Johnson (since 2007) and Campbell Soup Company (since 2009) and previously served as a director of Kellogg Company (2000 to 2006). As a result of these and other professional experiences, Mr. Perez possesses particular knowledge and experience in sales and distribution and strategic planning and leadership of complex organizations that strengthen the Boards collective qualifications, skills, and experience. Whirlpools Corporate Governance and Nominating Committee and Board were introduced to Mr. Perez in 2009 through a third party search firm. | ||
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JANICE D. STONEY, 69, has served as a director since 1987 (except for part of 1994 during a bid for political office). Ms. Stoney retired from U S WEST Communications Group, Inc., a telephone communications company, in 1993. At U S West, she served as Executive Vice President and prior to that President, Communications Consumer Division. Ms. Stoney is also a director of The Williams Companies, Inc. (since 1999) and previously served as a director of Bridges Investment Fund (1999 to 2006). As a result of these and other professional experiences, Ms. Stoney possesses particular knowledge and experience in human resources and development practices and legal/regulatory and government affairs that strengthen the Boards collective qualifications, skills, and experience. | ||
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MICHAEL D. WHITE, 58, has served as a director since 2004. Mr. White has been President and Chief Executive Officer of The DIRECTV Group, Inc., a leading provider of digital television entertainment services, since January 2010, and a director since November 2009. From February 2003 until December 2009, Mr. White was Chief Executive Officer of PepsiCo International and Vice Chairman, PepsiCo, Inc. after holding positions of increasing importance with PepsiCo since 1990. As a result of these and other professional experiences, Mr. White possesses particular knowledge and experience in marketing/branded consumer products and accounting, finance, and capital structure that strengthen the Boards collective qualifications, skills, and experience. | ||
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Directors whose terms expire in 2011
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HERMAN CAIN, 64, has served as a director since 1992 (except from December 2003 to April 2005 during a bid for political office). Mr. Cain has been Chief Executive Officer and President of THE New Voice, Inc., a business and leadership consulting company, since 2004. Before founding THE New Voice, Inc., Mr. Cain held various positions in the banking and food services industries. He is also a director of AGCO Corporation (since 2004) and previously served as a director of Aquila, Inc. (1992 to 2008) and The Readers Digest Association, Inc. (2001 to 2007). As a result of these and other professional experiences, Mr. Cain possesses particular knowledge and experience in human resources and development practices and legal/regulatory and government affairs that strengthen the Boards collective qualifications, skills, and experience. | ||
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JEFF M. FETTIG, 53, has served as a director since 1999. Mr. Fettig has been Chairman of the Board and Chief Executive Officer of Whirlpool since 2004 after holding other positions of increasing responsibility since 1981. Mr. Fettig is also a director of The Dow Chemical Company (since 2003). As a result of these and other professional experiences, Mr. Fettig possesses particular knowledge and experience in marketing/branded consumer products and sales and distribution that strengthen the Boards collective qualifications, skills, and experience. | ||
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MILES L. MARSH, 62, has served as a director since 1990. Mr. Marsh retired from Fort James Corporation, a manufacturer and marketer of consumer paper products, in 2000. At Fort James Corporation, he served as Chairman of the Board, Chief Executive Officer, and President at various times beginning in 1995. Before joining Fort James Corporation, Mr. Marsh held various positions in the food products industry. He previously served as a director of GATX Corporation (1995 to 2006) and Morgan Stanley (1996 to 2005). As a result of these and other professional experiences, Mr. Marsh possesses particular knowledge and experience in international operations and accounting, finance, and capital structure that strengthen the Boards collective qualifications, skills, and experience. | ||
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PAUL G. STERN, 71, has served as a director since 1990. Dr. Stern has been a Partner of the private investment companies Thayer Capital Partners, L.L.P. and Arlington Capital Partners, L.L.P. since 1995 and 1999, respectively, and Chairman of Claris Capital Partners, a private investment banking firm, since 2004. Dr. Stern is also a director of The Dow Chemical Company (since 1992) and previously served as a director of ManTech International Corporation (2004 to 2007). As a result of these and other professional experiences, Dr. Stern possesses particular knowledge and experience in international operations and design, innovation, and engineering that strengthen the Boards collective qualifications, skills, and experience. | ||
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Directors whose terms expire in 2012 | ||
GARY T. DICAMILLO, 59, has served as a director since 1997. Mr. DiCamillo has been a Partner at Eaglepoint Advisors, LLC, a turnaround, restructuring, and crisis management firm, since January 2010. Prior to joining Eaglepoint Advisors, LLC, Mr. DiCamillo was President and Chief Executive Officer of RADIA International, a professional and commercial staffing company, from 2005 until August 2009. Prior to holding that position, Mr. DiCamillo was President and Chief Executive Officer of TAC Worldwide Companies, a technical and professional staffing company, from 2002 to 2005. From 1995 to 2002, Mr. DiCamillo served as Chairman and Chief Executive Officer of Polaroid Corporation, which filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in October 2001 and emerged from Chapter 11 protection in June 2002. Mr. DiCamillo is director of 3Com Corporation (since 2000) and The Sheridan Group, Inc. (since 1989). As a result of these and other professional experiences, Mr. DiCamillo possesses particular knowledge and experience in marketing/branded consumer products and strategic planning and leadership of complex organizations that strengthen the Boards collective qualifications, skills, and experience. | ||
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KATHLEEN J. HEMPEL, 59, has served as a director since 1994. Ms. Hempel retired from Fort Howard Corporation, a manufacturer of paper and paper products, in 1997. At Fort Howard Corporation, she served as Vice Chairman and Chief Financial Officer, among other positions, beginning in 1973. Ms. Hempel is also a director of Oshkosh Corporation (since 1997) and previously served as a director of Actuant Corporation (2000 to 2008). As a result of these and other professional experiences, Ms. Hempel possesses particular knowledge and experience in accounting, finance, and capital structure and board practices of other major corporations that strengthen the Boards collective qualifications, skills, and experience. | ||
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MICHAEL A. TODMAN, 52, has served as a director since 2006. Mr. Todman has been President, Whirlpool International since January 2010 after holding other positions of increasing responsibility since 1993. Mr. Todman is also a director of Newell Rubbermaid Inc. (since 2007). As a result of these and other professional experiences, Mr. Todman possesses particular knowledge and experience in international operations and sales and distribution that strengthen the Boards collective qualifications, skills, and experience. | ||
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE |
During 2009, our Board met ten times and had four committees. The committees consisted of an Audit Committee, a Human Resources Committee, a Corporate Governance and Nominating Committee, and a Finance Committee. Each director attended at least 75% of the total number of meetings of the Board and the Board committees on which he or she served, except for Mr. Cain who attended 74% of his meetings.
All directors properly nominated for election are expected to attend the annual meeting of stockholders. In 2009, all of our directors attended the annual meeting of stockholders.
The table below breaks down 2009 committee membership for each committee and each director.
Name | Audit | Human Resources |
Corporate Governance & |
Finance | ||||
Mr. Cain |
X | X | ||||||
Mr. DiCamillo |
X | Chair | ||||||
Mr. Fettig |
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Ms. Hempel |
X | X | ||||||
Mr. Johnston |
X | Chair | ||||||
Mr. Kerr |
X | X | ||||||
Mr. Marsh |
X | X | ||||||
Mr. Perez |
X | X | ||||||
Dr. Stern |
Chair | X | ||||||
Ms. Stoney |
X | X | ||||||
Mr. Todman |
||||||||
Mr. White |
Chair | X | ||||||
2009 Meetings |
11 | 4 | 3 | 5 |
Audit Committee
The members of the Audit Committee are Mr. White (Chair), Mr. DiCamillo, Mr. Kerr, and Mr. Marsh. Pursuant to a written charter, the Committee provides independent and objective oversight of our accounting functions and internal controls and monitors the objectivity of our financial statements. The Committee assists Board oversight of:
1. | the integrity of our financial statements; |
2. | our compliance with legal and regulatory requirements; |
3. | the independent registered public accounting firms qualifications and independence; and |
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4. | the performance of our internal audit function and independent registered public accounting firm. |
In performing these functions, the Committee is responsible for the review and discussion of the annual audited financial statements, quarterly financial statements and related reports with management, and the independent registered public accounting firm. These related reports include our disclosures under Managements Discussion and Analysis of Financial Condition and Results of Operations. The Committee also monitors policies and guidelines with respect to risk assessment and risk management, the adequacy of financial disclosure, retains and/or terminates our independent registered public accounting firm and exercises sole authority to review and approve all audit engagement fees and terms. The Committee approves in advance the nature, extent, and cost of all internal control-related and permissible non-audit services provided by the independent registered public accounting firm; and reviews annual reports from the independent registered public accounting firm regarding its internal quality control procedures.
Under its charter, the Committee is comprised solely of three or more independent directors who meet the enhanced independence standards for audit committee members set forth in the New York Stock Exchange (NYSE) listing standards (which incorporates the standards set forth in the rules of the Securities and Exchange Commission). The Board has determined that each member of this Committee satisfies the financial literacy qualifications of the NYSE listing standards and that Mr. White satisfies the audit committee financial expert criteria established by the Securities and Exchange Commission and has accounting and financial management expertise as required under the NYSE listing rules.
Human Resources Committee
The members of the Human Resources Committee are Dr. Stern (Chair), Mr. Cain, Mr. Johnston, Mr. Kerr, Mr. Marsh, Mr. Perez, and Mr. White. Pursuant to a written charter, the Committee assures the adequacy of the compensation and benefits of Whirlpools officers and top management and compliance with any executive compensation disclosure requirements. In performing these functions, the Committee has sole authority and responsibility to retain and terminate any consulting firm assisting in the evaluation of CEO or senior executive compensation. The Committee has the following duties and responsibilities, among others:
1. | reviews and approves corporate goals and objectives relevant to CEO compensation, evaluates the CEOs performance in light of these goals and objectives, and sets the CEOs compensation level based on this evaluation and other relevant business information; |
2. | determines and approves the compensation and other employment arrangements for Whirlpools elected officers; |
3. | makes recommendations to the Board with respect to incentive-compensation and equity-based plans; and |
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4. | determines and approves grants for each individual participant under the stock option plans and administers the stock option plans. |
The Committee has the authority to form subcommittees and delegate to those subcommittees certain actions. Under its charter, the Committee is comprised solely of three or more independent directors who meet the independence standards under the NYSE listing standards. For information about the Committees processes for establishing and overseeing executive compensation, refer to Compensation Discussion and Analysis Role of the Human Resources Committee.
Corporate Governance and Nominating Committee
The members of the Corporate Governance and Nominating Committee are Mr. Johnston (Chair), Ms. Hempel, Mr. Perez, Dr. Stern, and Ms. Stoney. Pursuant to a written charter, the Committee provides oversight on the broad range of issues surrounding the composition and operation of the Board, including:
1. | identifying individuals qualified to become Board members; |
2. | recommending to the Board director nominees for the next annual meeting of stockholders; |
3. | recommending to the Board a set of corporate governance principles applicable to Whirlpool; and |
4. | recommending to the Board changes relating to director compensation. |
The Committee also provides recommendations to the Board in the areas of committee selection and rotation practices, evaluation of the overall effectiveness of the Board and management, and review and consideration of developments in corporate governance practices. The Committee retains the sole authority to retain and terminate any search firm to be used to identify director candidates, including sole authority to approve the search firms fees and other retention terms. To assist the Committee in identifying potential director nominees who meet the criteria and priorities established from time to time and facilitate the screening and nomination process for such nominees, the Committee has retained a third party search firm. During 2009, we engaged Heidrick & Struggles, and subsequently RSR Partners, to assist the Committee in identifying and soliciting potential candidates to join our Board. On an annual basis, the Committee solicits input from the full Board and conducts a review of the effectiveness of the operation of the Board and Board Committees, including reviewing governance and operating practices and the Corporate Governance Guidelines for Operation of the Board of Directors. Under its charter, the Committee is comprised solely of three or more independent directors who meet the independence standards under the NYSE listing standards.
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Finance Committee
The members of the Finance Committee are Mr. DiCamillo (Chair), Mr. Cain, Ms. Hempel, and Ms. Stoney. Pursuant to a written charter, the Committee considers issues impacting our financial structure and makes recommendations to the Board. The Committee develops capital policies and strategies to set an acceptable capital structure, regularly reviews dividend action, liquidity management, adequacy of insurance coverage, the annual business plan as it relates to funds flow, capital expenditure and financing requirements, capital investment projects, major financial transactions, and tax and planning strategy and initiatives. The Committee also provides oversight of the Pension Fund Committee with respect to pension plan investment policies and plan funding requirements.
Director Independence
The Corporate Governance and Nominating Committee conducts an annual review of the independence of the members of the Board and its committees and reports its findings to the full Board. Ten of our 12 directors are nonemployee directors (all except Messrs. Fettig and Todman). Although the Board has not adopted categorical standards of materiality for independence purposes (other than those set forth in the NYSE listing standards), information provided by the directors and Whirlpool did not indicate any relationships (e.g., commercial, industrial, banking, consulting, legal, accounting, charitable, or familial), which would impair the independence of any of the nonemployee directors. Based on the report and recommendation of the Corporate Governance and Nominating Committee, the Board has determined that each of its nonemployee directors satisfies the independence standards set forth in the listing standards of the NYSE. Other than the transactions, relationships, and arrangements described in the section entitled Related Person Transactions, there was one other matter considered by the Board in determining that Whirlpools nonemployee directors are independent.
The Committees independence determinations included the review of transactions which commenced in 2004 between Whirlpool and a temporary staffing agency. The agency was selected as a supplier to Whirlpool through a competitive bid process. In 2007, the agency was acquired by a corporation which employed Mr. DiCamillo. In 2008, the contract was assumed by affiliates of the temporary staffing agency. In 2009, the total amount involved in transactions between Whirlpool and the agencies was again below the objective test of independence established under NYSE standards. In addition, Mr. DiCamillo confirmed that he did not participate in transactions between Whirlpool and the agencies or receive compensation based on those transactions. Mr. DiCamillo retired from the corporation that owns the agencies in August 2009.
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Board Leadership Structure, Risk Oversight, Executive Sessions of
Nonemployee Directors, and Communications Between Stockholders and the Board
Board Leadership Structure
As noted above, our Board is currently comprised of ten independent and two employee directors. Mr. Fettig has served as Chairman of the Board and Chief Executive Officer since July 2004, and has been a member of our Board since June 1999. Since 2003 the Board has designated one of the independent directors as Presiding Director. We believe that the number of independent, experienced directors that make up our Board, along with the independent oversight of our Presiding Director, benefits Whirlpool and its stockholders.
We recognize that different board leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for us because it demonstrates to our employees, suppliers, customers, and other stakeholders that Whirlpool is under strong leadership, with a single person setting the tone and having primary responsibility for managing our operations. Having a single leader for both the company and the Board eliminates the potential for confusion or duplication of efforts, and provides clear leadership for Whirlpool. We believe Whirlpool, like many U.S. companies, has been well-served by this leadership structure.
Because the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate for the independent Directors to elect one independent Director to serve as a Presiding Director. In addition to presiding at executive sessions of nonemployee directors, the Presiding Director has the responsibility to: (1) coordinate with the Chairman of the Board and Chief Executive Officer in establishing the annual agenda and topic items for Board meetings; (2) retain independent advisors on behalf of the Board as the Board may determine is necessary or appropriate; (3) assist the Human Resources Committee with the annual evaluation of the performance of the Chairman of the Board and Chief Executive Officer, and in conjunction with the Chair of the Human Resources Committee, meet with the Chairman of the Board and Chief Executive Officer to discuss the results of such evaluation; and (4) perform such other functions as the independent directors may designate from time to time. Mr. Marsh is currently serving as the Presiding Director.
Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for Whirlpool and its stockholders. Our Corporate Governance Guidelines provide the flexibility for our Board to modify or continue our leadership structure in the future, as it deems appropriate.
Risk Oversight
Our Board is responsible for overseeing Whirlpools risk management process. The Board focuses on Whirlpools general risk management strategy, the most significant risks
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facing Whirlpool, and ensures that appropriate risk mitigation strategies are implemented by management. The Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters.
The Board has delegated to the Audit Committee oversight of Whirlpools risk management process. Among its duties, the Audit Committee reviews with management (a) Whirlpool policies with respect to risk assessment and management of risks that may be material to Whirlpool, (b) Whirlpools system of disclosure controls and system of internal controls over financial reporting, and (c) Whirlpools compliance with legal and regulatory requirements. The Audit Committee is also responsible for reviewing major legislative and regulatory developments that could materially impact Whirlpools contingent liabilities and risks. Our other Board committees also consider and address risk as they perform their respective committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk.
Whirlpools management is responsible for day-to-day risk management. Our Treasury, Risk Management, and Internal Audit areas serve as the primary monitoring and testing function for company-wide policies and procedures, and manage the day-to-day oversight of the risk management strategy for the ongoing business of Whirlpool. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels.
We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing Whirlpool and that our Board leadership structure supports this approach.
Executive Sessions of Nonemployee Directors
The Board holds executive sessions of its nonemployee directors generally at each regularly scheduled meeting. The Presiding Director serves as the chairperson for these executive sessions.
Communications between Stockholders and the Board
Interested parties, including stockholders, may communicate directly with the Chairman of the Audit Committee or the nonemployee directors as a group by writing to those individuals or the group at the following address: Whirlpool Corporation, 27 North Wacker Drive, Suite 615, Chicago, Illinois 60606-2800. This address is administered by an independent maildrop business. If correspondence is received by the Corporate Secretary, it will be forwarded to the appropriate person or persons in accordance with the procedures adopted by a majority of the independent directors of the Board with a copy to the Presiding Director. When reporting a concern, please supply sufficient information so that the matter may be addressed properly. Although you are encouraged to identify yourself to assist Whirlpool in effectively addressing your concern, you may choose to remain anonymous, and Whirlpool will use its reasonable efforts to protect your identity to the extent appropriate or permitted by law.
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Corporate Governance Guidelines for Operation of the Board of Directors
Whirlpool is committed to the highest standards of corporate governance. On the recommendation of the Corporate Governance and Nominating Committee, the Board adopted a set of Corporate Governance Guidelines for Operation of the Board of Directors, which, among other things, sets forth the qualifications and other criteria for director nominees. The desired personal and experience qualifications for director nominees are described in more detail below under the caption Director Nominations to be Considered by the Board.
Majority Voting for Directors; Director Resignation Policy
Whirlpools By-laws require directors to be elected by the majority of the votes cast with respect to such director in uncontested elections (number of shares voted for a director must exceed the number of votes cast against that director). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), directors will be elected by a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. If a nominee who is serving as a director is not elected at the annual meeting, under Delaware law the director would continue to serve on the Board as a holdover director. However, under our Boards policy, any director who fails to be elected must offer to tender his or her resignation to the Board. The Board shall nominate for election or reelection as director only candidates who agree to tender, promptly following the annual meeting at which they are elected or reelected as director, irrevocable resignations that will be effective upon (1) the failure to receive the required vote at the next annual meeting at which they face reelection and (2) Board acceptance of such resignation. In addition, the Board shall fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors in accordance with this Board policy.
If an incumbent director fails to receive the required vote for reelection, the Corporate Governance and Nominating Committee will act on an expedited basis to determine whether to accept the directors resignation and will submit such recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding that resignation. The Corporate Governance and Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept a directors resignation.
Code of Ethics
All of Whirlpools directors and employees, including its Chief Executive Officer, Chief Financial Officer, and other senior financial officers, are required to abide by our long-standing Code of Ethics, augmented to comply with the requirements of the NYSE and Securities and Exchange Commission, to ensure that Whirlpools business is conducted in a consistently legal and ethical manner. The Code of Ethics covers all areas of professional conduct, including employment policies, conflicts of interest, fair dealing, and the protection of confidential information, as well as strict adherence to all laws and regulations applicable to the conduct of our business. We intend to disclose future amendments to, or waivers from,
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certain provisions of the Code of Ethics for executive officers and directors on the Whirlpool website within four business days following the date of any such amendment or waiver.
Director Nominations to be Considered by the Board
Stockholders entitled to vote in the election of directors of the Board may nominate director candidates at times other than at the annual meeting. For a nomination to be properly made by any stockholder and be considered for recommendation by the Board to the stockholders and included in our proxy statement for the 2011 annual meeting, written notice of such stockholders nomination must be given, either by personal delivery or by registered or certified United States mail, postage prepaid, to the Corporate Secretary of Whirlpool (and must be received by the Corporate Secretary) by November 10, 2010. Such notice shall set forth all of the information required by Article II, Section 11 of our By-laws. Our By-laws are posted for your convenience on the Whirlpool website: www.whirlpoolcorp.com. Whirlpool believes that all nominees must, at a minimum, meet the selection criteria established by the Corporate Governance and Nominating Committee. The Board evaluates director nominees recommended by stockholders in the same manner in which it evaluates other director nominees. Whirlpool has established through its Corporate Governance and Nominating Committee selection criteria that identify desirable skills and experience for prospective Board members, including those properly nominated by stockholders.
The Board, with the assistance of the Corporate Governance and Nominating Committee, selects potential new Board members using criteria and priorities established from time to time. Desired personal qualifications for director nominees include: intelligence, integrity, strength of character, and commitment. Nominees should also have the sense of timing required to assess and challenge the way things are done and recommend alternative solutions to problems; the independence necessary to make an unbiased evaluation of management performance and effectively carry out responsibilities of oversight; an awareness of both the business and social environment in which todays corporation operates; and a sense of urgency and spirit of cooperation that will enable them to interact with other Board members in directing the future, profitable growth of Whirlpool. Desired experience for director nominees include: at least ten years of experience in a senior executive role with a major business organization, preferably, as either Chief Executive Officer or Chairman (equivalent relevant experience from other backgrounds such as academics or government may also be considered); a proven record of accomplishment and line operating (or equivalent) experience; first-hand experience with international operations; a working knowledge of corporate governance issues and the changing role of the Board; exposure to corporate programs designed to create stockholder value, while balancing the needs of all stakeholders. Director nominees should not be employed by or affiliated with any organization that has competitive lines of business or that may otherwise present a conflict of interest. The composition, skills, and needs of the Board change over time and will be considered in establishing the profile of desirable candidates for any specific opening on the Board. The Corporate Governance and Nominating Committee has determined that it is desirable for the Board to have a variety of differences in viewpoints, professional experiences, educational background, skills, race, gender, age and national origin, and considers issues of diversity and background in its selection process.
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Available Information
Whirlpools current Corporate Governance Guidelines, Code of Ethics, and written charters for its Audit, Finance, Human Resources, and Corporate Governance and Nominating Committees are posted on the Whirlpool website: www.whirlpoolcorp.com scroll over the Responsibility dropdown menu, then Governance, then click on Board of Directors. Stockholders may also request a free copy of these documents from: Greg Fritz, Director, Investor Relations, Whirlpool Corporation, 2000 North M-63, Mail Drop 2800, Benton Harbor, Michigan 49022-2692; (269) 923-2641.
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NONEMPLOYEE DIRECTOR COMPENSATION |
The elements of our 2009 director compensation are reflected in the table below. Only nonemployee directors receive compensation for their services as a director. We believe that it is important to attract and retain outstanding nonemployee directors. One way we achieve this goal is through a competitive compensation program. To that end, in 2009, management worked with Towers Perrin and Frederic W. Cook & Co. to evaluate the competitiveness of our compensation program for our directors who are not employees of Whirlpool. After evaluating competitive market data on nonemployee director compensation, a modest increase in both the annual cash and equity retainers was recommended to our Corporate Governance and Nominating Committee, which is responsible for making director compensation recommendations to the Board. These recommendations were made so that Whirlpools nonemployee director compensation remains competitive with other large publicly held companies. After evaluating managements and the consultants report, in February 2010 the Committee recommended and the Board approved, effective April 1, 2010, an increase in the annual cash retainer from $90,000 to $100,000, and, provided the stockholders approve the 2010 Omnibus Stock and Incentive Plan, an increase in annual equity compensation from $90,000 to $100,000, comprised of 50% Whirlpool common stock and 50% stock options. The Board has adopted an equity ownership guideline for nonemployee directors under which these directors are encouraged to own Whirlpool stock equal in value to four times the basic annual cash retainer, with a five-year timetable to obtain this objective.
Type of Compensation | Amount | |
Annual Cash Retainer |
$90,000 | |
Annual Stock Options Retainer* |
2,845 options | |
Annual Stock Awards Retainer* |
1,479 shares | |
Annual Retainer for Committee Chair (in addition to other retainers): |
||
Audit Committee |
$20,000 | |
All Other Committees |
$10,000 | |
Annual Retainer for Presiding Director (in addition to other retainers) |
$20,000 |
* | See Nonemployee Director Equity Plan below for explanation of how the number of options and shares were calculated for 2009. |
Nonemployee Director Equity Plan
Our Nonemployee Director Equity Plan provides for (1) a one time grant of 1,000 shares of common stock made at the time a director first joins the Board; (2) an annual grant of stock options, with the number of options to be determined by dividing $36,000 by the product of the fair market value of a single share of our common stock on the final trading day before the annual meeting of stockholders ($36.15) multiplied by 0.35; and (3) an annual grant of stock, with the number of shares to be issued to the director determined by dividing $54,000 by the average fair market value of a single share of our common stock for the final
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three trading days before the grant ($36.50). The exercise price under each option granted is the fair market value of the common stock on the last trading day before the annual meeting of stockholders ($36.15).
Options granted in 2009 are exercisable for the earlier of ten years after grant or five years after a nonemployee director ceases to serve on our Board, or one year in the case of the nonemployee directors death. However, no option is exercisable within the first six months of its term, unless death or disability of the director occurs. In the event that the death or disability of the director does occur and an option is exercised in the first six months of its term, any shares of common stock issued on such exercise may not be sold until the six-month anniversary of the grant date. 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. All annual grants are made to directors on the date of our annual meeting of stockholders.
Deferral of Annual Retainer and Stock Grants
A nonemployee director may elect to defer any portion of the annual cash retainer and annual stock awards retainer until he or she ceases to be a director. Under this policy, when the directors term ends, any deferred annual retainer will be made in a lump sum or in monthly or quarterly installments. In addition, payment of any deferred annual stock grant will be made as soon as is administratively feasible. Amounts deferred on or before December 31, 2004 accrue interest quarterly at a rate equal to the prime rate in effect from time to time. Amounts deferred after December 31, 2004 may be allocated to notional investments that mirror those available to participants in our U.S. 401(k) plan, with the exception of the Whirlpool stock fund.
Charitable Program
Through 2007, each nonemployee director, upon election or reelection to the Board, could choose to relinquish all or a portion of the annual cash retainer, in which case Whirlpool may, at its sole discretion, then make an award of up to $1 million to a charitable organization upon the directors death. Under the program, the election to relinquish compensation is irreversible, and Whirlpool may choose to make contributions in the directors name to as many as three charities. The Board of Directors acted to eliminate this program, prospectively, as of January 1, 2008. Mr. White is the only active Director with an outstanding benefit under this program.
Term Life Insurance
Whirlpool pays the premiums to provide each nonemployee director who elects to participate, with term life insurance while serving as a director, and also makes a related income tax reimbursement payment. The coverage amount is equal to one-tenth of the directors basic annual cash retainer times the directors months of service (not to exceed 120). In addition, Whirlpool provides each nonemployee director with travel accident insurance of $1 million.
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Whirlpool Appliances
For evaluative purposes, Whirlpool permits nonemployee directors to test Whirlpool products for home use, and reimburses the directors for any income taxes they incur as a result of this policy. The cost to Whirlpool of this arrangement in 2009 (based on distributor price of products and delivery, installation, and service charges) did not exceed $36,000 for any one nonemployee director or $66,000 for all nonemployee directors as a group.
Business Expenses
Whirlpool reimburses nonemployee directors for business expenses related to their attendance at Whirlpool meetings, including room, meals and transportation to and from Board and committee meetings (e.g., commercial or private flights, cars and parking). On rare occasions, a directors spouse may accompany a director when traveling on Whirlpool business. Directors are also reimbursed for attendance at qualified third-party director education programs.
Nonemployee Director Compensation Table
Name | Fees Earned or Paid in Cash (1) ($) |
Stock Awards (2) ($) |
Option Awards (3) ($) |
Non-equity Incentive Plan Compensation (4) ($) |
Change in Pension Value and Non-qualified Deferred Compensation Earnings (5) ($) |
All
Other Compensation (6) ($) |
Total ($) | ||||||||
Herman Cain |
90,000 | 52,623 | 24,211 | | | 7,581 | 174,415 | ||||||||
Gary T. DiCamillo |
100,000 | 52,623 | 24,211 | | | 11,243 | 188,077 | ||||||||
Kathleen J. Hempel |
90,000 | 52,623 | 24,211 | | | 5,734 | 172,568 | ||||||||
Michael F. Johnston |
100,000 | 52,623 | 24,211 | | | 7,343 | 184,177 | ||||||||
William T. Kerr |
90,000 | 52,623 | 24,211 | | | 4,203 | 171,037 | ||||||||
Arnold G. Langbo (7) |
22,500 | | | | | 71,311 | 93,811 | ||||||||
Miles L. Marsh |
110,000 | 52,623 | 24,211 | | | 7,581 | 194,415 | ||||||||
William D. Perez (8) |
3,913 | 77,450 | | | | 732 | 82,095 | ||||||||
Paul G. Stern |
100,000 | 52,623 | 24,211 | | | 19,069 | 195,903 | ||||||||
Janice D. Stoney |
90,000 | 52,623 | 24,211 | | | 23,767 | 190,601 | ||||||||
Michael D. White (9) |
110,000 | 52,623 | 24,211 | | | 59,426 | 246,260 |
(1) | The aggregate dollar amount of all fees earned or paid in cash for services as a director, including all annual retainer fees, before deferrals and relinquishments. |
(2) | Reflects the fair value of shares of common stock awarded in 2009 on the award date. Mr. Perez received an award of 1,000 shares of common stock at the time he was appointed to the Whirlpool Board of Directors in December 2009, while all other awards relate to the annual grant of 1,479 shares of common stock in April 2009. The fair value of the stock awards for financial reporting purposes will likely vary from the amount the director actually receives based on a number of factors, including stock price fluctuations, timing of sale and differences between the valuation assumptions and actual experience. See Note 9 to the Consolidated Financial Statements contained in the Financial Supplement to this proxy statement for a discussion of the relevant assumptions used to account for these awards. As of December 31, 2009, none of our nonemployee directors were deemed to have outstanding stock awards because all stock awards vest immediately. |
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(3) | Reflects the fair value of the annual grant of stock options on the award date (2,845 in 2009) which generally become exercisable six months after grant and expire on the earlier of ten years from the award date or on the fifth anniversary of the date that the director ceases to be a director. The fair values of the option awards were calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP), and are therefore different than the amount used to calculate the number of options granted to each director under the Nonemployee Director Equity Plan. See Note 9 to the Consolidated Financial Statements contained in the Financial Supplement to this proxy statement for a discussion of the relevant assumptions used to account for these awards. The fair value of the stock option awards for financial reporting purposes will likely vary from the amount the director actually receives based on a number of factors, including stock price fluctuations, timing of exercise, and differences between the valuation assumptions and actual experience. As of December 31, 2009, the number of stock options held by each nonemployee director (all of which have fully vested) were: |
Herman Cain |
6,391 | |
Gary T. DiCamillo |
10,980 | |
Kathleen J. Hempel |
11,580 | |
Michael F. Johnston |
8,580 | |
William T. Kerr |
8,128 | |
Arnold G. Langbo |
8,735 | |
Miles L. Marsh |
12,780 | |
William D. Perez |
| |
Paul G. Stern |
12,780 | |
Janice D. Stoney |
12,780 | |
Michael D. White |
7,980 |
(4) | Whirlpool does not have a non-equity incentive plan for nonemployee directors. |
(5) | Whirlpool does not have a pension plan for nonemployee directors and does not pay above-market or preferential rates on non-qualified deferred compensation for nonemployee directors. |
(6) | The table below presents an itemized account of All Other Compensation provided in 2009 to the nonemployee directors. |
Director | Tax Reimbursements (a) ($) |
Life Insurance Premiums ($) |
Charitable Program (b) ($) |
Whirlpool Appliances and ($) |
Total ($) | |||||
Herman Cain |
5,577 | 1,555 | | 449 | 7,581 | |||||
Gary T. DiCamillo |
5,837 | 1,555 | | 3,851 | 11,243 | |||||
Kathleen J. Hempel |
3,730 | 1,555 | | 449 | 5,734 | |||||
Michael F. Johnston |
4,314 | 875 | | 2,154 | 7,343 | |||||
William T. Kerr |
3,294 | 460 | | 449 | 4,203 | |||||
Arnold G. Langbo |
30,482 | 518 | | 40,311 | 71,311 | |||||
Miles L. Marsh |
5,577 | 1,555 | | 449 | 7,581 | |||||
William D. Perez |
282 | 1 | | 449 | 732 | |||||
Paul G. Stern |
7,294 | | | 11,775 | 19,069 | |||||
Janice D. Stoney |
14,792 | 1,555 | | 7,420 | 23,767 | |||||
Michael D. White |
3,920 | 771 | 51,170 | 3,565 | 59,426 |
(a) | Tax reimbursements on income imputed to the director for Whirlpool appliances and other benefits received, and life insurance premiums paid on behalf of the director by Whirlpool. |
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(b) | Includes 2009 interest cost and service cost related to the Charitable Program, less 2009 relinquishments. The maximum amount payable under the Charitable Program upon Mr. Whites death is $1.5 million. |
(7) | Mr. Langbo retired from the Whirlpool Board of Directors in April 2009. |
(8) | Mr. Perez was appointed to the Whirlpool Board of Directors in December 2009. |
(9) | Mr. White relinquished $11,640 of fees earned to the Charitable Program. |
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SECURITY OWNERSHIP |
The following table presents the ownership on December 31, 2009 of the only persons known by us as of February 16, 2010 to beneficially own more than 5% of our common stock based upon statements on Schedule 13G filed by such persons with the SEC.
Schedule 13G Filed On |
Name and Address of Beneficial Owner | Shares Beneficially Owned |
Percent of Class |
||||
2/11/2010 |
PRIMECAP Management Company(1) 225 South Lake Avenue, #400 Pasadena, CA 91101 |
11,214,910 | 15.01 | % | |||
2/16/2010 |
FMR LLC(2) 82 Devonshire Street Boston, MA 02109 |
7,846,060 | 10.50 | % | |||
2/4/2010 |
Vanguard Chester Funds Vanguard Primecap Fund(3) 100 Vanguard Blvd. Malvern, PA 19355 |
5,985,000 | 8.01 | % | |||
2/8/2010 |
The Vanguard Group Inc.(4) 100 Vanguard Blvd. Malvern, PA 19355 |
3,861,210 | 5.17 | % | |||
1/29/2010 |
BlackRock, Inc.(5) 40 East 52nd Street New York, NY 10022 |
3,835,679 | 5.13 | % |
(1) | Based solely on a Schedule 13G/A filed with the SEC by PRIMECAP Management Company, a registered investment advisor. PRIMECAP has sole voting power with respect to 2,730,510 shares and sole dispositive power with respect to 11,214,910 shares. |
(2) | Based solely on a Schedule 13G/A filed with the SEC by FMR LLC (FMR) and Edward C. Johnson, all such shares are beneficially owned by three entities: (a) Fidelity Management & Research Company (Fidelity), a registered investment advisor to various investment companies (Fidelity Funds) and a wholly-owned subsidiary of FMR, (b) Strategic Advisers, Inc. (SA), a wholly-owned subsidiary of FMR and a registered investment advisor, and (c) Pyramis Global Advisors Trust Company (PGATC), an indirect wholly-owned subsidiary of FMR and a bank. Fidelity is the beneficial owner of 7,807,588 shares. Mr. Johnson (Chairman of FMR), FMR (through its control of Fidelity) and Fidelity Funds each has sole dispositive power with respect to 7,807,588 shares. Neither Mr. Johnson nor FMR has the sole power to vote or direct the voting of the shares owned directly by Fidelity Funds. The sole voting power of all shares directly owned by Fidelity Funds resides with the Board of Trustees of such funds. SA is the beneficial owner of 67 shares. PGATC is the beneficial owner of 38,405 shares. Mr. Johnson and FMR (through its control of PGATC) each has sole dispositive power over 38,405 shares and sole voting power with respect to 38,405 shares. |
(3) | Based solely on a Schedule 13G/A filed with the SEC by Vanguard Chester Funds Vanguard Primecap Fund (Vanguard), a registered investment advisor. Vanguard has sole voting power with respect to all shares. |
(4) | Based solely on a Schedule 13G/A filed with the SEC by The Vanguard Group Inc., (Vanguard), a registered investment advisor. Vanguard has sole voting power with respect to 118,134 shares, sole dispositive power with respect to 3,755,576 shares, and shared voting power with respect to 105,634 shares. |
(5) | Based solely on a Schedule 13G filed with the SEC by BlackRock, Inc., BlackRock has sole voting and dispositive power with respect to all shares. |
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BENEFICIAL OWNERSHIP |
The following table reports beneficial ownership of common stock by each director, nominee for director, the Chief Executive Officer, Chief Financial Officer, and the three other most highly compensated executive officers, and all directors and executive officers of Whirlpool as a group, as of February 22, 2010. Beneficial ownership includes, unless otherwise indicated, all shares with respect to which each director or executive officer, directly or indirectly, has or shares the power to vote or to direct the voting of such shares or to dispose or direct the disposition of such shares. The address of all directors and executive officers named below is c/o Whirlpool Corporation, 2000 North M-63, Benton Harbor, Michigan 49022-2692.
Shares Beneficially Owned(1) |
Deferred Stock Units(2) |
Shares Under Exercisable Options(3) |
Total(4) | Percentage | |||||||
Marc R. Bitzer |
32,412 | 10,153 | 40,641 | 83,206 | * | ||||||
Herman Cain |
11,629 | | 6,391 | 18,020 | * | ||||||
Gary T. DiCamillo |
5,744 | 7,768 | 10,980 | 24,492 | * | ||||||
Jeff M. Fettig |
165,378 | 190,088 | 607,069 | 962,535 | 1.27 | % | |||||
Kathleen J. Hempel |
9,954 | 4,336 | 11,580 | 25,870 | * | ||||||
Michael F. Johnston |
3,000 | 4,913 | 8,580 | 16,493 | * | ||||||
William T. Kerr |
4,747 | | 8,128 | 12,875 | * | ||||||
Miles L. Marsh |
13,533 | 5,878 | 12,780 | 32,191 | * | ||||||
William D. Perez |
1,000 | | | 1,000 | * | ||||||
Paulo F. M. Periquito |
173,965 | 53,579 | 77,353 | 304,897 | * | ||||||
Paul G. Stern |
11,554 | 7,075 | 12,780 | 31,409 | * | ||||||
Janice D. Stoney |
9,427 | 8,538 | 12,780 | 30,745 | * | ||||||
Roy W. Templin |
29,440 | 2,620 | 55,175 | 87,235 | * | ||||||
Michael A. Todman |
47,714 | 31,384 | 125,154 | 204,252 | * | ||||||
Michael D. White |
2,700 | 4,449 | 7,980 | 15,129 | * | ||||||
All directors and executive officers as a group (18 persons) |
541,568 | 330,781 | 1,041,498 | 1,913,847 | 2.51 | % |
* | Less than 1%. |
(1) | Does not include 2,177,915 shares held by the Whirlpool 401(k) Trust (but does include 4,770 shares held for the accounts of executive officers); Executive Vice President and Chief Financial Officer Roy W. Templin served as one of four individual trustees with shared voting and investment powers until April 2009. |
(2) | Represents the number of shares of common stock, based on deferrals made into the Deferred Compensation Plan II for Nonemployee Directors, one of the executive deferred savings plans, or the terms of deferred stock awards, that we are required to pay to a nonemployee director when the director leaves the Board or to an executive officer when the executive officer is no longer an employee. None of these deferred stock units have voting rights. |
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(3) | Includes shares subject to options that will become exercisable within 60 days of February 22, 2010. |
(4) | No shares of Whirlpool stock have been pledged as security by any of these individuals, except that Mr. Bitzer pledged 28,566 shares, and Mr. Todman pledged 42,360 shares, each in connection with a transaction with a third party. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
Section 16(a) of the Securities Exchange Act of 1934 requires Whirlpools directors and executive officers and persons who own more than 10% of Whirlpools common stock (each a reporting person) to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Whirlpools common stock. Based solely on its review of the copies of such reports furnished to or prepared by Whirlpool and written representations that no other reports were required, Whirlpool believes that all Section 16(a) filing requirements applicable to reporting persons were complied with during the fiscal year ended December 31, 2009.
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COMPENSATION DISCUSSION AND ANALYSIS |
2009 Summary
| Compensation awarded to our Named Executive Officers (NEOs) is comprised of base salary, annual short term incentives, and long-term incentives, with over 75% of total compensation each year being at-risk. |
| 2009 reflected our ongoing commitment to a pay-for-performance philosophy, where executive compensation is linked to both individual and company performance. |
| Despite facing continued economic challenges, our overall 2009 financial performance rebounded significantly from 2008. |
| The challenging annual short-term cash and long-term cash and equity incentive goals, which were established at the height of the economic crisis, were met or exceeded with year-end award determinations resulting in above target award levels for 2009, in contrast to significantly reduced award levels for all NEOs in 2008. |
| Improvement in our 2009 financial performance resulted in higher total compensation for our NEOs in comparison to 2008, a year when core business objectives were not achieved, demonstrating that our program design responds to our business results. |
| Equity-based awards will continue to play an important role in this challenging economic environment because they reward NEOs for the achievement of long-term business objectives and provide incentives for the creation of stockholder value. |
| Changes in the management structure of our International and North American operations in December 2009 resulted in new compensation arrangements for three of our NEOs for 2010. |
The Objectives of Whirlpools Compensation Program
We are dedicated to global leadership and to delivering superior stockholder value. Our executive compensation philosophy supports these objectives by attracting and retaining the best management talent and by motivating these employees to achieve business and financial goals that create value for stockholders in a manner consistent with Whirlpools focus on five enduring values: respect, integrity, diversity and inclusion, teamwork, and the spirit of winning.
To achieve our objectives, we implement a pay-for-performance philosophy using the following guiding principles:
| compensation should be incentive-driven with both a short- and long-term focus; |
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| a significant portion of pay should be variable, or at risk; |
| components of compensation should be tied to increasing stockholder value; and |
| compensation should be tied to a balanced evaluation of business and individual performance measured against financial, customer, and employee related objectives a balanced scorecard approach. |
The Human Resources Committee of the Board of Directors (the Committee) sets compensation using a market-based approach, with differentiation based on individual and company performance. The elements of our compensation program reflect our pay-for-performance philosophy. The Committee creates a compensation package for each NEO that contains a mix of compensation elements that it believes best addresses the NEOs responsibilities and that will best achieve our overall compensation objectives. In establishing target compensation, the Committee considers factors discussed below such as market value and job responsibility. The Committee does not use a specific formula for allocating between fixed and variable components of pay or between long-term incentive vehicles.
Generally, the proportion of equity compensation rises with increasing job responsibility. Taken as a whole, our compensation program is designed so that the individuals target compensation level rises as job responsibility increases, with the portion of performance-based, or at risk, compensation rising as a percentage of total target compensation. As a result, actual total compensation of an executive as a multiple of the total compensation of his or her subordinates is designed to increase in periods of above-target performance and decrease in times of below target performance. In addition, the Committee makes distinctions in the mix of cash and equity components based on job responsibility in shaping each executive officers compensation package.
Our performance-based restricted stock units are typically subject to a one-year performance period, followed by a two year vesting period. Corporate-wide performance metrics are weighted more heavily than regional metrics in both annual and long-term incentive programs. Stock options vest over a three-year period. The Committee believes that these factors, together with a balance of cash and equity awards, and short- and long-term incentives, as well as executive stock ownership guidelines and clawback provisions, ensure that our compensation program does not create risks that are reasonably likely to have a material adverse effect on Whirlpool.
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Compensation Elements
Element | Characteristics | |
Base Salary |
Fixed component based on responsibility, experience and performance
Target is the median level for similar positions in the comparator group | |
Short-term Incentives |
Variable cash incentives based on annual performance
Target is the median level of total cash compensation for similar positions in the comparator group | |
Long-term Incentives |
Performance-based variable equity and cash incentives through grants of stock options and performance-based restricted stock units (payable in stock) and performance cash units
Target is the median level of total pay for similar positions in the comparator group | |
Other Benefits |
Health and welfare benefits available to substantially all salaried employees
Limited perquisites designed to support a market-competitive compensation package | |
Retirement Benefits |
U.S. based NEOs participate in qualified and non-qualified defined benefit and defined contribution plans
Target is the median income replacement ratio for a broad-based group of companies
NEOs outside the U.S. participate in retirement plans designed to be competitive within their regions |
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Compensation Process and Methodology
Role of the Human Resources Committee
The Committee has overall responsibility for Whirlpools executive compensation programs. Typically, the Committee adopts the compensation goals and objectives for awards under our short-term and long-term incentive plans at its meeting in February of each year. The Committee considers and makes decisions on the principle elements of each executive officers compensation package at its February meeting. The Committee also performs its evaluation of CEO performance and establishes CEO compensation at this meeting. Throughout the year, the Committee evaluates the overall effectiveness of our compensation philosophy and programs. In addition, the Committee reviews managements recommendations regarding hiring, promotion, retention, severance and individual executive compensation packages related to those events.
In making its determinations, the Committee reviews and considers various factors and assigns different weightings to these factors depending on the type of determination and the circumstances related to each specific action. For example, in determining base salary, the Committee may rely more heavily on market data and the recommendation of its independent compensation consultant. In determining the payout of incentive awards, the Committees consideration of company performance and managements assessment of individual performance may predominate. In setting long-term compensation, the Committee may give more weight to the complexity of the individuals position and impact on overall company results. While the Committee solicits and reviews recommendations from its independent compensation consultant, and in some circumstances, management, ultimately the Committee makes decisions regarding these matters in the exercise of its sole discretion.
Benchmarking and the Role of Consultants
The Committee establishes target compensation levels using a market-based approach. Each year, the Committee engages an independent compensation consultant to advise the Committee on Whirlpools executive compensation program.
Specifically, the Committee requests that the consultant assist the Committee in (1) reviewing the group of companies against whom Whirlpools senior executive pay levels are compared (our comparator group); (2) reviewing executive compensation market practices and trends in general; and (3) designing and recommending the compensation packages provided to the NEOs and other senior executives based on a marketplace assessment of the compensation for the NEOs and other senior executives in comparison to the compensation for comparable positions within the comparator group. With respect to the CEO, the consultant provides a recommendation, without the CEOs input, to the Committee regarding the CEOs compensation package (target and mix of pay components).
The Committee has the sole authority to approve the independent compensation consultants fees and terms of engagement. In 2008 and prior years, Hewitt Associates was the Committees independent compensation consultant. As part of a periodic assessment of its
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compensation consultant, the Committee elected to interview other consulting firms. In December 2008, after meeting with several firms, the Committee appointed Frederic W. Cook & Co. as its independent compensation consultant for 2009. The Committee selected Frederic W. Cook & Co. based on its extensive expertise, high quality team and lack of an existing business relationship with Whirlpool.
In connection with the transition, Hewitt Associates provided limited services related to the Committees February 2009 meeting and its recommendations were reviewed by Frederic W. Cook & Co. Hewitt Associates received $11,200 for executive compensation consulting services provided to the Committee in 2009. Hewitt Associates fees for other services for the full 2009 fiscal year were $280,000. These fees related primarily to actuarial services provided to foreign Whirlpool affiliates by foreign affiliates of Hewitt Associates. The Whirlpool affiliates were solely responsible for retaining Hewitt Associates for these services, which were not reviewed or approved by the Committee.
In connection with the services it performs for the Committee, Frederic W. Cook & Co. works with management on compensation programs in which executive officers, as well as other salaried employees, participate, in each case under the oversight and with the approval of the Committee. In 2009, these services included reviewing the design of the overall executive compensation program and providing advice on the design of Whirlpools 2010 Omnibus Stock and Incentive Plan.
For 2009, the Committee retained the comparator group listed below which was used to benchmark executive compensation in prior years. These companies were selected because they have national and international business operations and are similar to Whirlpool in sales volumes, market capitalizations, employment levels, lines of business, and organizational structure. Companies in the comparator group are recognized for their excellence in the areas of consumer focus and trade partner relations, and for possessing highly complex global supply chains and manufacturing footprints.
3M Company
The Black & Decker Corporation
Caterpillar Inc.
Cummins Inc.
Colgate-Palmolive Company
Deere & Company
Eastman Kodak Company
Eaton Corporation
Emerson Electric Co.
The Goodyear Tire & Rubber Company
H. J. Heinz Company
|
Honeywell International Inc.
Illinois Tool Works, Inc.
Ingersoll-Rand Company Ltd.
Kellogg Company
Motorola, Inc.
PPG Industries, Inc.
Raytheon Company
Sara Lee Corporation
Textron, Inc.
United Technologies Corp.
Xerox Corporation
|
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We use publicly disclosed compensation data contained in proxy statements, as well as proprietary surveys purchased from third-party consulting firms to acquire market compensation data for companies in the comparator group.
Role of Management
Each year, the CEO and Chief Human Resources Officer, makes recommendations to the Committee regarding the compensation and benefit programs for all executive officers. In addition, the CEO makes recommendations with respect to base salary, annual cash incentives, equity compensation, and the total compensation levels for executive officers other than himself based on his assessment of personal performance and contribution to Whirlpool. The CEO and Chief Human Resources Officer recommend the performance metrics to be used in establishing performance goals for the annual cash incentive and long-term equity and cash incentive programs for adoption by the Committee. The Committee has authority to adopt or modify these metrics in its sole discretion. In addition, the CEO may assess individual performance to assist the Committee in making determinations regarding awards to be paid out under incentive programs.
Base Salary
Consistent with the CEOs recommendations, the Committee maintained year-end 2008 salary levels and authorized no salary increases in 2009 for Messrs. Fettig, Templin, Todman and Periquito due to the challenging economic environment at that time. In recognition of his promotion to President, U.S. Operations in December 2008, the Committee approved a salary of $650,000 for Mr. Bitzer, effective March 1, 2009. This amount was approximately equivalent to his year-end 2008 salary expressed in Euros, based on February 2009 conversion rates.
Goals and Performance Metrics
As discussed below under the caption Deductibility of Executive Compensation, awards under our annual short-term and long-term incentive programs may be designed to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code). To preserve maximum tax deductibility and allow the Committee the latitude to address unforeseeable and uncontrollable events and conditions, and to facilitate the Committees ability to assess and reward individual performance under the Whirlpool performance assessment system, the Committee established a 2009 return on equity (ROE) target for annual cash and long-term incentive awards to executive officers. The Committee established the ROE target at a level that would allow the Committee to take into consideration the impact of such events or conditions in adjusting payouts downward. The ROE target was tied to our projected operating plan and, therefore, its achievement was substantially uncertain when it was set in February 2009. The Committee selected ROE as the target measure because it is widely recognized, indicative of Whirlpools profitability, and complements the revenue, free cash flow and earnings metrics used in the short- and long-term incentive plans.
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As in prior years, the 2009 awards under both the annual short-term and long-term incentive programs were designed so that achievement of the ROE target would establish the maximum award level for each NEO, with actual award levels determined by formulas based on additional performance metrics and the exercise of negative discretion by the Committee. Against the backdrop of unprecedented economic volatility, the Committee recognized the importance of ensuring that the incentive program design would focus executives on Whirlpools priorities and drive attainment of critical objectives for 2009. Although the Committee has in the past finalized these formulas and metrics at its February meeting, the Committee held an additional meeting in March 2009 for this purpose. The Committee reviewed the 2009 business challenges and program design alternatives with management. As a result, the performance metrics selected by the Committee, including the introduction of the Cost Take-Out Threshold discussed below, and the weight given to the earnings before interest and taxes and free cash flow measures, reflect Whirlpools priorities and critical objectives for 2009.
Short-Term Incentives
Consistent with Whirlpools pay-for-performance philosophy, substantially all salaried employees, including each NEO, are eligible to participate in the stockholder-approved Performance Excellence Plan (PEP), our annual cash incentive program. PEP is designed to focus attention on stockholder value creation, drive performance in support of this goal and other business goals, and reflect individual performance as measured against financial, customer, and employee-related objectives. The Committee establishes target incentive levels for NEOs as a percentage of their base salary as of the start of the performance period.
PEP ensures that a significant proportion of pay for our NEOs is at risk and variable. Under the terms of PEP, no award for 2009 could exceed $5 million. For 2009, the Committee established PEP targets, expressed as percentages of base salary, for the NEOs as follows: Mr. Fettig at 140%; Mr. Templin at 85%; Mr. Todman at 100%; Mr. Periquito at 100%; and Mr. Bitzer at 85%. These amounts became the Target Awards. The Committee set maximum award levels with respect to the achievement of the ROE target under PEP at four times the Target Award to allow for the exercise of negative discretion. The factors considered in applying negative discretion are set forth below.
In addition to setting Target Awards, the Committee established equally weighted Company Performance and Individual Performance Factors for each executive officer. In defining the Company Performance Factor for 2009, the Committee determined that company performance in-line with expected performance would result in a Performance Factor of 100%. Company performance substantially above expected performance would result in a Performance Factor of up to 200%, and performance below expected performance could result in a Performance Factor as low as 0%, with no award being paid out under PEP.
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The Committee adopted the following measures for purposes of determining the Company Performance Factor under PEP for 2009:
A. | Cost Take Out Threshold |
| A pass/fail threshold objective requiring significant reductions in the cost of materials, conversion, quality, and logistics, as well as Selling, General and Administrative expenses, across the organization in order for any NEO to achieve 100% of his Target Award. |
B. | Balanced Scorecard |
| Financial Measures revenue growth, earnings, earnings per share, free cash flow, and operating profit margin; |
| Customer Measures market share, quality, and brand equity progress; and, |
| Employee Measures the strengthening of our talent pipeline, diversity and inclusion and the engagement of our employees. |
In reviewing performance under PEP for 2009, at its February 2010 meeting, the Committee determined that the ROE target established for 2009 was met. For each NEO, the Committee adjusted the maximum award level downward based on a Company Performance Factor and an Individual Performance Factor as illustrated below:
Illustration of Whirlpools Annual Short-Term Incentive Award:
Our comprehensive cost reduction initiative drove total cost reduction which exceeded the established Cost Take-Out Threshold. With respect to the Global Balanced Scorecard, the Committee determined that Financial Measures, including earnings from continuing operations of $4.34 per share and free cash flow of $1.1 billion exceeded the goals established by the Committee. The Committee found that Customer Measures related to market share,
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quality, and brand equity progress met expectations overall. Performance on Employee Measures related to strengthening of our talent pipeline, diversity and the engagement of our employees exceeded expectations overall. Based on these performance results, the Committee assigned a Global Balanced Scorecard multiplier of 110%.
For each NEO with specific regional responsibilities (Mr. Bitzer North America, and Mr. Periquito Latin America), the Global Balanced Scorecard multiplier is added to the Regional Balanced Scorecard multiplier and divided by two to determine the Company Performance Factor. The Committee considered an increase in gross margin from 10% in 2008 to 12.9% in 2009, as well as an increase in operating profit from $199 million in 2008 to $560 million in 2009, in North America in assigning a Regional Balanced Scorecard multiplier of 110%. This Regional Balanced Scorecard multiplier when averaged with the Global Balanced Scorecard multiplier resulted in a Company Performance Factor of 110% for Mr. Bitzer. Strong financial performance in Latin America, including unit volume growth of 14.5%, resulted in a Regional Balanced Scorecard multiplier of 175%. Averaging this Regional Balanced Scorecard multiplier and the Global Balanced Scorecard multiplier resulted in a Company Performance Factor of 142.5% for Mr. Periquito.
The Committee annually evaluates each executive officers individual performance based on a rigorous review of individual achievements during the performance period relative to established goals. With respect to NEOs other than the CEO, the Committee may rely on the assessment of individual performance provided by the CEO. Executive officers are reviewed based on established criteria for results, leadership, talent and demonstration of Whirlpool values.
As a result of this process, each NEO receives one of the following performance ratings:
Individual Performance Rating |
General Description | Individual Performance Factor (Individual Multiplier) | ||
1 | Extraordinary Results | 200% of target amount | ||
2 | Very Strong Results | 150% of target amount | ||
3 | Strong Results | 100% of target amount | ||
4 | Results Need to Be Improved | 50% to 75% of target amount | ||
5 | Unacceptable Results | 0% - No award given |
The Committee retains the discretion to reduce Individual Performance Factors within the ranges set forth above. In determining the individual performance rating, the CEO and Committee consider each NEOs absolute performance, performance relative to internal peers, any unforeseen factors that influenced the results of each NEO, and the extent to which the leadership of each NEO has contributed to Whirlpools success during the performance period based on qualitative measures. For 2009, each NEO received a performance rating of Level 3 or higher.
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Based on this review, the Committee determined the actual PEP payout to each NEO by multiplying the NEOs Target Award by the applicable Company Performance Factor and Individual Performance Factor. Actual PEP payouts for 2009 exceeded the target award in each case in large part as a result of Whirlpools financial performance.
Long-Term Incentives
Long-term incentive opportunities are tied directly to Whirlpools financial and strategic performance over a preset period beginning each January 1 and continuing for one year or longer. Each set of performance measures is unique and rewards the achievement of specific long-term strategic goals designed to deliver long-term shareholder value. The length of the performance period varies from year to year depending on the performance measures established by the Committee.
Long-term awards typically consist of a combination of stock options and stock equivalents in the forms of performance-based restricted stock units, which are distributed in stock, and performance units payable in cash, depending on the NEOs job responsibilities. From time to time, the Committee has approved awards of stock units with certain time-based vesting requirements for selected executives based on special recognition and retention circumstances.
The Whirlpool Corporation 2007 Omnibus Stock and Incentive Plan, which was approved by the stockholders at the 2007 annual meeting, also provides for the issuance of other types of equity-based awards, including stock awards and stock appreciation rights. A new omnibus stock and incentive plan is being submitted for stockholder approval at our 2010 annual meeting of stockholders as described under Item 3 Approval of the Whirlpool Corporation 2010 Omnibus Stock and Incentive Plan.
Establishing Award Levels and Equity Values
The Committee typically makes long-term awards to executive officers annually and establishes performance measures at its February meeting. As discussed above, consistent with our annual incentive plan, PEP, the Committee establishes an ROE target for purposes of ensuring that stock equivalent awards qualify as performance-based compensation under Section 162(m).
The Committee establishes market-based target incentive levels for each executive officer expressed as a percentage of base salary. For 2009 long-term incentives, the Committee determined the following long-term incentive targets for NEOs: for Mr. Fettig, 575%; for Mr. Templin, 200%; for Mr. Todman, 250%; for Mr. Periquito, 225%; and for Mr. Bitzer, 200%.
For 2009 the Committee granted NEOs long-term awards consisting of a combination of stock options, performance-based restricted stock units and performance cash units under the stockholder approved 2007 Omnibus Stock and Incentive Plan. The Committee believes
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that awards of stock options and performance-based restricted stock units, which if earned are distributed in the form of common stock, reinforce the objectives of making these incentives at risk and directly tied to increasing stockholder value. The Committee determined the allocation of each executive officers award based on the officers position and ability to impact stock value.
Ordinarily, the Committee determines that long-term incentive award amounts will be equally weighted 50% in stock options and 50% in performance-based restricted stock units for Messrs. Fettig and Todman, the officers with the greatest ability to drive stock value. However, the number of stock options necessary to equal 50% of the value of Mr. Fettigs 2009 target long-term incentive compensation exceeded the limit on the number of stock options which could be awarded under the 2007 Omnibus Stock and Incentive Plan. As a result, the Committee retained the overall level of stock-based compensation provided to Mr. Fettig by increasing the percentage of Mr. Fettigs 2009 target long-term incentive compensation to be provided by performance-based restricted stock units to 54% and decreasing the percentage to be provided by stock options to 46%. Mr. Todmans 2009 target long-term incentive compensation was weighted 50% in stock options and 50% in performance-based restricted stock units. Consistent with awards approved for other senior officers, the Committee established the 2009 long-term incentive awards for Messrs. Templin and Bitzer as 1/3 performance-based restricted stock units, 1/3 stock options, and 1/3 performance cash units. Because Mr. Periquito was contemplating retirement in 2009, the Committee made 100% of his long-term incentive award in the form of performance cash units. The Committee determined that the maximum award available for achievement of the ROE goal in any performance period would be 200% of the target number of performance-based restricted stock units and performance cash units. The maximum award for Mr. Fettig was approximately 180% of his target number of performance-based restricted stock units solely as a result of the increase in the weighting of performance-based restricted stock units as described above.
Because the value of stock options is inherently linked to Whirlpools stock performance, the number of stock options to be awarded is not determined over the course of a performance period. The Committee granted stock options to the NEOs in February 2009, determining the number of stock options to be awarded based on a target value on the date of the award. The fair market value of stock options has been set at 35% of face value, using an option valuation methodology. The option strike price is $31.82 per share, the closing price of Whirlpool stock on the New York Stock Exchange on the date of the grant. Stock options generally vest over a three year term and are exercisable over a ten year period, promoting a focus on long-term stock value, as well as executive retention.
For 2009, the Committee selected a one-year performance period for the achievement of performance goals, with the number of performance-based restricted stock units and performance-based cash units to be awarded determined in 2010 based on 2009 performance. The Committee established the Target Award for each NEO based on the closing price of Whirlpool stock on February 16, 2009, the date the Target Award was established. Because
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the Committee determines the number of stock options to be granted and the target number of restricted stock units based on the then current fair market value, these numbers may vary significantly from year to year as a result of changes in the stock price.
Establishing Performance Measures and Reviewing Outcomes
The Committee establishes performance measures to determine awards through the exercise of negative discretion. For 2009, the Committee established goals based on our critical liquidity measures: Free Cash Flow and Earnings Before Interest and Taxes (EBIT). For Free Cash Flow the Committee established a Free Cash Flow objective based on a pass (100%)/fail (0%) standard. For EBIT, the Committee established an EBIT Performance Factor which tied the achievement of specific levels of earnings before interest and taxes to a 0% to 200% payout range. The Committee designated a performance period of one year.
For 2009, the Committee determined that performance in-line with expectations would result in a payout equal to 100% of the target number of performance-based stock units and performance cash units, while performance substantially above expected performance could result in a payout of up to 200% of the target number of restricted stock units and performance cash units. Performance below expected performance could result in no pay out.
Illustration of Whirlpools Annual Long-Term Incentive Award
As with PEP, the Committee determined that the ROE target was met for 2009. Free Cash Flow of $1.1 billion met the Free Cash Flow objective resulting in a Free Cash Flow Performance Factor of 100%. Based on performance above the established target range of $545 to $625 million EBIT, the Committee determined an EBIT Performance Factor of 130%. As a result of these performance outcomes, the Committee determined that 115% of the target number of restricted stock units and performance cash units would be awarded to the NEOs. The performance-based restricted stock units and performance cash units are subject to a two-year vesting period and will be distributed in February 2012. By combining the features of a performance period and a vesting period, these awards reward contributions to long-term objectives and discourage taking excessive risks for short-term gain.
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Timing of Equity Awards
We have generally followed a practice of making all equity-based grants to employees, including NEOs, on a single date every year. Generally, the Committee grants these equity-based awards at its regularly scheduled meeting in mid-February. This meeting usually occurs after we release our final earnings for the prior fiscal year, which permits material information regarding our performance for the prior fiscal year to be disclosed to the public before equity-based grants are made.
The Committee determines equity award values based on the stock price on the date of grant. In February 2010, the Committee determined that there were insufficient shares remaining available under the 2007 Omnibus Stock and Incentive Plan to grant the target level of stock options to executives and key employees.
As a result, the Committee elected to grant only performance-based restricted stock unit awards which have a higher value at grant and therefore, require fewer shares than stock options to convey the same value. In order to ensure Whirlpool has adequate equity awards to grant over the next few years, a new omnibus stock and incentive plan is being submitted for stockholder approval at our 2010 annual meeting of stockholders. We currently anticipate that in future years, the Committee will return to the practice of granting stock options, as well as restricted stock unit awards, in mid-February.
Under the 2007 Omnibus Stock and Incentive Plan, and the proposed 2010 Omnibus Stock and Incentive Plan, stock option exercise prices are set equal to the fair market value of Whirlpool stock which is the officially quoted closing price of our common stock on the date of grant.
While most of our equity-based awards have historically been made pursuant to our annual grant practice, the Committee retains the discretion to make additional off-cycle awards in connection with promotions, recruitment efforts, or significant accomplishments. No off-cycle awards were granted to NEOs in 2009.
Perquisites
We provide limited perquisites to executives, including financial planning services, limited use of Whirlpool owned and leased property, product discounts, home security, relocation assistance, and comprehensive health evaluations. These perquisites are designed to support a market-based competitive total compensation package and ensure that Whirlpool derives the most value from our overall compensation and benefits expenditures. For purposes of personal security, Mr. Fettig and Mr. Todman may use company aircraft for personal use, and other executives may be granted limited use of the aircraft with the permission of the CEO. Mr. Periquito is eligible to receive the use of a company car and driver as part of a competitive total compensation package, consistent with prevailing practice in Latin America. Mr. Periquito also received an annual allowance of approximately $100,000 to recognize increased living costs outside the United States.
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Post-termination Payments
Our U.S.-based NEOs are eligible to receive benefits under a severance policy generally available to U.S. salaried employees. In addition, the Human Resources Committee may agree to provide additional severance benefits upon the termination of an executive officer. The Committee approved retirement arrangements for Mr. Periquito on February 15, 2010 which are discussed under the heading Periquito Retirement Arrangements in the Potential Post-Termination Payments section of the Executive Compensation Tables later in this proxy statement.
We have entered into Compensation Benefits and Assurance Agreements with each executive officer, including each NEO, to provide benefits in the event of a qualifying termination following a change in control of Whirlpool. We maintain this program to ensure that our NEOs are not deterred from exploring opportunities that will result in maximum value for stockholders, including actions that may result in a change in their position or standing within Whirlpool. The value of the severance benefits associated with a change in control of Whirlpool is based on a thorough review of competitive market practice. We believe that these benefits are of reasonable value and ultimately benefit stockholders. See the Potential Post-Termination Payments Tables section later in this proxy statement.
Deductibility of Executive Compensation
The Committee intends to preserve the tax deductibility of executive compensation under Section 162(m) of the Internal Revenue Code to the extent practicable while focusing on consistency with its compensation philosophy, the needs of Whirlpool, and stockholder interests. Whirlpools stockholders have approved PEP and our omnibus stock and incentive plans that award our short-term cash and long-term incentives to executives. Many of the types of awards authorized in these stockholder-approved plans would be considered qualifying performance-based compensation for purposes of Section 162(m). As a result, such awards would not count toward the $1 million deduction limit. However, the Committee retains the ability to make payments in one or more of the programs described in this report that may not qualify for tax deductibility under Section 162(m).
Retirement Benefits
NEOs are eligible for retirement benefits designed to provide, in total, a market-competitive level of income replacement upon achieving retirement eligibility by using a combination of qualified and non-qualified plans. We assess retirement benefits for NEOs against data provided to the Towers Watson Employee Benefits Information Center by other U.S. companies that provide survey data on executive benefits. The Towers Watson Employee Benefits Information Center database contains information on over 700 companies of varying size, competing in a variety of industries.
Accordingly, this survey tool includes data on a much broader base of companies than those included in the executive compensation comparator group. This assessment is an important factor used by the Committee in determining the median retirement income
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replacement ratio among similarly situated executives at such companies as the targeted amount of total retirement benefits for our NEOs. Total retirement benefits are provided through a combination of qualified and non-qualified defined contribution plans and qualified and non-qualified defined benefit plans. As a result of the current mix of our retirement plans, we believe that total retirement benefits for the NEOs are currently slightly below the median level when compared to the other companies in the survey. Whirlpool continues to strive to provide retirement benefits that are market-competitive.
U.S.-based NEO Defined Contribution Plans
Our NEOs in the United States participate in one qualified defined contribution plan, the Whirlpool 401(k) Retirement Plan, and the following non-qualified defined contribution plans: the Executive Deferred Savings Plan II (EDSP II) and its predecessor, the Executive Deferred Savings Plan (EDSP I). These plans allow eligible employees, including the NEOs, to defer portions of their base salary, annual cash incentive payment, restricted stock unit distribution, and performance cash unit payment into the plans.
The Whirlpool 401(k) Retirement Plan provides a defined contribution retirement benefit qualified under Section 401(k) of the Internal Revenue Code. This plan offers participants a pre-tax retirement savings vehicle plus employer contributions that encourage participant retirement savings and provide additional assets for employees retirement. Most U.S.-based employees of Whirlpool are eligible to participate in this plan, although different levels of employer contributions apply to different groups. This plan provides an automatic employer contribution of 3% of pay payable in cash or company stock. Through 2008, the 401(k) plan provided for an employer match of up to 4% of pay, provided that participants contributed at least 5% of pay on a pre-tax basis to the plan and subject to contribution and benefit limitations under the Internal Revenue Code. The employer match was suspended for all participants effective March 1, 2009, but is being reinstated for all participants effective March 1, 2010 due to somewhat improved economic conditions and Whirlpools improved financial performance.
EDSP I is a non-qualified plan designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan. Participants may no longer make deferrals to EDSP I. EDSP II became effective January 1, 2005 to comply with the requirements of Section 409A of the Internal Revenue Code. EDSP II includes two components: the traditional component is known as EDSP II and the new component, which became effective January 1, 2007, is known as the Whirlpool Executive Restoration Plan (the 401(k) Restoration Plan). The traditional component allows eligible executives to contribute up to 75% of their short-term incentives and long-term incentives. The 401(k) Restoration Plan works with the Whirlpool 401(k) Retirement Plan to enable executives to defer funds and receive Whirlpool matching contributions and non-elective contributions using the same formula as the Whirlpool 401(k) Retirement Plan, but without regard to limitations imposed by the Internal Revenue Code. Amounts deferred into this plan have already been earned by the executives and have been deferred through a voluntary enrollment process. These values are unfunded and are paid from Whirlpools general assets.
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U.S.-based NEO Defined Benefit Plans
Messrs. Fettig, Templin and Todman accrued benefits under the Whirlpool Employees Pension Plan (WEPP) and the associated Whirlpool Retirement Restoration Plan (the Pension Restoration Plan) through December 31, 2006, when plan benefits were frozen. Messrs. Fettig, Templin, Todman and Bitzer currently participate in the Supplemental Executive Retirement Plan (SERP). These plans provide a defined benefit upon retirement relative to salary and annual cash incentives earned during the employment period. The formulas for these programs are designed to provide a benefit at the median of the competitive market and support Whirlpools overall retirement benefit goal of providing a median level of replacement income upon retirement.
WEPP is a qualified plan that provides all eligible employees, which includes most Whirlpool salaried employees in the United States, with a defined pension benefit upon reaching retirement eligibility as described under the caption Pension Benefits Table later in this proxy statement. Benefits in this plan have been frozen for most participants, including the NEO participants, effective December 31, 2006 based on their service and pay as of December 31, 2006.
The Pension Restoration Plan is a non-qualified plan that works with WEPP to provide Whirlpool executives that portion of their retirement benefit which would have been paid under WEPP if Internal Revenue Code maximum annual benefits and compensation limitations did not apply. Benefits under this plan are frozen as of the same dates as benefits under WEPP as described above. Years of service are calculated under this plan using the same method employed under WEPP. The plan does not grant additional years of service credits to our NEOs.
SERP is a non-qualified plan that supplements Whirlpools broad-based retirement plan and provides benefits in excess of Internal Revenue Code limitations under WEPP. SERP generally provides retirement income based on the average of the highest five payouts received under PEP during the last ten years of employment multiplied by a factor determined based upon years of service. Years of service are calculated under this plan using the same method employed under WEPP. Other companies may reflect the value of incentive compensation, like PEP, in their qualified plan benefit formulas. In contrast, WEPP calculates benefits based solely on salary. Therefore, SERP is designed to further our goal of providing Whirlpool executives with a level of income replacement compensation at retirement that approximates the median when compared to the other companies in the Towers Watson survey discussed above.
NEOs based outside the U.S.
Our NEOs in locations outside the United States receive retirement benefits designed to be competitive with benefits provided to executives in comparable positions within their regions. As an executive in Italy during a portion of 2009, Mr. Bitzer was subject to the National Collective Agreement for Industrial Dirigenti, which stipulates certain compensatory
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arrangements and benefits for industrial executives in Italy. One of the benefits mandated by the agreement is a voluntary defined contribution plan, Previndai, to which both Mr. Bitzer and Whirlpool contributed through February 2009. Effective March 1, 2009, Mr. Bitzer became eligible to participate in the U.S.-based defined contribution plans and SERP described above.
Pursuant to the terms of his employment contract, Mr. Periquito participated in the Founder Pension Plan, a non-U.S. retirement plan, to which both Mr. Periquito and Whirlpool contributed. In 2006, the pension asset and obligation attributable to Mr. Periquito were transferred to a private pension fund with Bradesco Bank pursuant to the terms of the Founder Pension Plan. The benefit under this plan is fully accrued and funded and available for distribution to Mr. Periquito prior to and during retirement. For further discussion of Mr. Periquitos retirement arrangements, see Periquito Retirement Arrangements in the Potential Post-Termination Payments section of the Executive Compensation Tables later in this proxy statement.
Stock Ownership Guidelines
Stock ownership guidelines support the objective of increasing the amount of stock owned by senior Whirlpool leaders and aligning the interests of executives with those of our long-term stockholders. These ownership guidelines are approved by the Committee and are based on a review of competitive market practice as conducted by the independent executive compensation advisor to the Committee, as well as to ensure that our NEOs and other senior Whirlpool leaders have a significant stake in Whirlpools long-term success. The guidelines for stock ownership are based on an individuals level in the organization and range from seven times base salary for the Chief Executive Officer to one-half times base salary for lower level executives, including those who are not NEOs. Ownership guidelines as a multiple of base salary for NEOs are listed below:
CEO: | 7 times base salary | |
President: | 5 times base salary | |
Executive Vice Presidents: | 4 times base salary |
The guidelines state that each executive should achieve the required level of stock ownership within five years. For these guidelines, ownership includes shares purchased on the open market, shares owned jointly and separately by spouses and children, shares held in the Whirlpool 401(k) Retirement Plan, shares obtained through stock option exercises (but not including unexercised stock options) and stock award distributions, and vested stock units (including those that have been deferred for distribution).
The Committee, as well as Whirlpools senior leadership, annually reviews progress for each executive on achieving their required level of ownership. During the Committees most recent review of ownership levels, it was determined that each NEO currently meets or is on track to meet his respective stock ownership guideline during the required timeframe.
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Management Changes
Effective January 1, 2010, Mr. Todman became President, Whirlpool International, succeeding Mr. Periquito. Mr. Bitzer was promoted to President, Whirlpool North America, succeeding Mr. Todman. In connection with their new roles, effective January 1, 2010, the Committee increased Mr. Todmans annual base salary from $760,000 to $825,000 and Mr. Bitzers base salary from $650,000 to $750,000. The Committee also increased Mr. Bitzers target award under PEP from 85% to 100% and long-term incentive target award from 200% to 250%, each effective for the 2010 performance year.
Mr. Periquito completed his duties as President, Whirlpool International on December 31, 2009, and is continuing to serve as Chairman of Whirlpool S.A., a Brazilian subsidiary of Whirlpool, until his current term ends, which is expected to be on or before April 30, 2010 (the Transition Period). In recognition of Mr. Periquitos long service and contribution to Whirlpools success, and in the interest of facilitating a smooth transition of responsibilities, on February 15, 2010, the Committee approved certain retirement arrangements for Mr. Periquito which are discussed below under the heading Periquito Retirement Arrangements in the Potential Post-Termination Payments section of the Executive Compensation Tables.
HUMAN RESOURCES COMMITTEE REPORT |
The Human Resources Committee of Whirlpools Board of Directors reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement.
Based upon this review and discussion, the Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Whirlpools Annual Report on Form 10-K for the year ended December 31, 2009, as incorporated by reference from this proxy statement.
HUMAN RESOURCES COMMITTEE
Dr. Paul G. Stern, Chair
Mr. Herman Cain
Mr. Michael F. Johnston
Mr. William T. Kerr
Mr. Miles L. Marsh
Mr. William D. Perez
Mr. Michael D. White
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EXECUTIVE COMPENSATION TABLES |
The following table sets forth compensation information for our NEOs during the 2009, 2008, and 2007 fiscal years. The table may not reflect the actual compensation received by our NEOs for those periods. For example, amounts recorded in the stock awards and options columns reflect the fair market value of the awards at the award date and the targeted compensation for certain performance-based equity awards. The actual value of compensation realized by the NEO will likely vary from any targeted equity award amount due to stock price fluctuations, forfeitures and differences between valuation assumptions and actual experience.
Name and Principal Position |
Year | Salary ($) (1) |
Bonus ($) | Stock Awards (2) ($) |
Option Awards (3) ($) |
Non-Equity Incentive Plan Compensation (4) ($) |
Change in (5) ($) |
All Other Compensation (6) ($) |
Total ($) | |||||||||
2009 | 1,275,000 | | 3,990,133 | 1,914,000 | 3,500,000 | 1,704,872 | 126,911 | 12,510,916 | ||||||||||
Jeff M. Fettig Chairman of the |
2008 | 1,262,500 | | 3,738,703 | 2,544,356 | 420,000 | 683,122 | 133,207 | 8,781,888 | |||||||||
2007 | 1,183,333 | | 3,078,400 | 2,048,410 | 6,962,500 | 930,008 | 138,226 | 14,340,877 | ||||||||||
2009 | 650,000 | | 433,325 | 248,239 | 1,409,958 | 130,835 | 60,484 | 2,932,841 | ||||||||||
Roy W. Templin Executive Vice |
2008 | 641,667 | | 433,601 | 295,120 | 312,869 | 60,254 | 56,781 | 1,800,292 | |||||||||
2007 | 591,667 | | 2,113,500 | 238,606 | 1,922,813 | 67,407 | 39,841 | 4,973,834 | ||||||||||
2009 | 760,000 | | 949,986 | 544,220 | 1,254,000 | 411,121 | 125,086 | 4,044,413 | ||||||||||
Michael A. Todman President, |
2008 | 753,333 | | 951,268 | 647,156 | 188,333 | 192,160 | 125,613 | 2,857,863 | |||||||||
2007 | 708,333 | | 4,150,040 | 429,941 | 2,142,313 | 202,240 | 166,031 | 7,798,898 | ||||||||||
2009 | 735,000 | 100,008(8) | | | 3,734,719 | (9) | 169,193 | 4,738,920 | ||||||||||
Paulo F. M. O. Periquito(7) President, |
2008 | 729,168 | 100,008(8) | 551,204 | 375,182 | 1,012,815 | (9) | 225,776 | 2,994,153 | |||||||||
2007 | 671,643 | 87,504(8) | 426,743 | 219,563 | 3,402,155 | (9) | 166,470 | 4,974,078 | ||||||||||
2009 | 648,013 | | 433,325 | 248,239 | 1,407,171 | 9,348 | 80,689 | 2,826,785 | ||||||||||
Marc R. Bitzer(7) Executive Vice |
2008 | 713,378 | | 359,181 | 244,444 | 234,052 | (10) | 105,222 | 1,656,277 | |||||||||
2007 | 625,340 | | 3,813,436 | 205,854 | 1,519,759 | (10) | 82,173 | 6,246,562 |
(1) | Salary adjustments for each NEO were made in March 2008 and continued unchanged through 2009, except that Mr. Bitzers salary was set at $650,000, effective March 1, 2009, to approximate his 2008 salary as expressed in Euros. Mr. Bitzers 2007 and 2008 salaries as set forth above reflect the effect of the then current Euro to U.S. Dollar exchange rate. |
(2) | Reflects fair value of target performance-based restricted stock unit awards and time-based restricted stock unit awards on the award date. See our Stock Options and Incentive Plans Note to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the applicable fiscal year for a discussion of the relevant assumptions used to account for these awards. Performance-based restricted stock units have a potential payout of 0% to 200% of the target |
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amount. The fair values of the maximum possible performance-based restricted stock unit awards as of the award dates are as follows: Mr. Fettig 2007- $6,156,800, 2008-$7,477,406, 2009-$7,331,201; Mr. Templin 2007-$721,500, 2008- $867,202, 2009- $866,650; Mr. Todman 2007-$1,289,080, 2008-$1,902,536, 2009-$1,899,972; Mr. Periquito 2007-$853,486, 2008-$1,102,408; Mr. Bitzer 2007-$615,872, 2008- $718,362, 2009-$866,650. For the actual number of performance-based restricted stock units earned for the 2007, 2008, and 2009 performance periods, see the Outstanding Equity Awards at Fiscal Year-End table. |
(3) | Reflects the fair value of stock option awards on the award date. See our Stock Options and Incentive Plans Note to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the applicable fiscal year for a discussion of the relevant assumptions used in calculating these values. |
(4) | Represents the sum of cash awards earned in 2009 under PEP. For Messrs. Templin, Periquito and Bitzer this amount also includes earned 2009 performance cash units. The 2009 performance cash unit awards are subject to time-based vesting and will not be paid out until February 2012. However, Mr. Periquitos award will be paid out in April 2010 due to retirement. The individual PEP and performance cash unit awards that comprise the total value in the Non-Equity Incentive Plan Compensation column above for our NEOs were: |
Name | 2009 PEP Award ($) | 2009 Performance Cash Award (earned, but unvested) ($) |
Total ($) | |||
Jeff M. Fettig |
3,500,000 | | 3,500,000 | |||
Roy W. Templin |
911,625 | 498,333 | 1,409,958 | |||
Michael A. Todman |
1,254,000 | | 1,254,000 | |||
Paulo F. M. O. Periquito |
1,832,906 | 1,901,813 | 3,734,719 | |||
Marc R. Bitzer |
908,838 | 498,333 | 1,407,171 |
(5) | Reflects the change in actuarial present value of these benefits from December 31, 2008 to December 31, 2009. See the Pension Benefits table for the actuarial present value of these benefits. None of our NEOs received above-market earnings on their non-qualified deferred compensation accounts. |
(6) | The following table presents an itemized account of the amounts shown in the All Other Compensation column for each NEO in 2009: |
Name | Personal Use of Whirlpool Aircraft (a) ($) |
Car & Driver (b) |
Other Perquisites (c) |
Insurance Premiums (d) ($) |
Defined Contribution Plan Contributions (e) ($) |
Relocation (f) ($) |
Total ($) | |||||||
Jeff M. Fettig |
37,192 | | 33,556 | | 56,163 | | 126,911 | |||||||
Roy W. Templin |
12,116 | | 15,097 | | 33,271 | | 60,484 | |||||||
Michael A. Todman |
77,738 | | 12,513 | | 34,835 | | 125,086 | |||||||
Paulo F. M. O. Periquito |
| 104,352 | 1,441 | 63,400 | | | 169,193 | |||||||
Marc R. Bitzer |
| | 27,968 | 1,807 | 8,305 | 42,609 | 80,689 |
(a) | Our incremental cost for personal use of Whirlpool aircraft is calculated by multiplying the aircrafts hourly variable operating cost by a trips flight time, which includes any flight time of an empty return flight. Variable operating costs are based on industry standard rates of variable operating costs, including fuel costs, trip-related maintenance, landing/ramp fees and other miscellaneous variable costs. On certain occasions, a spouse or other family member may accompany one of our NEOs on a flight. No additional operating cost is incurred in such situations under the foregoing methodology. We do not pay our NEOs any amounts in connection with taxes on income imputed to them for personal use of our aircraft. |
(b) | For Mr. Periquito, this amount includes $30,459 for the incremental cost to Whirlpool of providing a car and $73,893 for the incremental cost to Whirlpool of providing a driver. We calculated the incremental cost of the driver by using the actual employment cost to Whirlpool during 2009 and of the car by using the value of (1) the purchase price divided by four (for the expected usage of the car in years) and (2) the annual cost of insurance, maintenance, and registration. |
(c) | Represents the incremental cost to Whirlpool of: Whirlpool products offered at discounted prices; financial planning and tax services; personal use of property that we own or lease primarily for business purposes; comprehensive health evaluations and home security. Individually, none of these categories of perquisites or personal benefits exceeded $25,000 for any single NEO. |
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(d) | Represents Whirlpools payments to provide certain privately funded life, medical and dental insurance programs to non-U.S. based NEOs. |
(e) | Represents Whirlpools contributions to the 401(k) Retirement Plan for Messrs. Fettig, Templin, Todman, and Bitzer and to the 401(k) Restoration Plan for Messrs. Fettig, Templin, and Todman. The amount for Mr. Bitzer includes Whirlpools contributions to Previndai, a voluntary savings plan for executives (dirigenti) in Italy for a portion of 2009. |
(f) | For Mr. Bitzer, this amount reflects the differential between relocation payments and expenses provided under the executive relocation program and the relocation program available to salaried employees generally. In connection with assuming his responsibilities as Executive Vice President and President, U.S. Operations, Mr. Bitzer relocated from Comerio, Italy to Benton Harbor, Michigan. |
(7) | Compensation values shown for Mr. Bitzer have been converted from Euros to U.S. dollars using the average currency conversion rate for each respective period. For Mr. Periquito, all compensation values for 2007, and All Other Compensation values for 2008 and 2009 have been converted from Brazilian reais to U.S. dollars using the average currency conversion rate for each respective year. |
(8) | Represents additional compensation for increased living costs outside the United States. |
(9) | No change in actuarial value is reflected due to transfer of the asset and obligation to a private pension account in 2006. |
(10) | No change in actuarial value is reflected as Mr. Bitzer became eligible to participate in the Whirlpool Supplemental Executive Retirement Plan (SERP) in 2009. |
The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. During 2009, we granted short-term cash incentives under the Performance Excellence Plan (PEP awards) and long-term incentives using stock options, performance cash units and performance-based restricted stock units under the Whirlpool Corporation 2007 Omnibus Stock and Incentive Plan (the Plan).
Stock option grants are issued with an exercise price equal to the closing price of Whirlpool common stock on the New York Stock Exchange on the award date. The option term is ten years and options vest in three equal annual installments. If the executive dies, becomes disabled, or retires the stock options (whether vested or unvested) become vested and may be exercised until the earlier of the expiration date and three years from the date of death or disability or five years from the date of retirement, as applicable. In the event of death, the option may be exercised one year beyond the date of death, even if this is beyond the expiration date. However, the option may not be exercised earlier than the first anniversary date of the award. In other instances, vested stock options expire immediately upon termination of employment.
From time to time, the Committee grants restricted stock unit awards subject only to time-based vesting conditions. The Committee did not grant any awards of this type to NEOs in 2009. In 2009, the Committee established target and maximum performance-based restricted stock unit and performance cash unit awards to be determined based on the achievement of specified objectives during the 2009 fiscal year (the performance period). The Committee approved awards in 2010, basing the number of restricted stock units and
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performance cash units awarded on the level of achievement of 2009 objectives. These awards are subject to a two year vesting period. Upon vesting, restricted stock units convert on a one-for-one basis to shares of common stock. Upon vesting, performance cash units entitle an executive to receive a cash payment equal to the dollar amount awarded.
Generally, an executive must be employed by Whirlpool on the last day of the performance period in order to obtain PEP, performance-based restricted stock unit or performance cash unit awards. However, if an executive dies, becomes disabled, or retires after a minimum of six months of the performance period has been completed, but prior to the end of the performance period, and at the end of the performance period the Committee determines that the performance objectives have been met, the Committee may determine to award the executive or his beneficiaries, if applicable, a portion of the award. With respect to performance-based restricted stock unit and performance cash unit awards, if an executive dies, becomes disabled, or retires after the completion of the performance period, but prior to the vesting date of the award, vesting and distribution are accelerated.
Name | Grant Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($) |
Estimated Future Payouts Under Equity Incentive Plan Awards (#) |
All Other (#) |
All Other (#) |
Exercise or Base Price of Option Awards ($/Share) |
Grant Date Fair Value of Stock and Option Awards (4) ($) |
||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||
Jeff M. Fettig | |||||||||||||||||||||||||||||||
PEP Cash(1) | | | 1,785,000 | 5,000,000 | | | | | | | | ||||||||||||||||||||
Performance RSUs (2) | 2/16/2009 | | | | | 125,397 | 230,396 | | | | 3,990,133 | ||||||||||||||||||||
Stock Options | 2/16/2009 | | | | | | | | 300,000 | 31.82 | 1,914,000 | ||||||||||||||||||||
Roy W. Templin | |||||||||||||||||||||||||||||||
PEP Cash(1) | | | 552,500 | 2,210,000 | | | | | | | | ||||||||||||||||||||
Performance Cash Units(3) |
| | 433,333 | 866,667 | | | | | | | | ||||||||||||||||||||
Performance RSUs(2) | 2/16/2009 | | | | | 13,618 | 27,236 | | | | 433,325 | ||||||||||||||||||||
Stock Options | 2/16/2009 | | | | | | | | 38,909 | 31.82 | 248,239 | ||||||||||||||||||||
Michael A. Todman | |||||||||||||||||||||||||||||||
PEP Cash(1) | | | 760,000 | 3,040,000 | | | | | | | | ||||||||||||||||||||
Performance RSUs(2) | 2/16/2009 | | | | | 29,855 | 59,710 | | | | 949,986 | ||||||||||||||||||||
Stock Options | 2/16/2009 | | | | | | | | 85,301 | 31.82 | 544,220 | ||||||||||||||||||||
Paulo F. M. O. Periquito | |||||||||||||||||||||||||||||||
PEP Cash(1) | | | 735,000 | 2,940,000 | | | | | | | | ||||||||||||||||||||
Performance Cash Units(3) | | | 1,653,750 | 3,307,500 | | | | | | | | ||||||||||||||||||||
Marc R. Bitzer | |||||||||||||||||||||||||||||||
PEP Cash(1) | | | 552,500 | 2,210,000 | | | | | | | | ||||||||||||||||||||
Performance Cash Units(3) | | | 433,333 | 866,667 | | | | | | | | ||||||||||||||||||||
Performance RSUs(2) | 2/16/2009 | | | | | 13,618 | 27,236 | | | | 433,325 | ||||||||||||||||||||
Stock Options | 2/16/2009 | | | | | | | | 38,909 | 31.82 | 248,239 |
(1) | Represents estimated possible payouts of short-term incentive awards for 2009 under PEP. See the column captioned Non-Equity Incentive Plan Compensation in the Summary Compensation Table for the actual payout amounts for 2009. |
(2) | Represents estimated possible restricted stock unit awards for 2009 performance. See the column captioned Stock Awards Number of Shares or Units of Stock That Have Not Vested in the Outstanding Equity Awards at Fiscal Year-End Table for actual awards. |
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(3) | Represents estimated possible performance cash unit awards for 2009 performance for Messrs. Templin, Periquito, and Bitzer. See the column captioned Non-Equity Incentive Plan Compensation in the Summary Compensation Table for actual awards for 2009. In 2009, Messrs. Fettig and Todman did not receive performance cash unit awards as part of their long-term incentives. |
(4) | Represents the fair value on the award date as presented in our financial statements for the 2009 fiscal year for the stock options. For the performance-based restricted stock unit awards for each NEO, the amount represents the fair value at the award date, based upon the probable outcome of the performance conditions. |
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Outstanding Equity Awards at Fiscal Year-End
The table below lists outstanding equity grants for each NEO as of December 31, 2009. The table includes outstanding equity grants from past years as well as the current year.
Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name | Number
of Securities Underlying Unexercised Options (Exercisable) (#) |
Number of Securities Underlying Unexercised Options (Unexercisable) (#) (1) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) (3) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) |
||||||||||||||||||
Jeff M. Fettig Stock Options |
|||||||||||||||||||||||||||
2001 |
70,000 | | 54.07 | 2/19/2011 | |||||||||||||||||||||||
2002 |
70,000 | | 67.29 | 2/18/2012 | |||||||||||||||||||||||
2003 |
70,000 | | 49.60 | 2/17/2013 | |||||||||||||||||||||||
2004 |
40,000 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
83,200 | | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
60,667 | 30,333 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
41,038 | 79,662 | 88.49 | 2/18/2018 | |||||||||||||||||||||||
2009 |
| 300,000 | 31.82 | 2/16/2019 | |||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2007 |
32,000 | (2) | 2,581,120 | (4) | |||||||||||||||||||||||
2008 |
11,000 | (5) | 887,260 | ||||||||||||||||||||||||
2009 |
144,206 | (6) | 11,631,656 | ||||||||||||||||||||||||
RSUs |
36,850 | (7) | 2,972,321 | ||||||||||||||||||||||||
Roy W. Templin Stock Options |
|||||||||||||||||||||||||||
2003 |
10,000 | | 62.98 | 7/01/2013 | |||||||||||||||||||||||
2004 |
2,664 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
9,300 | | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
7,067 | 3,533 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
4,760 | 9,240 | 88.49 | 2/18/2018 | |||||||||||||||||||||||
2009 |
| 38,909 | 31.82 | 2/16/2019 | |||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2007 |
3,750 | (2) | 302,475 | (4) | |||||||||||||||||||||||
2008 |
1,224 | (5) | 98,728 | ||||||||||||||||||||||||
2009 |
15,660 | (6) | 1,263,136 | ||||||||||||||||||||||||
RSUs |
25,000 | (8) | 2,016,500 |
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Option Awards | Stock Awards | ||||||||||||||||||||||||||
Name | Number
of Securities Underlying Unexercised Options (Exercisable) (#) |
Number of Securities Underlying Unexercised Options (Unexercisable) (#) (1) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) (3) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) |
||||||||||||||||||
Michael A. Todman Stock Options |
|||||||||||||||||||||||||||
2002 |
27,000 | | 67.29 | 2/18/2012 | |||||||||||||||||||||||
2004 |
10,282 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
19,200 | | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
12,733 | 6,367 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
10,438 | 20,262 | 88.49 | 2/18/2018 | |||||||||||||||||||||||
2009 |
| 85,301 | 31.82 | 2/16/2019 | |||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2007 |
6,700 | (2) | 540,422 | (4) | |||||||||||||||||||||||
2008 |
2,687 | (5) | 216,733 | ||||||||||||||||||||||||
2009 |
34,333 | (6) | 2,769,300 | ||||||||||||||||||||||||
RSUs |
64,601 | (9) | 5,210,717 | ||||||||||||||||||||||||
Paulo F. M. O. Periquito Stock Options |
|||||||||||||||||||||||||||
2003 |
33,000 | | 49.60 | 2/17/2013 | |||||||||||||||||||||||
2004 |
12,339 | | 72.94 | 2/16/2014 | |||||||||||||||||||||||
2006 |
10,335 | | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
6,503 | 3,251 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
6,052 | 11,746 | 88.49 | 2/18/2018 | |||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2007 |
4,436 | (2) | 357,808 | (4) | |||||||||||||||||||||||
2008 |
1,557 | (5) | 125,588 | ||||||||||||||||||||||||
Marc R. Bitzer Stock Options |
|||||||||||||||||||||||||||
2004 |
3,563 | | 75.32 | 2/16/2014 | |||||||||||||||||||||||
2006 |
6,932 | | 89.16 | 2/20/2016 | |||||||||||||||||||||||
2007 |
6,097 | 3,048 | 94.47 | 2/19/2017 | |||||||||||||||||||||||
2008 |
3,944 | 7,652 | 88.49 | 2/18/2018 | |||||||||||||||||||||||
2009 |
| 38,909 | 31.82 | 2/16/2019 | |||||||||||||||||||||||
Performance RSUs |
|||||||||||||||||||||||||||
2007 |
3,201 | (2) | 258,193 | (4) | |||||||||||||||||||||||
2008 |
1,014 | (5) | 81,789 | ||||||||||||||||||||||||
2009 |
15,660 | (6) | 1,263,136 | ||||||||||||||||||||||||
RSUs |
57,609 | (10) | 4,646,742 |
(1) | As shown in the table above, each NEO, other than Mr. Periquito, has three awards with remaining unvested stock options listed in this column. These awards represent grants from 2007, 2008 and 2009. Mr. Periquito did not receive an option grant in 2009. Stock options generally vest and become exercisable in equal installments on the first, second, and third anniversary of the grant date. As of the last day of our 2009 fiscal year, the awards made in 2007 have one |
52
remaining vesting date, February 19, 2010; the awards made in 2008 have two vesting dates remaining, February 18, 2010, and February 18, 2011. The awards made in 2009 have three vesting dates remaining, February 16, 2010, February 16, 2011, and February 16, 2012. |
(2) | Represents restricted stock units earned for 2007 performance, but subject to time-based vesting and unvested as of December 31, 2009. Shares of common stock were distributed on February 19, 2010. |
(3) | Represents earned, but unvested restricted stock units multiplied by the closing price, $80.66, of our common stock on December 31, 2009. The ultimate value of the awards will depend on the value of our common stock on the actual vesting date. |
(4) | The value of the awards as of the February 19, 2010 vesting date was as follows: Mr. Fettig, $2,709,440; Mr. Templin, $317,513; Mr. Todman, $567,289; Mr. Periquito, $375,596; Mr. Bitzer, $271,029. |
(5) | Represents earned, but unvested restricted stock units granted for 2008 performance. Although earned in 2008, these restricted stock units are subject to time-based vesting and shares will not be distributed until February 18, 2011. |
(6) | Represents earned, but unvested restricted stock units granted for 2009 performance. Although earned in 2009, these restricted stock units are subject to time-based vesting and shares will not be distributed until February 16, 2012. |
(7) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 14,350 upon retirement; 22,500 on July 1, 2011. Deferred vested units and units vesting upon retirement are credited with dividend equivalents until distribution. |
(8) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 7,500 on June 18, 2010; 10,000 on September 1, 2011; 7,500 on June 18, 2014. |
(9) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 15,000 on July 1, 2011; 16,190 on June 19, 2012; 33,411 upon retirement. Deferred vested units and units vesting upon retirement are credited with dividend equivalents until distribution. |
(10) | Represents unvested time-based restricted stock units which will vest and be distributed in shares of common stock as follows: 10,153 on August 24, 2010; 10,000 on July 1, 2011; 10,793 on June 19, 2012; 10,793 on June 19, 2017; 15,870 upon retirement. Deferred vested units and units vesting upon retirement are credited with dividend equivalents until distribution. |
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Option Exercises and Stock Vested
The table below summarizes the value received from stock option exercises and stock grants vested in 2009.
Name | Option Awards | Stock Awards | ||||||||||
Number of Shares Acquired on Exercise (1) (#) |
Value Realized on Exercise (2) ($) |
Number of Shares Acquired on Vesting (3) (#) |
Value Realized on Vesting (4) ($) |
|||||||||
Jeff M. Fettig |
64,000 | 1,460,979 | 73,580 | 2,761,475 | ||||||||
Roy W. Templin |
| | 20,397 | 1,033,421 | ||||||||
Michael A. Todman |
| | 18,663 | 738,904 | ||||||||
Paulo F. M. O. Periquito |
| | 6,330 | 166,163 | ||||||||
Marc R. Bitzer |
| | 4,246 | 111,458 |
(1) | Option awards exercised by Mr. Fettig were granted on February 14, 2000. |
(2) | The dollar value realized on the exercise of stock options represents the pre-tax difference (fair market value of Whirlpool common stock on the exercise date minus the exercise price of the option) multiplied by the number of shares of common stock covered by the stock options held by Mr. Fettig. |
(3) | Reflects shares distributed as a result of the vesting of restricted stock unit awards: Mr. Fettig 25,000 time-based restricted stock units, 48,580 performance-based restricted stock units; Mr. Templin 15,000 time-based restricted stock units, 5,397 performance-based restricted stock units; Mr. Todman 7,500 time-based restricted stock units, 11,163 performance-based restricted stock units; Mr. Periquito 6,330 performance-based restricted stock units; and Mr. Bitzer 4,246 performance-based restricted stock units. |
(4) | The dollar value realized represents the pre-tax value received by each NEO upon the vesting of the stock unit awards. The value realized is based on the closing stock price of Whirlpool stock on the New York Stock Exchange on the vesting date. |
The following table describes the estimated actuarial present value of accrued pension benefits through the end of our 2009 fiscal year for each of our NEOs listed in the table. Our U.S.-based NEOs are entitled to benefits under the Whirlpool Employees Pension Plan (WEPP), the Whirlpool Retirement Benefit Restoration Plan (Pension Restoration Plan), and the Whirlpool Supplemental Executive Retirement Plan (SERP). None of our U.S.-based NEOs are retirement-eligible as of the last day of our 2009 fiscal year. The number of years of service credited to each NEO equals the NEOs length of eligible service with Whirlpool. Whirlpool currently has a policy against crediting additional years of service under the following pension plans.
For benefits under WEPP, the formula is:
2% x years of credited service x average base salary |
In this formula:
| years of credited service for salaried employees is generally based on hours worked as a salaried employee and also includes hours paid but not worked (such as vacations and holidays), hours of military service required to be recognized under federal law, and hours for up to 24 months of long-term disability; |
54
| average base salary generally means the average of base salary in effect during the 60 sequential (but not necessarily consecutive) full calendar months of a participants last 120 or fewer consecutive full calendar months of service before retirement or other termination of service that will produce the largest average monthly amount; and |
| the maximum number of years of service credited under the plan is 30 years. |
Retirement benefits under this formula are limited by the Internal Revenue Code. Benefits can be paid to plan participants in a variety of annuity forms or as a lump sum amount. The benefits payable to our NEOs from this plan were frozen as of December 31, 2006.
After reaching age 55 and completing five years of service with Whirlpool, salaried participants in this plan are eligible for early retirement benefits under the plan. Benefits paid prior to age 65 are reduced. The factors used to determine this reduction vary with the participants age. For example, for salaried participants whose benefits have vested and who retire from active service at age 55, their retirement benefits are reduced to 55% of the full retirement benefit payable at age 65. None of our NEOs who participate in this plan were eligible for early retirement as of the last day of our 2009 fiscal year.
Under the Pension Restoration Plan, the retirement eligibility and benefit formula are the same as under WEPP, except that in this plan statutory benefit limitations are not applied in calculating benefits under the formula. With respect to our NEOs who participate in this plan, payments under this plan are made in accordance with their distribution elections. Participants in this plan may select among the following payment distribution options: lump sum seven months following termination; lump sum in the year following the year of termination; or ten annual installments commencing in the year following termination. Participants may not make withdrawals during their employment. The benefits payable to our NEOs from this plan were frozen as of December 31, 2006.
With respect to benefits under SERP, the formula is:
2% x years of credited service x average of the highest 5 PEP awards received over the last ten years |
In this formula:
| years of credited service has the same meaning as it does under WEPP described above; and |
| the maximum number of years of service credited under the plan is 30 years. |
Mr. Bitzer became eligible to participate in SERP in 2009, but will not be vested until December 31, 2013 as he must complete five years of credited U.S. service in the plan. After completing five years of service, our NEOs are eligible for benefits under SERP upon termination of employment for any reason except a termination for cause, provided they have received one or more PEP awards within the last ten calendar years preceding their termination of employment. Participants in this plan may select among the following payment
55
distribution options: lump sum seven months following termination; lump sum in the year following the year of termination; or ten annual installments commencing in the year following termination.
The actuarial present values of benefits under these plans are calculated in accordance with the following assumptions: (1) discount rate: 2009 5.85% and 2008 6.1%; (2) assumed retirement age: 65; (3) no pre-retirement decrements; (4) assumed form of payment: lump sum, determined as equal to the present value of the life annuity provided by the plans formulas and calculated based on the plans provisions, including an interest rate based on high-quality corporate bond yields (assumed to be 5.85%) and mortality assumption that is based on the RP-2000 Table. The actuarial increase during our 2009 fiscal year of the projected retirement benefits can be found in the Summary Compensation Table in the Change in Pension Value and Non-Qualified Deferred Compensation Earnings column (all amounts reported under that heading represent actuarial increases in our plans).
Mr. Periquito became retirement-eligible as of the last day of our 2007 fiscal year. Both Mr. Periquito and Whirlpool contributed to his benefit under the Founder Pension Plan, a non-U.S. pension plan, prior to its transfer to a private pension fund in 2006. Whirlpool has not made any contributions to the fund since 2006 and expects to make no future contributions to the fund. Any change in pension value from the prior year is solely due to the change in the conversion rate from Brazilian Real to the U.S. Dollar. Mr. Periquito may draw from the fund prior to and during retirement.
Name | Plan Name | Number of Years Credited Service (#) |
Present Value of Accumulated Benefit ($) |
Payments During Last Fiscal Year ($) | ||||
Jeff M. Fettig |
WEPP | 26 | 602,105 | | ||||
Pension Restoration |
26 | 1,888,728 | | |||||
SERP |
29 | 5,967,774
Total 8,458,607 |
| |||||
Roy W. Templin |
WEPP | 4 | 66,939 | | ||||
Pension Restoration |
4 | 60,457 | | |||||
SERP |
7 | 322,886
Total 450,282 |
| |||||
Michael A. Todman |
WEPP | 14 | 310,189 | | ||||
Pension Restoration |
14 | 494,006 | | |||||
SERP |
17 | 1,306,475
Total 2,110,670 |
| |||||
Paulo F. M. O. Periquito(1) |
Private Pension Fund | | 9,844,469 | | ||||
Marc R. Bitzer |
WEPP | | | | ||||
Pension Restoration |
| | | |||||
SERP |
1 | 9,348 | | |||||
Total 9,348 |
(1) | Benefit was frozen in 2006. Change in pension value from the prior year is solely due to the change in the conversion rate from Brazilian Real to the U.S. Dollar. |
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Non-Qualified Deferred Compensation
The table below provides information about the non-qualified defined contribution deferred compensation plans in which our NEOs participate. Some of our U.S.-based NEOs participate in the Whirlpool Corporation Executive Deferred Savings Plan (EDSP I) and the Whirlpool Corporation Executive Deferred Savings Plan II (EDSP II). EDSP I was designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan. Participants may no longer make deferrals to EDSP I. EDSP II became effective January 1, 2005 to comply with the requirements of Code Section 409A.
EDSP II includes two components: the traditional component is known as EDSP II and the added component is known as the Whirlpool Executive Restoration Plan (the 401(k) Restoration Plan). The traditional EDSP II is designed to provide executives with pre-tax deferral opportunities beyond those offered by the Whirlpool 401(k) Retirement Plan and the 401(k) Restoration Plan. Eligible executives may elect to contribute up to 75% of their short-term incentives and long-term incentives under this component. For our NEOs, the 401(k) Restoration Plan treats base salary as the only form of compensation eligible for deferral under the plan.
An EDSP I participant may elect distribution following termination of employment in the form of a lump sum or in a number of monthly installments designated by the participant. A participant in EDSP II may select among the following post-termination distribution options: lump sum seven months following termination, lump sum in the year following the year of termination, or ten annual installments commencing in the year following termination.
EDSP I and EDSP II (including both the traditional component and the 401(k) Restoration Plan component) are unfunded non-qualified plans that are secured by our general assets. Amounts deferred are credited to recordkeeping accounts for participants, and the recordkeeping balances are credited with earnings and losses measured by investments generally similar to those selected by executives and available in the Whirlpool 401(k) Retirement Plan. Participants may not make withdrawals during their employment, except in the event of hardship, as approved by the Human Resources Committee.
As an executive in Italy for a portion of 2009, Mr. Bitzer participated in Previndai, a voluntary defined contribution plan mandated by the National Collective Agreement for Industrial Dirigenti. Both Mr. Bitzer and Whirlpool made contributions to his Previndai account through February 2009, as reflected in the Summary Compensation Table. Mr. Bitzer will be eligible to participate in EDSP II for the 2010 plan year. Mr. Periquito did not participate in any non-qualified defined contribution or other non-qualified deferred compensation plans.
57
Name | Executive Contributions in Last FY (1) ($) |
Registrant Contributions in Last FY (2) ($) |
Aggregate Earnings in Last FY (3) ($) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last FYE (4) ($) |
||||||||
Jeff M. Fettig |
|||||||||||||
EDSP I |
|
|
716,477 | | 1,720,938 | ||||||||
EDSP II |
943,010 | |
4,047,896 | | 6,917,427 | ||||||||
401(k) Restoration |
40,339 | 40,313 | 90,007 | | 431,764 | ||||||||
Total |
983,349 | 40,313 | 4,854,380 | | 9,070,129 | ||||||||
Roy W. Templin |
|||||||||||||
EDSP I |
|
|
| | | ||||||||
EDSP II |
13,976 | |
135,458 | | 365,497 | ||||||||
401(k) Restoration |
20,608 | 18,501 | 47,560 | | 245,033 | ||||||||
Total |
34,584 | 18,501 | 183,018 | | 610,530 | ||||||||
Michael A. Todman |
|||||||||||||
EDSP I |
|
|
211,797 | | 615,290 | ||||||||
EDSP II |
|
|
48,919 | | 153,304 | ||||||||
401(k) Restoration |
26,368 | 21,221 | 20,950 | | 137,456 | ||||||||
Total |
26,368 | 21,221 | 281,666 | | 906,050 |
(1) | The amount of the contributions made by each NEO, as reported above, is also included in each NEOs compensation reported under the Summary Compensation Table, either as Salary, Non-Equity Incentive Plan Compensation or Stock Awards. |
(2) | Represents the amount of the contributions made by Whirlpool to each NEO under the 401(k) Restoration Plan. These amounts are also reflected in the All Other Compensation column of the Summary Compensation table. |
(3) | The aggregate earnings are not reported in the Summary Compensation Table. |
(4) | The aggregate balance at December 31, 2009, as reported above, reflects amounts that either are currently reported or were previously reported as compensation in the Summary Compensation Table for 2009 or prior years, except for the aggregate earnings on deferred compensation. |
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Potential Post-Termination Payments
The tables below describe compensation and benefits payable to each of our NEOs, other than Mr. Periquito, in each of the following circumstances: involuntary termination by Whirlpool for cause, involuntary termination by Whirlpool without cause, resignation, retirement, death, disability, and change in control (with and without a qualifying termination). Mr. Periquito resigned as President, Whirlpool International as of December 31, 2009. Mr. Periquitos agreement and retirement arrangements are discussed below under the heading Periquito Retirement Arrangements.
The amounts shown in the table below assume that termination of employment or a change in control occurred as of December 31, 2009, and estimate certain amounts which would be paid to our NEOs upon the specified event. Due to the number of factors that affect the nature and amounts of compensation and benefits provided upon the events discussed below, the actual amounts paid or distributed may be different. Factors that could greatly affect these amounts include the timing during the year of any such event, Whirlpools stock price, and the NEOs age.
The tables quantify and the accompanying narrative disclosure describes the compensation and benefits that are paid in addition to compensation and benefits generally available to salaried employees. Examples of compensation and benefits generally available to salaried employees, and thus not included below, are distributions under the Whirlpool 401(k) Retirement Plan, accrued vacation pay, and, in certain circumstances, vested equity.
Involuntary Terminations and Resignation
We provide no additional benefits to any of our NEOs in the event that the NEO resigns from Whirlpool. Also, we do not have employment agreements with any of our NEOs that would provide benefits in the event that we terminate the NEOs employment involuntarily for cause. Upon resignation and involuntary termination for cause, and in accordance with the terms of the long-term incentive awards granted under our incentive programs, our NEOs forfeit all unvested performance-based restricted stock units and performance cash units, as well as all unvested, and vested, but unexercised options. Certain time-based restricted stock units accelerate upon an involuntary termination without cause. Generally, in the event we terminate the employment of an NEO involuntarily without cause, the payment of the value of these unvested time-based restricted stock units is the only benefit to which the NEO is entitled. The amounts reflected in the table below do not include amounts payable under the severance policy generally applicable to all U.S. salaried employees. The Committee may, in its discretion, approve additional severance benefits designed to mitigate economic injury to the NEO as a direct result of the termination.
Retirement
None of the other NEOs, other than Mr. Periquito, was retirement-eligible as of the last day of our 2009 fiscal year. If these NEOs chose to retire as of the last day of our 2009 fiscal year, the effect of that retirement would be the same as if the NEO had resigned, as
59
described immediately above. The following quantification of estimated compensation and benefits payable at retirement, as well as the accompanying narrative disclosure, assumes that each of our NEOs was retirement-eligible as of the end of our 2009 fiscal year.
In the event of retirement, our NEOs would be entitled to a mix of short- and long-term incentives. The possible short-term incentive payout would consist of a prorated cash payout under PEP for the fiscal year in which the NEO retires, provided that the objective performance goal for that year is met. Proration is based on the ratio of the number of days worked during the performance period to the total number of days in the performance period. The Committee met on February 15, 2010 and determined the PEP awards earned for 2009. An NEO who retired during 2009 would receive a payout based on the amounts approved by the Committee.
For the purposes of the table below and consistent with our assumption that each of our NEOs is retirement-eligible, we include a value showing the full vesting of certain unvested long-term incentive awards for the completed 2007 and 2008 performance periods. Vesting of performance cash units is accelerated at retirement. With respect to restricted stock unit awards, the benefit a retirement-eligible NEO would actually receive upon retirement would depend on whether the initial award is performance-based or time-based. For awards which are initially performance-based, but subject to vesting requirements, vesting accelerates upon retirement provided that the performance period is completed. For awards subject only to time-based vesting, the NEO forfeits any unvested restricted stock units upon retirement. Certain time-based awards fully vest upon retirement and attainment of age 60.
With respect to performance-based awards, a retirement-eligible NEO receives a prorated award if the NEO retires at least six months into the performance period, provided that the objective performance goal is met. The 2009 performance-based restricted stock unit and performance cash unit awards were granted for a one-year performance period. Proration is based on the ratio of the number of days worked during the performance period to the total number of days in the performance period. In the case of the 2009 awards, as of the last day of our 2009 fiscal year, each NEO had completed the full one year performance period. The Committee met on February 15, 2010 and determined that our NEOs earned 115% of these 2009 awards. A NEO who retired during 2009 would receive a prorated payout based on this level of achievement.
A retirement-eligible NEO would receive accelerated vesting of all applicable unvested stock option awards upon retirement. Unvested stock options that are accelerated upon the retirement of a retirement-eligible NEO must be exercised within five years or the unexercised stock options will be cancelled.
Death and Disability
Upon the death or disability of one of our NEOs, with respect to the accelerated vesting of unvested, or partially unvested, performance cash unit awards, performance-based restricted stock unit awards, and stock options, the same analysis applies under these two scenarios as would apply in the case of the retirement of a retirement-eligible NEO, as described immediately above.
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Certain time-based restricted stock units which provide for full vesting and distribution upon retirement accelerate upon death or disability. Other time-based units are forfeited in the event of death or disability prior to vesting.
The following table shows the possible payouts to each of our NEOs for the specified type of employment termination. As detailed above, the values for the retirement portion of the table assume that our NEOs were retirement-eligible as of the last day of the 2009 fiscal year and also assume that our NEOs were eligible for the full vesting of any unvested restricted stock unit awards. As a result of these assumptions, the benefit conferred to our NEOs upon retirement is identical to the benefit conferred in the event of a disability. In addition, the amounts under Retirement and Disability Total in the table below are identical to the amounts under Death Total in the table below for each of the NEOs. The designated beneficiaries of our NEOs would receive the same life insurance benefits generally available to all salaried employees and, thus, there is no additional incremental benefit paid out in the event that they die.
Name | RESIGNATION | INVOLUNTARY TERMINATION |
RETIREMENT AND DISABILITY | DEATH | ||||||||||||||||||||||||||||||||||||||
With Cause ($) |
Without Cause (1) ($) |
Short- Term Incentives |
Long-Term Incentives | |||||||||||||||||||||||||||||||||||||||
2009 PEP ($) |
2007 Perfor- RSUs ($) |
2008 Perfor- RSUs ($) |
2009 Perfor- RSUs ($) |
2007 Perfor- Cash ($) |
2008 Perfor- Cash ($) |
2009 Perfor- Cash ($) |
Stock Options ($) |
RSUs ($) |
TOTAL ($) |
TOTAL ($) |
||||||||||||||||||||||||||||||||
Jeff M. Fettig |
| | 1,157,471 | 3,500,000 | 2,581,120 | 887,260 | 11,631,656 | | | | 14,652,000 | 1,157,471 | 34,409,507 | 34,409,507 | ||||||||||||||||||||||||||||
Roy W. Templin | | | | 911,625 | 302,475 | 98,728 | 1,263,136 | 350,000 | 108,338 | 498,333 | 1,900,316 | | 5,432,951 | 5,432,951 | ||||||||||||||||||||||||||||
Michael A. Todman | | | 4,000,817 | 1,254,000 | 540,422 | 216,733 | 2,769,300 | | | | 4,166,101 | 4,000,817 | 12,947,373 | 12,947,373 | ||||||||||||||||||||||||||||
Marc R. Bitzer | | | 3,840,142 | 908,838 | 258,193 | 81,789 | 1,263,136 | 315,306 | 90,020 | 498,333 | 1,900,316 | 3,840,142 | 9,156,073 | 9,156,073 |
(1) | Represents the benefit of accelerated vesting of certain unvested time-based restricted stock units for Messrs. Fettig, Todman, and Bitzer. |
Change in Control
Upon the occurrence of a change in control, our NEOs may receive accelerated vesting of previously unvested, performance cash units, restricted stock units, and stock options under the terms of those awards. Vesting of performance cash units and performance-based restricted stock units will accelerate upon a change in control, but awards will not be distributed unless they are not assumed by Whirlpools successor. Time-based restricted stock units will be accelerated and paid out upon a change in control.
We have agreements with each of the NEOs that take effect only in the event of a change in control. A change in control in accordance with these agreements is generally defined to include the acquisition by any person or group of 25% or more of Whirlpools voting securities, a change in the composition of the Board such that the existing Board or persons who were approved by a majority of directors or their successors on the existing Board no longer constitute a majority, and approval by the stockholders of an acquisition or liquidation of Whirlpool.
Under these change in control agreements, our NEOs may be entitled to receive an additional lump-sum payment in an amount sufficient to cover the full cost of any excise tax and the NEOs city, state, and federal income, employment, and excise taxes on payments under the change in control agreement and payments upon a change in control under compensation plans or award agreements, together with such
61
iterative payments such that the NEO is made entirely whole for the impact of the excise tax. The excise tax gross-up represents a benefit actually paid out by Whirlpool in connection with the occurrence of a change in control, whereas the accelerated vesting of long-term incentives provides a benefit to our NEOs, but does not represent amounts that we pay out solely in the event of a change in control. The following table shows the possible payouts to our NEOs triggered solely upon the occurrence of a change in control as of December 31, 2009.
Name | CHANGE IN CONTROL ONLY |
|||||||||||||||||||||||||||||
Long-Term Incentives | Excise Gross-Up |
TOTAL | ||||||||||||||||||||||||||||
Stock Options ($) |
2007 Perfor- RSUs ($) |
2008 Perfor- RSUs ($) |
2009 Perfor- RSUs (1) ($) |
2007 Perfor- Cash ($) |
2008 Perfor- Cash ($) |
2009 Perfor- Cash (1) ($) |
RSUs ($) |
($) | ($) | |||||||||||||||||||||
Jeff M. Fettig | 14,652,000 | 2,581,120 | 887,260 | 10,114,522 | | | | 2,972,321 | | 31,207,223 | ||||||||||||||||||||
Roy W. Templin | 1,900,316 | 302,475 | 98,728 | 1,098,428 | 350,000 | 108,338 | 433,333 | 2,016,500 | | 6,308,118 | ||||||||||||||||||||
Michael A. Todman | 4,166,101 | 540,422 | 216,733 | 2,408,104 | | | | 5,210,717 | | 12,542,077 | ||||||||||||||||||||
Marc R. Bitzer | 1,900,316 | 258,193 | 81,789 | 1,098,428 | 315,306 | 90,020 | 433,333 | 4,646,742 | | 8,824,127 |
(1) | Values shown represent target awards. |
Additional benefits are payable to our NEOs after a change in control, but only after a qualifying termination occurs. Qualifying terminations include: involuntary termination of the NEO by Whirlpool; voluntary termination by the NEO for good reason, as defined in the agreement; voluntary termination by the NEO during, and only during, the 13th month after the change in control; or a material breach of the change in control agreement by Whirlpool.
Cash severance arising from these changes in control agreements is paid out in a lump sum payment equal to:
| the NEOs unpaid base salary; |
| vacation pay equal to twice the annual accrual rate appropriate for the NEO, based on the NEOs length of service with Whirlpool; |
| unreimbursed business expenses; |
| all other items earned by and owed to the NEO through and including the date of the termination; |
| the higher of three times the NEOs base salary on the date of the termination or the NEOs base salary at any time during the 12 months prior to the change in control; |
| the higher of three times current target bonus opportunity (in terms of a percentage of base salary) under PEP or the NEOs highest target bonus opportunity at any time during the 12 months prior to the change in control; and |
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| the higher of the NEOs pro rata target bonus opportunity (in terms of a percentage of Base Salary) under PEP or the highest target bonus opportunity at any time during the 12 months prior to the change in control, or the actual bonus earned through the date of the termination under PEP based on the NEOs current level of goal achievement. |
The amount of cash severance will be offset by any other severance-type payments the NEO may be eligible or entitled to receive from any other sources.
Our NEOs are also entitled to receive continued benefits for 36 months in connection with a termination after a change in control. These benefits include certain health, life, and short- and long-term disability insurance benefits. The severance benefits provided to the NEOs in the event of a change in control include an amount, payable at the same time and in the same form as if paid from the non-qualified defined benefit pension plans, equal to the additional benefits to which the NEO would be entitled under our non-qualified defined benefit pension plans if:
| the NEOs benefits had fully vested; |
| the number of years of credited service was increased by three years; and |
| the NEOs age was equal to the NEOs actual age plus three years for purposes of determining retirement eligibility and early retirement reduction factors. |
The continuation of the NEOs benefits will be calculated at the same cost and at the same level of coverage as in effect on the date of termination.
The following table shows possible payouts to our NEOs as of December 31, 2009, triggered upon the occurrence of a change in control and a subsequent qualifying termination.
Name | CHANGE IN CONTROL ONLY |
QUALIFYING TERMINATION AFTER CHANGE IN CONTROL | |||||||||||||||||||
Cash Compensation | |||||||||||||||||||||
TOTAL ($) | Severance Payments ($) |
Annual Incentives ($) |
Health, Welfare and Other Benefits ($) |
Enhanced Pension Benefits ($) |
Incremental Excise Tax Gross-Up ($) |
TOTAL ($) | |||||||||||||||
Jeff M. Fettig |
31,207,223 | 9,180,000 | 3,500,000 | 30,852 | 276,843 | 10,498,253 | 54,693,171 | ||||||||||||||
Roy W. Templin |
6,308,118 | 3,607,500 | 911,625 | 36,357 | 147,209 | 2,853,829 | 13,864,638 | ||||||||||||||
Michael A. Todman |
12,542,077 | 4,560,000 | 1,254,000 | 37,308 | 230,554 | 4,309,033 | 22,932,972 | ||||||||||||||
Marc R. Bitzer |
8,824,127 | 3,607,500 | 908,838 | 36,357 | 28,045 | 3,625,174 | 17,030,041 |
Periquito Retirement Arrangements
Mr. Periquito completed his duties as President, Whirlpool International on December 31, 2009, and is continuing to serve as Chairman of Whirlpool S.A., a Whirlpool Brazilian subsidiary, until his current term ends, which is expected to be on or before April 30, 2010 (the Transition Period). On February 18, 2010, Whirlpool, Whirlpool S.A. and Mr. Periquito entered into a Transition Agreement (the Transition Agreement) under which
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the parties agreed that Mr. Periquitos employment will be deemed to terminate at the end of the Transition Period.
Under the Transition Agreement, Mr. Periquito will receive from Whirlpool S.A. severance compensation and benefits which are basically consistent with its current pay practices with respect to retiring executives located in Brazil. This compensation includes: (1) a contribution of 1,009,764 Brazilian reais (approximately U.S. $600,000), to Fundo de Garantia do Tempo De Servico, a government severance indemnity fund, on behalf of Mr. Periquito; and (2) a lump sum cash payment in reais equivalent to 13.82 months of monthly base salary (U.S. $846,475). Mr. Periquito will receive additional benefits under the Transition Agreement, including life insurance benefits for the duration of his life, retiree medical and dental benefits for him and his spouse for the duration of their lives (provided that such coverage can be obtained on commercially reasonable terms) and, for security reasons, continued use of a company car and driver through April 30, 2012. The cost of these additional benefits is not expected to exceed 1.7 million Brazilian reais (approximately U.S. $1 million).
Mr. Periquito, who is no longer an executive officer of Whirlpool Corporation, will not be eligible for an annual cash incentive (PEP) award, performance-based restricted stock units or performance cash units for the 2010 performance period. Vesting of Mr. Periquitos 2008 and 2009 performance cash unit awards will accelerate and he will receive $2,039,626. In addition, vesting of Mr. Periquitos 2008 performance restricted stock unit award will accelerate and he will receive 1,557 shares of Whirlpool common stock (with a fair market value of $125,588 as of December 31, 2009). Mr. Periquitos accelerated awards will be distributed to him as soon as practicable after the end of the Transition Period.
Vesting of the unvested portions of Mr. Periquitos 2007 and 2008 stock option grants will also accelerate at the end of the Transition Period, however, these awards have exercise prices that were above fair market value as of December 31, 2009. These options, and any of Mr. Periquitos other unexercised options, will remain exercisable until the earlier of the expiration of five years from the end of the Transition Period or the original expiration date provided by the terms of the award.
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RELATED PERSON TRANSACTIONS |
Procedures for Evaluating Related Person Transactions
The Board has adopted written procedures relating to the Corporate Governance and Nominating Committees review and approval of transactions with related persons that are required to be disclosed in proxy statements by Securities and Exchange Commission regulations (related person transactions). A related person is defined under the applicable Securities and Exchange Commission regulation and includes our directors, executive officers, and owners of 5% or more of our common stock. The Corporate Secretary administers procedures adopted by the Board with respect to related person transactions and the Committee reviews and approves all such transactions. At times, it may be advisable to initiate a transaction before the Committee has evaluated it, or a transaction may begin before discovery of a related persons participation. In such instances, management consults with the Chairman of the Committee to determine the appropriate course of action. Approval of a related person transaction requires the affirmative vote of the majority of disinterested directors on the Committee. In approving any related person transaction, the Committee must determine that the transaction is fair and reasonable to Whirlpool. The Committee periodically reports on its activities to the Board. The written procedures relating to the Committees review and approval of related person transactions is available on our website: www.whirlpoolcorp.com scroll over the Leadership dropdown menu, then Board of Directors, then Corporate Governance Guidelines and Policies, then click on Procedures for Evaluating Related Person Transactions. All of the related person transactions described under the heading Related Person Transactions below have been approved by the Corporate Governance and Nominating Committee pursuant to these procedures.
Related Person Transactions
Whirlpool employs a son of Arnold Langbo, a former director of Whirlpool who retired from our Board in April 2009. Mr. Gary Langbo holds a management position in Whirlpools Marketing Department and received base salary and bonus compensation of $240,928 in 2009, along with other employment benefits that are standard for Whirlpool employees at that management level. Mr. Arnold Langbo was not involved in the recruiting or hiring of his son, nor in any decision affecting his sons compensation. His sons compensation was established by Whirlpool in accordance with our compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions.
On February 20, 2006, the Board authorized and directed Whirlpool to enter into an Indemnity Agreement (the Indemnity Agreement) with each current and future nonemployee member of its Board and certain current and future employees of Whirlpool, including Messrs. Fettig, Todman, Periquito, Templin and Bitzer. The Indemnity Agreement provides for indemnification by Whirlpool of such directors and officers to the fullest extent permitted by law against expenses and damages if the indemnified officer or director is, or is threatened to be made, a party to or participant in a legal proceeding by reason of his or her
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status as a director or officer of Whirlpool or by reason of the fact that he or she is or was serving at the request of Whirlpool as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent. The Indemnity Agreement provides that Whirlpool will advance the expenses of the indemnified officer or director incurred in any such proceedings prior to final disposition of the claim. During fiscal 2009, we advanced, in accordance with provisions of our certificate of incorporation and Indemnity Agreement, approximately $474,000 in legal fees on behalf of Mr. Periquito in connection with the previously disclosed antitrust investigation of the global compressor industry.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION |
No member of the Human Resources Committee was at any time during 2009 an officer or employee of Whirlpool and no member of the Committee has formerly been an officer of Whirlpool. In addition, no compensation committee interlocks existed during fiscal year 2009.
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EQUITY COMPENSATION PLAN INFORMATION |
The following table presents information as of December 31, 2009 with respect to Whirlpools compensation plans under which equity securities are authorized for issuance.
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average and rights ($) |
Number of securities remaining available for future issuance under equity compensation plans(1) | |||||
Equity compensation plans approved by security holders |
5,912,871 | (2) | 71.32 | (3) | 879,787 | |||
Equity compensation plans not approved by security holders(4) |
| | | |||||
Total |
5,912,871 | 71.32 | 879,787 |
(1) | Excluding securities in the Number of securities to be issued upon exercise of outstanding options, warrants and rights column. This amount includes 629,806 shares available under the 2007 Omnibus Stock and Incentive Plan, and 249,981 shares available under the Nonemployee Director Equity Plan. |
(2) | This amount includes 4,696,615 shares subject to outstanding stock options with a weighted average remaining contractual term of 6.0 years and 1,216,256 shares subject to outstanding restricted stock units. |
(3) | The weighted-average exercise price information does not include any outstanding restricted stock units. |
(4) | The only plan previously reported in this table which was not approved by our security holders was the Key Employee Treasury Stock Ownership Plan, which was terminated in 2009. No awards were made under this plan in 2009 and no awards are currently outstanding under this plan. |
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Fees
In the years indicated, Ernst & Young LLP billed Whirlpool the following fees (in millions):
Year ended December 31 | ||||||
2008 | 2009 | |||||
Audit Fees |
$ | 11.1 | $ | 10.8 | ||
Audit Related Fees |
0.4 | 0.9 | ||||
Tax Fees |
3.3 | 3.3 | ||||
All Other Fees |
0.1 | 0.1 | ||||
Total |
$ | 14.9 | $ | 15.1 |
Audit-related fees are principally comprised of fees for services provided in connection with employee benefit plan audits and consultation with management as to the accounting or disclosure treatment of various transactions or events. Tax fees are principally comprised of fees for services provided in connection with worldwide tax planning and compliance services, expatriate tax services, and assistance with tax audits and appeals.
Advance Approval Policy for Independent Registered Public Accounting Firm Services
Pursuant to its written charter, the Audit Committee, or a subcommittee thereof, is responsible for approving in advance all audit, internal control-related, and permitted non-audit services the independent registered public accounting firm performs for us. In recognition of this responsibility, the Audit Committee has established a policy to approve in advance all audit, internal control-related, and permissible non-audit services the independent registered public accounting firm provides. Prior to engagement of the independent registered public accounting firm for the next years audit, management or the independent registered public accounting firm submits to the Audit Committee a request for approval of services expected to be rendered during that year. This request outlines each of the four categories listed above, and the Audit Committee approves these services by category. The fees are budgeted and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original advance approval. In those instances, the Audit Committee requires specific approval in advance before engaging the independent registered public accounting firm. The Audit Committee may delegate authority to make advance approval to one or more of its members. The member or members to whom such authority is delegated must report, for information purposes only, any such approval decisions to the Audit Committee at its next scheduled meeting. A copy of the Audit Committee Pre-Approval
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Policy for Independent Registered Public Accounting Firm Services appears on Whirlpools website: www.whirlpoolcorp.com scroll over the Leadership dropdown menu, then Board of Directors, then Corporate Governance Guidelines and Policies, then click on Audit Committee Pre-Approval Policy.
AUDIT COMMITTEE REPORT |
The Audit Committee provides independent oversight of Whirlpools accounting functions and monitors the objectivity of the financial statements prepared under the direction of Whirlpools management. In addition, the Committee retains our independent registered public accounting firm; reviews major accounting policy changes by Whirlpool; reviews and approves the scope of the annual internal and independent audit processes; reviews and monitors our assessment of internal controls; approves in advance audit, permitted non-audit, and internal control-related services provided by the independent registered public accounting firm; approves all fees paid to the independent registered public accounting firm; and monitors our activities designed to assure compliance with Whirlpools ethical standards. The Committee is composed of four directors who have been determined by the Board to be independent and financially literate pursuant to the NYSE listing requirements. The Committee operates under a written charter adopted by our Board.
The Committee has reviewed our audited consolidated financial statements for 2009 with management, and management has represented to the Committee that these financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Committee discussed with management the quality and the acceptability of the accounting principles employed, including all critical accounting policies used in the preparation of the financial statements and related notes, the reasonableness of judgments made, and the clarity of the disclosures included in the statements.
The Committee also reviewed our consolidated financial statements for 2009 with Ernst & Young LLP, our independent registered public accounting firm for 2009 (Ernst & Young), which is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States. Further, the Committee reviewed with Ernst & Young its judgment as to the quality, not just the acceptability, of Whirlpools accounting principles. In addition, the Committee met with Ernst & Young, with and without management present, to discuss the results of its examinations, its evaluations of our internal controls, and the overall quality of our financial reporting. The Audit Committee met eleven times during the fiscal year ended December 31, 2009.
The Committee has received the written disclosures and the letter from Ernst & Young required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firms communications with the Audit Committee concerning independence, as modified or supplemented, and has discussed with Ernst & Young its independence. The Committee considered the compatibility of non-audit services Ernst & Young provided to us with Ernst & Youngs independence. Finally, the
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Committee discussed with Ernst & Young the matters required to be discussed by the Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board, and the Board has approved, the inclusion of the consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2009 for filing with the Securities and Exchange Commission. The Committee has selected Ernst & Young as our independent registered public accounting firm for 2010.
AUDIT COMMITTEE
Mr. Michael D. White, Chair
Mr. Gary T. DiCamillo
Mr. William T. Kerr
Mr. Miles L. Marsh
ITEM 2 RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS WHIRLPOOLS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
RESOLVED, that the appointment of Ernst & Young LLP to audit the Consolidated Financial Statements and related internal control over financial reporting of Whirlpool and its subsidiaries for fiscal 2010, made by the Audit Committee with the concurrence of the Board, is hereby ratified.
The Audit Committee has appointed, and the Board has concurred subject to your ratification, Ernst & Young LLP to audit and report on the Consolidated Financial Statements and related internal control over financial reporting of Whirlpool and its subsidiaries for fiscal 2010. Ernst & Young LLP served as Whirlpools independent registered public accounting firm for fiscal 2009.
Before making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates for the independent registered public accounting firm. For Ernst & Young LLP, this has included a review of its performance in prior years, its independence and processes for maintaining independence, the results of the most recent internal quality control review or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firms approach to resolving significant accounting and auditing matters including consultation with the firms national office, as well as its reputation for integrity and competence in the fields of accounting and auditing.
Representatives of Ernst & Young LLP will attend the annual meeting of stockholders and may make a statement if they wish. They will be available to answer appropriate questions at the annual meeting. To pass, this proposal requires the affirmative vote of a majority of the outstanding common stock present in person or by proxy at the annual meeting and entitled to
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vote. In the event that the selection of Ernst & Young LLP is not ratified by the stockholders, the Audit Committee will take that event into account in connection with any future decisions as to the selection of a firm to serve as Whirlpools independent registered public accounting firm, although by law the Audit Committee has final authority over the determination of whether to retain Ernst & Young LLP or another firm at any time.
The Board of Directors recommends that stockholders vote FOR Item 2, which ratifies the selection of Ernst & Young LLP as the independent registered public accounting firm for Whirlpool and its subsidiaries for fiscal 2010.
ITEM 3 MANAGEMENTS PROPOSAL TO APPROVE THE WHIRLPOOL CORPORATION 2010 OMNIBUS STOCK AND INCENTIVE PLAN |
RESOLVED, that the Whirlpool Corporation 2010 Omnibus Stock and Incentive Plan is hereby approved.
Overview
On February 16, 2010, the Board unanimously approved and adopted the Whirlpool Corporation 2010 Omnibus Stock and Incentive Plan (the 2010 Incentive Plan), subject to the approval of our stockholders. The 2010 Incentive Plan affords the Board the ability to design compensatory awards that are responsive to Whirlpools needs, and includes authorization for a variety of awards designed to advance Whirlpools interests and long-term success by encouraging stock ownership among Whirlpools officers and other key executives, employees, nonemployee directors and consultants and other advisors and otherwise linking the compensation of such persons to share price performance or the achievement of specified corporate objectives. These awards include equity and cash awards intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code).
Whirlpool has historically granted equity awards under various plans, including most recently Whirlpools 2007 Omnibus Stock and Incentive Plan and Nonemployee Director Equity Plan (together, the Prior Plans). If the 2010 Incentive Plan is approved by Whirlpools stockholders as proposed, no further awards will be made under the Prior Plans. As of December 31, 2009, under the Prior Plans, stock options with respect to 4.697 million shares of Whirlpools common stock were outstanding with a weighted average exercise price of $71.32 and a weighted average remaining term of six years, and there were 1.216 million restricted stock units outstanding. Under the Prior Plans, there were 879,787 shares available for grant as of December 31, 2009. The closing price of Whirlpool common stock on February 22, 2010 was $84.52 per share.
The summary of the 2010 Incentive Plan which follows is qualified in its entirety by reference to the complete text of the 2010 Incentive Plan as set forth in Annex A to this proxy statement. You should read the complete text of the 2010 Incentive Plan for more details regarding the operation of the 2010 Incentive Plan.
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Summary of the 2010 Incentive Plan
The Board and the Human Resources Committee of the Board (the Committee) recommend that the stockholders approve the 2010 Incentive Plan. If the holders of a majority of the shares of common stock which are represented and actually voted at the annual meeting, and which constitute a majority in interest of all of the shares of common stock entitled to vote thereon, vote FOR the 2010 Incentive Plan, it will immediately become effective. Upon the effectiveness of the 2010 Incentive Plan, no further grants will be made under the Prior Plans. If Whirlpools stockholders do not approve the 2010 Incentive Plan, the 2010 Incentive Plan will not become effective, and the Prior Plans, as they presently exist, will continue in effect. The results of the vote will not affect any awards outstanding under the Prior Plans at the time of the annual meeting.
Purpose
The Board believes that the 2010 Incentive Plan fosters and promotes the long-term financial success of Whirlpool and materially increases stockholder value by:
| strengthening Whirlpools capability to develop, maintain, and direct an outstanding management team; |
| motivating superior performance by means of long-term performance related incentives; |
| encouraging and providing for obtaining an ownership interest in Whirlpool; |
| attracting and retaining outstanding executive and director talent by providing compensation opportunities competitive with other major companies; and |
| enabling executives and directors to participate in the long-term growth and financial success of Whirlpool. |
Plan Term
The 2010 Incentive Plan will be effective upon stockholder approval at the annual meeting. No new awards may be granted under the 2010 Incentive Plan after the tenth anniversary of the date that the stockholders approve the 2010 Incentive Plan. However, the term and exercise of awards granted before then may extend beyond that date. The Board may terminate the 2010 Incentive Plan at any time with respect to all awards that have not been granted.
Eligibility
The officers, executives, and other employees of Whirlpool or its subsidiaries and Whirlpools nonemployee directors may be selected by the Committee to receive awards under the 2010 Incentive Plan. In addition, the Committee may select certain consultants and advisors providing services to Whirlpool or its subsidiaries to receive awards under the 2010
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Incentive Plan. The Committee determines which eligible persons will receive awards and the size, terms, conditions and restrictions of such awards. Whirlpool refers to eligible persons who have been approved to receive awards under the 2010 Incentive Plan as participants. The number of persons eligible to participate in the 2010 Incentive Plan is estimated to be approximately 3,000 people.
Administration
The 2010 Incentive Plan is to be administered by the Committee. The Committee may grant awards to eligible persons and, to the extent permitted by applicable law, may delegate to (1) a committee of one or more directors of Whirlpool any of the authority of the Committee under the 2010 Incentive Plan or (2) one or more executive officers, or a committee of executive officers, the right to grant awards to employees who are not directors or executive officers of Whirlpool and the authority to take action on behalf of the Committee pursuant to the 2010 Incentive Plan to cancel or suspend awards to employees who are not directors or executive officers of Whirlpool. The Committee is authorized to interpret the 2010 Incentive Plan and related agreements and documents and to take various other actions with respect thereto.
Available Awards
The 2010 Incentive Plan authorizes Whirlpool to provide equity-based compensation in the form of (1) stock options, including incentive stock options (ISOs), entitling the optionee to favorable tax treatment under Section 422 of the Code; (2) stock appreciation rights (SARs); (3) restricted stock and restricted stock units (RSUs); (4) other share-based awards; and (5) performance awards. Each type of award is described below under Types of Awards Authorized Under the 2010 Incentive Plan. Each award granted under the 2010 Incentive Plan will be evidenced by an award agreement containing such terms and provisions, consistent with the 2010 Incentive Plan, as the Committee may approve.
Shares Available Under the 2010 Incentive Plan
Subject to adjustment as provided for in the 2010 Incentive Plan, the number of shares of Whirlpool common stock subject to grants under the 2010 Incentive Plan will not exceed in the aggregate:
| 4.1715 million shares, plus |
| any shares remaining available for grant under the Prior Plans as of December 31, 2009, minus |
| one share for each share of common stock that was subject to a stock option or SAR granted under the Prior Plans after December 31, 2009, and 1.75 shares for each share of common stock subject to an award other than a stock option or SAR granted under the Prior Plans after December 31, 2009. |
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These shares may be of original issuance, treasury shares or other shares, or a combination of the foregoing. After the effective date of the 2010 Incentive Plan, no awards may be granted under the Prior Plans.
Award Limitations
Subject to certain adjustments as provided for in the 2010 Incentive Plan:
| No participant may be granted stock options or SARs for more than 1,200,000 shares of Whirlpool common stock for each type of award during any 36-month period. |
| No participant may be granted restricted stock, RSUs, performance shares or other share-based awards for more than 1,200,000 shares of Whirlpool common stock for each type of award during any 36-month period if the award is intended to be performance-based compensation under Section 162(m) of the Code. |
| The maximum dollar value that may be earned by any participant for any 12-month performance period (as established by the Committee) with respect to performance awards which are denominated in cash and intended to be performance-based compensation under Section 162(m) of the Code is $5,000,000. |
Share Counting
Under the 2010 Incentive Plan, each share of Whirlpool common stock that is subject to a stock option or SAR counts against the aggregate 2010 Incentive Plan limit as one share, and each share of Whirlpool common stock that is subject to an award other than a stock option or SAR under the 2010 Incentive Plan counts against the aggregate 2010 Incentive Plan limit as 1.75 shares. However, for each share that is forfeited, expires or is settled for cash (in whole or in part) under the 2010 Incentive Plan, or after December 31, 2009 under the Prior Plans, one share will be added back to the aggregate 2010 Incentive Plan limit for such share subject to a stock option or SAR, and 1.75 shares will be added back to the aggregate 2010 Incentive Plan limit for such share subject to an award other than a stock option or SAR. The following shares of Whirlpool common stock will not increase the number of shares available for grant under the 2010 Incentive Plan:
| any shares of Whirlpool common stock tendered by a participant or withheld by Whirlpool in full or partial payment of the exercise price of stock options or the full or partial satisfaction of a tax withholding obligation on any award under either the 2010 Incentive Plan or the Prior Plans; |
| Whirlpool common stock subject to a SAR granted under either the 2010 Incentive Plan or the Prior Plans that is not issued when the SAR is exercised and settled in Whirlpool common stock; and |
| Whirlpool common stock reacquired by Whirlpool on the open market or otherwise using cash proceeds from the exercise of stock options granted either under the 2010 Incentive Plan or the Prior Plans. |
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Shares of Whirlpool common stock issued as substitution awards in connection with Whirlpools merger with or acquisition of a company will not decrease the number of shares available for grant under the 2010 Incentive Plan, but shares of Whirlpool common stock subject to substitution awards will not be available for further awards under the 2010 Incentive Plan if the substitution awards are forfeited, expire or settled in cash. Whirlpool may use shares under a pre-existing, stockholder-approved plan of a company acquired by Whirlpool for awards under the 2010 Incentive Plan, which shares will not decrease the number of shares available for grant under the 2010 Incentive Plan, but such shares may only be used for grants of awards made prior to the expiration of the pre-existing plan and to persons who were not employees or directors of Whirlpool or any subsidiary prior to such acquisition.
Section 162(m) of the Code
The 2010 Incentive Plan is designed to allow Whirlpool to grant awards that satisfy the requirements for the performance-based compensation exclusion from the deduction limitations under Section 162(m) of the Code. The Board and the Committee believe that it is in Whirlpools interests and the interests of Whirlpools stockholders to maintain an equity and long-term cash compensation plan under which compensation awards made to Whirlpools named executive officers can qualify for deductibility for federal income tax purposes. Accordingly, the 2010 Incentive Plan has been structured in a manner such that awards under it can satisfy the requirements for the performance-based compensation exclusion from the deduction limitations under Section 162(m) of the Code. In order for awards to satisfy the requirements for the performance-based compensation exclusion from the deduction limitations under Section 162(m) of the Code, the 2010 Incentive Plan specifies performance measures and other material terms that must be approved by Whirlpools stockholders. Approval of the 2010 Incentive Plan by the required vote of Whirlpools stockholders described above is intended to constitute such approval.
Repricing Prohibited
Except in connection with an adjustment involving a corporate transaction or event as provided for in the 2010 Incentive Plan, the Committee may not authorize the amendment of any outstanding stock option or SAR to reduce the exercise or base price, and no outstanding stock option or SAR may be cancelled in exchange for other awards, or cancelled in exchange for stock options or SARs having a lower exercise or base price, or cancelled in exchange for cash, without the approval of Whirlpools stockholders.
Types of Awards Authorized Under the 2010 Incentive Plan
Stock Options. Stock options may be granted that entitle the optionee to purchase shares of Whirlpool common stock at a price not less than fair market value per share as of the date of grant (except for substitution awards). The maximum term for stock options is 10 years. ISOs granted to any person who owns, as of the date of grant, stock possessing more than 10% of the total combined voting power of all classes of our stock, however, must have an exercise price that is not less than 110% of the fair market value of Whirlpool common
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stock on the date of grant and may not have a term extending beyond the fifth anniversary of the date of grant. The maximum aggregate number of shares of Whirlpool common stock that may be issued pursuant to ISOs granted under the 2010 Incentive Plan is 3,000,000 shares. Stock options may be granted as ISOs, nonqualified stock options, or combinations of the foregoing. Each grant of stock options will specify whether the exercise price is payable: (1) in cash or by cash equivalents; (2) by the transfer to Whirlpool of previously acquired shares of Whirlpool common stock owned by the optionee; (3) with the consent of the Committee, by delivery of other consideration having a fair market value on the exercise date equal to the total purchase price; (4) pursuant to a net exercise arrangement whereby the participant directs Whirlpool to deduct from shares issuable upon exercise of his or her stock options a number of shares having an aggregate fair market value equal to the sum of the total purchase price; (5) by such other methods as may be specified in the award agreement; or (6) by a combination of such payment methods.
SARs. A SAR is a right, exercisable by surrender of the SAR and the related stock option (if granted in tandem with a stock option) or by surrender of the SAR only (if granted as a free-standing SAR), to receive from Whirlpool an amount equal to the number of shares of Whirlpool common stock subject thereto multiplied by the difference between the fair market value of Whirlpool common stock on the date of exercise and the grant price of the SAR. The grant price of a free-standing SAR may not be less than the market value per share at the date of grant (except for substitution awards). Any grant may specify that the amount payable on exercise of a SAR may be paid by Whirlpool in cash, in shares of Whirlpool common stock or other property, or in any combination thereof, in the sole discretion of the Committee. No SAR may be exercisable more than 10 years from the date of grant.
Restricted Stock and RSUs. A grant of restricted stock involves the immediate transfer by Whirlpool to a participant of ownership of a specified number of restricted shares of Whirlpool common stock in consideration of the performance of service. The participant is entitled immediately to voting, dividend and other ownership rights in such shares; provided, however, that at least a portion of the restricted stock covered by such issuance or transfer must be subject to a substantial risk of forfeiture within the meaning of Section 83 of the Code for a period to be determined by the Committee at the date of grant or to the achievement of specified performance measures. An RSU represents the right of the grantee of the RSU to receive from Whirlpool a payment upon or after vesting of the RSU equal to the per share value of Whirlpool common stock as of the date of grant, vesting date, or other date determined by the Committee at the date of grant of the RSU. At the discretion of the Committee, RSUs may be settled in cash, shares of Whirlpool common stock or any combination thereof. RSUs may entitle the participant to receive credits for dividend equivalents, but not voting or other rights as a stockholder.
If the restricted stock or RSUs vest upon the passage of time rather than the achievement of performance measures, the period of time for such vesting may not be shorter than three years from the date of grant (with the possibility of ratable vesting during such three-year period). If the restricted stock or RSUs vest upon the achievement of performance measures, the restrictions may not terminate sooner than one year after the date of grant. In
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each case awards are subject to accelerated vesting in the Committees discretion in the event of a change of control (as defined in the 2010 Incentive Plan) or the death, disability, or retirement of the participant. Further, the restrictions described in this paragraph do not apply to grants of up to 5% of the number of shares of Whirlpool common stock available for awards on the effective date of the 2010 Incentive Plan.
Other Share-Based Awards. The Committee may, subject to limitations under applicable law, grant to any participant other share-based awards, which may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Whirlpool common stock or other property, including deferred stock units, in the sole discretion of the Committee. The Committee will determine the terms and conditions of these awards.
If other share-based awards (except for awards in the form of deferred stock units granted to directors in lieu of all or a portion of their fees for serving as directors) vest upon the passage of time rather than the achievement of performance measures, the period of time for such vesting may not be shorter than three years (with the possibility of ratable vesting during such three-year period). If other share-based awards vest upon the achievement of performance measures, the restrictions may not terminate sooner than one year after the date of grant. In each case awards are subject to accelerated vesting in the Committees discretion in the event of a change of control (as defined in the 2010 Incentive Plan) or the death, disability, or retirement of the participant. Further, the restrictions described in this paragraph do not apply to grants of up to 5% of the number of shares of Whirlpool common stock available for awards on the effective date of the 2010 Incentive Plan.
Performance Awards. The Committee may grant to any participant performance awards in the form of performance shares or performance units, as determined by the Committee in its sole discretion. Performance shares entitle the grantee to units valued by reference to a designated number of shares of Whirlpool common stock. Performance units entitle the grantee to units valued by reference to a designated amount of cash or property other than shares of Whirlpool common stock. The performance period for performance shares payable in Whirlpool common stock may not be shorter than one year. Each performance award will specify one or more performance measures that must be satisfied within a specified period (referred to as the performance period) in order for the performance awards to be earned.
To the extent earned, the performance awards will be paid to the participant at the time and in the manner determined by the Committee. Any grant may specify that the amount payable with respect thereto may be paid by Whirlpool in cash, shares of Whirlpool common stock or other property or any combination thereof at the discretion of the Committee. Performance awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code.
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Performance Measures
Performance measures are measurable performance objectives established by the Committee for participants who have received awards under the 2010 Incentive Plan. Performance measures may be described in terms of either company-wide objectives or objectives that are related to the performance of the individual participant or of the subsidiary or division, business segment or business unit within Whirlpool or a subsidiary in which the participant is employed. Performance measures applicable to any award or portion of an award that is intended to be a qualified performance-based award to a participant who is, or is determined by the Committee to be likely to become, a covered employee within the meaning of Section 162(m) of the Code will be based on the attainment of specified levels of one or any combination of the following:
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Dividends and Dividend Equivalents on Performance Awards
Any dividends or dividend equivalents provided with respect to performance awards, as well as with respect to restricted stock, RSU and other stock-based awards that are subject to the attainment of performance measures, will be subject to the same restrictions and risk of forfeiture as the underlying awards.
Amendment and Termination of the 2010 Incentive Plan
The Board may alter, amend, suspend or terminate the 2010 Incentive Plan from time to time subject to approval by Whirlpools stockholders if required by applicable law, including the rules and regulations of the principal U.S. national securities exchange on which shares of Whirlpool common stock are traded. Further, the Board may not, without the approval of Whirlpools stockholders, amend the 2010 Incentive Plan to:
| materially increase the maximum number of shares of Whirlpool common stock that may be the subject of awards under the 2010 Incentive Plan (except for adjustments as provided in the 2010 Incentive Plan); |
| expand the types of awards available under the 2010 Incentive Plan; |
| materially expand the class of persons eligible to participate in the 2010 Incentive Plan; |
| eliminate certain requirements relating to minimum exercise price, minimum grant price and stockholder approval with respect to stock options and SARs; |
| increase the maximum permissible term of any option or the maximum permissible term of a SAR; |
| increase any limitation on grants to an individual participant as set forth in the 2010 Incentive Plan; or |
| alter the repricing provisions referred to above under Repricing Prohibited. |
The Board may not amend the 2010 Incentive Plan to impair the rights of a participant in any material respect under any award previously granted without such participants consent.
Vesting and Exercise of an Award
The applicable award agreement governing an award will specify the period during which the right to exercise the award in whole or in part vests, including the events or conditions upon which the vesting of an award will occur or may accelerate. No portion of an award which is not vested at the time of participants termination of service with us will subsequently become vested, except as may be otherwise provided in the agreement relating to the award or determined by the Committee.
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Generally, a stock option or SAR may only be exercised while a participant remains an officer, executive, or other employee of Whirlpool or its subsidiaries or a nonemployee director of Whirlpool or for a specified period of time (up to the remainder of the term of the award as established on the date of grant) following the participants termination of service with Whirlpool or any of its subsidiaries. An award may be exercised for any vested portion of the shares subject to such award until the award expires or as otherwise determined by the Committee.
If permitted by applicable law, in the case of a termination of employment by reason of the death, disability, or retirement of a participant who holds any restricted stock or RSUs as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or other stock-based awards that have not been fully earned, or who holds shares of Whirlpool common stock subject to any other transfer restriction imposed pursuant to the 2010 Incentive Plan, the Committee may, in its sole discretion, take such action as it deems equitable in the circumstances or in the best interests of Whirlpool, including waiving or modifying any vesting, performance or other period, any performance measure or any other requirement, condition, restriction or limitation applicable to any such award.
Unless otherwise provided in the applicable award agreement, in the event of a change of control of Whirlpool (as defined in the 2010 Incentive Plan) in which the successor company assumes or substitutes for options rights, SARs, restricted stock or RSUs or other share-based awards, if a participants employment is terminated within 24 months following a change of control, (1) stock options will immediately vest and become exercisable for 24 months following the date of such change of control; (2) the restrictions, limitations and other conditions applicable to any restricted stock or RSUs as of the date of such termination of employment will lapse and the restricted stock or RSUs will become vested; and (3) the restrictions, limitations and other conditions applicable to any other share-based awards will lapse and the other share-based awards will become fully vested and transferable to the full extent of the original grant.
Adjustments
The number and kind of shares covered by outstanding awards under the 2010 Incentive Plan and, in the case of stock options and SARs, the exercise or base prices applicable thereto, must be adjusted as the Committee, in its sole discretion exercised in good faith, determines is equitably required to prevent dilution or enlargement of the rights of participants or optionees in the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution, stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the shares of common stock or the value thereof. In the event of any such transaction or event or in the event of a change in control of Whirlpool (as defined in the 2010 Incentive Plan), the Committee, in its discretion, may provide in substitution for any or all outstanding awards under the 2010 Incentive Plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and may require the surrender of all awards so replaced in a
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manner that complies with Section 409A of the Code. In addition, for each stock option or SAR with an exercise price or base price greater than the consideration offered in connection with any such transaction or event or change in control, the Committee may in its sole discretion elect to cancel such stock option or SAR without any payment to the person holding such stock option or SAR. The Committee shall also make or provide for such adjustments in the number of shares available under the 2010 Incentive Plan, including the individual participant limits described in the 2010 Incentive Plan, as the Committee may determine appropriate to reflect any transaction or event described above, except that any such adjustment will be made only to the extent that it would not cause any stock option intended to qualify as an ISO to fail to so qualify. Additionally, Whirlpool may eliminate fractional shares or settle fractional shares in cash.
Limited Transferability
No award and no shares of Whirlpool common stock that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution, and such award may be exercised during the life of the participant only by the participant or the participants guardian or legal representative. To the extent and under such terms and conditions as determined by the Committee, a participant may assign or transfer an award to: (1) the participants spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings; (2) a trust for the benefit of one or more of the participant or the persons referred to in clause (1); (3) a partnership, limited liability company or corporation in which the participant or the persons referred to in clause (1) are the only partners, members or shareholders; or (4) for charitable donations; provided that in each case such permitted assignees are bound by and subject to all of the terms and conditions of the 2010 Incentive Plan and the award agreement relating to the transferred award and shall execute an agreement satisfactory to Whirlpool evidencing such obligations.
Withholding Taxes
To the extent that Whirlpool is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a participant or other person under the 2010 Incentive Plan, and the amounts available to Whirlpool for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the participant or such other person make arrangements satisfactory to Whirlpool for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of Committee) may include relinquishment of a portion of such benefit. In certain circumstances, Whirlpool may withhold from wages amounts otherwise payable to participant, or shares of common stock that are deliverable to a participant, to settle tax withholding obligations. Participants may elect to have shares of common stock withheld by Whirlpool or may deliver other shares of common stock to satisfy tax withholding obligations, but the value of any shares withheld will not exceed the minimum amount of taxes required to be withheld.
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Compliance with Section 409A of the Internal Revenue Code
To the extent applicable, it is intended that the 2010 Incentive Plan and any grants made thereunder comply with or be exempt from the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the participants. The 2010 Incentive Plan and any grants made under the 2010 Incentive Plan shall be administered in a manner consistent with this intent.
Termination
No grant will be made under the 2010 Incentive Plan more than 10 years after the date on which the 2010 Incentive Plan is first approved by Whirlpools stockholders, but all grants made on or prior to such ten-year anniversary of stockholder approval will continue in effect after such date subject to the terms thereof and of the 2010 Incentive Plan. Upon approval of the 2010 Incentive Plan by Whirlpools stockholders, no further grants will be made under the Prior Plans, but all outstanding awards under the Prior Plans will continue to be in effect subject to the terms thereof.
Federal Income Tax Consequences
The following is a brief summary of some of the federal income tax consequences of certain transactions under the 2010 Incentive Plan based on federal income tax laws in effect on January 1, 2010. This summary is not intended to be complete and does not describe any gift, estate, social security or state or local tax consequences. It is not intended as tax guidance to participants in the 2010 Incentive Plan.
Tax Consequences to Participants
Nonqualified Stock Options. A recipient of stock options will not realize any taxable income upon the grant of a nonqualified stock option and Whirlpool will not receive a deduction at the time of such grant unless such stock option has a readily ascertainable fair market value (as determined under applicable tax law) at the time of grant. Upon exercise of a nonqualified stock option, the recipient generally will realize ordinary income in an amount equal to the excess of the fair market value of the shares of common stock on the date of exercise over the exercise price. Upon a subsequent sale of such shares of common stock by the recipient, the recipient will recognize short-term or long-term capital gain or loss depending upon his or her holding period of such shares of common stock. Subject to the limitations under Sections 162(m) and 280G of the Code (as described below), Whirlpool will generally be allowed a deduction equal to the amount recognized by the recipient as ordinary income. Officers and directors of the Company subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, may be subject to special tax rules regarding the income tax consequences concerning their options.
ISOs. In general, a recipient will not realize taxable income upon either the grant or the exercise of an ISO and Whirlpool will not realize an income tax deduction at either of such times. In general, however, for purposes of the alternative minimum tax, the excess of the fair
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market value of the shares of common stock acquired upon exercise of an ISO (determined at the time of exercise) over the exercise price of the ISO will be considered income. If the recipient was continuously employed from the date of grant until the date three months prior to the date of exercise and such recipient does not sell the shares of common stock received pursuant to the exercise of the ISO within either (1) two years after the date of the grant of the ISO, or (2) one year after the date of exercise, a subsequent sale of such shares of common stock will result in long-term capital gain or loss to the recipient and will not result in a tax deduction to Whirlpool.
If the recipient is not continuously employed from the date of grant until the date three months prior to the date of exercise or such recipient disposes of the shares of common stock acquired upon exercise of the ISO within either of the time periods described in the immediately preceding paragraph, the recipient will generally realize as ordinary income an amount equal to the lesser of (1) the fair market value of such shares of common stock on the date of exercise over the exercise price, or (2) the amount realized upon disposition over the exercise price. In such event, subject to the limitations under Sections 162(m) and 280G of the Code (as described below), Whirlpool generally will be entitled to an income tax deduction equal to the amount recognized as ordinary income. Any gain in excess of such amount realized by the recipient as ordinary income would be taxed at the rates applicable to short-term or long-term capital gains (depending on the holding period).
SARs. No income will be recognized by a participant in connection with the grant of a tandem SAR or a free-standing SAR. When the SAR is exercised, the participant normally will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair market value of any unrestricted shares of Whirlpool common stock received on the exercise.
Restricted Stock. The recipient of restricted stock generally will be subject to tax at ordinary income rates on the fair market value of the restricted stock (reduced by any amount paid by the participant for such restricted stock) at such time as the shares are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (the Restrictions). However, a recipient who so elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted stock. If a Section 83(b) election has not been made, any dividends received with respect to restricted stock that is subject to the Restrictions generally will be treated as compensation that is taxable as ordinary income to the participant.
RSUs. No income generally will be recognized upon the award of RSUs. The recipient of an award of RSUs generally will be subject to tax at ordinary income rates on the cash or the fair market value of the property (for example, the unrestricted shares of Whirlpool common stock) on the date that such cash or property is transferred to the participant under the award (reduced by any amount paid by the participant for such RSUs), and the capital gains/loss holding period for any such property will also commence on such date.
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Performance Awards. No income generally will be recognized upon the grant of performance shares pursuant to a performance award. Upon payment in respect of the earn-out of performance awards, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted shares of Whirlpool common stock or other property received.
New 2010 Incentive Plan Benefits
Because awards to be granted in the future under the 2010 Incentive Plan are at the discretion of the Committee, it is not possible to determine the benefits or the amounts to be received under the 2010 Incentive Plan by Whirlpool officers or employees. Effective April 1, 2010, and assuming approval of the 2010 Incentive Plan by our stockholders, each nonemployee director will receive annual equity compensation of $100,000 (comprised of 50% stock options and 50% unrestricted stock). See Nonemployee Director Compensation for how the number of stock options and shares are calculated. Had the 2010 Incentive Plan been in effect as of February 22, 2010, and had grants been made as of the close of business on that date, each nonemployee director would have received 1,573 stock options and 591 shares.
For grants made during Whirlpool fiscal year 2009 to Whirlpool named executive officers, please see the 2009 Grants of Plan-Based Awards table earlier in this proxy statement.
The Board of Directors recommends a vote FOR approval of Item 3, which approves the Whirlpool Corporation 2010 Omnibus Stock and Incentive Plan.
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WHIRLPOOL CORPORATION
2010 OMNIBUS STOCK AND INCENTIVE PLAN
Whirlpool Corporation (the Company), a Delaware corporation, hereby establishes and adopts the following 2010 Omnibus Stock and Incentive Plan (the Plan).
1. PURPOSE OF THE PLAN
The purpose of the Plan is to foster and promote the long-term financial success of the Company and materially increase stockholder value by: (i) strengthening the Companys capability to develop, maintain, and direct an outstanding management team; (ii) motivating superior performance by means of long-term performance related incentives; (iii) encouraging and providing for obtaining an ownership interest in the Company; (iv) attracting and retaining outstanding executive talent by providing incentive compensation opportunities competitive with other major companies; and (v) enabling executives to participate in the long-term growth and financial success of the Company.
2. DEFINITIONS
2.1. Award shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Other Share-Based Award, Performance Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan.
2.2. Award Agreement shall mean any agreement, contract or other instrument or document evidencing any Award hereunder, whether in writing or through an electronic medium.
2.3. Board shall mean the board of directors of the Company.
2.4. Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
2.5. Committee shall mean the Human Resources Committee of the Board or such other committee of directors as is designated by the Board, or a subcommittee thereof formed by the Human Resources Committee or such other committee to act as the Committee hereunder. The Committee shall consist of no fewer than two Directors, each of whom will be intended to be to the extent required by applicable law, rule or regulation (i) a Non-Employee Director within the meaning of Rule 16b-3 of the Exchange Act, (ii) an outside director within the meaning of Section 162(m) of the Code, and (iii) an independent director for purpose of the rules of the principal U.S. national securities exchange on which the Shares are traded, to the extent required by such rules. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 of the Exchange Act, Section 162(m) of the Code or the rules of the principal U.S. national securities exchange, such noncompliance shall not affect the validity of Awards, grants, interpretations or other actions of the Committee.
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2.6. Consultant shall mean any consultant or advisor who is a natural person and who provides services to the Company or any Subsidiary, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Companys securities in a capital-raising transaction, (ii) does not directly or indirectly promote or maintain a market for the Companys securities and (iii) can be covered as a consultant under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 registration statement.
2.7. Covered Employee shall mean an employee of the Company or its Subsidiaries who is a covered employee within the meaning of Section 162(m) of the Code.
2.8. Director shall mean a non-employee member of the Board.
2.9. Dividend Equivalents shall have the meaning set forth in Section 12.6.
2.10. Employee shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person becoming an employee of the Company or any Subsidiary.
2.11. Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
2.12. Fair Market Value shall mean, with respect to Shares as of any date, (i) the closing price of the Shares as reported on the principal U.S. national securities exchange on which the Shares are listed and traded on such date, or, if there is no closing price on that date, then on the last preceding date on which such a closing price was reported; (ii) if the Shares are not listed on any U.S. national securities exchange but are quoted in an inter-dealer quotation system on a last sale basis, the final ask price of the Shares reported on the inter-dealer quotation system for such date, or, if there is no such sale on such date, then on the last preceding date on which a sale was reported; or (iii) if the Shares are neither listed on a U.S. national securities exchange nor quoted on an inter-dealer quotation system on a last sale basis, the amount determined by the Committee to be the fair market value of the Shares as determined by the Committee in its sole discretion taking into account the requirements of Section 409A. The Fair Market Value of any property other than Shares shall mean the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee.
2.13. Incentive Stock Option shall mean an Option which when granted is intended to qualify as an incentive stock option for purposes of Section 422 of the Code.
2.14. Limitations shall have the meaning set forth in Section 10.5.
2.15. Net Exercise means a Participants ability to exercise an Option by directing the Company to deduct from the Shares issuable upon exercise of his or her Option a number of Shares having an aggregate Fair Market Value equal to the sum of the aggregate exercise price therefor plus the amount of the Participants minimum tax withholding (if any), whereupon the Company shall issue to the Participant the net remaining number of Shares after such deductions.
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2.16. Option shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine.
2.17. Other Share-Based Award shall have the meaning set forth in Section 8.1.
2.18. Participant shall mean an Employee, Director or Consultant who is selected by the Committee to receive an Award under the Plan.
2.19. Payee shall have the meaning set forth in Section 13.2.
2.20. Performance Award shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9.
2.21. Performance Period shall mean the period established by the Committee during which any performance goals specified by the Committee with respect to a Performance Award are to be measured.
2.22. Performance Share shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant upon achievement of such performance goals as the Committee shall establish.
2.23. Performance Unit shall mean any grant pursuant to Article 9 of a unit valued by reference to a designated amount of cash or property other than Shares, which value may be paid to the Participant upon achievement of such performance goals during the Performance Period as the Committee shall establish.
2.24. Permitted Assignee shall have the meaning set forth in Section 12.3.
2.25. Prior Plans shall mean, collectively, the Companys 2007 Omnibus Stock and Incentive Plan and Nonemployee Director Equity Plan.
2.26. Restricted Stock shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.
2.27. Restricted Stock Award shall have the meaning set forth in Section 7.1.
2.28. Restricted Stock Unit means an Award that is valued by reference to a Share, which value may be paid to the Participant in Shares or cash (or in combination thereof) as determined by the Committee in its sole discretion upon the satisfaction of vesting restrictions as the Committee may establish, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.
2.29. Restricted Stock Unit Award shall have the meaning set forth in Section 7.1.
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2.30. Shares shall mean the shares of common stock of the Company, par value $1.00 per share.
2.31. Stock Appreciation Right shall mean the right granted to a Participant pursuant to Article 6.
2.32. Subsidiary shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the relevant time each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
2.33. Substitute Awards shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.34. Vesting Period shall mean the period of time specified by the Committee during which vesting restrictions for an Award are applicable.
3. SHARES SUBJECT TO THE PLAN
3.1. Number of Shares.
(a) Subject to adjustment as provided in Section 12.2, a total of 4,171,500 Shares shall be authorized for grant under the Plan, plus any Shares remaining available for grant under the Prior Plans on December 31, 2009, less one (1) Share of stock for every one (1) Share of stock that was subject to an option or stock appreciation right granted after December 31, 2009 under the Prior Plans and 1.75 Shares for every one (1) Share that was subject to an award other than an option or stock appreciation right granted after December 31, 2009 under the Prior Plans. Under the Plan, any Shares that are subject to Options or Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share granted, and any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as 1.75 Shares for every one (1) Share granted. After the effective date of the Plan (as provided in Section 13.13), no awards may be granted under any Prior Plan.
(b) If (i) any Shares subject to an Award are forfeited, an Award expires or an Award is settled for cash (in whole or in part), or (ii) after December 31, 2009 any Shares subject to an award under the Prior Plans are forfeited, or an award under the Prior Plans expires or is settled for cash (in whole or in part), the Shares subject to such Award or award under the Prior Plans shall, to the extent of such forfeiture, expiration or cash settlement, again be available for Awards under the Plan, in accordance with Section 3.1(d) below. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for
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grant under paragraph (a) of this Section: (i) Shares tendered by the Participant or withheld by the Company in payment of the purchase price of an Option or an option granted under the Prior Plans, or to satisfy any tax withholding obligation with respect to an Award or an award granted under the Prior Plans, and (ii) Shares subject to a Stock Appreciation Right or a stock appreciation right granted under the Prior Plans that are not issued in connection with its stock settlement on exercise thereof and (iii) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options or options granted under the Prior Plans.
(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan or the applicable Limitations applicable to a Participant under Section 10.5, nor shall Shares subject to a Substitute Award again be available for Awards under the Plan to the extent of any forfeiture, expiration or cash settlement as provided in paragraph (b) above. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors prior to such acquisition or combination.
(d) Any Shares that again become available for grant pursuant to this Section shall be added back as (i) one (1) Share if such Shares were subject to Options or Stock Appreciation Rights granted under the Plan or options or stock appreciation rights granted under the Prior Plans, and (ii) as 1.75 Shares if such Shares were subject to Awards other than Options or Stock Appreciation Rights granted under the Plan or awards other than options or stock appreciation rights granted under the Prior Plans.
3.2. Character of Shares. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise. No fractional shares shall be issued under the Plan and the Committee shall determine the manner in which fractional share value shall be treated.
4. ELIGIBILITY AND ADMINISTRATION
4.1. Eligibility. Any Employee, Director or Consultant shall be eligible to be selected as a Participant.
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4.2. Administration.
(a) The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Employees, Directors and Consultants to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards to be granted to each Participant hereunder; (iii) determine the number of Shares (or dollar value) to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award, other than an Option or Stock Appreciation Right, will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.
(b) 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.
(c) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, and any Subsidiary. A majority of the members of the Committee may determine its actions, including fixing the time and place of its meetings.
(d) To the extent not inconsistent with applicable law, including Section 162(m) of the Code, or the rules and regulations of the principal U.S. national securities exchange on which the Shares are traded, the Committee may delegate (i) a committee of one or more directors of the Company any of the authority of the Committee under the Plan, including the right to grant, cancel or suspend Awards and (ii) to the extent permitted by law, one or more executive officers or a committee of executive officers the right to grant and determine the terms of Awards to Employees who are not directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not directors or executive officers of the Company.
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(e) Each person who is or shall have been a member of the Committee shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by that person in connection with or resulting from any claim, action, suit or proceeding to which that person may be a party or in which that person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by that person in settlement thereof, with the Companys approval, or paid by that person in satisfaction of any judgment in any such action, suit or proceeding against that person, provided that person shall give the Company an opportunity, at its own expense, to handle and defend the same before that person undertakes to handle and defend it on that persons own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Companys Certificate of Incorporation or By-laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
5. OPTIONS
5.1. Grant of Options. Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan. Any Option shall be subject to the terms and conditions of this Article and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall deem desirable.
5.2. Award Agreements. All Options shall be evidenced by a written Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms and conditions of Options need not be the same with respect to each Participant. Granting an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article may hold more than one Option granted pursuant to the Plan at the same time.
5.3. Option Price. Other than in connection with Substitute Awards, the option price per each Share purchasable under any Option granted pursuant to this Article shall not be less than 100% of the Fair Market Value of one Share on the date of grant of such Option; provided, however, that in the case of an Incentive Stock Option granted to a Participant who, at the time of the grant, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Subsidiary, the option price per share shall be no less than 110% of the Fair Market Value of one Share on the date of grant. Other than pursuant to Section 12.2, the Committee shall not without the approval of the Companys stockholders (i) lower the option price per Share of an Option after it is granted, (ii) cancel an Option in exchange for cash or another Award (other than in connection with a Change in Control as defined in Section 11.3 or a Substitute Award), or (iii) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the Shares are traded.
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5.4. Option Term. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten (10) years from the date the Option is granted, except in the event of death or disability; provided, however, that the term of the Option shall not exceed five (5) years from the date the Option is granted in the case of an Incentive Stock Option granted to a Participant who, at the time of the grant, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Subsidiary.
5.5. Exercise of Options.
(a) Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participants executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by giving notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased. The notice of exercise shall be in such form, made in such manner, and shall comply with such other requirements consistent with the provisions of the Plan as the Committee may prescribe from time to time.
(b) Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (i) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (ii) by tendering previously acquired Shares (either actually or by attestation) valued at their then Fair Market Value, (iii) with the consent of the Committee, by delivery of other consideration having a Fair Market Value on the exercise date equal to the total purchase price, (iv) pursuant to a Net Exercise arrangement; provided, however, that in such event, the Committee may exercise its discretion to limit the use of a Net Exercise, (v) through any other method specified in an Award Agreement (including same-day sales through a broker), or (vi) any combination of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share.
5.6. Incentive Stock Options. The Committee may grant Incentive Stock Options to any employee of the Company or any Subsidiary, subject to the requirements of Section 422 of the Code. Solely for purposes of determining whether Shares are available for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of Shares that may be issued pursuant to Incentive Stock Options granted under the Plan shall be 3,000,000 Shares, subject to adjustment as provided in Section 12.2.
5.7. Termination of Employment. In the event a Participant who is an Employee ceases to be employed with the consent of the Committee or upon the Participants death, retirement,
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or disability, each of the Participants outstanding Options shall be exercisable by the Participant (or the Participants legal representative or designated beneficiary), as provided under the terms of the Award Agreement, at any time prior to an expiration date established by the Committee at the time of grant or as otherwise determined by the Committee (which may be the original expiration date of such Option or such earlier time as the Committee may establish), but in no event after its respective expiration date; provided that the Committee may provide for Options to be exercisable up to one year after the death