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REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HOUSEHOLD INTERNATIONAL, INC.
(Exact name of issuer as specified in its charter)
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DELAWARE 36-3121988
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 SANDERS ROAD, PROSPECT HEIGHTS, 60070
IL
(Address of Principal Executive (Zip Code)
Offices)
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HOUSEHOLD INTERNATIONAL TAX REDUCTION INVESTMENT PLAN
(Full title of the plan)
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PATRICK D. SCHWARTZ, ESQ.
CORPORATE FINANCE COUNSEL
HOUSEHOLD INTERNATIONAL, INC.
2700 SANDERS ROAD
PROSPECT HEIGHTS, IL 60070
(Name and address of agent for service)
(708) 564-6301
(Telephone number, including area code, of agent for service)
APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF SALES PURSUANT TO THE PLAN: As soon
as practicable after the effective date hereof.
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED INTEREST/SHARE PRICE* REGISTRATION FEE*
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Interests in the Household
International Tax Reduction
Investment Plan..................... 25,000 Interests Not applicable $33,312,500 $11,487.15
Household International, Inc. Common
Stock, $1 par value................. 1,000,000 Shares Not applicable
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*The calculation of the registration fee is based on the anticipated
requirements of the Plan over the next two years. The common shares registered
hereby represent the estimated number of shares which may be purchased with
employer and employee contributions. It is impossible to determine precisely the
maximum aggregate offering price for the 25,000 interests registered hereunder;
therefore, the proposed maximum aggregate offering price and the amount of the
registration fee are estimated pursuant to Rule 457(h) on the basis of an
estimated amount of employee contributions to be received by the Plan over the
next two years.
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PURSUANT TO RULE 429 THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT IS A
COMBINED PROSPECTUS WHICH ALSO RELATES TO REGISTRATION STATEMENT NO. 33-21343.
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HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
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This Prospectus contains important information about the Household
International Tax Reduction Investment Plan (referred to herein as the "Plan" or
"TRIP"). The Plan has been adopted to encourage eligible employees to establish
a regular savings program and to provide such employees with additional benefits
through employer contributions and through tax benefits resulting from
participating in the Plan. A total of 3,500,000 shares of Household
International, Inc. common stock ($1 par value) and 85,000 Interests in the Plan
have been or are being offered pursuant to the Plan. If you have any questions
concerning the Plan, you should contact Employee Benefits at the Home Office.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS APPENDIX OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is February 9, 1994.
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TABLE OF CONTENTS
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PAGE
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Introductory Statement..................................................................................... 2
Description of the Plan
General.................................................................................................. 3
Eligibility.............................................................................................. 3
Administration of the Plan............................................................................... 3
Contributions............................................................................................ 5
Investment Funds......................................................................................... 7
Performance of the Investment Funds...................................................................... 10
Changing Investment Options in the Investment Funds...................................................... 11
Transfer Restrictions.................................................................................... 11
Vesting.................................................................................................. 12
Withdrawals.............................................................................................. 12
Special Rules for Hardship Withdrawals................................................................... 13
Distributions Upon Termination of Employment............................................................. 14
Loans to Participants.................................................................................... 14
Federal Income Tax Effects to Participants................................................................. 15
General.................................................................................................. 15
Contributions to Employee Accounts....................................................................... 15
Withdrawals While Employed............................................................................... 15
Distribution Upon Termination of Employment.............................................................. 16
Excess Tax Reduction Contributions....................................................................... 17
Excise Tax on Excess Distributions....................................................................... 17
Rollover of a Distribution............................................................................... 17
Internal Revenue Service Approval........................................................................ 17
Special Tax Notice Regarding Plan Payments................................................................. 18
Summary.................................................................................................. 18
Payments Eligible to be Rolled Over...................................................................... 18
Direct Rollover.......................................................................................... 19
Payment Paid to a Participant............................................................................ 19
Surviving Spouses, Alternate Payees and other Beneficiaries.............................................. 21
How to Obtain Additional Information..................................................................... 21
Other Important Information................................................................................ 22
Available Information and Incorporation of Certain Documents by Reference.................................. 23
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INTRODUCTORY STATEMENT
In this Prospectus, Household International, Inc. is referred to as
"Household" or the "Corporation". The address of Household's general
administrative office is 2700 Sanders Road, Prospect Heights, Illinois 60070
(Telephone: (708) 564-5000). A copy of the Corporation's latest Annual Report to
shareholders is being delivered with this Prospectus to employees, except to
employees who have previously received a copy of such Report; however, Household
will promptly send without charge an additional Annual Report to any such
employee at the employee's request.
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DESCRIPTION OF THE PLAN
GENERAL
The Plan and the trust fund established thereunder are qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The Plan is also subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") which are applicable to "defined
contribution plans". These provisions include reporting, disclosure,
participation, vesting and fiduciary responsibilities. Because the Plan is not a
defined benefit plan, Participants are not guaranteed a specific amount by the
Plan, and the benefit is not insured by the Pension Benefit Guaranty
Corporation. Consequently, Title IV (plan termination insurance) of ERISA does
not apply to this Plan.
ELIGIBILITY
Household and each of its participating subsidiaries (the "Employers") will
each contribute to the Plan for its own employee participants (the
"Participants"). Any employee of Household International, Inc. and its U.S.
subsidiaries (including Household Finance Corporation, Household Finance
Corporation II, Household Finance Corporation III, Household Financial Group
Ltd., Household Finance Consumer Discount Company, Household Bank, f.s.b.,
Household Mortgage Services, Inc., Household Insurance Services, Inc., Household
Credit Services, Inc., HCFS Business Equipment Corporation, Hamilton
Investments, Inc., Household Retail Services, Inc., Household Commercial
Financial Services, Inc., Alexander Hamilton Life Insurance Company of America,
First Alexander Hamilton Life Insurance Company and Omni Products International,
Inc.), except for an employee in a collective bargaining unit or of Capital
Graphics, Inc. or of B & K Corporation, is eligible to participate in the Plan
on the first day of the calendar quarter coinciding with or following the
earlier of i) the completion of three years of service, or ii) the attainment of
age 21 and completion of one year of service. Any eligible employee may begin
participation in the Plan if the employee meets the minimum years of service
requirement specified in the preceding sentence. An employee who chooses not to
participate in the Plan at such time as he becomes eligible may elect to
participate in the Plan effective on the first day of any calendar quarter in
accordance with the terms of the Plan, by completing the proper form and
submitting it to Household at least 30 days prior to the first day of that
calendar quarter. If an election form is received later than 30 days prior to
the start of a calendar quarter, the employee will be admitted into the Plan on
the first day of the second calendar quarter immediately following the date the
form is received.
ADMINISTRATION OF THE PLAN
The Plan's Administrative and Investment Committee (the "Committee") has
responsibility for administration of the Plan, including interpreting provisions
of the Plan, reviewing claims arising under the Plan, and filing reports and
other notices required for the continual qualification of the Plan under the
Code. Committee members are appointed and serve at the discretion of Household's
Chief Executive Officer.
Household has entered into a Trust Agreement with Vanguard Fiduciary Trust
Company ("Vanguard" or, the "Trustee") under which Vanguard will be Trustee of
the trust fund (the "Trust") and recordkeeper for the Plan. The Trustee has
responsibility for the administration of the Trust and the management of the
assets held by it. The Trustee may be removed, and a new Trustee appointed, at
the discretion of the Committee. Additional information about the Plan, the
Committee and Vanguard can be obtained from Household at its address previously
noted herein or by calling Employee Benefits at the Home Office, telephone
number (708) 564-5000.
THIS PLAN OFFERS PARTICIPANTS THE OPPORTUNITY TO DIRECT INVESTMENTS OF THEIR
ACCOUNTS OTHER THAN THE COMPANY MATCHING ACCOUNT (DESCRIBED BELOW). IT IS THE
INTENTION OF THE COMPANY AND THE COMMITTEE THAT THE FIDUCIARIES OF THE PLAN ARE
TO BE RELIEVED OF LIABILITY FOR ANY LOSSES WHICH ARE THE DIRECT AND NECESSARY
RESULT OF INVESTMENT INSTRUCTIONS GIVEN BY A PARTICIPANT OR BENEFICIARY.
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Administrative expenses of the Plan, including fees of the Trustee, counsel,
accountants, or other experts appointed under the Plan, will be paid out of the
Trust to the extent not paid by Household.
The following Administrative expenses of the Plan are paid out of the Trust:
HOUSEHOLD COMMON STOCK FUND: Vanguard assesses an administrative fee of
five basis points (0.05%) per annum on the aggregate value of the common
stock in the Fund using a daily accrual rate that is recorded on the stock
ledger for the Fund. At the end of each calendar quarter, Vanguard redeems
the accrued fee from funds on deposit in a separate Vanguard Money Market
Reserves account which is a part of the Common Stock Fund.
FIXED INCOME SECURITIES FUND: Vanguard assesses a $10,000 annual
administrative fee for the guaranteed investment contracts that existed in
the portfolio at the time of Vanguard's appointment as Trustee on January 1,
1991. This fee is assessed at a daily rate and is deducted from the assets
of the Fund on a monthly basis. For the portion of the Fund that is invested
in the Vanguard Investment Contract Trust, thirty basis points (0.30%) is
deducted from income to the Fund prior to distribution to Participant
accounts.
VANGUARD EXTENDED MARKET INDEX TRUST: Vanguard will assess a 1% fee on
shares purchased in this Fund at the time shares are purchased to cover
transaction costs consisting of bid/ask spreads, commissions, and market
impact (liquidity costs). The fee will assure that transaction costs are
spread equitably among shareholders of the portfolio. Since the fee is paid
directly by the portfolio, this fee is not, and should not be construed as,
as a sales load.
LOAN FEE: Participants will be charged a $30 administrative fee for each
new loan drawn from the Plan after August 1, 1993.
DEFERRED DISTRIBUTION FEE: Beginning July 1, 1994, Participants who defer
distribution of their accounts beyond the first day of July following the
calendar year in which their employment terminates will be charged an annual
fee of $30 until distribution is initiated.
With respect to shares of Household's common stock and shares in the Windsor
II Fund, Quantitative Portfolio Fund, Extended Market Index Trust, Wellington
Fund and Money Market Reserves -- Federal Portfolio held by the Trust, each
Participant may instruct the Trustee on how shares held in the Participant's
account are to be voted. Any shares of Household's common stock for which voting
instructions are not received from a Participant will be voted by the Trustee
(i) in the same manner as the majority of shares for which voting directions are
received by the Trustee, and (ii) with respect to the election of directors, the
Trustee will vote for the nominees who receive the most votes pursuant to such
voting directions.
By resolution of the Board of Directors of Household International, all
proxies, consents, ballots and voting materials that identify the vote of
specific stockholders are to be kept confidential except in the case of a
contested proxy, consent solicitation or to meet applicable legal requirements.
All such documents are to be returned to the tabulator and are to be made
available to the Inspectors of Election to enable them to certify the results of
the vote. The tabulator for each proxy solicitation and the Inspectors of
Election will be appointed by the Board of Directors prior to the meeting of
shareholders for which the proxy solicitation is required. The tabulator will
provide all comments written on or accompanying proxy cards to the Corporation,
along with the name of the stockholder, without indication of the vote of the
stockholder except where the vote is included in the comment or is necessary for
an understanding of the comment.
Both Vanguard and the tabulator have been informed of this confidential
position and neither will reveal any information relating to the purchase, sale
and holding and exercise of voting and similar rights with respect to such
securities to any officer, employee or agent of the Company except as required
by law or regulation. TRIP Committee member, R. Frank Spaulding, is designated
to monitor Plan compliance with these procedures. Mr. Spaulding's address is
2700 Sanders Road, Prospect Heights, Illinois 60070. Phone: (708) 564-5000.
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Other voting securities held in the Trust by the Trustee will be voted by
the Trustee in accordance with instructions given by the Committee. In the event
of a tender offer or exchange offer for shares of Household's common stock, each
Participant will be given the opportunity to decide individually whether shares
held in the Participant's account will be tendered or exchanged.
CONTRIBUTIONS
INVESTMENT PLAN AND TAX REDUCTION CONTRIBUTIONS. The Plan allows a
Participant to elect to make Tax Reduction Contributions and Investment Plan
Contributions to a Plan account through payroll deductions from 1% to 15% (in
whole percentages only) of eligible compensation. A contribution designated as a
Tax Reduction Contribution reduces the gross income of the Participant for
federal income tax purposes (except for social security taxes) at the time of
such contribution, whereas an Investment Plan Contribution is made on an
after-tax basis. Participants may make both Investment Plan Contributions and
Tax Reduction Contributions, but in no event may a combination of such
contributions exceed 15% of the Participant's compensation. Eligible
compensation includes salary, bonuses, commissions, overtime payments, severance
pay, and pay in lieu of vacation, but as of the date of this Prospectus may not
exceed $150,000 annually. (The maximum amount of Eligible Compensation is
adjusted annually for changes in the cost of living pursuant to regulations
issued by the Secretary of the Treasury). Participants may also be subject to
other limitations on the amount of contributions, as described elsewhere herein.
Please refer to "Description of the Plan -- Withdrawals" and "-- Special
Rules for Hardship Withdrawals" for important information regarding certain
restrictions on the ability of Participants to withdraw contributions and
earnings from their accounts. Reference is also made to "Federal Income Tax
Effects to Participants" for information regarding the different tax
considerations applicable to Investment Plan Contributions and Tax Reduction
Contributions.
INVESTMENT ELECTIONS. Participants must submit an investment election form
to Household designating the Investment Funds in which they wish their
contributions to be invested. Contributions to individual Investment Funds must
be made in multiples of 10% of the total of a Participant's Tax Reduction and
Investment Plan Contributions. The Investment Funds are described elsewhere
herein.
ROLLOVER CONTRIBUTIONS. In addition to the contributions specified above,
employees who receive a "qualifying distribution" under the Code from any other
tax qualified plan (as defined in the Plan) may have all or part of such
distribution transferred to a Rollover Account established in the name of the
employee for that purpose. Such Rollover Contributions are subject to
regulations imposed by the Code. Household recommends that Participants consult
with their tax advisors with respect to the impact of such regulations. An
investment election form must be submitted with the Rollover Contribution which
directs that such Rollover Contribution be invested in the Investment Fund(s) of
the Participant's choosing in multiples of 10% of the Participant's Rollover
Contribution.
TRUSTEE-TO-TRUSTEE TRANSFER CONTRIBUTIONS. In connection with the
distribution resulting from the termination of the Household International Tax
Credit Stock Ownership Plan ("PAYSOP"), participants in PAYSOP were permitted
during 1988 to transfer their PAYSOP account balances (which were primarily
invested in shares of Household common stock) into the Household Common Stock
Fund of the Plan (as described herein).
EMPLOYER MATCHING CONTRIBUTIONS. Subject to certain limitations, each
Participant's Employer may at its option elect to make contributions each month
to Participant accounts in an amount determined by the Employer. Each Employer's
matching contribution will not be more than 100% of each Participant's Tax
Reduction and Investment Plan Contributions during the month, and the amount of
such contributions by the Participant which are eligible to be matched by the
Employer may not exceed 6% of the Participant's compensation. Employer Matching
Contributions may be made in cash or in Household's common stock, at the
discretion of Household. However, all Employer
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Matching Contributions made in cash will be invested in the Household Common
Stock Fund. Employer Matching Contributions shall be made first to match a
Participant's Tax Reduction Contributions and then to match a Participant's
Investment Plan Contributions.
As of the date of this Prospectus, subject to the 6% of Participant
compensation limitation described above, Employer Matching Contributions will be
made each month at a rate equal to 100% of a Participant's Tax Reduction and
Investment Plan Contributions, except that the Employer Matching Contribution
rate for employees of Omni Products International, Inc. is 50%.
SUSPENDING OR CHANGING CONTRIBUTIONS. Participants may suspend Tax
Reduction and Investment Plan Contributions at any time. The effective date of a
suspension of contributions will be as soon as reasonably possible following
receipt by Household of a notice of suspension of contributions. Participants
may resume Tax Reduction Contributions and/or Investment Plan Contributions as
of the first day of a calendar quarter. In no event may contributions resume
prior to the first day of the calendar quarter at least 30 days following
Household's receipt of a Participant's written election to resume contributions.
Participants may increase or decrease the amount of their Investment Plan
Contributions, and also may decrease the amount of their Tax Reduction
Contributions, effective the first day of a calendar quarter, by submitting a
properly executed election form to Household at least 30 days prior to the
effective date of the change. Election forms received less than 30 days prior to
a calendar quarter will be effective on the first day of the subsequent calendar
quarter.
LIMITATIONS ON CONTRIBUTIONS. The total contributions allocated to a
Participant's Plan account for any calendar year are limited pursuant to
requirements of the Code. In general, the Code requires that Tax Reduction,
Investment Plan, and Employer Matching Contributions, forfeitures, and certain
defined Participant contributions cannot exceed the lesser of (i) 25% of the
Participant's annual compensation, or (ii) an amount, which as of the date of
this Prospectus is $30,000, (this amount may be adjusted annually for changes in
the cost of living in accordance with regulations issued by the Secretary of the
Treasury), or (iii) an amount which, when considered together with benefits or
contributions for the Participant under other tax-qualified plans of Household
and its subsidiaries, does not cause the Participant's benefits or contributions
under all such plans to exceed certain limitations imposed by the Code.
In addition, a Participant may not contribute, as of the date of this
Prospectus, more than $9,240 of Tax Reduction Contributions in any year, but
such limit may be adjusted annually for changes in the cost of living in
accordance with regulations issued by the Secretary of the Treasury. Any
contributions by a Participant in excess of $9,240 during a year which were
designated as Tax Reduction Contributions will be automatically treated as
Investment Plan Contributions. Reference is made to "Federal Income Tax Effects
to Participants -- Excess Tax Reduction Contributions" herein for further
information on excess Tax Reduction Contributions.
There are also limitations on contributions made by individuals who are
considered by the Internal Revenue Service to be "highly compensated
individuals". Elections to make Tax Reduction Contributions and Investment Plan
Contributions by Participants who are highly compensated individuals will be
valid only to the extent that the total of such contributions made bears a
required relationship, set forth in the Code, to such contributions made by all
other individuals in the Plan. Contributions made by Participants who are not
highly compensated individuals will not be affected by these rules. Tax
Reduction Contributions of highly compensated individuals that exceed this
limitation must be reduced until the required relationship is met. In such
event, the reduced Tax Reduction Contributions of a Participant, and earnings
thereon, may be deemed Investment Plan Contributions or may be returned to the
Participant. Investment Plan Contributions and Employer Matching Contributions
of Participants who are highly compensated individuals must also be reduced in
order to meet the required relationship. Reduced Employer Matching
Contributions, to the extent not vested, may be forfeited, and reduced
Investment Plan Contributions, vested Employer Matching
6
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Contributions, and earnings thereon, may be returned to the Participants who are
highly compensated. Employer Matching Contributions and earnings on all
contributions will be taxed as regular income. Reduced Tax Reduction
Contributions cannot be deemed to be Investment Plan Contributions to the extent
that such treatment will cause Investment Plan Contributions by highly
compensated individuals to exceed the required relationship.
Total Tax Reduction and Employer Matching Contributions, which are
deductible by Household as an expense for federal income tax purposes, will be
limited to the maximum amount which Household is permitted to deduct during any
year.
INVESTMENT FUNDS
The Plan is intended to be a "participant directed plan" as described in
Section 404(c) of the Employee Retirement Income Security Act, and Title 29 of
the Code of Federal Regulations Section 2550.404c-1. The fiduciaries of the Plan
may be relieved of liability for any losses which are the direct and necessary
result of investment instruction given by the Participant or Beneficiary.
Participants may direct the investment of their contributions into one of
the following nine Investment Funds:
HOUSEHOLD COMMON STOCK FUND. This fund will primarily be invested in shares
of common stock of Household. Temporary cash balances may be invested in a
short-term money market account. Any dividends, net of Plan expenses
attributable to the Household Common Stock Fund, will be reinvested in
Household's common stock. The Trustee may purchase Household's common stock at
market prices in transactions over securities exchanges and may also purchase
newly-issued or treasury stock directly from Household at such prices and on
such terms as it deems proper. Each share of Household's common stock also
represents ownership of a Preferred Share Purchase Right, described herein under
"Other Important Information -- Household Preferred Share Purchase Rights".
FIXED INCOME SECURITIES FUND. Assets in this fund, as well as ongoing
employee contributions, are primarily invested in the Vanguard Fiduciary Trust
Company Investment Contract Trust (formerly named The Vanguard Variable Rate GIC
Trust). In addition, future proceeds received upon the maturity, termination or
sale of the existing individual investment contracts held by this fund with the
insurance companies specified below under "Performance of Investment Funds" will
be invested in the Vanguard Fiduciary Trust Company Investment Contract Trust.
Vanguard Fiduciary Trust Company has the authority to sell or terminate the
investment contracts currently in effect if it deems it to be in the best
interests of Participants to do so, and it may choose to exercise this
discretion in the future. Any gain or loss (if any) realized on such termination
or sale will be borne by Participants with investments in this fund following
such termination or sale. The Vanguard Fiduciary Trust Company Investment
Contract Trust seeks to provide safety of principal and a level of current
income consistent with other instruments with a two-to three-year average
maturity. The Trust is a collective trust invested primarily in guaranteed
investment contracts issued by insurance companies and bank investment contracts
issued by commercial banks. The Trust intends to maintain a constant net asset
value of $1.00 per share. There is no assurance that the fund will be able to
maintain a stable net asset value of $1.00 per share.
The interest earnings for any year is a blend or average of all the
investments in this fund and, consequently, the interest rate on this fund will
fluctuate based on the interest rate earned on individual investments held by
the fund. Using a single blended rate has the effect of smoothing rate
fluctuations from year to year. The Vanguard Fiduciary Trust Company Investment
Contract Trust return will be blended with the return on the other contracts.
WINDSOR II FUND. Vanguard's Windsor II Fund is a mutual fund designed to
provide long-term capital growth and a reasonable level of current income from
dividends. The fund's policy is to invest in a diversified portfolio of common
stocks listed on exchanges in the United States. Windsor II follows
7
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a flexible investment strategy emphasizing income-producing common stocks which
are, in the investment advisor's opinion, undervalued in the marketplace at the
time of purchase. For the most part, these securities are characterized by
above-average income yields and below-average price-earnings ratios, relative to
the stock market in general, as measured in the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index"). The price per share is determined by
dividing the total market value of the fund's investments and other assets, less
any liabilities, by the number of outstanding shares of the fund. Price per
share is determined as of the close of the New York Stock Exchange (the
"Exchange") on each day that the Exchange is open, and on any other day on which
there is sufficient trading in the fund's portfolio securities to materially
affect the fund's price per share. Dividend income is credited to Participants'
Plan accounts and is used to purchase additional shares of the Windsor II Fund.
QUANTITATIVE PORTFOLIO FUND. Vanguard's Quantitative Portfolio Fund is a
mutual fund which provides investment results that correspond to the price and
yield performance of publicly traded common stocks, in the aggregate, as
represented by the S&P 500 Index. The fund's policy is to be fully invested in
common stocks, and it is expected that cash or cash items would normally be less
than 1% of net assets. Temporary cash balances may be invested in short-term
money market instruments. The fund generally selects about 200 stocks, most of
which are in the S&P 500 Index. The selection of these 200 stocks is made with
quantitative and mathematical analysis to achieve an overall portfolio which
replicates very closely the investment performance of the S&P 500 Index. In
addition, the stock selection is made to identify stocks with superior relative
value, seeking thereby to marginally outperform the S&P 500 Index. The price per
share is determined by dividing the total market value of the fund investments
and other assets, less any liabilities, by the total outstanding shares of the
fund. Price per share is determined as of the close of the Exchange on each day
that the Exchange is open, and on any other day on which there is sufficient
trading in the portfolio securities to materially affect the fund's price per
share. Dividend income under this fund is credited to Participants' Plan
accounts and is used to purchase additional shares of the Quantitative Portfolio
Fund.
EXTENDED MARKET INDEX TRUST. This Vanguard managed mutual fund attempts to
invest in a reliable sample of all U.S. stocks not in the S&P 500 Index, in
percentages corresponding to their proportion of the Wilshire 4500 Index.
Because many of these stocks are too small in capitalization to own or trade
without undue liquidity risk, the portfolio is constructed to approximate the
Wilshire 4500 Index. The performance of the portfolio will therefore vary within
a reasonable range from the performance of the Wilshire 4500 Index. The price
per share is determined by dividing the total market value of the fund's
investments and other assets, less any liabilities, by the number of outstanding
shares of the fund. Price per share is determined as of the close of the
Exchange on each day that the Exchange is open, and on any other day on which
there is sufficient trading in the fund's portfolio securities to materially
affect the fund's price per share. Dividend income is credited to Participants'
Plan accounts and is used to purchase additional shares of the Extended Market
Index Trust.
PRIMECAP FUND. The Vanguard PrimeCAP Fund seeks long-term growth by
investing principally in common stocks of companies which the investment advisor
anticipates will experience significant long-term capital growth. Income from
dividends is expected to be minimal. Growth stocks, which are the Fund's primary
investments, are likely to be more volatile in price than the stock market as a
whole. The price per share is determined by dividing the total market value of
the fund's investments and other assets, less any liabilities, by the number of
outstanding shares of the fund. Price per share is determined as of the close of
the Exchange on each day the Exchange is open. Dividend income is credited to
Participants' Plan accounts and is used to purchase additional shares of the
PrimeCAP Fund.
WELLINGTON FUND. This Vanguard mutual fund is a "balanced fund", meaning
that it will hold varying amounts of bonds, U.S. preferred and common stocks,
and cash. The Wellington Fund's objective is conservation of principal,
reasonable income return, and modest profits without undue risk. The amount held
in each asset class will fluctuate within a range according to the portfolio
8
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manager's assessment of the risk and reward of each asset class given the then
current economic conditions. Normally, 60% to 70% of the Wellington Fund's
assets will be invested in U.S. common stocks. The price per share is determined
by dividing the total market value of the fund's investments and other assets,
less any liabilities, by the number of outstanding shares of the fund. Price per
share is determined as of the close of the Exchange on each day that the
Exchange is open, and on any other day on which there is sufficient trading in
the fund's portfolio securities to materially affect the fund's price per share.
Dividend income is credited to Participants' Plan Accounts and is used to
purchase additional shares of the Wellington Fund.
INTERNATIONAL GROWTH PORTFOLIO TRUST. This mutual fund seeks to provide
long-term capital growth by investing in a diversified portfolio of common
stocks of companies based outside the United States. The investment advisor to
the fund seeks to acquire securities which are undervalued or which offer
opportunities for significant future growth. Income from dividends may be
received, but is not an objective of the fund. The price per share is determined
by dividing the total market value of the fund's investments and other assets,
less any liabilities, by the number of outstanding shares of the fund. Price per
share is determined as of the close of the Exchange on each day the Exchange is
open. Dividend income is credited to Participants' Plan accounts and is used to
purchase additional shares of the International Growth Portfolio Trust.
The stocks in this fund will be affected by various factors which are likely
to cause the price performance of such stocks to be different than U.S. stocks
and, in some cases, more volatile. Such factors include differences in the tax
laws, accounting practices and financial reporting standards of the U.S. and the
country in which the companies are based and fluctuations in the value of
currencies in which the stocks are denominated.
MONEY MARKET RESERVES -- FEDERAL PORTFOLIO. This mutual fund seeks the
maximum current income that is consistent with preservation of capital and
liquidity by investing in short-term securities issued by the U.S. Treasury and
agencies of the U.S. government and repurchase agreements collateralized by such
securities. The liabilities of such agencies may not be backed by the full faith
and credit of the U.S. Government. The portfolio maintains a weighted average
maturity of less than ninety days.
The portfolio intends to maintain a constant net asset value of $1.00 per
share. Investments in money market funds such as this are, however, neither
insured nor guaranteed by the U.S. Government, and there is no assurance that
the fund will be able to maintain a stable net asset value of $1.00 per share.
The Fixed Income Securities Fund, Windsor II Fund, Quantitative Portfolio
Fund, Extended Market Index Trust, PrimeCAP Fund, Wellington Fund, International
Growth Portfolio Fund and Money Market Reserves-Federal Portfolio comprise part
of the Vanguard Group of Investment Companies. Household in its discretion may
add to, subtract from, or substitute different funds for the nine Investment
Funds currently available to Participants in the Plan. A prospectus on the eight
Vanguard funds is available by writing to Vanguard at 1400 Morris Drive, Wayne,
PA 19087, or by calling (800) 523-1188. Participants should request prospectuses
and read them prior to investment in a fund. Copies of the most recent
prospectus relating to Household common stock is available by writing to
Household at 2700 Sanders Road, Prospect Heights, IL 60070, or by calling (708)
564-5000.
Some Participants in the Plan have a portion of their Plan accounts invested
in the Eljer Industries, Inc. Common Stock Fund, the Schwitzer, Inc. Common
Stock Fund, and the Scotsman Industries, Inc. Common Stock Fund (such Investment
Funds referred to collectively as the "Manufacturing Company Investment Funds").
Each Manufacturing Company Investment Fund holds shares of common stock (and
related Common Stock Purchase Rights) of the former manufacturing subsidiary of
Household whose name it bears. However, the Committee has determined to
liquidate the Manufacturing Company Investment Funds as of June 30, 1994. Prior
to that date, dividends, if any, paid on shares of common stock of the
Manufacturing Companies will be used to purchase shares of Household common
stock and credited to the Household Common Stock Fund. Participants may
9
<PAGE>
not make contributions into the Manufacturing Company Investment Funds, nor are
transfers permitted from the other Investment Funds into the Manufacturing
Company Investment Funds. Participant balances invested in a Manufacturing
Company Investment Fund must be transferred to other Investment Funds by June
30, 1994. Any shares held in a Manufacturing Company Investment Fund as of June
30, 1994 will be sold by the Trustee and proceeds will be invested in the
Participant's Plan account based upon the Participant's most recent designated
allocations. See "Changing Investment Options in the Investment Funds" herein
for more information regarding permissible transfers to other Investment Funds.
PERFORMANCE OF THE INVESTMENT FUNDS
The table below presents certain historical information on the investment
performance of each of the Investment Funds. The rates of return presented below
are not intended to predict what the future performance of the Investment Funds
will be, and neither Household nor the Plan guarantees the performance of any of
the Investment Funds. The past return on an individual Participant's account
balance may differ from the annualized rates of return disclosed herein due to
the timing of when contributions in the various Investment Funds were made and
how long such investments were maintained by the Participant, as well as other
factors.
The table below shows annual rates of return for the various investment
alternatives, as well as indices of some relevant asset classes which are widely
used for comparative purposes. The annual rates of return take into
consideration the reinvestment of income (dividend and interest) and the price
changes of the fund or asset, if any.
<TABLE>
<CAPTION>
% ANNUAL RATES OF RETURN
---------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICALLY AVAILABLE
INVESTMENTS
Household Common Stock (1).... (13.99) 40.41 9.35 (32.69) 63.10 20.70 13.78
Fixed Income Securities 11.48 10.46 9.72 9.31 8.75 8.42 7.91
Fund (2).....................
Windsor II Fund............... (2.15) 24.73 27.83 (9.98) 28.70 16.50 13.60
Quantitative Portfolio (3).... 4.02 16.80 32.06 (2.44) 30.29 7.01 13.83
Extended Market Index (0.10) 19.74 24.10 (14.91) 41.85 12.47 14.49
Trust (4)....................
PrimeCAP Fund................. (2.29) 14.66 21.61 (2.79) 33.14 8.99 18.03
Wellington Fund............... 2.28 16.11 21.62 (2.81) 23.65 7.93 13.52
International Growth 12.48 11.61 24.76 (12.05) 4.74 (5.79) 44.74
Portfolio....................
Money Market Reserves -- 6.37 7.33 9.15 8.07 5.95 3.67 2.98
Federal Portfolio............
Eljer Industries Common N/A N/A (32.61) (63.23) (8.69) (24.14) (26.94)
Stock (5)....................
Schwitzer Common Stock (5).... N/A N/A (50.90) (38.18) 52.64) (0.06) (2.24)
Scotsman Industries Common N/A N/A (23.58) (32.93) 18.09 28.56 49.62
Stock (5)....................
INDICES OF ASSET CLASSES
S&P 500 Index (6)............. 5.22 16.83 31.52 (3.12) 30.34 7.61 10.06
Wilshire 4500 (7)............. (3.51) 20.53 23.94 (13.56) 43.45 11.87 14.57
Wilshire 5000 (8)............. 2.27 17.92 29.19 (6.18) 34.20 8.97 11.28
Shearson Lehman 2.30 7.58 14.22 2.28 14.62 7.58 11.03
Corp/Gov. (9)................
<FN>
- ------------------------
(1) The total performance of a share of Household common stock including
dividends and changes in market value during the year. These rates of
return reflect the market value on April 14, 1989 of the Manufacturing
Companies (Eljer Industries, Inc., Schwitzer, Inc., and Scotsman Indus-
tries, Inc.) that were spun-off to stockholders as a dividend of Household
during 1989.
(2) The Fixed Income Securities Fund was invested in the insurance company
contracts in the following percentages of total assets of the fund as of
December 31, 1993: Aetna Life Insurance Company: 25%; Principal Mutual Life
Insurance Company: 13%. The remaining 62% was invested in the Vanguard
Investment Contract Trust Fund.
</TABLE>
h-TM-
10
<PAGE>
<TABLE>
<S> <C>
(3) This mutual fund began operations during the fourth quarter of 1986;
therefore, 1987 is the first full year of performance.
(4) This mutual fund began operations during the fourth quarter of 1987;
therefore, 1988 is the first full year of performance.
(5) The performance data presented is consistent with the methodology described
in footnote 1. Returns shown for 1989 include the period from April 14,
1989, to year-end 1989.
(6) This widely used index includes 500 stocks of U.S. companies with large
capitalization. The market value of this index at December 31, 1993 was
$3.3 trillion.
(7) This widely used index includes virtually all of the stocks of U.S.
companies which are not in the S&P 500 Index. These are generally stocks of
smaller capitalized companies whose aggregate performance the Extended
Market Fund intends to approximate. The market value of this index at
December 31, 1993 was $1.6 trillion.
(8) This widely used index includes virtually all U.S. stocks, and had a market
value at December 31, 1993 of $4.9 trillion.
(9) This widely used index includes most publicly traded corporate and
government bonds and had a market value at December 31, 1993 of $2.9
trillion.
</TABLE>
CHANGING INVESTMENT OPTIONS IN THE INVESTMENT FUNDS
Subject to certain exceptions outlined in the following paragraph, a
Participant may elect to change the Investment Funds into which the
Participant's ongoing Tax Reduction and Investment Plan Contributions are
invested, or may choose to transfer previously-made Investment Plan
Contributions, Tax Reduction Contributions, Rollover Contributions,
Trustee-to-Trustee Transfer Contributions, and earnings on such contributions,
among the various Investment Funds by notifying Vanguard by phone at (800)
523-1188 or in writing at 1400 Morris Drive, Wayne, PA 19087. Written
confirmation of a transfer will be sent by Vanguard to the Participant's home
address. Such changes will be effective as soon as reasonably possible following
receipt by Vanguard of notification of the requested change, except for changes
involving the Fixed Income Securities Fund, which will be effective as of the
first day of the calendar quarter following notification to Vanguard of the
requested change. Changes in investment directions and transfers among the
Investment Funds may generally be made as often and whenever the Participant
chooses. Following any change in investment directions, contributions to each
Investment Fund must continue to be made in multiples of 10% of the total of the
Participant's contributions. Transfer from one Investment Fund to another may
generally be made in any amount of the Participant's choosing. Transfer of
Employer Matching Contributions (invested in the Household Common Stock Fund) to
other Investment Funds is not permitted.
Participants may transfer shares of the Manufacturing Companies held in the
Manufacturing Company Investment Funds into other Investment Funds of the Plan
in the same manner as transfers from other Investment Funds. Participants may
not make transfers or direct additional investments into the Manufacturing
Company Investment Funds and all existing investments in the Manufacturing
Company Investment Funds must be transferred to other Investment Funds by June
30, 1994. On June 30, 1994, the Trustee will liquidate the Manufacturing Company
Investment Funds and all proceeds attributable to a Participants interest in
such funds will be invested in non-Manufacturing Company Investment Funds based
upon the Participant's most recent investment allocations.
TRANSFER RESTRICTIONS
Certain conditions of the Vanguard Fiduciary Trust Company Investment
Contract Trust require that the Plan impose restrictions on transfers both into
and out of the Fixed Income Securities Fund. These conditions also impose
restrictions on transfers from the Fixed Income Securities Fund directly to the
Money Market Reserves -- Federal Portfolio. Due to these limitations, the Plan
permits transfers both into and out of the Fixed Income Securities Fund only
once per calendar quarter.
11
<PAGE>
Assets withdrawn from the Fixed Income Securities Fund must be deposited and
remain in an eligible equity fund for a minimum of ninety calendar days prior to
becoming eligible for transfer back into the Fixed Income Securities Fund or for
transfer to the Money Market Reserves -- Federal Portfolio. Such assets are
eligible for transfer to funds other than the Money Market Reserves -- Federal
Portfolio on a daily basis. The following funds are eligible equity funds:
Household Common Stock Fund; Windsor II; Quantitative Portfolio Fund; Extended
Market Portfolio, PrimeCAP Fund; Wellington Fund; and International Growth
Portfolio.
Exchanges from the Money Market Reserves -- Federal Portfolio may be made
directly into the Fixed Income Securities Fund without a ninety day investment
in an eligible equity fund.
VESTING
Participants are fully vested at all times in the portion of their account
balance attributable to their own Tax Reduction Contributions, Investment Plan
Contributions, Rollover Contributions, and Trustee-to-Trustee Transfer
Contributions. Participants become vested in Employer Matching Contributions at
the rate of 20% per year measured as of the calendar quarter in which they
entered the Plan. However, any Participant who has completed five years of
employment with Household or a participating subsidiary becomes immediately
vested in 100% of their Employer Matching Contributions. Participants are also
fully vested in Employer Matching Contributions at age 65, upon becoming
eligible for normal or early retirement as set forth under their Employer's
pension plan, or upon total disability or death. In addition, the Committee, in
its discretion, may accelerate vesting to 100% in special circumstances.
WITHDRAWALS
Subject to certain limitations, employees who are Participants in the Plan
may withdraw all or part of their account balance, subject to a minimum
withdrawal of $500 or the balance of the account, whichever is less. For
purposes of withdrawals, the value of a Participant's account balance will be
determined as soon as reasonably practicable following receipt by Vanguard of
the Participant's written withdrawal request. Withdrawals of account balances
will be made of all amounts in each category below (in the order in which such
categories are listed) before amounts in the next category may be withdrawn, and
are subject to the limitations set forth below:
1) Investment Plan Contributions (excluding earnings thereon) made prior to
January 1, 1987, which have not been matched by Employer Matching Contributions.
2) Investment Plan Contributions (including earnings thereon) made after
January 1, 1987 which have not been matched by Employer Matching Contributions;
and, if the Participant is a former participant in PAYSOP who transferred a
PAYSOP account balance into the Plan pursuant to a Trustee-to-Trustee Transfer
Contribution, the amount equal to such Participant's own contributions (if any)
into PAYSOP (excluding earnings thereon).
3) Investment Plan Contributions (excluding earnings thereon) made prior to
January 1, 1987, which have been matched by Employer Matching Contributions,
providing that the Participant has been in the Plan for five years; and, if the
Participant is a former participant in PAYSOP who transferred a PAYSOP account
balance into the Plan pursuant to a Trustee-to-Trustee Transfer Contribution,
earnings on such Participant's employee contributions (if any).
4) Investment Plan Contributions (including earnings thereon) made after
January 1, 1987, which have been matched by Employer Matching Contributions,
provided that the Participant has been in the Plan for five years.
5) Employer Matching Contributions, including earnings thereon, provided
that the Participant has been in the Plan for five years.
6) Trustee-to-Trustee Transfer Contributions (except any amount
attributable to such contributions previously distributed, as described above)
and Rollover Contributions, plus earnings thereon.
12
<PAGE>
7) Investment Plan Contributions (excluding earnings thereon) of
Participants who have been in the Plan for less than five years, which have been
matched by Employer Matching Contributions.
8) Tax Reduction Contributions, plus earnings thereon, by Participants who
have attained age 59 1/2, or in order to meet immediate financial hardships as
defined by the Code and regulations thereunder. Participants who have not
attained age 59 1/2 may withdraw account balances attributable to Tax Reduction
Contributions (excluding earnings thereon that were earned on or after January
1, 1989) during employment with Household or a subsidiary only to meet immediate
financial hardships. Except to meet immediate financial hardships, Participants
under age 59 1/2 may not make withdrawals attributable to Tax Reduction
Contributions during employment with Household or a subsidiary. The rules
concerning withdrawals for financial hardships are described under "Special
Rules for Hardship Withdrawals" herein.
Participants who have attained age 59 1/2 may withdraw all or part of the
balance in their accounts which is invested in shares of the Manufacturing
Companies held in the Manufacturing Company Investment Funds. Any such
withdrawals are not subject to the required priority of withdrawals set forth
above, or to the $500 minimum withdrawal.
A Participant with less than five years of participation in the Plan who
withdraws Investment Plan Contributions which have been matched by Employer
Matching Contributions will not be able to make contributions into the Plan (and
thereby receive Employer Matching Contributions) for a six month period
following such withdrawal.
Payments of withdrawals will be made in cash, except that non-hardship
withdrawals from the Household Common Stock Fund and the Manufacturing Company
Investment Funds may be made in cash, shares, or a combination of cash and
shares at the Participant's option, subject to the Committee's discretion to
determine the minimum number of shares which the Plan may distribute to a
Participant in lieu of cash. Reference is made to "Federal Income Tax Effects to
Participants" for tax consequences of withdrawals of account balances from the
Plan during employment.
SPECIAL RULES FOR HARDSHIP WITHDRAWALS
A Participant may only make a hardship withdrawal if the withdrawal is made
on account of an immediate and heavy financial need of the Participant and if
the withdrawal is necessary to satisfy such financial need. A withdrawal will be
deemed to be made on account of an immediate and heavy financial need if used
for one of the following purposes: the purchase of a principal residence (use of
withdrawals to make mortgage payments is not permissible); payment of tuition
for the next semester, trimester, or quarter of post-secondary education for
Participants, their spouses, or dependents; the need to prevent the eviction of
Participants from their principal residence or foreclosure on a mortgage of any
such residence; and certain medical expenses described in the Code.
A distribution will not be treated as necessary to satisfy an immediate and
heavy financial need to the extent the amount of the withdrawal is in excess of
the amount required to relieve the financial need or to the extent such need may
be satisfied from other resources that are reasonably available to the
Participant. In order to demonstrate that the withdrawal is necessary to satisfy
an immediate and heavy financial need, a Participant will be required to execute
a written representation that the need cannot be met through one or more of the
following means: reimbursement or compensation by insurance or otherwise;
reasonable liquidation of the Participant's assets, to the extent such
liquidation would not itself cause an immediate and heavy financial need;
cessation of Tax Reduction or Investment Plan Contributions to the Plan;
borrowing from commercial sources on reasonable commercial terms; or other
withdrawals or nontaxable (at the time of the loan) loans available from the
Plan, all of which have been exhausted pursuant to the terms of the Plan.
For purposes hereof, a Participant's assets shall be deemed to include those
assets of the Participant's spouse and minor children that are reasonably
available to the Participant.
13
<PAGE>
Participants who make hardship withdrawals will not be able to make Tax
Reduction or Investment Plan Contributions for a period of twelve months
following the request for a hardship withdrawal. Also, the amount of Tax
Reduction Contributions for the Plan year following the year in which a
Participant makes a hardship withdrawal shall be limited to an amount (as of the
date of this Prospectus $9,240, subject to annual adjustment by the Secretary of
the Treasury for changes in the cost of living), reduced by the amount of the
Participant's Tax Reduction Contributions for the prior year.
Refer to "Federal Income Tax Effects to Participants -- Withdrawals While
Employed" for tax consequences of hardship withdrawals.
DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT
Subject to the rules for vesting of Employer Matching Contributions,
Participants who have terminated employment are entitled to receive the entire
balance of their account under the Plan as soon as administratively practicable
following receipt by Household of a request for distribution of the
Participant's account. If a Participant does not request a distribution and if
the value of their account following termination exceeds $3,500, the
distribution will be deferred until a later date but not later than the first
business day following the date the Participant reaches age 65. Participants who
are retirement eligible under a pension plan of Household or a subsidiary may
elect to defer the distribution of their account regardless of amount, provided
that such distribution is made no later than April 1 of the year following the
year in which the Participant attains age 70 1/2. A direct rollover to an
individual retirement account or a qualified retirement plan is available. Until
distributions are initiated, a deferred account fee of $30 will be charged each
year to any Participant who defers distribution from the Plan beyond June 30 of
the year following the calendar year in which employment is terminated. All
amounts will generally be distributed in a lump sum distribution; however,
Participants in the Plan prior to July 1, 1989, and who do not have outstanding
loans may choose to receive their distribution in the form of an annuity. Lump
sum payments will be made in cash, except that distributions from the Household
Common Stock Fund and the Manufacturing Company Investment Funds may be made in
cash, shares, or a combination of cash and shares at the Participant's option,
subject to the Committee's discretion to determine the minimum number of shares
which the Plan may distribute to a Participant in lieu of cash. A Participant's
account will also be distributed upon death or total disability.
A Participant may designate a beneficiary or beneficiaries to receive the
vested and undistributed amount of the Participant's account (less the amount of
any outstanding loan) in the event of the Participant's death. Subject to the
consent of the Participant's spouse, if any, a Participant may designate a
beneficiary other than his or her spouse to receive the Participant's account
balance, in the event of the Participant's death.
Amounts distributed to Participants will be valued as of the date of
distribution.
Any non-vested portion of a terminating Participant's account will be
applied to reduce Employer Matching Contributions otherwise payable by Household
or the Participant's Employer, as applicable, to the accounts of other
Participants.
Refer to "Federal Income Tax Effects to Participants" for tax consequences
resulting from distributions upon termination of employment.
LOANS TO PARTICIPANTS
Loans are available under the Plan to Participants. Requests for loans must
be approved by the Committee or the Committee's designee. A $30 loan fee will be
deducted from the amount borrowed when the loan is made. Participants must
obtain the consent of their spouse in order to borrow money from their account.
Each loan must be for an amount not less than $500 ($2,000 for residential
loans) or the eligible balance of the Participant's account, whichever is less.
No more than two non-residential loans and one loan for the construction or
acquisition of a principal residence may be outstanding at any time. Outstanding
loans to a Participant under the Plan and all other tax-qualified plans of
14
<PAGE>
Household and its subsidiaries may not exceed $50,000 at any point in time. In
the case of a new loan this dollar limitation is reduced by the highest
outstanding loan balance during the prior twelve months. A Participant may not
borrow more than 50% of the value of the Participant's non-forfeitable account
(i.e. Tax Reduction Contributions, Investment Plan Contributions, Rollover
Contributions, Trustee-to-Trustee Transfer Contributions, any earnings or
appreciation on any such contributions and the vested portion of any Employer
Matching Contributions and any earnings or appreciation thereon). Loans will be
secured by the Participant's account balance. The Committee will determine the
interest rate to be charged on each loan. Loans must be repaid within five years
except that, at the Committee's discretion, loans for the construction or
acquisition of a Participant's principal residence may be made for a term of up
to 25 years. However, all loans become due upon severance of the Participant's
employment. Loan installment payments will be made through payroll deductions.
Prepayment of a loan in full is allowed at any time without penalty. Interest on
loans made after January 1, 1987, secured by the portion of a Participant's
account attributable to Tax Reduction Contributions is not deductible for
federal income tax purposes. Loan repayments will be credited to a Participant's
Plan account and invested in accordance with the Participant's current
investment election for future Tax Reduction and/or Investment Plan
Contributions, except that repayment of loans borrowed from funds attributable
to Employer Matching Contributions will be invested in the Household Common
Stock Fund.
FEDERAL INCOME TAX EFFECTS TO PARTICIPANTS
GENERAL. The Plan is operated as a qualified plan under Sections 401(a) and
401(k) of the Code. Qualification of the Plan means that a Participant will not
be subject to federal income taxes on Tax Reduction Contributions and Employer
Matching Contributions, or on earnings or appreciation on all account balances
held in the Plan, until such amounts either are withdrawn by or distributed to
the Participant or are distributed to the Participant's beneficiary in the event
of the Participant's death.
CONTRIBUTIONS TO EMPLOYEE ACCOUNTS. No deduction for federal income tax
purposes is allowed to Participants for Investment Plan Contributions. Tax
Reduction Contributions of a Participant, however, reduce the gross income of
the Participant for federal income tax purposes (but not for social security
taxes) to the extent of the contributions.
WITHDRAWALS WHILE EMPLOYED. The withdrawal of amounts attributable to Tax
Reduction Contributions, Employer Matching Contributions, Rollover
Contributions, and all accumulated earnings thereon, and the withdrawal of
earnings on Investment Plan Contributions, will be subject to federal income
tax. Withdrawals of amounts attributable to Trustee-to-Trustee Transfer
Contributions, including earnings thereon, will also be subject to federal
income tax except for the amount (if any) of the Participant's own contributions
into PAYSOP. An additional 10% excise tax will also be imposed on withdrawals of
taxable amounts (including hardship withdrawals) unless: (i) the Participant is
age 59 1/2 or over; (ii) the withdrawal is made to pay medical expenses, except
that the additional 10% excise tax will be imposed on the amount of medical
expenses that the Participant cannot deduct on a tax return; or (iii) the
payment is made to an alternate payee pursuant to a qualified domestic relations
order.
If a Participant exercises the right to withdraw amounts attributable to
Investment Plan Contributions (excluding earnings thereon) while continuing as
an employee, such withdrawal, being a return of the Participant's after-tax
contributions, will not be subject to federal income tax provided they were
contributed to the Plan prior to January 1, 1987. After any pre-1987 Investment
Plan Contributions have been withdrawn, further withdrawals are considered to be
made on a pro-rata basis from nontaxable employee contributions and taxable
earnings on contributions. Thus, a withdrawal of Investment Plan Contributions
is considered to be part nontaxable (the return of Investment Plan Contributions
made after January 1, 1987) and part taxable (the payment of earnings on the
Investment Plan Contributions, including earnings on Investment Plan
Contributions made prior to 1987). In similar fashion, if withdrawal of the
portion of a Participant's Trustee-to-Trustee Transfer Contribution attributable
to such Participant's employee contributions into PAYSOP is made,
15
<PAGE>
such withdrawal will be considered in part nontaxable (the return of the
Participant's employee contributions into PAYSOP) and part taxable (the earnings
on such Participant's employee contributions into PAYSOP).
DISTRIBUTION UPON TERMINATION OF EMPLOYMENT. Amounts subject to federal
income taxation that are distributed after termination of employment will become
taxable in the year of distribution.
If distribution of a Participant's account is made in a lump sum, the amount
of the distribution equal to a Participant's Investment Plan Contributions and
the portion of the Participant's Trustee-to-Trustee Transfer Contribution equal
to the employee's contributions into PAYSOP is returned tax-free for federal
income tax purposes. The remainder of such distribution, including all
accumulated earnings, is subject to federal income tax at ordinary income rates,
subject to the rules described in the next paragraph.
The Tax Reform Act of 1986 repealed ten-year forward averaging and phased
out over a five-year period pre-1974 capital gains treatment for lump sum
distributions. Individuals over age 59 1/2 are entitled to make one election of
five-year forward averaging for a lump sum distribution. However, a transitional
rule allows individuals who were age 50 before January 1, 1986, and who are
otherwise eligible, to make one election, without regard to the age 59 1/2
requirement, to use five-year forward averaging (using current rates) or
ten-year averaging (using the 1986 tax rates) with respect to a lump sum
distribution. This transitional rule also allows such an individual to elect
capital gains treatment (at a 20% rate) with respect to lump-sum distributions
without regard to the phaseout of capital gains. An individual who elects to use
the transitional rule with respect to a distribution received before age 59 1/2
will lose the opportunity to make another such election for distributions after
age 59 1/2.
With respect to Participants who choose to have their distributions paid in
the form of an annuity, federal taxation of the annuity payments will be
determined pursuant to rules established under the Code. Generally, that part of
annuity income attributable to Investment Plan Contributions and the portion of
Trustee-to-Trustee Transfer Contributions equal to employee contributions into
PAYSOP is returned tax-free for federal income tax purposes, but the remaining
part is subject to federal income tax at ordinary income rates.
If a lump sum distribution of stock from the Household Common Stock Fund or
the Manufacturing Company Investment Funds is distributed upon termination of
employment, the excess, if any, of the fair market value of such stock over the
cost of the stock when acquired by the Trustee is not subject to federal income
tax at the time of distribution to a Participant but generally will be subject
to federal income tax when such stock is subsequently sold by the Participant.
To the extent provided in regulations issued pursuant to the Tax Reform Act of
1986, a taxpayer may elect not to defer the tax on net unrealized appreciation
until the year of disposition of the stock, thus subjecting the distribution to
federal income tax at the time of distribution.
An additional 10% excise tax is imposed on the taxable portion of a
distribution received by a Participant prior to age 59 1/2 unless such
distribution is: (i) made to a beneficiary after the Participant's death; (ii)
made on account of the Participant's disability, defined as the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long continued or indefinite duration; (iii) part of a
scheduled series of substantially equal annual (or more frequent) payments over
life or life expectancy (or joint lives or life expectancies) but only if
payments begin after termination of employment; (iv) made after termination of
employment on account of early retirement under a corporation sponsored
retirement plan after attainment of age 55; (v) made to a Participant for
payment of medical expenses that could be deducted on the Participant's tax
return; or (vi) a distribution to an alternate payee pursuant to a qualified
domestic relations order.
16
<PAGE>
EXCESS TAX REDUCTION CONTRIBUTIONS. If a Participant makes tax-deferred
contributions during the year to certain other tax-qualified plans or
tax-sheltered annuities, such tax-deferred contributions must be combined with
the Participant's Tax Reduction Contributions to the Plan in determining whether
the $9,240 limit on Tax Reduction Contributions has been exceeded during the
year. If a Participant has made more than $9,240 in tax-deferred contributions
under more than one plan during a taxable year, the Participant may notify the
Committee of the Plan's allocable share of the excess contribution prior to the
March 1 following the end of such taxable year. On or before April 15 of such
year, the Committee will distribute to the Participant any excess Tax Reduction
Contributions and earnings thereon. The excess Tax Reduction Contributions are
included in the Participant's income for the year in which such excess Tax
Reduction Contributions were made. The earnings on the excess Tax Reduction
Contributions will be treated as earned and received in the tax year in which
the income is distributed. If the excess Tax Reduction Contributions and
earnings thereon are returned after April 15, such excess is taxable to the
Participant in both the year in which the excess Tax Reduction Contributions
were made and in the year in which such excess is distributed from the Plan to
the Participant.
EXCISE TAX ON EXCESS DISTRIBUTIONS. The Code imposes a 15% excise tax on
certain distributions from tax-qualified plans. In general, the payments in any
calendar year from the Plan and any other tax-qualified defined benefit or
defined contribution plan, tax-sheltered annuity, or individual retirement
account will be compared to a dollar limitation, currently $150,000. The excess
of the amount distributed over the dollar limitation will be subject to the 15%
excise tax in addition to any applicable income tax, but reduced by the 10%
excise tax paid for an early distribution as described under "Federal Income Tax
Effects to Participants -- Distribution upon Termination of Employment" above.
For lump sum distributions for which a Participant elects the Code's
averaging provisions, the penalty will be applied to the extent the lump sum
exceeds five times the otherwise applicable limit for the year. All lump sum
distributions from qualified retirement plans made within the same year will be
aggregated for this purpose. Lump sum distributions are not aggregated with
annuity payments. Benefits that accrued before August 1, 1986, will be subject
to special rules if an election was made on the Participant's 1987 or 1988
income tax return and accrued benefits exceeded $562,500.
The excise tax does not apply to excess distributions (i) of Investment Plan
Contributions, (ii) on account of death, (iii) to alternate payees under
qualified domestic relations orders, or (iv) rolled over into another qualified
plan or individual retirement account.
ROLLOVER OF A DISTRIBUTION. If a distribution is made in a lump sum, a
Participant may, under certain conditions, roll over to an individual retirement
account or other tax-qualified plan all amounts distributed from the Plan
account, except for amounts equal to Investment Plan Contributions and the
portion of any Trustee-to-Trustee Transfer Contribution equal to his or her
employee contributions into PAYSOP, and thereby postpone the payment of federal
income tax on the distribution. A subsequent distribution to the employee from
the individual retirement account or tax-qualified plan will be subject to
federal income tax at ordinary income rates and will not qualify for special
five-year averaging described above.
INTERNAL REVENUE SERVICE APPROVAL. The tax consequences explained above are
based on the Internal Revenue Service's determination that the Plan is a
qualified plan under Sections 401(a) and 401(k) of the Code.
The foregoing is not intended to cover all tax aspects of Plan participation
and is based upon current understanding of federal tax laws and regulations as
in effect as of the date of this Prospectus. Each Participant or beneficiary
should consult with tax counsel concerning specific tax consequences, including
the application of state tax laws which may differ from the federal tax
treatment.
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SPECIAL TAX NOTICE REGARDING PLAN PAYMENTS
This notice contains important information Participants should consider
before they decide how to receive their benefits from the Plan.
SUMMARY
A payment from the Plan that is eligible for "rollover" can be taken in two
ways. Participants may have ALL OR ANY PORTION of their payments either 1) PAID
IN A "DIRECT ROLLOVER" or 2) PAID DIRECTLY TO THEMSELVES. A rollover is a
payment of Plan benefits to an individual retirement arrangement (IRA) or to
another qualified employer plan. This choice will affect the tax owed.
If a Participant chooses a DIRECT ROLLOVER:
- The payment will not be taxed in the current year and no income
tax will be withheld.
- The payment will be made directly to a designated IRA or, if the
Participant chooses, to another employer plan that will accept the
rollover.
- The payment will be taxed later when it is taken out of the IRA
or the employer plan.
If Participants choose to have Plan benefits PAID TO THEMSELVES:
- A Participant will receive only 80% of the payment, because the
Plan is required to withhold 20% of the payment and send it to the
IRS as income tax withholding to be credited against taxes.
- The payment will be taxed in the current year unless it is
rolled over. Special tax rules are available that could reduce the
tax owed. However, if the payment is received before age 59 1/2,
an additional 10% tax may be owed.
- A Participant can roll over the payment by paying it to an IRA
or to another employer plan that accepts rollovers within 60 days
of receiving the payment. The amount rolled over will not be
taxed until taken out of the IRA or employer plan.
- If a Participant wants to roll over 100% of the payment to an
IRA or an employer plan, OTHER MONEY MUST BE FOUND TO REPLACE THE
20% THAT WAS WITHHELD. If a Participant rolls over only the 80%
that was received, tax will be imposed on the 20% that was
withheld and that is not rolled over.
PAYMENTS ELIGIBLE TO BE ROLLED OVER
Payments from the Plan may be "eligible rollover distributions." This means
that they can be rolled over to an IRA or to another employer plan that accepts
rollovers. Vanguard and other Plan administrators should be able to tell a
Participant what portion of a payment is an eligible rollover distribution. The
following types of payments CANNOT be rolled over:
NON-TAXABLE PAYMENTS. In general, only the "taxable portion" of a payment
is an eligible rollover distribution. If a Participant has made Investment Plan
Contributions to the Plan, these contributions will be non-taxable when they are
paid to the Participant, and they cannot be rolled over. (Investment Plan
Contributions are contributions made to the Plan that were already taxed.)
PAYMENTS SPREAD OVER LONG PERIODS. A payment cannot be rolled over if it is
part of a series of equal (or almost equal) payments that are made at least once
a year and that will last for:
- the Participant's lifetime (or the Participant's life
expectancy), or
- the Participant's lifetime and the Participant's beneficiary's
lifetime (or life expectancies), or
- a period of ten years or more.
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REQUIRED MINIMUM PAYMENTS. Beginning in the year a Participant reaches age
70 1/2, a certain portion of a payment cannot be rolled over because it is a
"required minimum payment" that must be paid to the Participant.
DIRECT ROLLOVER
Participants can choose a direct rollover of all or any portion of a payment
that is an "eligible rollover distribution," as described above. In a direct
rollover, the eligible rollover distribution is paid directly from the Plan to
an IRA or another employer plan that accepts rollovers. Participants that choose
a direct rollover, are not taxed on a payment until they take it out of the IRA
or the employer plan.
DIRECT ROLLOVER TO AN IRA. Participants can open an IRA to receive the
direct rollover. (The term "IRA", as used in this notice, includes individual
retirement accounts and individual retirement annuities). Participants who
choose to have payment made directly to an IRA, should contact an IRA sponsor to
find out how to have payment made in a direct rollover to an IRA at that
institution. An IRA can be established to receive a payment and temporarily hold
the account balance until a decision is made on how to invest the funds.
However, in choosing an IRA, a Participant may wish to consider whether the IRA
chosen will allow all or a part of the payment to another IRA at a later date,
without penalties or other limitations. See IRS Publication 590, Individual
Retirement Arrangements, for more information on IRAs (including limits on how
often IRAs may be rolled over between IRAs).
DIRECT ROLLOVER TO A PLAN. If a Participant is employed by a new employer
that has a qualified plan, and would like to have a direct rollover made to that
plan, the administrator of that plan should be asked whether it will accept the
rollover. An employer plan is not legally required to accept a rollover. If the
new employer's plan does not accept a rollover, a Participant can make a direct
rollover to an IRA.
DIRECT ROLLOVER OF A SERIES OF PAYMENTS. If a Participant receives eligible
rollover distributions that are paid in a series for less than ten years, the
choice on whether a direct rollover will be made will apply to all later
payments in the series until a change is made to the payment election. A
Participant is free to change the election for any later payment in the series.
PAYMENT PAID TO A PARTICIPANT
A payment made directly to a Participant is subject to a 20% income tax
withholding. The payment is taxed in the year it is received unless, within 60
days, it is rolled over to an IRA or another plan that accepts rollovers. If it
is not rolled over, special tax rules may apply.
MANDATORY WITHHOLDING. If any portion of a payment made directly to a
Participant is an eligible rollover distribution, the Plan is required by law to
withhold 20% of that amount. This amount is sent to the IRS as income tax
withholding. For example, if an eligible rollover distribution is $10,000, only
$8,000 will be paid to the Participant because the Plan must withhold $2,000 as
income tax. However, when the Participant prepares an income tax return for the
year, the full $10,000 will be reported as a payment from the Plan. The $2,000
will be reported as tax withheld, and it will be credited against any income tax
owed for the year.
VOLUNTARY WITHHOLDING. If any portion of a payment is not an eligible
rollover distribution but is taxable, the mandatory withholding rules described
above do not apply. In this case, an election may be made to not have
withholding apply to that portion. To elect out of withholding, ask Vanguard for
the election form and related information.
SIXTY-DAY ROLLOVER OPTION. If an eligible rollover distribution is paid to
a Participant, the Participant may still decide to roll over all or part of it
to an IRA or another employer plan that accepts rollovers. If the Participant
decides to roll over, THE ROLLOVER MUST BE MADE WITHIN 60 DAYS AFTER THE PAYMENT
IS RECEIVED. The portion of the payment that is rolled over will not be taxed
until it is taken out of the IRA or the employer plan.
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Up to 100% of the eligible rollover distribution, including an amount equal
to the 20% that was withheld, may be rolled over. If 100% is rolled over, other
money must be contributed to the IRA or the employer plan within the 60-day
period to replace the 20% that was withheld. On the other hand, if only the 80%
received is rolled over, the 20% that was withheld will be taxed.
EXAMPLE: An eligible rollover distribution is $10,000, and the
Participant chooses to receive payment directly. The Participant will
receive $8,000 and $2,000 will be sent to the IRS as income tax withholding.
Within 60 days after receiving the $8,000, the Participant may roll over the
entire $10,000 to an IRA or employer plan. To do this, the Participant must
roll over the $8,000 received from the Plan, and an additional $2,000 from
other sources (savings, a loan, etc.). In this case, the entire $10,000 is
not taxed until it is taken out of the IRA or employer plan. If the entire
$10,000 is rolled over, when the Participant files a federal income tax
return, the $2,000 withheld may be refunded.
If, on the other hand, if only $8,000 is rolled over, the $2,000 not
rolled over is taxed in the year it was withheld. When the Participant files
an income tax return, a refund of part of the $2,000 withheld may be
payable. (However, any refund is likely to be larger if the entire $10,000
is rolled over.).
ADDITIONAL 10% TAX IF A PARTICIPANT IS NOT AGE 59 1/2. If a Participant
receives a payment before reaching age 59 1/2 and it is not rolled over, then,
in addition to the regular income tax, an additional tax equal to 10% of the
taxable portion of the payment may be payable. The additional 10% tax does not
apply to the payment if it is (1) paid because employment is terminated with the
employer during or after the year the Participant reaches age 55, (2) paid
because retirement is due to disability, (3) paid as equal (or almost equal)
payments over the Participant's life or life expectancy (or the Participant's
and the Participant's beneficiary's lives or life expectancies), or (4) used to
pay certain medical expenses. See IRS Form 5329 for more information on the
additional 10% tax.
SPECIAL TAX TREATMENT. If an eligible rollover distribution is not rolled
over, it will be taxed in the year it is received. However, if it qualifies as a
"lump sum distribution", it may be eligible for special tax treatment. A lump
sum distribution is a payment of a Participant's entire balance under the Plan
(and certain other similar plans of the employer) that is paid to the
Participant within one year because the Participant has reached age 59 1/2 or
has terminated employment with the employer (or, in the case of a self-employed
individual, because the Participant has reached age 59 1/2 or has become
disabled). For a payment to qualify as a lump sum distribution, the Participant
must have been a participant in the Plan for at least 5 years. The special tax
treatment for lump sum distributions is described below.
FIVE-YEAR AVERAGING. If a lump sum distribution is received after a
Participant is age 59 1/2, the Participant may be able to make a one-time
election to figure the tax on the payment by using "five-year averaging".
Five-year averaging often reduces the tax owed because it treats the payment
much as if it were paid over five years.
TEN-YEAR AVERAGING IF A PARTICIPANT WAS BORN BEFORE JANUARY 1, 1936. If
a lump sum distribution is received and the Participant was born before
January 1, 1936, the Participant can make a one-time election to figure the
tax on the payment by using "ten-year averaging" (using 1986 tax rates)
instead of five-year averaging (using current tax rates). Like the five-year
averaging rules, ten-year averaging often reduces the tax owed.
CAPITAL GAIN TREATMENT IF A PARTICIPANT WAS BORN BEFORE JANUARY 1,
1936. In addition, if a lump sum distribution is received and the
Participant was born before January 1, 1936, the Participant may elect to
have the part of the payment that is attributable to pre-1974 participation
in the Plan (if any) taxed as long-term capital gain at a rate of 20%.
There are other limits on the special tax treatment for lump sum
distributions. For example, Participants can generally elect this special tax
treatment only once in their lifetime, and the election applies to all lump sum
distributions that are received in that same year. If a Participant previously
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rolled over a payment from the Plan (or certain other similar plans of the
employer), the Participant cannot use this special tax treatment for later
payments from the Plan. If a Participant rolls over a payment to an IRA, this
special tax treatment for later payments from the IRA will not be available.
Also, if a Participant rolls over only a portion of a payment to an IRA, this
special tax treatment is not available for the rest of the payment. Additional
restrictions are described in IRS Form 4972, which has more information on lump
sum distributions and how to elect the special tax treatment.
EMPLOYER STOCK OR SECURITIES. There is a special rule that may be
applicable for a payment from the Plan that includes employer stock (or other
employer securities). To use this special rule, 1) the payment must qualify as a
lump sum distribution, as described above (or would qualify except that the
Participant does not yet have 5 years of participation in the Plan), or 2) the
employer stock included in the payment must be attributable to "after-tax"
employee contributions, if any. Under this special rule, a Participant may have
the option of not paying tax on the "net unrealized appreciation" of the stock
until the stock is sold. Net unrealized appreciation generally is the increase
in the value of the employer stock after it was acquired by the Plan. For
example, if employer stock was contributed to a Plan account when the stock was
worth $1,000 but the stock was worth $1,200 when it is received, tax would not
be paid on the $200 increase in value until the stock is later sold.
A Participant may instead elect not to have the special rule apply to the
net unrealized appreciation. In this case, net unrealized appreciation will be
taxed in the year the stock is received, unless the stock is rolled over. The
stock (including any net unrealized appreciation) can be rolled over to an IRA
or another employer plan either in a direct rollover or a rollover that is made
by the Participant.
If any employer stock is received in a payment that qualifies as a lump sum
distribution, the special tax treatment for lump sum distributions described
above (such as five-year averaging) also may apply. See IRS Form 4972 for
additional information on these rules.
SURVIVING SPOUSES, ALTERNATE PAYEES AND OTHER BENEFICIARIES
In general, the rules summarized above that apply to payments to employees
also apply to payments to surviving spouses of employees and to spouses or
former spouses who are "alternate payees". An alternate payee is an individual
whose interest in the Plan results from a "qualified domestic relations order",
which is an order issued by a court, usually in connection with a divorce or
legal separation. Some of the rules summarized above also apply to a deceased
employee's beneficiary who is not a spouse. However, there are some exceptions
for payments to surviving spouses, alternate payees, and other beneficiaries
that should be mentioned.
A surviving spouse may choose to have an eligible rollover distribution paid
in a direct rollover to an IRA or receive payment directly. If a surviving
spouse receives the payment directly, it may be kept or rolled over to an IRA
but it cannot be rolled over to an employer plan. An alternate payee has the
same choices as the employee. Thus, an alternate payee can have the payment paid
as a direct rollover or receive payment directly. If an alternate payee receives
payment directly, it may be kept or rolled over to an IRA or to another employer
plan that accepts rollovers. A beneficiary other than a surviving spouse CANNOT
choose a direct rollover, and CANNOT roll over the payment.
Payments to a surviving spouse, an alternate payee, or another beneficiary
are not subject to the additional 10% tax described in Section III above, even
if they are younger than age 59 1/2.
A surviving spouse, an alternate payee, or another beneficiary may be able
to use the special tax treatment for lump sum distributions and the special rule
for payments that include employer stock, as described in Section III above. If
a payment is received because of a Participant's death, the beneficiary may be
able to treat the payment as a lump sum distribution if the employee met the
appropriate age requirements, whether or not the employee had 5 years of
participation in the Plan.
HOW TO OBTAIN ADDITIONAL INFORMATION
This Prospectus summarizes only the federal (not state or local) tax rules
that might apply to payments. The rules described above are complex and contain
many conditions and exceptions that are not included in this notice. Therefore,
Participants may wish to consult with a professional tax advisor BEFORE they
take a payment of benefits from the Plan. Also, more specific information on
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the tax treatment of payments from qualified retirement plans can be found in
IRS Publication 575, Pension and Annuity Income, and IRS Publication 590,
Individual Retirement Arrangements. These publications are available from local
IRS offices or by calling (800) TAX-FORMS.
OTHER IMPORTANT INFORMATION
RESTRICTIONS ON RESALE OF HOUSEHOLD COMMON STOCK. There are generally no
restrictions on resale of Household's common stock acquired pursuant to the Plan
except for employees who are deemed to be "affiliates" of the Corporation, and
directors or officers of the Corporation who are subject to Section 16 of the
Securities Exchange Act of 1934. An affiliate may resell common stock of
Household acquired under the Plan either pursuant to a registration statement or
pursuant to Rule 144 or another applicable exemption under the Securities Act of
1933. For purposes of reselling, an affiliate is basically defined as a control
person or one who, directly or indirectly, has the power to direct or cause the
direction of the management and policies of Household. Under Section 16 of the
Securities Exchange Act of 1934, any profit realized by a director or officer of
Household through the purchase and sale or any sale and purchase of any equity
security of Household within a period of six months might be recoverable by
Household. If an employee thinks that he or she might be an affiliate of the
Corporation, or subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, an attorney should be consulted to determine what steps
should be taken to accomplish any such resale under securities laws.
HOUSEHOLD PREFERRED SHARE PURCHASE RIGHTS. Each share of Household's common
stock owned by a Participant also represents ownership of a Preferred Share
Purchase Right ("Right"), as set forth in a Rights Agreement (as amended)
between Household and Harris Trust and Savings Bank, as Rights Agent. Each Right
entitles the holder to purchase from Household one-hundredth of a share of a
series of Preferred Stock designated Series A Junior Participating Preferred
Stock ("Junior Preferred Stock") at a price of $100 per one-hundredth of a
share. The Rights are not exercisable until ten days after anyone acquires 20%
or more of Household's common stock or makes an offer for 30% or more of
Household's common stock. If Household is acquired in a merger or other business
combination, each Right will entitle its holder to purchase at the $100 exercise
price the number of shares of common stock of the surviving company which would
have a market value of two times the exercise price. In the event that Household
were the surviving corporation in the merger and its common stock were not
changed, proper provision would be made so that each holder of a Right would
thereafter have the right to receive upon exercise the number of shares of
Household's Junior Preferred Stock (or a new series of Household's preferred
stock having the same rights, privileges and preferences as the Junior Preferred
Stock) having a market value of two times the exercise price of the Right. The
Rights will expire on August 31, 1994, and may also be redeemed at the option of
Household for 50 CENTS per Right unless a person has acquired beneficial
ownership of 20% or more of Household's common stock. The Junior Preferred Stock
purchasable upon exercise of the Rights will be nonredeemable and subordinate to
other series of Household's preferred stock. The above summary of the Rights and
Junior Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement (as amended) and to the
Certificate of Designation, Preferences and Rights of the Junior Preferred
Stock, copies of which have been filed with the Securities and Exchange
Commission. Copies of such documents can also be obtained from Household's
Office of the Secretary.
AMENDMENT OR TERMINATION. The Plan has no specified duration. Household
reserves the right to amend, suspend, or terminate the Plan at any time, and to
discontinue or modify its contributions at any time. Rights or benefits
previously acquired by or allocated for Participants will not be adversely
affected by any such action unless the general officers of Household, on advice
of legal counsel, determine such action to be necessary or advisable to conform
the Plan to the requirements of Sections 401 and 501 of the Code or other
federal law.
REPORTS TO PARTICIPANTS. Participants in the Plan will receive an account
statement showing their current account balance as of the end of each quarter.
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NON-ASSIGNABILITY AND SECURITY INTERESTS. Except for security interests in
a Participant's account resulting from loans by the Plan to a Participant, and
unless otherwise required by law, e.g. a qualified domestic relations order, a
Participant may not assign, transfer, pledge, or otherwise encumber the
Participant's interest in the Plan.
BURDEN OF RISK. Household does not guarantee the value of the benefits
payable under the Plan, and payments which are specified to be made thereunder
shall be made exclusively from the assets of the Trust. A Participant assumes
all risk connected with any decline in market value of Household common stock or
other securities and investments credited to the Participant's account.
MISCELLANEOUS. The foregoing statements are summaries of important
provisions of the Plan and are not complete. Each employee may obtain a complete
copy of the Plan from the Corporation. In case of any conflict between
information provided in this Prospectus and the provisions of the Plan, the
provisions of the Plan control.
AVAILABLE INFORMATION AND
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Household is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements, and other information can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Commission's Regional Offices, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661, and Seven World
Trade Center, New York, New York 10048. Copies of such material can also be
obtained at prescribed rates by writing to the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
reports, proxy statements, and other material concerning Household can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005, and the Chicago Stock Exchange, 440 South LaSalle
Street, Chicago, Illinois 60605.
The following documents filed with the Commission are incorporated herein by
reference:
(a) The Corporation's and the Plan's latest annual reports filed
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
or, in the case of the Corporation, the latest prospectus filed pursuant to
Rule 424(b) under the Securities Act of 1933, which contains, either
directly or by incorporation by reference, certified financial statements
for the Corporation's latest fiscal year for which such statements have been
filed.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 since the end of the fiscal year covered by
the annual reports or the prospectus incorporated pursuant to (a) above.
(c) The description of any class of securities to be offered herein
which is contained in any registration statements filed under Section 12 of
the Securities Exchange Act of 1934, including any amendments or reports
filed for the purpose of updating such description.
All documents subsequently filed by Household pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities remaining
unsold, shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents.
Household will provide without charge to each person to whom this Prospectus
is delivered, on the written or oral request of such person, a copy of any or
all of the documents incorporated herein by reference (other than exhibits to
such documents). Requests should be directed to: Household International, Inc.,
2700 Sanders Road, Prospect Heights, IL 60070, Attention: Office of the
Secretary (Telephone: (708) 564-5000).
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PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The information set forth under "Available Information and Incorporation of
Certain Documents by Reference" in the Prospectus included as a part of this
Registration Statement is hereby incorporated herein by reference.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The information set forth under "Legal Opinions" and "Experts" in the
Prospectus included as a part of this Registration Statement is hereby
incorporated herein by reference.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of Delaware (Section 102) allows a corporation
to eliminate the personal liability of directors of a corporation to the
corporation or to any of its stockholders for monetary damage for a breach of
his/her fiduciary duty as a director, except in the case where the director
breached his/her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law
or obtained an improper personal benefit. The Restated Certificate of
Incorporation, as amended, of Household International, Inc. ("Household"),
contains a provision which eliminates directors' personal liability as set forth
above.
The General Corporation Law of Delaware (Section 145) gives Delaware
corporations such as Household broad powers to indemnify their present and
former directors and officers and those of affiliated corporations against
expenses incurred in the defense of any lawsuit to which they are made parties
by reason of being or having been such directors or officers, subject to
specified conditions and exclusions; gives a director or officer who
successfully defends an action the right to be so indemnified; and authorizes
Delaware corporations to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other right to which those indemnified
may be entitled under any bylaw, agreement, vote of stock holders or otherwise.
Household's Restated Certificate of Incorporation, as amended, provides for
indemnification to the fullest extent as expressly authorized by Section 145 of
the General Corporation Law of Delaware for directors, officers and employees of
Household and also to persons who are serving at the request of Household as
directors, officers or employees of other corporations (including subsidiaries).
This right of indemnification is not exclusive of any other right which any
person may acquire under any statute, bylaw, agreement, contract, vote of
stockholders or otherwise.
Household has purchased liability policies which indemnify its officers and
directors against loss arising from claims by reason of their legal liability
for acts as officer and directors, subject to limitations and conditions as set
forth in the policies.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS
<TABLE>
<C> <S>
4) Amended and Restated Household International Tax Reduction Investment Plan.
5A) Opinion of John W. Blenke, Assistant General Counsel and Secretary of Household, as to
the legality of the securities being registered.
5B) Internal Revenue Service Determination letter as to qualification under Section 401 of
the Internal Revenue Code.
5C) Undertaking to file amended provisions of the plan with the Internal Revenue Service.
</TABLE>
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23A) Consent of Arthur Andersen & Co., Certified Public Accountants.
23B) Consent of Mr. Blenke is contained in his opinion.
24) Power of Attorney (included on Page II-4 hereof).
</TABLE>
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10 (a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that the undertakings set forth in paragraphs
(a)(I)(i) and (a)(1)(ii) above do not apply if the information required
to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each of the filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceedings) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Prospect Heights, State of Illinois, on the 8th day
of February, 1994.
HOUSEHOLD INTERNATIONAL, INC.
By DONALD C. CLARK
-----------------------------------
Donald C. Clark,
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Each person whose signature appears below constitutes and appoints J. W.
Blenke and M. M. Carlson and P. D. Schwartz and each or any one of them (with
full power to act alone), as his/her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him/ her in
his/her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Form S-8 and to file
the same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each such
attorneys-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he/ she might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or their substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirement of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 8th day of February, 1994.
SIGNATURE TITLE
- -------------------------------------- ----------------------------------------
JOHN C.
BIEGLER
- -------------------------------------- Director
(John C. Biegler)
DONALD C.
CLARK Chairman of the Board, Chief Executive
- -------------------------------------- Officer and Director
(Donald C. Clark)
ROBERT J.
DARNALL
- -------------------------------------- Director
(Robert J. Darnall)
GARY G.
DILLON
- -------------------------------------- Director
(Gary G. Dillon)
II-3
<PAGE>
SIGNATURE TITLE
- -------------------------------------- ----------------------------------------
MARY JOHNSTON
EVANS
- -------------------------------------- Director
(Mary Johnston Evans)
CYRUS F. FREIDHEIM,
JR.
- -------------------------------------- Director
(Cyrus F. Freidhiem, Jr.)
LOUIS E.
LEVY
- -------------------------------------- Director
(Louis E. Levy)
JOHN D.
NICHOLS
- -------------------------------------- Director
(John D. Nichols)
GORDON P.
OSLER
- -------------------------------------- Director
(Gordon P. Osler)
ARTHUR E.
RASMUSSEN
- -------------------------------------- Director
(Arthur E. Rasmussen)
LOUIS W. SULLIVAN,
M.D.
- -------------------------------------- Director
(Louis W. Sullivan, M.D.)
RAYMOND C.
TOWER
- -------------------------------------- Director
(Raymond C. Tower)
DAVID A.
SCHOENHOLZ Vice President and
- -------------------------------------- Chief Accounting Officer
(David A. Schoenholz) (A Principal Financial Officer)
II-4
<PAGE>
SIGNATURE FOR THE PLAN
Pursuant to the requirements of the Securities Act of 1933, the Household
International Tax Reduction Investment Plan has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Prospect Heights, and State of Illinois on the 8th
day of February, 1994.
HOUSEHOLD INTERNATIONAL TAX
REDUCTION INVESTMENT PLAN
By: R. FRANK SPAULDING
-----------------------------------
(R. Frank Spaulding)
Member of the Administrative and
Investment Committee of the Household
International Tax Reduction Investment
Plan
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
4) Amended and Restated Household International Tax Reduction Investment Plan.
5A) Opinion of John W. Blenke, Assistant General Counsel and Secretary of Household, as to the legality of
the securities being registered.
5B) Internal Revenue Service Determination letter as to qualification under Section 401 of the Internal
Revenue Code.
5C) Undertaking to file amended provisions of the plan with the Internal Revenue Service.
23A) Consent of Arthur Andersen & Co., Certified Public Accountants.
23B) Consent of Mr. Blenke is contained in his opinion.
24) Power of Attorney (included on Page II-3 hereof).
</TABLE>
II-6
<PAGE>
EXHIBIT 4
AMENDMENT TWO OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its Board of
Directors on September 11, 1990 authorized the undersigned to amend the
Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of January 1, 1992;
and
WHEREAS, the restated Plan was amended on July 30, 1993 and further
amendment of the Plan is now considered desirable;
NOW THEREFORE, the Household International Tax Reduction Investment Plan is
amended effective as of January 1, 1994 as follows:
1. The last paragraph of the definition of "Compensation" in Article 2.1
is amended and restated to read as follows:
"Effective January 1, 1989, the maximum amount of Compensation taken
into account under the Plan in any Plan Year for purposes of determining
the amount of a Participant's Tax Reduction Contributions, Investment Plan
Contributions and Matching Company Contributions shall be $209,200 adjusted
pursuant to the Code. Effective January 1, 1994, the maximum amount of
Compensation taken into account under the Plan in any Plan Year for
purposes of determining the amount of a Participant's Tax Reduction
Contributions, Investment Plan Contributions and Matching Company
Contributions shall be $150,000, adjusted pursuant to the Code. At the
discretion of the Company, any Matching Company Contributions that cannot
be allocated under this Plan due to this dollar limitation on Compensation
may be allocated and paid to the affected Participant under a non-qualified
plan."
2. The following two new definitions are added to Article 2.1 immediately
after the definition of "Fund J":
"Fund K- Vanguard PrimeCAP Fund. This Fund shall primarily be
invested in common stock and other equity securities with an emphasis on smaller
companies.
Fund L- Vanguard International Growth Portfolio Fund. This Fund
shall primarily be invested in common stocks and other equity securities of
companies located in countries other than the United States."
<PAGE>
3. Article 13.7 is amended and restated to read as follows:
"13.7 INVESTMENT TRANSFERS.
A Participant shall be permitted to transfer contributions to the
Trust (other than Matching Company Contributions) previously invested in one
Investment Fund and earnings thereon to one or more other Investment Funds other
than Funds D, E and F. In addition, a Participant shall be permitted to
transfer contributions to the Trust (including Matching Company Contributions)
and earnings thereon that are invested in Funds, D, E or F to one or more of the
Investment Funds other than Funds D, E and F. A transfer election shall be made
in 1% increments of the Participant's total interest in an Investment Fund or in
a whole dollar amount or in a number of whole shares to another Investment Fund
in accordance with rules and procedures prescribed by the Committee. Transfer
elections may be made as often as directed by the Participant, except that
transfers to and from Fund B may be made only once per calendar quarter.
Assets exchanged out of Fund B must remain in an eligible equity
fund for a minimum of ninety calendar days prior to becoming eligible for
transfer into Fund J - the Vanguard Money Market Reserves - Federal Portfolio.
They are eligible for transfer to funds other than Fund J on a daily basis. The
following funds are eligible equity funds: Fund A - Household International,
Inc. Common Stock Fund; Fund C - Vanguard Windsor II; Fund G - Wellington Fund;
Fund H - Vanguard Quantitative Portfolio Fund; Fund I - Vanguard Extended
Market Portfolio; Fund K - Vanguard PrimeCAP Fund; and Fund L - Vanguard
International Growth Portfolio Fund.
Exchanges from Fund J, the Vanguard Money Market Reserves -
Federal Portfolio, may be made directly into Fund B without a ninety day
investment in an eligible equity fund.
If on June 30, 1993 any amount remains credited to a
Participant's account which is invested in Fund D, E or F, then the Trustee
shall transfer all such amounts to the other Funds in the same proportions as
the Participant has directed for future contributions in accordance with Article
13.5."
4. The following new Article is added immediately after Article 16.6:
"16.7 WITHDRAWAL FROM FUNDS D, E and F.
Any Participant who has attained age 59-1/2 may, in addition to the
withdrawal options provided in Articles 16.1 and 16.4, elect to withdraw all or
part of his vested accounts that are invested in Funds D. E or F. In such
event, the Participant shall
- 2 -
<PAGE>
file a written request with the Committee in accordance with Article 16.3
specifying the category of the withdrawal and the amount requested to be
withdrawn, but it will not be necessary that all amounts eligible for withdrawal
in each of the classifications listed in Articles 16.1 and 16.4 be distributed
before amounts in the next lower classification are distributed. Any such
distributions shall be in cash or stock or a combination of both, at the
discretion of the Participant; provided, however, that partial shares will be
paid in cash. If the Participant has less than five years of participation in
the plan and makes a withdrawal from Category G of Article 16.1 or Article 16.4,
his contributions will be restricted as outlined in Article 16.5."
IN WITNESS WHEREOF, Household International, Inc. has caused this
instrument to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by its officers thereunto duly authorized this 10th day of
December, 1993.
HOUSEHOLD INTERNATIONAL, INC.
BY (Colin P. Kelly)
-------------------------------------
Colin P. Kelly
Vice President - Human Resource
(Corporate Seal)
ATTEST:
(Susan E. Casey)
- -----------------------------------------
Assistant Secretary
- 3 -
<PAGE>
AMENDMENT ONE OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its Board of
Directors on September 11, 1990 authorized the undersigned to amend the
Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of January 1, 1992;
and
WHEREAS, further amendment of the Plan is now considered desirable;
NOW, THEREFORE, the Household International Tax Reduction Investment Plan
is amended effective as of January 1, 1993 as follows:
1. The following paragraph is substituted for the last paragraph of
Article 1:
"The Plan was amended and restated on December 6, 1991 effective
as of January 1, 1992 subject to any contrary effective date as set
forth in the Plan for a particular article or provision or as
otherwise required by law."
2. The following subparagraph is substituted for subparagraph 3.6(A)(b):
(b) NONWORKING PAID TIME - Each hour for which an individual is
paid or entitled to be paid by the Company or an Affiliate on account
of a period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity, disability, layoff, jury duty,
military duty or leave of absence; provided, however, that no credit
shall be given for payments made or due under a plan maintained solely
for the purpose of complying with applicable worker's or unemployment
compensation or disability insurance laws or for payments which solely
reimburse an individual for medical or medically related expenses
incurred by the individual; and
3. The following new Article 12.5 is added immediately after Article
12.4:
12.5 OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLLOVER
- 1 -
<PAGE>
DISTRIBUTIONS.
(A) If the distributee of any eligible rollover distribution made after
December 31, 1992:
(a) elects to have all or any part of such distribution paid
directly to an eligible retirement plan, and
(b) specifies the eligible retirement plan to which such
distribution is to be paid (in such form and at such time as the
Committee may prescribe),
such distribution shall not be deemed a transfer under Article 12.4 but shall be
made in the form of a direct trustee-to-trustee transfer to the eligible
retirement plan so specified. This subparagraph (A) shall apply only to the
extent that the eligible rollover distribution would be includible in gross
income if not transferred as provided in subparagraph (A) (determined without
regard to sections 402(c) and 403(a)(4) of the Code).
(B) As used in this Article 12.5 the term "eligible rollover distribution"
means any distribution to an Employee of all or any portion of the balance to
the credit of the Employee in the Plan, except that such term shall not include:
(a) any distribution which is one of a series of substantially
equal periodic payments (not less frequently than annually) made --
(i) for the life (or life expectancy) of the Employee
or the joint lives (or joint life expectancies) of the
Employee and the Employee's designated beneficiary, or
(ii) for a specified period of 10 years or more, and
(b) any distribution to the extent such distribution is required
under section 401(a)(9) of the Code, and
(c) the portion of a distribution which consists of after-tax
contributions.
(C) As used in this Article 12.5, the term "eligible retirement plan"
means:
(i) an individual retirement account described in
section 408(a) of the Code,
(ii) an individual retirement annuity described in
section 408(b) of the Code (other
- 2 -
<PAGE>
than an endowment contract),
(iii) a qualified trust, and
(iv) an annuity plan described in section 403(a) of the
Code.
(D) As used in this Article 12.5, the term "qualified trust" means an
Employees' trust described in section 401(a) of the Code which is exempt from
tax under section 501(a) of the Code and which is a defined contribution plan
whose terms permit the acceptance of rollover contributions.
(E) If any distribution attributable to an Employee is paid to the spouse
of the Employee after the Employee's death, the preceding provisions of this
Article shall apply to such distribution in the same manner as if the spouse
were the Employee; except that a trust or plan described in clause (iii) or (iv)
of Article 12.5 (C) above shall not be treated as an eligible retirement plan
with respect to such distribution.
(F) If any amount is paid or distributed to an alternate payee who is the
spouse or former spouse of the Participant by reason of any qualified domestic
relations order (within the meaning of section 414(p) of the Code, this Article
12.5 shall apply to such distribution in the same manner as if such alternate
payee were the Employee.
4. The following sentence is substituted for the first sentence of
Article 13.6:
"Matching Company Contributions and forfeitures shall be invested in
Fund A and allocated to the account of each Participant on a monthly
basis."
5. The following three additional sentences are added after the last
sentence of Article 15.1(D):
"However, in the event of such deferral, the Participant's account
will be charged an annual fee of $30 on the July 1 following the close
of the Plan Year in which the Participant terminated employment for
any reason, including, but not limited to, death or retirement, if he
still has a balance in his account at that time. This $30 fee will
continue to be imposed as of each subsequent July 1 if there then
remains a balance in such terminated Participant's account but no fee
will be charged under this Article 15.1 (D) prior to July 1, 1994.
This fee is subject to increase or decrease as determined by the
Committee."
6. The following sentence is substituted for the second
- 3 -
<PAGE>
sentence of Article 17.1:
"These loans are limited to a minimum of $500 each for non-residential
loans and $2,000 each for residential loans (or the eligible balance
of the Participant's account, if less) and may be granted twice per
year."
7. The following additional sentence is added after the last sentence of
Article 17.4:
"In addition, the Participant's account will be charged a loan fee of
$30 for each loan distributed to a Participant after August 1, 1993."
IN WITNESS WHEREOF, Household International, Inc. has caused this
instrument to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by its officers thereunto duly authorized this 30th day of
July, 1993.
HOUSEHOLD INTERNATIONAL, INC.
By (Colin P. Kelly)
-----------------------------
Colin P. Kelly
Vice President - Human Resources
(Corporate Seal)
ATTEST:
(Susan E. Casey)
- -----------------------
Assistant Secretary
- 4 -
<PAGE>
HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
January 1, 1992
<PAGE>
AMENDMENT AND RESTATEMENT OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, the Corporation by resolution of its Board of Directors on
September 11, 1990 authorized the undersigned to amend the Household
International Tax Reduction Investment Plan,
NOW, THEREFORE, Household International, Inc., hereby amends and
restates the plan as set forth in the attached 74 pages effective as of January
1, 1992 subject to any contrary effective date as set forth in the Plan for a
particular article or provision.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed and its corporate seal to be hereunto affixed and attested by its
proper officers thereunto authorized all on this 6th day of December, 1991.
HOUSEHOLD INTERNATIONAL, INC.
By (Colin P. Kelly)
---------------------------------
Colin P. Kelly,
Vice President Human Resources
ATTEST:
(Susan E. Casey)
- ----------------------
Assistant Secretary
(Corporate Seal)
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 PARTICIPATION AND YEARS OF SERVICE . . . . . . . . . . . . . . . 7
3.1 Eligibility to Participate . . . . . . . . . . . . . . . . . . 7
3.2 Commencement of Participation . . . . . . . . . . . . . . . . . 7
3.3 Waiver of Participation . . . . . . . . . . . . . . . . . . . . 7
3.4 Employment by Foreign Subsidiary . . . . . . . . . . . . . . . 7
3.5 Transfers from Eligible Employment . . . . . . . . . . . . . . 8
3.6 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 Participation and Service Upon Reemployment . . . . . . . . . . 10
3.9 Predecessor Service . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Tax Reduction Contributions . . . . . . . . . . . . . . . . . . 11
4.2 Tax Reduction Agreement . . . . . . . . . . . . . . . . . . . . 11
4.3 Investment Plan Contributions . . . . . . . . . . . . . . . . . 12
4.4 Investment Plan Agreement . . . . . . . . . . . . . . . . . . . 12
4.5 Matching Company Contributions . . . . . . . . . . . . . . . . 14
ARTICLE 5 LIMITATION ON TAX REDUCTION CONTRIBUTIONS . . . . . . . . . . . . 15
5.1 Dollar Limitation . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Maximum Deferral Percentage . . . . . . . . . . . . . . . . . . 15
5.3 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Family Members . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Prospective Reduction of Tax Reduction
Contributions . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6 LIMITATION ON INVESTMENT PLAN AND
MATCHING COMPANY CONTRIBUTIONS . . . . . . . . . . . . . . . . . 19
6.1 Maximum Contribution Percentage . . . . . . . . . . . . . . . . 19
6.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Prospective Reduction of Investment Plan
Contributions . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Testing of Tax Reduction Contributions
Under Maximum Contribution Percentage Test . . . . . . . . . 20
i
<PAGE>
PAGE
ARTICLE 7 AGGREGATE LIMIT ON DEFERRAL AND CONTRIBUTION
PERCENTAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 General Rules . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Prospective Reduction of Contributions . . . . . . . . . . . . 22
ARTICLE 8 CORRECTION OF TAX REDUCTION CONTRIBUTIONS
IN EXCESS OF DOLLAR LIMITATION . . . . . . . . . . . . . . . . . 23
8.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Designation as Excess Deferral . . . . . . . . . . . . . . . . 23
8.3 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Coordination with Excess Tax Reduction
Contributions . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9 CORRECTION OF EXCESS CONTRIBUTIONS . . . . . . . . . . . . . . . 24
9.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 Maximum Deferral Percentage Test --
Excess Tax Reduction Contributions . . . . . . . . . . . . . 24
9.3 Recharacterization of Excess Tax Reduction
Contributions . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Distribution of Excess Tax Reduction
Contributions . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 Maximum Contribution Percentage Test --
Excess Aggregate Contributions . . . . . . . . . . . . . . . 26
9.6 Distribution of Excess Aggregate
Contributions . . . . . . . . . . . . . . . . . . . . . . . . 26
9.7 Forfeiture of Matching Company Contributions . . . . . . . . . 27
9.8 Allocable Income . . . . . . . . . . . . . . . . . . . . . . . 27
9.9 Timing of Corrections . . . . . . . . . . . . . . . . . . . . . 27
9.10 Special Rule for Recharacterized Amounts . . . . . . . . . . . 27
9.11 Corrective Measures with Respect to
Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . 27
9.12 Additional Company Contributions . . . . . . . . . . . . . . . 28
9.13 Highly Compensated Individual Elections . . . . . . . . . . . . 28
9.14 Other Permissible Methods of Testing and
Correction . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 10 LIMITATIONS ON ANNUAL ADDITIONS . . . . . . . . . . . . . . . . . 29
10.1 Basic Limitation . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Limitation on Combination of Plans . . . . . . . . . . . . . . 30
10.4 Prospective Adjustment to Contributions . . . . . . . . . . . . 30
10.5 Disposal of Excess Annual Additions . . . . . . . . . . . . . . 30
ii
<PAGE>
PAGE
ARTICLE 11 GENERAL PROVISIONS REGARDING CONTRIBUTIONS . . . . . . . . . . . 32
11.1 Manner of Making Contributions . . . . . . . . . . . . . . . . 32
11.2 Limitation to Amount Deductible . . . . . . . . . . . . . . . . 32
11.3 Return of Contributions . . . . . . . . . . . . . . . . . . . . 32
11.4 Certain Aggregation Rules . . . . . . . . . . . . . . . . . . . .33
ARTICLE 12 ROLLOVERS AND TRANSFERS . . . . . . . . . . . . . . . . . . . . . 34
12.1 Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.2 Transfers from Other Plan . . . . . . . . . . . . . . . . . . . 35
12.3 Section 401(k) Limitations . . . . . . . . . . . . . . . . . . 35
12.4 Transfers to Other Plan . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 13 ACCOUNTS AND ALLOCATION OF FUNDS . . . . . . . . . . . . . . . . 36
13.1 Receipt of Contributions by Trustee . . . . . . . . . . . . . . 36
13.2 Trust Fund Valuation . . . . . . . . . . . . . . . . . . . . . 36
13.3 Allocation of Contributions to
Participants' Separate Accounts . . . . . . . . . . . . . . . 36
13.4 Adjustments to Participants' Accounts . . . . . . . . . . . . . 36
13.5 Participant-Directed Investments For
Future Contributions . . . . . . . . . . . . . . . . . . . . 37
13.6 Investment of Matching Company
Contributions; Forfeitures . . . . . . . . . . . . . . . . . 38
13.7 Investment Transfers . . . . . . . . . . . . . . . . . . . . . 38
13.8 No Rights Created by Allocation . . . . . . . . . . . . . . . . 38
ARTICLE 14 VESTING; FORFEITURES . . . . . . . . . . . . . . . . . . . . . . 39
14.1 Vesting of Accounts . . . . . . . . . . . . . . . . . . . . . . 39
14.2 Forfeiture of Non-Vested Interest . . . . . . . . . . . . . . . 40
14.3 Restoration of Non-Vested Interest . . . . . . . . . . . . . . 41
ARTICLE 15 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 42
15.1 Timing of Distributions; Applicable
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . 42
15.2 Method of Distribution . . . . . . . . . . . . . . . . . . . . 42
15.3 Designation of Beneficiary . . . . . . . . . . . . . . . . . . 43
15.4 Code Section 401(a)(9) . . . . . . . . . . . . . . . . . . . . 44
iii
<PAGE>
PAGE
ARTICLE 16 WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.1 Withdrawal Categories . . . . . . . . . . . . . . . . . . . . . 46
16.2 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . 47
16.3 Manner of Making Withdrawals . . . . . . . . . . . . . . . . . 49
16.4 Withdrawals Upon Attainment of Age 59-1/2 . . . . . . . . . . . 49
16.5 Consequences of Withdrawals of Matched
After-Tax Contributions . . . . . . . . . . . . . . . . . . . 50
16.6 Qualified Domestic Relations Order
Distribution . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 17 LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.2 Amount of Loan . . . . . . . . . . . . . . . . . . . . . . . . 52
17.3 Security for Loan . . . . . . . . . . . . . . . . . . . . . . . 52
17.4 Interest Rate Charged . . . . . . . . . . . . . . . . . . . . . 53
17.5 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . 53
17.6 Default on Loan . . . . . . . . . . . . . . . . . . . . . . . . 54
17.7 Manner of Making Loans . . . . . . . . . . . . . . . . . . . . 54
17.8 Accounting for Loans . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 18 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.1 Allocation of Responsibilities Among
Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.2 Powers and Responsibilities of the
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.3 Conclusiveness of Records . . . . . . . . . . . . . . . . . . . 56
18.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.5 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 19 AMENDMENT, TERMINATION AND MERGER . . . . . . . . . . . . . . . . 59
19.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 59
19.2 Plan Termination . . . . . . . . . . . . . . . . . . . . . . . 59
19.3 Distributions upon Certain Sales . . . . . . . . . . . . . . . 59
19.4 Successor Employer . . . . . . . . . . . . . . . . . . . . . . 59
19.5 Merger, Consolidation or Transfer . . . . . . . . . . . . . . . 60
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PAGE
ARTICLE 20 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 61
20.1 Exclusive Benefit of Participants a
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 61
20.2 Non-Guarantee of Employment . . . . . . . . . . . . . . . . . . 61
20.3 Rights to Trust Assets . . . . . . . . . . . . . . . . . . . . 61
20.4 Non-Alienation of the Right to Receive
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 61
20.5 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . 62
20.6 Plan Controls . . . . . . . . . . . . . . . . . . . . . . . . . 62
20.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 62
20.8 Effect of Mistake . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 21 TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 63
21.1 Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . 63
21.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 63
21.3 Minimum Allocation . . . . . . . . . . . . . . . . . . . . . . 66
21.4 Nonforfeitability of Minimum Allocation . . . . . . . . . . . . 67
21.5 Compensation Limitation . . . . . . . . . . . . . . . . . . . 67
21.6 Minimum Vesting Schedules . . . . . . . . . . . . . . . . . . . 67
21.7 Collective Bargaining Rules . . . . . . . . . . . . . . . . . . 67
21.8 Temporary Effect . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 22 FORMER EMPLOYEES OF FREEDOM FEDERAL SAVINGS
BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
22.1 Application . . . . . . . . . . . . . . . . . . . . . . . . . . 68
22.2 Participation . . . . . . . . . . . . . . . . . . . . . . . . . 68
22.3 Service Credit . . . . . . . . . . . . . . . . . . . . . . . . 68
22.4 Rights with respect to Transferred
Account Balances . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 23 HOUSEHOLD MANUFACTURING, INC. DIVESTITURE . . . . . . . . . . . . 69
23.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . 69
23.2 Discontinuance of Participation by
Spinoff Company Employees . . . . . . . . . . . . . . . . . . 69
23.3 Continued Participation by Sale Company
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 69
23.4 Eljer, Schwitzer and Scotsman Stock Funds . . . . . . . . . . . 70
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PAGE
ARTICLE 24 SPECIAL PLAN PROVISIONS FOR TRANSITION PERIOD . . . . . . . . . . 72
24.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . 72
24.2 Investment of Fund C . . . . . . . . . . . . . . . . . . . . . 72
24.3 Suspension of Activity in the Plan . . . . . . . . . . . . . . 72
24.4 Special Transfer Date . . . . . . . . . . . . . . . . . . . . . 72
24.5 Plan Limitations on events . . . . . . . . . . . . . . . . . . 72
24.6 Matching Company Contributions . . . . . . . . . . . . . . . . 72
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ARTICLE 1
INTRODUCTION
1.1 INTRODUCTION
This plan has been established by Household International, Inc., as a
profit sharing plan for the benefit of its eligible employees and eligible
employees of subsidiaries thereof in order to encourage their personal savings.
It is to be maintained according to the terms and conditions of this instrument.
The assets of the Plan are held, administered and managed in accordance with the
terms and conditions of the Trust Agreement, which is considered to be an
integral part of the Plan. The Plan is intended to be a qualified profit
sharing plan under Section 401(a) of the Internal Revenue Code with a cash or
deferred arrangement that is qualified under Section 401(k) of the Code.
The Plan is amended from time to time. Except as otherwise provided in the
Plan or amendments, any amendment shall apply solely to employees whose
employment is terminated on or after the effective date of the amendments. The
rights of an employee whose employment is terminated prior to the effective date
shall be determined solely by the provisions of the Plan as in effect on the
date of his termination of employment.
The Plan was amended and restated on July 26, 1989 and further amended on
June 21, 1991 to make a number of changes to comply with the Tax Reform Act of
1986 and other applicable law. Except as otherwise required or permitted by
law, or set forth in the provisions of the Plan, the above-referenced amendments
shall be effective January 1, 1987 to the extent required by law.
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ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS.
Whenever used in the Plan the following terms shall have the respective
meanings set forth below unless otherwise expressly provided in the Plan:
"AFFILIATE" means any company that is included as a member with a Company
in a controlled group of corporations, as described in Section 414(b) of the
Code, any trade or business (whether or not incorporated) that is under common
control with a Company as described in Section 414(c) of the Code, any trade or
business that, with a Company, is a member of an affiliated service group as
described in Section 414(m) of the Code, and any other trade or business
required to be aggregated with a Company pursuant to Section 414(o) of the Code.
Service, compensation or their credit under the Plan shall be given for periods
of employment with an Affiliate only if such periods occur at a time when there
was an Affiliate relationship with the Company as described herein.
"BOARD OF DIRECTORS" means the Board of Directors of Household
International, Inc., or any committee of the Board authorized to act on its
behalf.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor legislation thereto, and includes any regulations promulgated
thereunder.
"COLLECTIVE BARGAINING UNIT EMPLOYEE" means any employee who is a member of
a unit of employees covered by a collective bargaining agreement between
employee representatives and the Company if retirement benefits were the subject
of good faith bargaining between the Company and such representatives.
"COMMITTEE" means the Administrative and Investment Committee which is a
committee of at least three employees of the Company appointed by the Chief
Executive Officer of Household International, Inc., and serving at the pleasure
of Household International, Inc.
"COMPANY" means Household International, Inc., and any direct or indirect
U.S. subsidiary named as an employer, any of whose employees are covered by this
Plan pursuant to the Company election document that is filed with the Committee
and made a part of this Plan. The Committee shall have the exclusive right to
determine whether any subsidiary shall be a Company that participates in this
Plan and the employees of such subsidiary covered hereby.
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"COMPANY STOCK" means common stock par value $1.00 per share of Household
International, Inc.
"COMPENSATION" means the total base wages or salary paid by the Company in
cash to an Employee, including bonuses, severance pay, pay in lieu of vacation,
commissions and overtime payments, prior to any reduction for contributions that
are made to the Trust on behalf of the Employee in accordance with his tax
reduction agreement under Article 4.2 and prior to any reduction for
contributions to any cafeteria plan covered by Section 125 of the Code
maintained by the Company; provided, however, that compensation received from
the Household International Long-Term Executive Incentive Compensation Plan
shall be excluded from the definition of compensation.
In the event that an Employee receives Company Stock as a bonus from a
bonus plan other than the Long-Term Executive Incentive Compensation Plan, the
stock shall be valued at the high/low average of the New York Stock Exchange
Composite as reported in the WALL STREET JOURNAL on the date of the award and
this amount shall be considered Compensation.
Effective January 1, 1989, the maximum amount of Compensation taken into
account under the Plan in any Plan Year for purposes of determining the amount
of a Participant's Tax Reduction Contributions, Investment Plan Contributions
and Matching Company Contributions shall be $209,200, adjusted pursuant to the
Code. At the discretion of the Company, any Matching Company Contributions that
cannot be allocated under this Plan due to this dollar limitation on
Compensation may be allocated and paid to the affected Participant under a non-
qualified plan.
"DISABILITY" means the physical or mental disability of an Employee whereby
such Employee is disabled by bodily injury or disease and will be prevented
thereby from engaging in any employment for the Company.
"EFFECTIVE DATE" means January 1, 1984, the original effective date of the
Plan.
"EMPLOYEE" means any individual employed by a Company to whom the Plan is
extended as set forth in the Company election document. An individual shall be
considered to be an Employee if such individual is a leased employee of a
Company within the meaning of Section 414(n) of the Code; provided, however,
that a leased employee shall not be eligible to participate in the Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and includes any regulations promulgated thereunder.
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"FISCAL YEAR" means the taxable year of the Company ending on December
31st.
"HOURLY EMPLOYEE" means any employee who is compensated by the Company on
an hourly-rate basis.
"HOUR OF SERVICE" has the meaning set forth in Article 3.6.
"INVESTMENT FUND" means any of the following funds of the Trust Fund
established from time to time by the Committee:
Fund A - Household International, Inc. Common Stock Fund. This fund shall
primarily be composed of investments in Company Stock.
Fund B - Fixed Income Securities Fund. This Fund shall primarily be
invested in a guaranteed interest contract or contracts, bonds, notes and/or
other evidences of indebtedness, or mutual funds investing in such securities.
Effective January 1, 1992 new Fund B money and money in Fund B not invested in
existing insurance contracts will be invested in the Vanguard Variable Rate GIC
Trust.
Fund C - Vanguard Windsor II. This Fund shall primarily be invested in
common stock and other equity securities, or mutual funds investing in such
securities such as the Vanguard Windsor II Fund.
Fund D - Eljer Stock Fund. This Fund shall primarily be composed of
investments in Eljer Common Stock and such cash in the Vanguard Money Market
Prime Portfolio as the Committee deems appropriate.
Fund E - Schwitzer Stock Fund. This Fund shall primarily be composed of
investments in Schwitzer Common Stock and such cash in the Vanguard Money Market
Prime Portfolio as the Committee deems appropriate.
Fund F - Scotsman Stock Fund. This Fund shall primarily be composed of
investments in Scotsman Common Stock and such cash in the Vanguard Money Market
Prime Portfolio as the Committee deems appropriate.
Fund G - Wellington Fund. A Vanguard Mutual Fund primarily invested in a
combination of stocks and bonds.
Fund H - Quantitative Portfolio Fund. A Vanguard Mutual Fund primarily
invested in equity securities.
Fund I - Vanguard Extended Market Portfolio of Index Trust. A Vanguard
Mutual Fund primarily invested in equity securities.
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Fund J - Vanguard Money Market Reserves - Federal Portfolio. A Vanguard
Mutual Fund investing in short-term securities issued by the U.S. Treasury and
agencies of the U.S. government and repurchase agreements collateralized by such
securities.
Loan Fund - has the meaning set forth in Article 17.8.
Any other investment fund may be established by the Committee from time to
time.
"INVESTMENT PLAN CONTRIBUTION" means a contribution made to the Plan
pursuant to Article 4.3.
"LIMITATION YEAR" means the Plan Year.
"MATCHING COMPANY CONTRIBUTION" means a contribution made to the Plan
pursuant to Article 4.5.
"PARTICIPANT" means any Employee who is participating in the Plan in
accordance with the provisions of Article 3.
"PAYSOP" means the Household International Tax Credit Stock Ownership Plan.
"PLAN" means the Household International Tax Reduction Investment Plan as
amended from time to time.
"PLAN YEAR" means the twelve-month period commencing on January 1st and
ending on December 31st.
"QUARTERLY VALUATION DATE" means the last day of each calendar quarter.
"ROLLOVER CONTRIBUTION" means a contribution made to the Plan pursuant to
Article 12.1.
"SALARIED EXEMPT EMPLOYEE" means any Employee who is compensated by the
Company in fixed amounts at regular intervals without regard to the number of
hours worked and who is exempt from the overtime wage provisions of the federal
wage-hour law (as said law may be amended from time to time).
"SALARIED NON-EXEMPT EMPLOYEE" means any Employee who is compensated by the
Company in fixed amounts at regular intervals and who is not exempt from the
overtime wage provisions of the federal wage-hour law (as said law may be
amended from time to time).
"TAX REDUCTION CONTRIBUTION" means a contribution made to the Plan pursuant
to Article 4.1.
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"TRUST" means the fund maintained by the Trustee for the investment of Plan
assets in accordance with the terms and conditions of the Trust Agreement.
"TRUST AGREEMENT" means the agreement between the Company and the Trustee
under which the assets of the Plan are held, administered and managed by the
Trustee. The provisions of the Trust Agreement shall be considered an integral
part of this Plan as if set forth fully herein.
"TRUST FUND" means the assets or any part thereof of every kind and
description under the Trust.
"TRUSTEE" means any corporation or persons acting as trustee under the
Trust at any time.
"VALUATION DATE" means the last day of each month and such other dates as
may be declared by the Committee. Effective January 1, 1991 "Valuation Date"
means the last day of each Plan Year, or the last day of the Plan Year and more
frequent dates during each Plan Year as determined by the Committee or Trustee.
To the extent that Plan assets are invested in the Vanguard Funds or stock Funds
A, D, E, and F, and such investments are specifically credited or earmarked to
Participants' separate accounts under the Plan in accordance with the directed
investment provisions of the Plan, the term "Valuation Date" shall mean the
close of each day that the New York Stock Exchange is open for business.
"YEAR OF SERVICE" has the meaning set forth in Article 3.7.
6
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ARTICLE 3
PARTICIPATION AND YEARS OF SERVICE
3.1 ELIGIBILITY TO PARTICIPATE.
An Employee shall be eligible to participate in the Plan on the first day
of the calendar quarter (any period of three consecutive months beginning with
January 1, April 1, July 1 or October 1) next following or coinciding with the
earlier of the following dates:
(a) the date he completed three Years of Service; or
(b) the date he attained the age of 21 years and completed one Year
of Service.
3.2 COMMENCEMENT OF PARTICIPATION.
Any Employee eligible to participate in the Plan may elect to become a
Participant by executing either a tax reduction agreement as described in
Article 4.2 or an investment plan agreement as described in Article 4.4, or
both. Participation in the Plan shall commence on the effective date of his
agreement under Article 4.2(B) or Article 4.4(B), whichever date is earlier, and
shall continue in effect until amended or terminated. By signing such an
agreement, the Employee agrees to be bound by all terms and conditions of the
Plan as then in effect or as thereafter amended.
3.3 WAIVER OF PARTICIPATION.
Any Employee eligible to participate in the Plan who chooses not to
participate in the Plan during the first quarter in which he becomes eligible to
participate shall waive his right to participate until the first day of any
subsequent calendar quarter.
3.4 EMPLOYMENT BY FOREIGN SUBSIDIARY.
For purposes of the Plan, an individual who is a citizen of the United
States and an employee of a foreign subsidiary (as defined in Section 3121(1)(8)
of the Code) of the Company shall be treated as an Employee if:
(a) the Company has entered into an agreement under Section 3121(1)
of the Code which applies to such foreign subsidiary; and
(b) contributions under a funded plan of deferred compensation
(whether or not a plan described in Section 401(a) or 405(a) of the
Code) are not provided by any
7
<PAGE>
other person with respect to the remuneration paid to such individual
by the foreign subsidiary. It is intended by this Article 3.4 that
such individual be entitled to benefits under this Plan to the same
extent as if he were employed by the Company for the period he in fact
is employed by such foreign subsidiary.
3.5 TRANSFERS FROM ELIGIBLE EMPLOYMENT.
If a Participant is transferred to a class of employment not eligible
for participation in this Plan but continues to be employed by a Company or an
Affiliate, no further contributions to the Trust shall be made by or on behalf
of the Participant under the Plan with respect to periods on and after the
transfer unless the Participant is subsequently transferred back to eligible
employment and a new tax reduction agreement is executed in accordance with
Article 4.2 or a new investment plan agreement is executed in accordance with
Article 4.4. During the period of his employment in such transferred position:
(a) vesting shall continue in Matching Company Contributions; and
(b) he may make withdrawals, transfer funds, and change
beneficiaries in accordance with the provisions of the Plan.
3.6 HOUR OF SERVICE.
(A) An Hour of Service means:
(a) PERFORMANCE OF DUTIES - Each actual hour for which an
individual is paid or entitled to be paid for the performance of duties
for the Company or an Affiliate;
(b) NONWORKING PAID TIME - Each hour for which an individual is
paid or entitled to be paid by the Company or an Affiliate on account
of a period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) incapacity,
disability, layoff, jury duty, military duty or leave of absence;
provided, however, that no credit shall be given for payments made or
due under a plan maintained solely for the purpose of complying with
applicable worker's or unemployment compensation or disability
insurance laws or for payments which solely reimburse an individual for
medical or medically related expenses incurred by the individual; and
(c) BACK PAY - Each hour for which back pay, irrespective of
mitigation or damages, is either awarded or agreed to by the Company or
an Affiliate.
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Notwithstanding any other provision of this Plan to the contrary, an
individual shall not be credited with Hours of Service more than once
with respect to the same period of time.
(B) EQUIVALENCIES. In lieu of determining Hours of Service on the
basis of each actual hour for which an individual is paid or entitled to be paid
under (a) through (c) above, if a Company so elects on the Company election
document, an Employee shall be credited with --
(a) 10 Hours of Service for each day;
(b) 45 Hours of Service for each week;
(c) 95 Hours of Service for each semi-monthly payroll period; or
(d) 190 Hours of Service for each calendar month - for which he
would otherwise be credited with an Hour of Service in accordance with
the foregoing provisions of this Article 3.6.
In the event that a week or semi-monthly payroll period for which Hours
of Service are credited in accordance with subparagraph (b) or (c) next
above overlaps two Plan Years, all such Hours of Service shall be
credited to the first such Plan Year.
(C) PERIODS WHEN DUTIES NOT PERFORMED. The Committee shall adopt
methods of determining Hours of Service when payments are made for other than
the performance of duties and of crediting such Hours of Service to Plan Years
in accordance with Regulations Sec. 2530.200b-2(b) and (c) promulgated by the
Department of Labor which are incorporated by reference into the Plan. In no
event shall an Employee be credited with more than 501 Hours of Service during
any single continuous period during which he performs no duties for the Company
or an Affiliate.
3.7 YEAR OF SERVICE.
An Employee shall be credited with a Year of Service on the last day of
an eligibility computation period if he is credited with 1,000 Hours of Service
with respect to such eligibility computation period. An eligibility computation
period shall be the 12 consecutive month period beginning on the first date on
which an Employee is employed and completes an Hour of Service (or the first day
of the month in which an Employee is employed and completes an Hour of Service,
if the Employee's employment commences on the first regularly scheduled work day
of a month) or any Plan Year, beginning with the first Plan Year commencing
after the Employee's first date of employment.
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3.8 PARTICIPATION AND SERVICE UPON REEMPLOYMENT.
If an individual's employment with a Company or Affiliate is terminated
but he is reemployed as an Employee, the following rules shall apply in
determining his eligibility to participate in the Plan and his Years of Service:
(a) If the reemployed Employee was a Participant in the Plan or had
satisfied the service and age requirements of Article 3.1 during his
prior period of employment, he shall be entitled upon reemployment to
become a Participant in the Plan. In order to make contributions, he
shall be required to execute a new tax reduction agreement in
accordance with Article 4.2 or a new investment plan agreement in
accordance with Article 4.4.
(b) If the reemployed Employee was not a Participant in the Plan or
had not satisfied the service and age requirements of Article 3.1
during his prior period of employment, such service and age
requirements shall be satisfied before he becomes a Participant upon
reemployment; provided, however, that any Years of Service credited
during his prior period of employment shall be automatically reinstated
as of the date of his reemployment.
3.9 PREDECESSOR SERVICE.
Credit towards Hours and Years of Service (and years of employment
under Article 14.1) shall be given for periods of employment with any
corporation that is a predecessor corporation of a Company, or a corporation
merged, consolidated or liquidated into a Company or a predecessor of the
Company, or a corporation, substantially all of the assets of which have been
acquired by a Company, but only to the extent required by Section 414(a) of the
Code; provided, however, that even if not required by the Code, the Company on a
nondiscriminatory basis may grant credit for Hours and Years of Service (and
years of employment under Article 14.1) with a predecessor corporation.
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ARTICLE 4
CONTRIBUTIONS
4.1 TAX REDUCTION CONTRIBUTIONS.
Any Employee eligible to participate in the Plan may elect to have the
Company make Tax Reduction Contributions to the Trust on his behalf by executing
a tax reduction agreement as described in Article 4.2. The amount of Tax
Reduction Contributions made on behalf of a Participant for any payday shall
equal that whole percentage of his Compensation per payday selected by the
Participant, not to exceed 15% when combined with the percentage elected under
Article 4.3 by such Participant.
4.2 TAX REDUCTION AGREEMENT.
(A) NATURE OF AGREEMENT. The tax reduction agreement referred to in
Article 4.1 shall be a legally binding agreement (on a form prescribed by the
Committee) whereby the Participant agrees that, as of the effective date of the
agreement, the Compensation otherwise payable to him thereafter shall be reduced
by a whole percentage (as selected by the Participant) not to exceed the maximum
percentage permitted under Article 4.1 and whereby the Company agrees to
contribute the total amount of such reduction in Compensation to the Trust on
behalf of the Participant as a Tax Reduction Contribution under Article 4.1.
Such contributions may be made by the Company to the Trust on a monthly basis,
provided that in no event shall the Company's aggregate contribution on behalf
of the Participant under Article 4.1 for any Plan Year be made to the Trust
later than 90 days after the close of the Plan Year or such later date
prescribed under Department of Labor regulations.
(B) EFFECTIVE DATE OF AGREEMENT. The effective date of a Participant's
tax reduction agreement shall be no earlier than the first day of the calendar
quarter commencing at least 30 days after the agreement is received in executed
form by the Committee (provided such effective date is no earlier than the date
the Participant first becomes eligible to participate in the Plan).
(C) AMENDMENT OF AGREEMENT. A Participant may amend his tax reduction
agreement at any time with respect to Compensation not yet paid to change the
whole percentage (within the limits of Article 4.1) to be used to determine his
Tax Reduction Contribution. The amended tax reduction agreement shall be
effective no earlier than the first day of the calendar quarter commencing at
least 30 days after the amended agreement is received in executed form by the
Committee.
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(D) TERMINATION OF AGREEMENT. A Participant may terminate his tax
reduction agreement at any time with respect to Compensation not yet paid. The
effective date of termination shall be as soon as reasonably possible after the
notice of termination is received in executed form by the Committee. Any
Participant who terminates his tax reduction agreement shall be permitted to
execute a new tax reduction agreement and resume having contributions made to
the Trust on his behalf under Article 4.1, provided that the effective date of
the new tax reduction agreement shall be no earlier than the first day of a
calendar quarter commencing at least 30 days after the new tax reduction
agreement is received in executed form by the Committee.
(E) TRANSFER TO INELIGIBLE EMPLOYMENT OR TERMINATION OF EMPLOYMENT. A
Participant's tax reduction agreement shall automatically terminate if the
Participant transfers to a class of employment not eligible for participation in
this Plan or if he terminates his employment with the Company. Upon return of
the Participant to eligible employment, the Participant shall be permitted to
execute a new tax reduction agreement and resume having contributions made to
the Trust on his behalf under Article 4.1, provided that the effective date of
the new tax reduction agreement shall be effective on the first day of the
calendar quarter commencing at least 30 days after the agreement is received in
executed form by the Committee, and in no event earlier than the date the
Participant resumes eligible employment. Transfers to a different payroll
system shall be administered by procedures established by the Committee.
4.3 INVESTMENT PLAN CONTRIBUTIONS.
Any Employee eligible to participate in the Plan may elect to make
Investment Plan Contributions to the Trust by executing an investment plan
agreement as described in Article 4.4. The amount of Investment Plan
Contributions made by a Participant for any payday shall equal that whole
percentage of his Compensation per payday selected by the Participant, not to
exceed 15% when combined with the percentage elected under Article 4.1 by such
Participant.
4.4 INVESTMENT PLAN AGREEMENT.
(A) NATURE OF AGREEMENT. The investment plan agreement referred to in
Article 4.3 shall be a legally binding agreement (on a form prescribed by the
Committee) whereby the Participant agrees that, as of the effective date of the
agreement, the Compensation otherwise payable to him thereafter shall be
adjusted by a whole percentage (as selected by the Participant) not to exceed
the maximum percentage permitted under Article 4.3, and whereby the Participant
agrees to contribute the total amount of said adjustment in Compensation upon
any payday to the Trust as an Investment Plan Contribution under Article 4.3.
Each Participant's Investment Plan Contributions shall be paid over to the
Trustee for
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deposit in the Trust Fund at such time or times as may be convenient to the
Company but not later than the end of the month next following the month in
which the deduction is made or such later date prescribed under Department of
Labor regulations.
(B) EFFECTIVE DATE OF AGREEMENT. The effective date of a Participant's
investment plan agreement shall be no earlier than the first day of the calendar
quarter commencing at least 30 days after the agreement is received in executed
form by the Committee (provided such effective date is no earlier than the date
the Participant first becomes eligible to participate in the Plan).
(C) AMENDMENT OF AGREEMENT. A Participant may amend his investment
plan agreement at any time with respect to Compensation not yet paid to change
the whole percentage (within the limits of Article 4.3) to be used to determine
his Investment Plan Contribution. The amended investment plan agreement shall
be effective no earlier than the first day of the calendar quarter commencing at
least 30 days after the amended agreement is received in executed form by the
Committee.
(D) TERMINATION OF AGREEMENT. A Participant may terminate his
investment plan agreement at any time with respect to Compensation not yet paid.
The effective date of termination shall be as soon as reasonably possible after
notice of termination is received in executed form by the Committee. Any
Participant who terminates his investment plan agreement shall be permitted to
execute a new investment plan agreement and resume making contributions to the
Trust under Article 4.3, provided that the effective date of the new investment
plan agreement shall be no earlier than the first day of a calendar quarter
commencing at least 30 days after the new investment plan agreement is received
in executed form by the Committee.
(E) TRANSFER TO INELIGIBLE EMPLOYMENT OR TERMINATION OF EMPLOYMENT. A
Participant's investment plan agreement shall automatically terminate if the
Participant transfers to a class of employment not eligible for participation in
this Plan or if he terminates his employment with the Company. Upon return of
the Participant to eligible employment, the Participant shall be permitted to
execute a new investment plan agreement and resume making contributions to the
Trust under Article 4.3, provided that the effective date of the new investment
plan agreement shall be no earlier than the first day of the calendar quarter
commencing at least 30 days after the agreement is received in executed form by
the Committee, and in no event earlier than the date the Participant resumes
eligible employment. Transfers to a different payroll system shall be
administered by procedures established by the Committee.
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4.5 MATCHING COMPANY CONTRIBUTIONS.
(A) CONTRIBUTIONS. The Company shall make Matching Company
Contributions to the Trust on behalf of each Participant for each calendar month
in the amount set forth in the Company election document, which amount shall be
not more than one dollar for each dollar contributed under Articles 4.1 and 4.3;
provided, however, that no Matching Company Contributions will be made with
respect to Tax Reduction Contributions or Investment Plan Contributions that in
total exceed 6% of a Participant's Compensation.
(B) TIMING OF CONTRIBUTIONS. The Matching Company Contributions made
to the Trust under Article 4.5(A) for any Plan Year generally shall be made
monthly and in no event later than the date prescribed by law for filing the
Company's federal income tax return, including extensions, for the Fiscal Year
coincident with the Plan Year with respect to which the Matching Company
Contributions are made.
(C) ORDER OF MATCHING CONTRIBUTIONS. On a monthly basis, Matching
Company Contributions shall be made first to match a Participant's Tax Reduction
Contributions and then to match a Participant's Investment Plan Contributions.
(D) WAIVER OF MATCHING CONTRIBUTIONS. In accordance with rules
prescribed by the Committee, a Participant may waive in advance of any Plan Year
or other prescribed period the allocation to his account of the Matching Company
Contributions that otherwise would be made thereto.
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ARTICLE 5
LIMITATION ON TAX REDUCTION CONTRIBUTIONS
5.1 DOLLAR LIMITATION.
In no event may the Tax Reduction Contributions made on behalf of any
Participant exceed $7,000 in the 1987 Plan Year, adjusted in subsequent Plan
Years in accordance with the Code. The Committee shall establish rules
necessary for such limitation to be met with respect to any Participant
including, but not limited to, rules that require a reduction in contributions
in order to meet the limitation and rules applicable to satisfy the appropriate
limitations should a Participant participate within the same Plan Year in this
Plan and another plan (including that of another employer) subject to a similar
dollar limitation.
5.2 MAXIMUM DEFERRAL PERCENTAGE.
The Tax Reduction Contributions made on behalf of all eligible
Participants who are highly compensated individuals with respect to any Plan
Year shall not result in a deferral percentage for such group of Participants
for any Plan Year that exceeds the greater of (a) or (b) below, where:
(a) is an amount equal to 125% of the deferral percentage for all
eligible Participants other than eligible Participants who are highly
compensated individuals; and
(b) is an amount equal to the sum of the deferral percentage for
all eligible Participants other than highly compensated individuals and
2%, provided that such amount does not exceed 200% of the deferral
percentage for all eligible Participants other than highly compensated
individuals.
5.3 DEFINITIONS.
For purposes of this Article 5, the following terms shall have the
following meanings:
(A) "ELIGIBLE PARTICIPANT" shall mean an Employee who is eligible to
make Tax Reduction Contributions to the Plan, even if he elects not to make such
contributions, he is suspended from making such contributions for a period of
time due to such events as a loan or a withdrawal, or he is suspended from
further contributions during the Plan Year due to the limitations of Section 415
of the Code.
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(B) "HIGHLY COMPENSATED INDIVIDUAL" shall mean an individual who during
the current Plan Year or the preceding Plan Year:
(a) was at any time a 5% owner of a Company or an Affiliate;
(b) receives compensation from one or more Companies or Affiliates
in excess of $75,000 in 1987, adjusted in subsequent Plan Years in
accordance with the Code; or
(c) received compensation from one or more Companies or Affiliates
in excess of $50,000 in 1987, adjusted in subsequent Plan Years in
accordance with the Code, and was in the top 20% of all Employees, when
ranked on the basis of the compensation paid to all employees of all
Companies or Affiliates; or
(d) was at any time an officer of a Company or an Affiliate and
received compensation from one or more Companies or Affiliates greater
than 50% of the amount in effect under Section 415(b)(1)(A) of the
Code; provided, however, that no more than 50 individuals shall be
taken into account under this (d).
An individual not described in (b), (c) or (d) for the preceding
Plan Year shall not be considered a highly compensated individual for
the current Plan Year unless, for the current Plan Year, he is among
the 100 employees of all Companies and Affiliates paid the greatest
compensation.
The term "compensation" for purposes of determining who is a highly
compensated individual shall have the meaning prescribed in Section
415(c)(3) of the Code, but prior to reduction on account of a
Participant's Tax Reduction Contributions to this Plan and any other
contributions not treated as taxable income by reason of Sections 125,
402(a)(8) or 402(h)(1)(B) of the Code.
(C) "DEFERRAL PERCENTAGE" with respect to any group of eligible
Participants for a Plan Year shall mean the average of the deferral ratios
(calculated separately for each eligible Participant in the group and rounded to
the nearest one one-hundredth of one percent) of:
(a) the amount of Tax Reduction Contributions allocated to the
account of each eligible Participant for such year, to
(b) the eligible Participant's compensation for such year.
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The term "compensation" for purposes of this (C) has the meaning set
forth in Section 415(c)(3) of the Code but, as determined by the Committee,
prior to or after reduction on account of a Participant's Tax Reduction
Contributions to this Plan or any other contributions not treated as taxable
income by reason of Sections 125, 402(a)(8) or 402(h)(1)(B) of the Code. The
dollar limitation on "compensation" set forth in the definition of
"Compensation" in Article 2.1 of the Plan applies for this purpose.
Compensation received by a Participant for the entire Plan Year shall be taken
into account for purposes of this (C), even if the Participant begins, resumes
or ceases to be eligible to make Tax Reduction Contributions during the Plan
Year, provided such compensation is received from a Company or an Affiliate;
provided, however, that the Committee, in its discretion, may limit the
compensation taken into account for this purpose to only that received with
respect to periods during which an Employee is eligible to participate in the
Plan pursuant to Article 3, provided such limitations apply on a uniform basis
to all Participants.
5.4 FAMILY MEMBERS.
For purposes of determining who is a highly compensated individual and
for purposes of the maximum deferral percentage prescribed in Article 5.2 hereof
and the maximum contribution percentage prescribed in Article 6.1 hereof, a
family member of a 5% owner or of one of the highest 10 paid individuals
employed by all Companies and Affiliates shall not be considered a separate
individual and, further, any earnings paid to him or contributions made by or on
his behalf shall be attributed to the highly compensated individual described
above. The term "family" for purposes hereof includes an individual's spouse,
lineal ascendants or descendants, and the spouses of such lineal ascendants or
descendants.
5.5 PROSPECTIVE REDUCTION OF TAX REDUCTION CONTRIBUTIONS.
In the event that it is determined by the Committee at any time prior
to or within a Plan Year that the maximum deferral percentage prescribed in
Article 5.2 could be exceeded with respect to such Plan Year, then the amount of
Tax Reduction Contributions allowed to be made on behalf of eligible
Participants who are highly compensated individuals with respect to the
remainder of the Plan Year may be reduced by the Committee. The highly
compensated individuals with respect to whom such reduction shall be made and
the amount of such reduction shall be determined in a manner comparable to the
manner of determining Excess Tax Reduction Contributions under Article 9.2;
provided, however, that for purposes of this Article 5.5 (but not for purposes
of Article 9.2), the Committee may round off or estimate the prospective
reductions hereunder. Once a reduction has been made hereunder, it shall
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remain in effect unless the Committee determines that it is no longer necessary
in order for the maximum deferral percentage to be met.
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ARTICLE 6
LIMITATION ON INVESTMENT PLAN AND
MATCHING COMPANY CONTRIBUTIONS
6.1 MAXIMUM CONTRIBUTION PERCENTAGE.
The sum of the Investment Plan Contributions made by all eligible
Participants who are highly compensated individuals and the Matching Company
Contributions made on such Participants' behalf shall not result in a
contribution percentage for such group of Participants for any Plan Year that
exceeds the greater of (a) or (b) below, where:
(a) is an amount equal to 125% of the contribution percentage for
all eligible Participants other than highly compensated individuals;
and
(b) is an amount equal to the sum of the contribution percentage
for all eligible Participants other than highly compensated individuals
and 2%, provided that such amount does not exceed 200% of the
contribution percentage for all eligible Participants other than highly
compensated individuals.
6.2 DEFINITIONS.
For purposes of this Article 6, the following terms shall have the
following meanings:
(A) The terms "eligible Participant" and "highly compensated
individual" shall have the meanings prescribed in Article 5.
(B)"CONTRIBUTION PERCENTAGE" with respect to any group of eligible
Participants for a Plan Year shall mean the average of the ratios (calculated
separately for each eligible Participant in the group and rounded to the nearest
one one-hundredth of one percent) of:
(a) the sum of the Investment Plan Contributions and Matching
Company Contributions allocated to the account of each eligible
Participant for such year, to
(b) the eligible Participant's compensation (as defined in Article
5.3(C)) for such year.
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6.3 PROSPECTIVE REDUCTION OF INVESTMENT PLAN CONTRIBUTIONS.
In the event that it is determined by the Committee at any time prior
to or within a Plan Year that the maximum contribution percentage described in
Article 6.1 could be exceeded with respect to such Plan Year, then the amount of
Investment Plan Contributions allowed to be made by eligible Participants who
are highly compensated individuals may be reduced by the Committee. The highly
compensated individuals with respect to whom such reduction shall be made and
the amount of such reduction shall be determined by (i) reducing the maximum
allowable Investment Plan Contributions under Article 4.3 to such percentage
which will, when applied to all eligible Participants who are highly compensated
individuals (and taking into account any reduction in Matching Company
Contributions as a consequence of a reduction in Tax Reduction Contributions
under Article 5.5 and a reduction in Investment Plan Contributions hereunder)
result in the maximum contribution percentage set forth in Article 6.1 not being
exceeded, and (ii) reducing accordingly the Investment Plan Contributions that
may be made in the remainder of the Plan Year in the case of each highly
compensated individual with respect to whom such reduced maximum percentage is
exceeded. Notwithstanding the foregoing, the Committee may round off or
estimate the prospective reductions hereunder. Once a reduction has been made
hereunder, it shall remain in effect unless the Committee determines that it is
no longer necessary in order for the maximum contribution percentage to be met.
6.4 TESTING OF TAX REDUCTION CONTRIBUTIONS UNDER MAXIMUM CONTRIBUTION
PERCENTAGE TEST.
Notwithstanding the foregoing provisions of this Article 6 or of
Article 5, all or a portion of the Tax Reduction Contributions made on behalf of
eligible Participants who are not highly compensated individuals may be treated
as Matching Company Contributions made on behalf of such eligible Participants
for the purpose of meeting the maximum contribution percentage test set forth in
Article 6.1, provided that the maximum deferral percentage test of Article 5.2
can be met, both when the Tax Reduction Contributions treated as Matching
Company Contributions hereunder are included in performing such maximum deferral
percentage test and when such Tax Reduction Contributions are excluded in
performing such maximum deferral percentage test. Except for purposes of
meeting the maximum contribution test of Article 6.1 to the extent described
hereunder, any such Tax Reduction Contributions shall continue to be treated as
Tax Reduction Contributions for all other purposes of the Plan.
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ARTICLE 7
AGGREGATE LIMIT ON DEFERRAL AND CONTRIBUTION PERCENTAGES
7.1 GENERAL RULES.
In addition to satisfaction of the maximum deferral percentage test
described in Article 5.2 and the maximum contribution percentage test described
in Article 6.1, effective January 1, 1989, the Tax Reduction Contributions,
Investment Plan Contributions and Matching Company Contributions made to the
Plan with respect to any Plan Year on behalf of eligible Participants who are
highly compensated individuals shall not cause the sum of the deferral
percentage and the contribution percentage with respect to such eligible
Participants (after application of Article 6.4, and after assuming that
corrections have been made to satisfy such maximum deferral percentage and
maximum contribution percentage tests pursuant to Article 9) to exceed the
aggregate limit prescribed in Article 7.2; provided, however, that such
aggregate limit only shall apply if the maximum deferral percentage test
described in Article 5.2(a) is not satisfied and the maximum contribution
percentage test in Article 6.1(a) is not satisfied.
7.2 AGGREGATE LIMIT.
The aggregate limit is equal to the greater of (a) and (b) below,
where:
(a) equals the sum of (i) an amount equal to 125% of the greater of
the deferral percentage or contribution percentage for all eligible
Participants other than highly compensated individuals; and (ii) is an
amount equal to the lesser of the deferral percentage or contribution
percentage for all eligible Participants other than highly compensated
individuals and 2%; provided that such amount does not exceed 200% of
the lesser of the deferral percentage or contribution percentage for
all eligible Participants other than highly compensated individuals;
and
(b) equals the sum of (i) an amount equal to 125% of the lesser of
the deferral percentage or contribution percentage for all eligible
Participants other than highly compensated individuals, and (ii) an
amount equal to the greater of the deferral percentage or contribution
percentage for all eligible Participants other than highly compensated
individuals and 2%; provided that such amount does not exceed 200% of
the greater of the deferral percentage or contribution percentage for
all eligible Participants other than highly compensated individuals.
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7.3 PROSPECTIVE REDUCTION OF CONTRIBUTIONS.
In the event that it is determined by the Committee at any time prior
to or within a Plan Year that the aggregate limit prescribed in Articles 7.1 and
7.2 could be exceeded with respect to such Plan Year, then the amount of Tax
Reduction Contributions, Investment Plan Contributions or both (as determined by
the Committee) made on behalf of or by eligible Participants who are highly
compensated individuals may be reduced in a manner similar to that described in
Articles 5.5 and 6.3.
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ARTICLE 8
CORRECTION OF TAX REDUCTION CONTRIBUTIONS
IN EXCESS OF DOLLAR LIMITATION
8.1 GENERAL RULE.
In the event that, notwithstanding Article 5.1, the dollar limitation
on Tax Reduction Contributions prescribed therein is exceeded, the excess shall
be considered an "Excess Deferral" and the procedures set forth in this Article
8 shall be followed.
8.2 DESIGNATION AS EXCESS DEFERRAL.
A Participant may designate to the Committee the amount of any Excess
Deferral that is allocable to the Plan and request that such amount be
distributed to the Participant. Such a designation must be made on or before
March 1 of the year following the Plan Year in which the Excess Deferral was
made.
8.3 DISTRIBUTION.
The Committee may grant a Participant's request for a distribution
pursuant to Article 8.2. Any such distribution shall be made at such date as
the Committee determines but in no event later than the April 15 following the
Plan Year in which the Excess Deferral was made. Any such distribution shall
include a distribution of income allocable to the Excess Deferral, determined by
applying methodology comparable to that described in Article 9.4(b) and (c).
8.4 COORDINATION WITH EXCESS TAX REDUCTION CONTRIBUTIONS.
The amount of Excess Deferrals that may be distributed under this
Article 8 with respect to a Participant for a Plan Year shall be reduced by any
Excess Tax Reduction Contributions previously recharacterized or distributed
with respect to such Participant for such Plan Year. Conversely, the amount of
Excess Tax Reduction Contributions to be recharacterized or distributed under
Article 9 with respect to a Participant for a Plan Year shall be reduced by any
Excess Deferrals previously distributed hereunder to such Participant for such
Plan Year.
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ARTICLE 9
CORRECTION OF EXCESS CONTRIBUTIONS
9.1 GENERAL RULE.
If as of the end of a Plan Year, the maximum deferral percentage test
of Article 5.2, the maximum contribution percentage test of Article 6.1 or the
aggregate limit test of Articles 7.1 and 7.2 are not satisfied, the Committee,
after the close of such Plan Year, shall make a determination of the Excess Tax
Reduction Contributions or Excess Aggregate Contributions and then apply one or
more of the corrective measures set forth in this Article 9 (with the applicable
measures determined by the Committee, in its sole discretion) in order that,
after application of such measures, all of such tests are satisfied.
9.2 MAXIMUM DEFERRAL PERCENTAGE TEST -- EXCESS TAX REDUCTION CONTRIBUTIONS.
Excess Tax Reduction Contributions are determined on an individual
basis under a leveling method pursuant to which the Committee shall reduce the
deferral ratio (determined in accordance with Article 5.3(C)) of the eligible
Participant who is a highly compensated individual and who has the highest
deferral ratio to the extent required to (i) cause the test of Article 5.2 to be
satisfied, or (ii) cause such individual deferral ratio to equal the deferral
ratio of the eligible Participant who is a highly compensated individual and who
has the next highest deferral ratio. This process shall be repeated until
Article 5.2 is satisfied. For each such individual affected, his total Tax
Reduction Contributions, minus an amount determined by multiplying his
permissible deferral ratio by his compensation used in determining such ratio,
shall be considered his Excess Tax Reduction Contributions.
9.3 RECHARACTERIZATION OF EXCESS TAX REDUCTION CONTRIBUTIONS.
Excess Tax Reduction Contributions may be recharacterized as Investment
Plan Contributions in order to meet the maximum deferral percentage test,
provided that the following conditions are met with respect thereto:
(a) The recharacterized amounts are reported to the Internal
Revenue Service and to the affected highly compensated individual as
income for the Plan Year in which the individual would have received
the recharacterized Tax Reduction Contributions in cash, had he not
elected to have such amounts contributed to the Plan;
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(b) The recharacterized amounts are treated as Investment Plan
Contributions for purposes of Sections 72, 401(a)(4) and 6047 of the
Code and for purposes of the maximum contribution test described in
Article 6.1 (in the year when taken into account as income);
(c) The recharacterized amounts continue to be treated for all
other purposes under the Plan as Tax Reduction Contributions; and
(d) Notice of recharacterization is given to each affected highly
compensated individual not later than the March 15 next following the
Plan Year with respect to which recharacterization occurs.
9.4 DISTRIBUTION OF EXCESS TAX REDUCTION CONTRIBUTIONS.
Excess Tax Reduction Contributions (and income allocable thereto) may
be distributed in order to meet the maximum deferral percentage test, provided
that the following conditions are met with respect thereto:
(a) The distributed amounts are designated as a distribution of
Excess Tax Reduction Contributions (and income) and are distributed to
the affected highly compensated individuals within 12 months following
the close of the Plan Year in which the maximum deferral percentage was
exceeded;
(b) Allocable income for the Plan Year in which the maximum
deferral percentage was exceeded is distributed. Such allocable income
shall be determined by multiplying the income for the Plan Year that is
attributable to the affected Participant's Tax Reduction Contributions
by a fraction, the numerator of which is the Participant's Excess Tax
Reduction Contributions for the Plan Year and the denominator of which
is the value of the Participant's entire Tax Reduction Contributions
sub-account as of the end of the Plan Year in which the maximum
deferral percentage was exceeded reduced by the gain allocable to such
sub-account for the Plan Year and increased by the loss allocable to
such sub-account for the Plan Year; and
(c) Allocable income for the period after the close of the Plan
Year in which the maximum deferral percentage was exceeded and prior to
distribution is distributed. Such allocable income either shall be
determined under the method prescribed in (b), but based on income
through the last day of the month preceding distribution, or under a
safe harbor method, as determined by the Committee. Under the safe
harbor method, 10% of the allocable income for the Plan Year in which
the maximum deferral percentage was
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exceeded (as computed under (b) hereof) is multiplied by the number of
months elapsed since the end of such Plan Year (treating any
distribution occurring on or before the 15th of a month as made in the
last preceding month), and the product is the safe harbor allocable
income.
The term "income" for all purposes under this Article 9 includes
all earnings and appreciation, including such items as interest,
dividends, rent, royalties, gains from the sale of property,
appreciation in the value of stocks, bonds, annuity and life insurance
contracts and other property, without regard to whether such
appreciation has been realized.
9.5 MAXIMUM CONTRIBUTION PERCENTAGE TEST -- EXCESS AGGREGATE CONTRIBUTIONS.
The term "Excess Aggregate Contributions" means the total dollar amount
of Investment Plan Contributions (including Tax Reduction Contributions
recharacterized as Investment Plan Contributions pursuant to Article 9.3) and
Matching Company Contributions (including Tax Reduction Contributions treated as
Matching Company Contributions pursuant to Article 6.4) allocated to the account
of any eligible Participant who is a highly compensated individual that, in
combination with a similarly-computed amount with respect to other such
individuals, causes the maximum contribution percentage limitation set forth in
Article 6.1 to be exceeded. In order to determine Excess Aggregate
Contributions with respect to any individual, the Committee shall apply the
methodology prescribed in Article 9.2 hereof but shall substitute the
contribution percentage tests prescribed in Article 6 for the deferral
percentage tests prescribed in Article 5 and shall substitute Investment Plan
Contributions and Matching Company Contributions for Tax Reduction
Contributions.
9.6 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.
Excess Aggregate Contributions (and income allocable thereto that is
earned prior to distribution) may be distributed in order to meet the maximum
contribution percentage test. If the affected highly compensated individual has
not made any Investment Plan Contributions to the Plan for the applicable Plan
Year, then the Excess Aggregate Contributions distributed shall be deemed to
consist solely of Matching Company Contributions. If the amount of the Excess
Aggregate Contributions is at least equal to the amount of the affected highly
compensated individual's Investment Plan Contributions that were not matched by
any Matching Company Contributions, then the Excess Aggregate Contributions
distributed shall be deemed to consist solely of Investment Plan Contributions.
In other cases, the Committee shall apportion the Excess Aggregate Contributions
between Investment Plan Contributions and Matching Contributions on a
nondiscriminatory basis; provided, however, that
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Matching Company Contributions always may be distributed prior to a distribution
of Investment Plan Contributions.
9.7 FORFEITURE OF MATCHING COMPANY CONTRIBUTIONS.
If, after applying the provisions of Article 9.6, the Committee
determines that all or a portion of the Excess Aggregate Contributions is to be
treated as Matching Company Contributions and the affected highly compensated
individual is not fully vested, the non-vested amount of the portion of the
Excess Aggregate Contributions treated as Matching Company Contributions (and
income allocable thereto that is earned prior to forfeiture) may be forfeited.
The non-vested amount of the portion of the Excess Aggregate Contributions
treated as Matching Company Contributions shall be determined by multiplying
such portion by the difference between 100% and the individual's vested
percentage under Article 14.
9.8 ALLOCABLE INCOME.
The income allocable to Excess Aggregate Contributions shall be
determined by applying a methodology comparable to that prescribed in Article
9.4(b) and (c).
9.9 TIMING OF CORRECTIONS.
Distributions or forfeitures pursuant to Article 9.6 or 9.7 shall be
made within 12 months following the close of the Plan Year in which the maximum
contribution percentage was exceeded.
9.10 SPECIAL RULE FOR RECHARACTERIZED AMOUNTS.
The determination of the amount of Excess Aggregate Contributions with
respect to a Plan Year shall be made after determining the Excess Tax Reduction
Contributions, if any, to be treated as Investment Plan Contributions due to
recharacterization. The income allocable to Excess Aggregate Contributions
resulting from the recharacterization of Tax Reduction Contributions shall be
determined and distributed as if such recharacterized Tax Reduction
Contributions had been distributed pursuant to Article 9.4 instead of
recharacterized pursuant to Article 9.3.
9.11 CORRECTIVE MEASURES WITH RESPECT TO AGGREGATE LIMIT.
If the aggregate limit prescribed under Articles 7.1 and 7.2 is
exceeded, the maximum contribution percentage for eligible Participants who are
highly compensated individuals shall be reduced in order to meet such limit.
Excess Aggregate Contributions shall be determined under such reduced percentage
pursuant to Article 9.5, and corrective measures pursuant to Article 9.6 or 9.7
shall be taken in order to satisfy the aggregate limit.
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9.12 ADDITIONAL COMPANY CONTRIBUTIONS.
Notwithstanding any other provision of the Plan, the Company may make
qualified nonelective contributions and qualified matching contributions
pursuant to Section 401(k) or (m) of the Code in order to satisfy the maximum
deferral percentage test, the maximum contribution percentage test or the
aggregate limit, provided that appropriate nondiscrimination tests under Section
401(k) or (m) and Section 401(a)(4) of the Code are satisfied. A Participant
shall at all times be 100% vested in such contributions. For purposes of
Article 16 hereof and any other distribution provisions of the Plan or the Code,
such contributions are treated as if they were Tax Reduction Contributions;
provided, however, that they may not be withdrawn merely on account of the
hardship of a Participant.
9.13 HIGHLY COMPENSATED INDIVIDUAL ELECTIONS.
Notwithstanding Article 9.1, but solely for purposes of satisfying the
maximum deferral percentage test (and not for purposes of satisfying the maximum
contribution percentage test) the Committee, in its sole discretion, may permit
a highly compensated individual to elect whether the appropriate method of
correcting Excess Tax Reduction Contributions shall be recharacterization,
distribution or a combination of both.
9.14 OTHER PERMISSIBLE METHODS OF TESTING AND CORRECTION.
The provisions of Article 5 through this Article 9 are intended to
conform with Sections 401(k) and (m) and 402(g) of the Code. In the event that
the Committee determines that, in accordance with the Code, the requirements of
such Code sections may be applied in a manner different from that prescribed in
Articles 5 through 9, the Committee, in its discretion, may make appropriate
adjustments.
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ARTICLE 10
LIMITATIONS ON ANNUAL ADDITIONS
10.1 BASIC LIMITATION.
Subject to the adjustments hereinafter set forth, the maximum annual
addition to a Participant's account in any Limitation Year under this Plan plus
the annual addition to the Participant's account under any other qualified
defined contribution plan maintained by the Company or by an affiliate shall not
exceed the lesser of:
(a) $30,000, adjusted in accordance with the Code, or
(b) 25% of the Participant's annual compensation.
10.2 DEFINITIONS.
For purposes of Article 10.1, the following terms shall have the
following meanings:
(A) ANNUAL ADDITION. The term "annual addition" shall mean the sum of:
(a) the Company's contributions (including Tax Reduction
Contributions, Matching Company Contributions and forfeitures treated
as Matching Company Contributions) allocated to the account of the
Participant under this Plan;
(b) the employer contributions and forfeitures allocated to the
account of the Participant under any other qualified defined
contribution plan maintained by the Company or by an affiliate; and
(c) the Participant's Investment Plan Contributions to this Plan
and after-tax employee contributions to any other qualified plan
maintained by the Company or an affiliate.
(B) COMPENSATION. The term "compensation" shall mean the Participant's
wages, salary for professional services and other amounts received for personal
services actually rendered (including, but not limited to, commissions paid to
salesmen, compensation for services on the basis of a percentage of profits and
bonuses) and such other amounts as are treated as "compensation" under Section
415(c)(3) of the Code.
(C) AFFILIATE. The term "affiliate" shall mean an Affiliate as defined
in Article 2.1, but modified pursuant to Section 415(h) of the Code.
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10.3 LIMITATION ON COMBINATION OF PLANS.
Notwithstanding the foregoing, in the case of a Participant who
participates in this Plan and any qualified defined benefit plan maintained by
the Company or by an affiliate, the sum of the defined benefit plan fraction and
the defined contribution plan fraction for any year shall not exceed 1.0. In
the event the sum of such fractions exceeds 1.0, benefits under the defined
benefit plan shall be reduced or frozen prior to making any reductions in this
Plan. For purposes of applying the limitations of this Article 10.3, the
following rules shall apply:
(a) The terms "defined benefit plan fraction" and "defined
contribution plan fraction" shall have the meanings prescribed in
Section 415(e) of the Code.
(b) The term "annual addition" shall have the meaning set forth in
Article 10.2.
10.4 PROSPECTIVE ADJUSTMENT TO CONTRIBUTIONS.
The Committee shall maintain records, showing the contributions to be
allocated to the account of each Participant in any limitation year. In the
event that it is determined prior to or within any Limitation Year that the
foregoing limitations would be exceeded if the full amount of contributions
otherwise allocable would be allocated, the annual additions to this Plan for
the remainder of the Limitation Year shall be adjusted by reducing (i) first,
any unmatched Investment Plan Contributions, (ii) second, any unmatched Tax
Reduction Contributions, (iii) third, matched Investment Plan Contributions and
a corresponding share of Matching Company Contributions; and (iv) fourth,
matched Tax Reduction Contributions and a corresponding share of Matching
Company Contributions but, in each case, only to the extent necessary to satisfy
the limitations.
10.5 DISPOSAL OF EXCESS ANNUAL ADDITIONS.
In the event that, notwithstanding Article 10.4 hereof, the limitations
with respect to annual additions prescribed hereunder are exceeded with respect
to any Participant and such excess arises as a consequence of forfeitures, a
reasonable error in estimating the Participant's compensation or such other
circumstance under which an adjustment hereunder is permitted under the Code,
the Participant's Investment Plan Contributions, if any, may be paid from the
Trust to him to the extent of the excess, in discretion of the Committee. Any
remaining excess shall be used to reduce future contributions by or on behalf of
the Participant for the next succeeding Limitation Year and succeeding
Limitation Years, as
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<PAGE>
necessary, or, if the Participant is no longer employed in such a succeeding
year, to reduce future contributions on behalf of other Participants entitled to
an allocation.
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ARTICLE 11
GENERAL PROVISIONS REGARDING CONTRIBUTIONS
11.1 MANNER OF MAKING CONTRIBUTIONS.
All contributions to the Trust shall be paid directly to the Trustee.
Tax Reduction Contributions and Investment Plan Contributions shall be made in
cash. Matching Company Contributions shall be made in cash or Company Stock, in
the discretion of the Company. Each contribution shall be accompanied by
written instructions from the Committee that:
(a) identify each Participant on whose behalf the contribution is
being made and the amount thereof;
(b) state whether the amount contributed on behalf of the
Participant represents a Tax Reduction Contribution, an Investment Plan
Contribution or a Matching Company Contribution; and
(c) direct the investment of the amount contributed on behalf of
the Participant.
11.2 LIMITATION TO AMOUNT DEDUCTIBLE.
Tax Reduction Contributions and Matching Company Contributions to the
Plan, when considered with the amount contributed by a Company to any other
tax-qualified plan, shall not exceed the amount deductible pursuant to Section
404 of the Code. In the event that the amount that any Company would contribute
but for the deductible limitation exceeds the deductible limitation,
contributions shall be reduced in such manner as the Committee, in its sole
discretion, shall prescribe.
11.3 RETURN OF CONTRIBUTIONS.
In the event that:
(a) a Matching Company Contribution or negative contribution is
made under a mistake of fact; or
(b) the deductibility of a Matching Company Contribution is
disallowed (it being understood that all Matching Company Contributions
are conditioned on the deductibility thereof under Section 404 of the
Code)
such contribution may be returned to the Company that made the
contribution within one year after the payment of the contribution or
the disallowance of the deduction (to the extent disallowed). If the
share prices of the funds that the contribution was invested in have
increased, then the Company receives back the amount of the
contribution. If
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the share prices of the funds that the contribution was invested in
have decreased, then the Company receives the number of shares
originally bought with the contribution amount times the current
day share price.
11.4 CERTAIN AGGREGATION RULES.
In the event that this Plan is aggregated with any other tax-
qualified plan maintained by the Company for purposes of satisfying Section
401(a)(4) or 410(b) of the Code (other than Section 410(b)(2)(A)(ii) of the
Code), the maximum deferral percentage limit of Article 5.2, the maximum
contribution percentage limit of Article 6.1 and the aggregate limit of Article
7.2 shall be applied as if the Plan and such other plan(s) were a single plan.
In addition, in the event that a Participant in this Plan who is a highly
compensated individual also participates in another tax-qualified plan
maintained by the Company, he shall be treated as participating in a single plan
for purposes of such limitations. The provisions of this Article 11.4 are
subject to Article 9.14 hereof.
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ARTICLE 12
ROLLOVERS AND TRANSFERS
12.1 ROLLOVERS.
Rollover Contributions may be made to the Plan in accordance with
the following provisions:
(A) AMOUNTS ELIGIBLE. Any amount eligible for a tax-free rollover
under applicable provisions of the Code may be rolled over to the Plan.
(B) INDIVIDUALS ELIGIBLE. Any Employee, including an Employee who
has not satisfied the participation requirements of Article 3 of the Plan, may
make a Rollover Contribution to the Plan. Even though an Employee has not yet
satisfied such participation requirements, the provisions of the Plan shall be
generally applicable to him and to the Rollover Contribution, unless expressly
provided otherwise.
(C) SOURCE OF ROLLOVER. Subject to the Code, Rollover
Contributions may be made directly by the Employee or by the retirement plan,
individual retirement account or other arrangement from which the Rollover
Contribution is being made.
(D) ASSETS ELIGIBLE FOR ROLLOVER. Rollover Contributions shall be
made in cash and not in stock or other property, unless otherwise permitted by
the Committee. A Rollover Contribution may not include any amounts representing
employee contributions, other than voluntary deductible contributions.
(E) TIMING. Any amount to be rolled over generally must be rolled
over to the Plan within 60 days of receipt by the Participant, unless otherwise
permitted by the Code and the Committee.
(F) SELF-EMPLOYED INDIVIDUAL. A rollover to the Plan shall not be
permitted to the extent the amount proposed to be rolled over is attributable to
periods during which an Employee was a self-employed individual, within the
meaning of Section 401(c)(1) of the Code.
(G) PROCEDURES. The Committee may adopt rollover procedures and,
before permitting a Rollover Contribution, may require an Employee to furnish
such information regarding the amount proposed to be rolled over as the
Committee determines is necessary or appropriate.
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12.2 TRANSFERS FROM OTHER PLAN.
The Committee, in its discretion, may accept a direct transfer to
the Plan from another plan qualified under Section 401(a) of the Code of all or
a portion of the amount credited under such other plan to an Employee. The
Committee may adopt rules with respect to any such transfer including, but not
limited to, rules with respect to accounting for, and the investment of, amounts
transferred.
12.3 SECTION 401(K) LIMITATIONS.
In the event that an amount transferred to the Plan pursuant to
Article 12.2 is attributable to a cash or deferred election that was made
pursuant to Section 401(k) of the Code, such amount shall be subject to the same
rules that apply under the Plan to Tax Reduction Contributions.
12.4 TRANSFERS TO OTHER PLAN.
The Committee, in its discretion, may permit a direct transfer from
the Plan to another plan qualified under Section 401(a) of the Code of all or a
portion of the amount credited under this Plan to an Employee. The Committee
may adopt rules with respect to any such transfer. In the event that an amount
transferred to another plan is attributable to Tax Reduction Contributions, it
shall be required as a condition of transfer that such contributions shall be
subject to such restrictions under the transferee plan as may be required
pursuant to Section 401(k) of the Code.
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<PAGE>
ARTICLE 13
ACCOUNTS AND ALLOCATION OF FUNDS
13.1 RECEIPT OF CONTRIBUTIONS BY TRUSTEE.
All contributions to the Trust that are received by the Trustee,
together with any earnings thereon, shall be held, managed and administered by
the Trustee in accordance with the terms and conditions of the Trust Agreement.
The Trustee shall at all times be subject to the proper directions of the
Committee or the Company which are made in accordance with the terms of this
Plan and the Trust Agreement and which are not, on their face, contrary to the
ERISA.
13.2 TRUST FUND VALUATION.
The value of each Investment Fund and of the Trust Fund shall be
determined by the Trustee as of the close of business on each Valuation Date, or
as soon thereafter as practicable, and shall be the fair market value of all
property held in the Investment Funds, plus cash and accrued income, with
equitable adjustments for pending trades less all charges, expenses, reserves
and liabilities due or accrued which are determined to be properly chargeable to
the Investment Funds.
13.3 ALLOCATION OF CONTRIBUTIONS TO PARTICIPANTS' SEPARATE ACCOUNTS.
The Trustee shall maintain a separate account for each Participant.
Within such account, one or more sub-accounts may be maintained as the Trustee
and the Committee deem appropriate to accurately reflect a Participant's
interest in the Plan. In all events, there shall be a separate sub-account for
Tax Reduction Contributions.
The maintenance of separate accounts is for accounting purposes
only. Any amount distributed to a Participant or his Beneficiary or any amount
withdrawn by a Participant shall be charged to the appropriate separate accounts
of the Participant as of the date of the distribution or withdrawal.
13.4 ADJUSTMENTS TO PARTICIPANTS' ACCOUNTS.
(A) The dividends, capital gains distributions, and other earnings
received on any share or unit of a Vanguard Fund or on any other Plan investment
that is specifically credited or earmarked to a Participant's separate account
under the Plan in accordance with the directed investment provisions of the Plan
shall be allocated to such separate account and immediately reinvested, to the
extent
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<PAGE>
practicable, in additional shares or units of such Fund or other earmarked Plan
investments.
(B) Any Plan earnings or losses attributable to the investment of a
Participant's separate account under the Plan in a loan to the Participant under
Article 17 shall be allocated to the Participant's separate account in
accordance with the procedures of Article 17.8.
(C) To the extent not otherwise provided in subsection (A) or (B)
above, the assets of the Plan shall be valued at their current fair market value
as of each Valuation Date, and the earnings or losses of the Plan since the
immediately preceding Valuation Date shall be allocated to the separate accounts
of all Participants and former Participants under the Plan in the ratio that the
fair market value of each such account as of the immediately preceding Valuation
Date, bears to the total fair market value of all separate accounts as of the
immediately preceding Valuation Date, reduced by any distributions or
withdrawals therefrom since such preceding Valuation Date.
13.5 PARTICIPANT-DIRECTED INVESTMENTS FOR FUTURE CONTRIBUTIONS.
(A) GENERAL RULE. Except as provided in Article 13.6, and Article
23.4(E) all contributions to the Trust that are allocated to the account of a
Participant shall be invested by the Trustee in the Investment Funds as directed
by the Participant. Any such investment directions by a Participant shall be
made in accordance with rules and procedures prescribed by the Committee, and
shall be timely furnished to the Trustee.
(B) INVESTMENT PLAN AND TAX REDUCTION CONTRIBUTIONS; LOAN
REPAYMENTS. For contributions made under investment plan agreements, tax
reduction agreements or for loan repayments, an investment election in the
manner prescribed by the Committee shall direct that the aggregate of such
contributions and loan repayments (without distinction) be invested in the
Investment Funds in multiples of 10%; provided, however, elections in effect
prior to 1991 for elections in multiples of 25% shall remain effective until
changed by the Participant. A Participant may change his investment directions
under this Article 13.5(B), in accordance with the rules and procedures
prescribed by the Committee and furnished to the Trustee.
(C) ROLLOVER CONTRIBUTIONS. An investment election in the manner
prescribed by the Committee shall be submitted with an Employee's Rollover
Contribution and shall direct that such contribution be invested in the
Investment Funds in multiples of 10%.
(D) FAILURE TO PROVIDE INVESTMENT INSTRUCTIONS. If the Trustee
receives any contribution to the Trust that is not
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accompanied by written instructions directing its investment, the Trustee may
hold or return all or a portion of such contribution uninvested without
liability for loss of income or appreciation pending receipt of proper
investment directions from the Committee.
13.6 INVESTMENT OF MATCHING COMPANY CONTRIBUTIONS; FORFEITURES.
Matching Company Contributions and forfeitures shall be invested in
Fund A and allocated to the account of each Participant a monthly basis.
Forfeitures arising during any month shall be held by the Trustee in the
Vanguard Money Market Prime Account portion of Fund A and used to reduce
Matching Company Contributions.
13.7 INVESTMENT TRANSFERS.
A Participant shall be permitted to transfer contributions to the
Trust (other than Matching Company Contributions) previously invested in one
Investment Fund and earnings thereon to one or more other Investment Funds other
than Funds D, E, and F. A transfer election shall be made in 1% increments of
the Participant's total interest in an Investment Fund or in a whole dollar
amount or in a number of whole shares to another Investment Fund in accordance
with rules and procedures prescribed by the Committee. Transfer elections may
be made as often as directed by the Participant, except that transfers to and
from Fund B may be made only once per calendar quarter.
Assets exchanged out of Fund B must remain in an eligible equity
fund for a minimum of ninety calendar days prior to becoming eligible for
transfer into Fund J - the Vanguard Money Market Reserves - Federal Portfolio.
They are eligible for transfer to funds other than Fund J on a daily basis. The
following funds are eligible equity funds: Fund A - Household International,
Inc. Common Stock Fund; Fund C - Vanguard Windsor II; Fund G - Wellington Fund;
Fund H - Vanguard Quantitative Portfolio Fund; and Fund I - Vanguard Extended
Market Portfolio.
Exchanges from Fund J, the Vanguard Money Market Reserves -Federal
Portfolio, may be made directly into Fund B without a ninety day investment in
an eligible equity fund.
13.8 NO RIGHTS CREATED BY ALLOCATION.
Any allocation of contributions or earnings to the separate account
of a Participant under this Article 13 shall not cause the Participant to have
any right, title or interest in any assets of the Plan except at the time and
under the terms and conditions expressly provided for in the Plan.
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<PAGE>
ARTICLE 14
VESTING; FORFEITURES
14.1 VESTING OF ACCOUNTS.
(A) YEARS OF MATCHING COMPANY ACCOUNT TEST. If a Participant's
employment with the Company or an Affiliate is terminated for any reason other
than a reason described in (C) hereof, the Participant shall:
(a) be entitled to the entire amount in his account attributable
to his Rollover Contributions, his Investment Plan Contributions,
and his Tax Reduction Contributions, including in each case any
contributions made for the year of termination of employment but
not yet allocated; and
(b) be vested in, and entitled to, an amount equal to a
percentage of the portion of his account attributable to Matching
Company Contributions. Such percentage shall be determined in
accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Matching Vested Forfeited
Company Account Percentage Percentage
----------------- ---------- ----------
<S> <C> <C>
less than 1 0% 100%
1 but less than 2 20% 80%
2 but less than 3 40% 60%
3 but less than 4 60% 40%
4 but less than 5 80% 20%
5 or more 100% 0%
</TABLE>
For purposes of this Article 14.1, "Years of Matching Company Account"
will be measured in calendar quarters beginning with the calendar quarter with
respect to which the Participant first has Matching Company Contributions
allocated to his account and ending with the calendar quarter in which the
Participant's employment is terminated.
(B) FIVE YEARS OF EMPLOYMENT TEST. Notwithstanding (A) hereof, a
Participant shall be 100% vested if his employment with the Company or an
Affiliate is terminated after 5 years of employment, determined in accordance
with the following:
(a) A "year of employment" for this purpose means a 365 day
period (disregarding fractional years), beginning on the date on which
an Employee first completes an Hour of Service (or the first day of
the month in which he is employed and completes an Hour of Service, if
his employment commences on the first regularly scheduled work day of
a month) and ends on the earlier of (i) the date
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<PAGE>
the Employee quits, is discharged, retires or dies or (ii) the first
anniversary of the date the Employee is absent from active employment
for any other reason including, but not limited to, short term
disability, vacation, leave of absence or layoff. The applicable date
under (i) or (ii) is the "severance from service date".
(b) Notwithstanding the foregoing, if the Employee is severed
from service by reason of quitting, discharge or retirement but
returns to employment and performs an Hour of Service within the 365
day period ending on the first anniversary of his severance from
service date, the interim period shall count towards the computation
of years of employment. If an Employee is absent for a reason
described in (a)(ii) and then quits, is discharged or retires but
subsequently returns to employment and performs an Hour of Service,
the interim period of absence shall count towards the computation of
years of employment, provided that the date on which the Employee
again performs an Hour of Service occurs within the 365 day period
ending on the first anniversary of the date the Employee was first
absent from employment for a reason described in (a)(ii).
(c) In accordance with uniform rules, the Committee may count
certain periods of absence from active employment toward the
computation of years of employment, even if not required pursuant to
(a) or (b) hereof.
(d) Years of employment credited during a prior period of
employment shall be automatically reinstated as of the date of an
Employee's reemployment.
(C) OTHER CIRCUMSTANCES. A Participant shall be 100% vested upon his
attainment of age 65, his eligibility for normal or early retirement (as defined
under any tax-qualified defined benefit plan maintained by a Company or
Affiliate in which he participates), his death prior to termination of
employment with a Company or Affiliate, or his Disability (as determined by the
Committee). In addition, the Company may accelerate vesting to 100% in special
circumstances including, but not limited to, a sale of stock or assets of an
Employee's employer.
14.2 FORFEITURE OF NON-VESTED INTEREST.
The portion of a Participant's account attributable to Matching
Company Contributions in which he is not vested when his employment with the
Company or an Affiliate is terminated shall be forfeited upon the earlier of
(i) the date that he receives a distribution of his entire vested interest
(including for this purpose, an annuity contract that represents his right to
such vested interest), or (ii) the fifth anniversary of the
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Participant's severance from service date, as defined in Article 14.1(B) hereof.
A Participant who does not have any vested interest in the portion of his
account attributable to Matching Company Contributions as of his severance from
service date shall be deemed to have received a distribution for purposes of (i)
hereof as of his severance from service date.
14.3 RESTORATION OF NON-VESTED INTEREST.
If, following his termination of employment, a Participant received a
distribution of his entire vested interest under the Plan and then is reemployed
and performs an Hour of Service prior to the fifth anniversary of the date on
which he received a distribution, the entire amount forfeited, unadjusted for
gains and losses following the distribution, shall be restored to his account
from other forfeiture amounts by Participants and the Plan earnings attributable
thereto, or by additional Company contributions to the Plan on behalf of the
Participant.
At any time thereafter, the amount in which he is vested shall be
determined by applying his vested percentage against the sum of the distribution
and the amount restored; provided, however, that the amount actually
distributable to him upon his subsequent termination of employment shall be
offset by the amount previously distributed.
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<PAGE>
ARTICLE 15
DISTRIBUTIONS
15.1 TIMING OF DISTRIBUTIONS; APPLICABLE VALUATION DATE.
(A) GENERAL RULE. Normally, the vested interest of a Participant (or
beneficiary) shall become distributable to him as soon as administratively
practicable following the Participant's severance from service date (or death),
provided that the Committee has received written notice of the Participant's
severance from service date (or death).
(B) CONSENT TO IMMEDIATE DISTRIBUTION; DEFERRAL IF CONSENT NOT
OBTAINED. If the value of a Participant's account as of the severance from
service date exceeds $3,500, no distribution shall be made thereunder unless the
Participant (or beneficiary) consents to the distribution. In accordance with
rules prescribed by the Committee, a Participant (or beneficiary) who does not
consent may defer his distribution until a date no later than the Valuation Date
first following the date he becomes age 65 (or the date he would have attained
age 65 in the case of a beneficiary).
(C) RETIREMENT-ELIGIBLE DEFERRALS. If a Participant is eligible for
normal or early retirement (as defined under any tax-qualified defined benefit
plan maintained by a Company or Affiliate in which he participates) as of his
severance from service date then, regardless of the value of his account, he may
elect to defer the receipt of his vested interest to a date, no later than his
required beginning date under Article 15.4. A beneficiary also may elect to
defer distribution hereunder if, as of the date of the Participant's death, he
was eligible for normal or early retirement.
(D) TREATMENT OF ACCOUNTS IN THE CASE OF DEFERRED DISTRIBUTIONS. If
a Participant or beneficiary elects to defer distribution of the Participant's
vested interest pursuant to (B) or (C) hereof, the Participant's account shall
continue to share in the earnings and losses of the Trust until the applicable
Valuation Date. Transfers among Investment Funds also shall be permitted until
such Valuation Date.
15.2 METHOD OF DISTRIBUTION.
All amounts which a Participant or a beneficiary shall be entitled to
receive under the Plan shall be distributed as a single sum distribution, unless
the Participant elects an annuity as described below. Payment from Fund B shall
be in cash. Payments in the form of a single sum distribution from Fund A (and
from the Eljer, Schwitzer and Scotsman Stock Funds) shall be in cash or stock or
a combination of both, at the discretion of the
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<PAGE>
Participant; provided, however, that partial shares will be paid in cash.
Payments in the form of a single sum distribution from Funds other than Fund A
(and from the Eljer, Schwitzer and Scotsman Stock Funds) shall be in cash.
A Participant (who does not have a loan outstanding) may elect to
receive his distribution in a single sum, as an immediate annuity purchased
under the group annuity contract or contracts, or as a combination of both, or
in any other form available through a group annuity contract issued to the Plan
by a legal reserve life insurance company authorized to do business in Illinois.
The forms of immediate annuity available under the group annuity contract or
contracts shall include the following:
(a) Qualified Joint and Survivor Annuity. An annuity for the
life of the Participant with a survivor annuity for the life of such
Participant's spouse which is not less than one-half, or greater than,
the amount of the annuity payable during the joint lives of the
participant and such Participant's spouse.
(b) Annuity Certain and Life. An annuity to the Participant for
a specified number of monthly payments. Thereafter, payments will
continue for as long as the annuitant lives.
If a married Participant who is eligible to elect to receive an
annuity elects payment in the form of a life annuity, it will be
provided in the form of a qualified joint and survivor annuity,
provided, that such participant (i) may elect with the consent of his
spouse not to take the joint and survivor annuity and (ii) may revoke
an election not to take a joint and survivor annuity or choose again
to take a joint and survivor annuity at any time and any number of
times prior to the commencement of benefit payments. The consent of a
married Participant's spouse not to take the joint and survivor
annuity only shall be effective if the spouse consents to the other
particular form of life annuity elected by the Participant and to the
specific beneficiary (if any) under such form. No annuity may be
purchased unless the payments of the annuity will equal or exceed $30
per month.
Notwithstanding the foregoing, the only form of distribution available
to an individual who becomes a Participant on or after July 1, 1989 shall be a
single sum distribution.
15.3 DESIGNATION OF BENEFICIARY.
A Participant may designate from time to time a beneficiary or
beneficiaries (who may be designated contingently or
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<PAGE>
successively and may be an entity other than a natural person) to be entitled
under Article 15.1 to receive any vested, undistributed amounts credited to the
Participant's account under the Plan at the time of the Participant's death
(reduced by the amount of any outstanding loan); provided, however, that if a
beneficiary other than the surviving spouse of the Participant is named, the
designation is valid only with the consent of such spouse. The consent must
acknowledge the effect of the election not to be the sole beneficiary and must
be witnessed by a notary public or a Plan representative. Spousal consent may
be dispensed with only if it is established to the satisfaction of the Committee
that: (i) such consent is not obtainable, either because there is no spouse, or
the spouse cannot be located; or (ii) because of such other circumstances as the
Secretary of the Treasury may by regulations prescribe. Subject to the
foregoing, any such beneficiary designation shall be made on a form prescribed
by the Committee, and shall be effective only when filed with the Committee
during the Participant's lifetime. A Participant may change or revoke his
beneficiary designation at any time by filing a new instrument with the
Committee. If the designated beneficiary (or each of the designated
beneficiaries) predeceases the Participant, the Participant's beneficiary
designation shall be ineffective. In determining whether any person named as a
beneficiary is living at the time of a Participant's death, if such person and
the Participant die in a common accident or disaster and there is insufficient
evidence to determine which person died first, then it shall be deemed that the
beneficiary died first. If no valid beneficiary designation is in effect at the
time of the Participant's death, the amount payable will be paid in equal shares
to those person(s) then living in the first of the following classes of
successive preference beneficiaries being the deceased Participant's:
(a) widow or widower;
(b) descendants, PER STIRPES (including adopted children);
(c) parents;
(d) brothers and sisters;
(e) executors or administrators.
15.4 CODE SECTION 401(A)(9).
All distributions under the Plan shall be subject to the requirements
of Section 401(a)(9) of the Code and applicable regulations thereunder,
including the incidental death benefit requirements thereof. Without limitation
of the foregoing, the following specific requirements of Section 401(a)(9) shall
apply:
(A) REQUIRED BEGINNING DATE. Distributions to a Participant shall
being not later than April 1 of the Plan Year following the Plan Year in which a
Participant attains age 70-1/2, even if the Participant has not yet severed from
service as of such date.
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<PAGE>
(B) PAYMENT TERM AND FREQUENCY. Benefits payable in the form of an
annuity shall not extend beyond the life of the Participant, the lives of the
Participant and a designated beneficiary, the life expectancy of the Participant
or the joint life and last survivor expectancy of the Participant and a
designated beneficiary. If a Participant dies and annuity payments have
commenced before his death, any annuity payments payable thereafter will be
distributed at least as rapidly as those made during the Participant's life.
(C) LUMP SUM PAYABLE AFTER DEATH. If a Participant dies prior to
payment or the commencement of payment to him of his vested interest, the amount
payable to his beneficiary pursuant to Article 15.1(A) and 15.3 shall in all
event be distributed within five (5) years after the Participant's death.
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<PAGE>
ARTICLE 16
WITHDRAWALS
16.1 WITHDRAWAL CATEGORIES.
A Participant may make a withdrawal of all or part of his account;
provided, however, that a minimum of $500 or the balance of the Participant's
account must be withdrawn and only two non-hardship withdrawals may be made in
each Plan Year. Withdrawals must be made of all amounts eligible for withdrawal
in each category below (listed in descending order) before amounts in the next
lower category may be withdrawn:
CATEGORY A: Investment Plan Contributions (excluding earnings thereon)
made prior to January 1, 1987, which have not been matched
by Employer Matching Contributions.
CATEGORY B: Investment Plan Contributions (including earnings thereon)
made after January 1, 1987, which have not been matched by
Employer Matching Contributions.
CATEGORY C: Investment Plan Contributions (excluding earnings thereon)
made prior to January 1, 1987, which have been matched by
Employer Matching Contributions, providing that the
Participant has been in the Plan for five years.
CATEGORY D: Investment Plan Contributions (including earnings thereon)
made after January 1, 1987, which have been matched by
Employer Matching Contributions, provided that the
Participant has been in the Plan for five years.
CATEGORY E: Employer Matching Contributions, including earnings thereon,
provided that the Participant has been in the Plan for five
years.
CATEGORY F: Trustee-to-Trustee Transfer Contributions (except any amount
attributable to such contributions previously distributed,
as described above) and Rollover Contributions, plus
earnings thereon.
CATEGORY G: Investment Plan Contributions (excluding earnings thereon)
of Participants who have been in the Plan for less than five
years,
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<PAGE>
which have been matched by Employer Matching Contributions;
provided, however, the earnings will be excluded only to the
extent of the Participant's pre 1987 cost basis. Thereafter
the withdrawal will be prorata to include earnings.
CATEGORY H: Tax Reduction Contributions, plus earnings thereon, by
Participants who have attained age 59-1/2, or in order to
meet immediate financial hardships as defined by the Code
and regulations thereunder. Participants who have not
attained age 59-1/2 may withdraw account balances
attributable to Tax Reduction Contributions (excluding
earnings thereon that were earned on or after January 1,
1989) during employment with Household or a subsidiary only
to meet immediate financial hardships.
16.2 HARDSHIP WITHDRAWALS.
(A) GENERAL RULE. A Participant may make a hardship withdrawal only
if the withdrawal is made on account of an immediate and heavy financial need of
the Participant and if the withdrawal is necessary to satisfy such financial
need.
(B) IMMEDIATE AND HEAVY FINANCIAL NEED. A withdrawal will be deemed
to be made on account of an immediate and heavy financial need of the
Participant if the withdrawal is on account of one of the following:
(a) Medical expenses described in Section 213(d) of the Code
incurred by the Participant, the Participant's spouse, or any
dependent of the Participant (as defined in Section 152 of the Code)
or necessary for these persons to obtain medical care (defined in Code
Section 213(d));
(b) Purchase (excluding mortgage payments) of a principal
residence of the Participant;
(c) Payment of tuition for the next 12 months of post-secondary
education and related educational fees for the Participant, his spouse
or dependents; or
(d) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(C) WITHDRAWAL NECESSARY TO SATISFY FINANCIAL NEED. A distribution
will not be treated as necessary to satisfy an immediate and heavy financial
need to the extent the amount of the
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withdrawal is in excess of the amount required to relieve the financial need or
to the extent such need may be satisfied from other resources that are
reasonably available to the Participant; provided, however, the amounts
necessary to pay reasonably anticipated federal, state and local income taxes
and penalties may be included. In order to demonstrate that the withdrawal is
necessary to satisfy an immediate and heavy financial need, a Participant shall
be required to execute a written representation that the need cannot be relieved
through one or more of the following means:
(a) Reimbursement or compensation by insurance or otherwise;
(b) Reasonable liquidation of the Participant's assets, to the
extent such liquidation would not itself cause an immediate and heavy
financial need;
(c) Cessation of Tax Reduction or Investment Plan Contribution
to the Plan;
(d) Borrowing from commercial sources on reasonable commercial
terms; or
(e) Other withdrawals or nontaxable (at the time of the loan)
loans available from the Plan, all of which have been exhausted
pursuant to the terms of the Plan; provided, however, that loans shall
be considered hereunder only to the extent that repayment of a loan
would not in and of itself be unreasonably burdensome to the
Participant. For purposes hereof, a Participant's assets shall be
deemed to include those assets of his spouse and minor children that
are reasonably available to the Participant.
(D) CONSEQUENCES OF HARDSHIP WITHDRAWALS. In the event that a
Participant makes a hardship withdrawal, his contributions shall be restricted
as follows:
(a) He shall not be eligible to make any Tax Reduction
Contributions or Investment Plan Contributions for the period
beginning with the payroll period next following the date he makes the
withdrawal request and ending with the last day of the calendar
quarter that is at least 12 months after the date he receives the
withdrawal;
(b) The amount of his Tax Reduction Contributions for the Plan
Year following the Plan Year in which he makes the withdrawal shall be
limited to the dollar amount prescribed under Article 5.1, reduced by
the amount of his Tax Reduction Contributions for the year in which he
made the withdrawal.
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16.3 MANNER OF MAKING WITHDRAWALS.
Any withdrawal by a Participant under this Article 16 shall be made
only after the Participant files a written request with the Committee,
specifying the category of the withdrawal and the amount requested to be
withdrawn. Upon approving the amount of any withdrawal, the Committee shall
furnish the Trustee with written instructions directing the Trustee to make a
single sum payment of the withdrawal. Payments from Funds B, C, G, H, I and J
shall be in cash. Payments from Funds A, D, E and F shall be in cash or stock
or a combination of both at the discretion of the Participant; provided,
however, that a hardship withdrawal only may be made in cash and provided,
further, that partial shares will be paid in cash.
Payment shall be made by withdrawing as of the Valuation Date a
proportionate amount credited to the interests of the Participant in the
Investment Funds under the Plan. Contributions which were received subsequent
to such Valuation Date will not be included.
16.4 WITHDRAWALS UPON ATTAINMENT OF AGE 59-1/2.
Any participant who has attained age 59-1/2 may, in addition to the
withdrawal options provided in Article 16.1, elect to withdraw all or part of
his vested accounts; provided, however, that withdrawals must be made of all
amounts eligible for withdrawal in each classification below (listed in
descending order) before amounts in the next lower classification may be
withdrawn:
CATEGORY A: Investment Plan Contributions (excluding earnings thereon)
made prior to January 1, 1987, which have not been matched
by Employer Matching Contributions.
CATEGORY B: Investment Plan Contributions (including earnings thereon)
made after January 1, 1987, which have not been matched by
Employer Matching Contributions.
CATEGORY C: Investment Plan Contributions (excluding earnings thereon)
made prior to January 1, 1987, which have been matched by
Employer Matching Contributions, providing that the
Participant has been in the Plan for five years.
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CATEGORY D: Investment Plan Contributions (including earnings thereon)
made after January 1, 1987, which have been matched by
Employer Matching Contributions, provided that the
Participant has been in the Plan for five years.
CATEGORY E: Employer Matching Contributions, including earnings thereon,
provided that the Participant has been in the Plan for five
years.
CATEGORY F: Trustee-to-Trustee Transfer Contributions (except any amount
attributable to such contributions previously distributed,
as described above) and Rollover Contributions, plus
earnings thereon.
CATEGORY G: Investment Plan Contributions (excluding earnings thereon)
of Participants who have been in the Plan for less than five
years, which have been matched by Employer Matching
Contributions; provided, however, the earnings will be
excluded only to the extent of the Participant's pre 1987
cost basis. Thereafter the withdrawal will be prorata to
include earnings.
CATEGORY H: Tax Reduction Contributions, plus earnings thereon, by
Participants who have attained age 59-1/2, or in order to
meet immediate financial hardships as defined by the Code
and regulations thereunder. Participants who have not
attained age 59 1/2 may withdraw account balances
attributable to Tax Reduction Contributions (excluding
earnings thereon that were earned on or after January 1,
1989) during employment with Household or a subsidiary only
to meet immediate financial hardships.
16.5 CONSEQUENCES OF WITHDRAWALS OF MATCHED AFTER-TAX CONTRIBUTIONS
In the event that a Participant with less than five years of
participation in the Plan makes a withdrawal from Category G of Article 16.1 or
Article 16.4, his contributions shall be restricted as follows: he shall not be
eligible to make any Tax Reduction Contributions or Investment Plan
Contributions for the period beginning with the payroll period next following
the date he makes the withdrawal request and ending with the payroll period next
following the later of 13 payroll periods or six months.
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16.6 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION.
In the event a distribution is made pursuant to a qualified domestic
relations order, the withdrawal will be made from each relevant category listed
in Section 16.1 (regardless of restrictions otherwise imposed) in the ratio the
distribution bears to the total account of the Participant.
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ARTICLE 17
LOANS
17.1 GENERAL RULE.
Loans are available to Participants. These loans are limited to a
minimum of $500 each (or the eligible balance of the Participant's account, if
less) and may be granted twice per year. No more than two non-residential loans
and one residential loan may be outstanding at any time.
17.2 AMOUNT OF LOAN.
Upon receipt of a written request from a Participant, the Committee
may direct the Trustee to make a loan to the requesting Participant. The total
amount of any such loan shall not cause the outstanding balance of all loans to
the Participant under any qualified plan of the Company or an Affiliate to
exceed 50% of the value of the Participant's vested interest under the Plan as
of the previous Valuation Date. In no event, however, shall the amount of any
loan to a Participant either (i) exceed $50,000, reduced by the highest
outstanding loan balance applicable to the Participant during the one year
period ending on the day before the second loan to the Participant is granted;
or (ii) cause the outstanding balance of all loans to the Participant under any
qualified plan of the Company or an Affiliate to exceed $50,000.
17.3 SECURITY FOR LOAN.
Any loan to a Participant under this Article 17 shall be secured by
the pledge of all of the Participant's right, title and interest in the Trust,
supported by the execution of a promissory note for the amount of the loan,
including interest, payable to the order of the Trustee. The spouse, if any,
shall be required to consent to the use of the Participant's account as security
and if such consent is not obtained, no loan will be made to the Participant.
Spousal consent shall be obtained no earlier than the beginning of the
90-day period that ends on the date on which the loan is to be so secured. The
consent must be in writing, must acknowledge the effect of the loan, and must be
witnessed by a plan representative or notary public. Such consent shall
thereafter be binding with respect to the consenting spouse or any subsequent
spouse with respect to that loan. A new consent shall be required if the
account balance is used for renegotiation, extension, renewal, or other revision
of the loan.
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17.4 INTEREST RATE CHARGED.
The rate of interest charged on any loan to a Participant under this
Article 17 shall be determined by the Committee and shall take into
consideration interest rates being charged under generally prevailing market
conditions for similarly secured personal loans. The Committee shall not
discriminate among Participants in the matter of interest rates, but loans
granted at different times may bear different interest rates if, in the opinion
of the Committee, the difference in rates is justified by a change in general
economic conditions.
17.5 REPAYMENT OF LOANS.
(A) GENERAL. Any loan to a Participant under this Article 17 shall
be repaid within five years of the date on which the loan is made, except that
loans used to acquire or construct any dwelling unit which is within a
reasonable time to be used as a principal residence of the Participant may be
repaid over a longer period of time (not greater than 25 years) as determined by
the Committee; provided, however, that any loan shall be repaid on or before the
Participant's final distribution date. Loans shall be amortized on a level
basis and repaid in regular, substantially equal installments by payroll
deduction on a schedule prescribed by the Committee (with payments made at least
as often as quarterly), which installments shall be applied to reduce the
principal as well as the accrued interest of the loan.
(B) PAYMENT TO TRUSTEE. Each loan repayment shall be paid to the
Trustee, and shall be accompanied by written instructions from the Committee
that:
(a) identify the Participant on whose behalf the repayment is
being made; and
(b) direct the investment of the loan repayment to the
Investment Fund account in the same proportion as elected by the
Participant in Article 13.5 as if the repayments were future
contributions.
(C) SECURITY NOT TO BE JEOPARDIZED. No distribution of benefits
under Article 15 or withdrawals under Article 16 which jeopardize the security
of the loan shall be made from amounts credited to a Participant's account under
the Plan unless and until all unpaid loans, including accrued interest thereon,
to the Participant have been satisfied.
17.6 DEFAULT ON LOAN.
In the event of a default by a Participant on a loan repayment, all
remaining repayments on the loan shall be immediately due and payable, and the
entire amount of the unpaid
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balance of such loan and accrued interest thereon shall be considered and
treated as having been distributed in cash under Article 15 as of the date of
default, and an appropriate adjustment of his account shall be made therefor as
if such distribution occurred on a Valuation Date. Notwithstanding the
foregoing, the Committee may use alternative means to pursue payment of a loan
in default if such alternative means are necessary to prevent a distribution
from the portion of the Participant's account that is attributable to Tax
Reduction Contributions and that would contravene Section 401(k) of the Code.
If a spousal consent has been obtained in accordance with Article
17.3, then, notwithstanding any other provision of this Plan, the portion of the
Participant's vested account balance used as a security interest held by the
Plan by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested account
balance (determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first reducing
the vested account balance by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the surviving spouse.
17.7 MANNER OF MAKING LOANS.
All requests by a Participant for loans from the Trust shall be made
in writing to the Committee prior to the Valuation Date used for purposes of
determining the amount of the loan made. The Committee shall apply its
standards for the approval of loans in a uniform and consistent manner with
respect to all Participants and shall approve a loan if the requirements of this
Article 17 are satisfied. If a Participant's request for a loan is approved by
the Committee, the Committee shall furnish the Trustee with written instructions
directing the Trustee to make the loan in a single sum payment in cash to the
Participant. Such payment shall be made by withdrawing as of the Valuation Date
a proportionate amount from the separate Investment Funds of the Participant
under the Plan.
17.8 ACCOUNTING FOR LOANS.
A loan to a Participant (and interest thereon) shall be considered a
Plan investment, and repayments shall be credited to an Investment Fund in
accordance with Article 13.5 as if such repayments were future contributions;
provided, however, that repayments attributable to money borrowed from the
portion of a Participant's account attributable to Matching Company
Contributions and interest thereon shall be credited to Fund A.
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ARTICLE 18
ADMINISTRATION
18.1 ALLOCATION OF RESPONSIBILITIES AMONG FIDUCIARIES.
A fiduciary to the Plan shall have only those specific powers, duties,
responsibilities and obligations as are explicitly given him under the Plan and
the Trust Agreement. In general, Household International, Inc., shall have the
sole authority to establish the Plan and Trust and to amend or terminate, in
whole or in part the Plan or the Trust Agreement subject to the provisions of
Article 19. The Chief Executive Officer of Household International, Inc. shall
have the sole authority to appoint and remove three or more members of the
Committee. The Company shall have the sole responsibility for making
contributions to the Plan. The Committee shall have the sole responsibility for
the administration of the Plan as more fully described in Article 18.2. Subject
to Participants' investment directions under Article 13, and subject to
Committee directions under Article 18.2, the Trustee shall have the sole
responsibility for the administration of the Trust and the management of the
assets held thereunder, as provided in the Trust Agreement. It is intended that
each fiduciary shall be responsible only for the proper exercise of his own
powers, duties, responsibilities and obligations under the Plan and the Trust
Agreement and shall not be responsible for any act or failure to act of another
fiduciary. A fiduciary may serve in more than one fiduciary capacity with
respect to the Plan.
It is expressly provided that any fiduciary to the Plan and the Trust
may also be an Employee of the Company.
No fiduciary guarantees the Trust Fund in any manner against
investment loss or depreciation in asset value.
18.2 POWERS AND RESPONSIBILITIES OF THE COMMITTEE.
The Committee as the plan administrator and named fiduciary of the
Plan shall have all powers, duties, responsibilities and obligations imposed by
law and by the provisions of the Plan and the Trust except those specifically
granted or allocated by those instruments to the Board of Directors, to
Household International, Inc., to its Chief Executive Officer, to the Trustee or
to any investment manager appointed by the Committee, and those which the
Committee has delegated or allocated to any other person. Such powers, duties,
responsibilities and obligations of the Committee shall include, but shall not
be limited to, excluding direct or indirect subsidiaries of Household
International, Inc. from participation in the Plan, approving the Company
election documents, refunding contributions, appointing and removing the
Trustee, any investment manager, and any other person appointed or
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employed to render advice with regard to the Plan, including but not limited to
such counsel, accountants and other experts as it deems necessary, determining
and instructing the Trustee and any investment managers on the funding,
investment policies, methods and objectives of the Trust, designating and
rescinding the designation of Trust assets which the Trustee and each investment
manager is to control, accepting or rejecting any tendered Rollover
Contribution, refunding Rollover Contributions, determining the form of and
providing any written documents to be used under the Plan, receiving and
maintaining such documents, authorizing or denying contributions to and
withdrawals or distributions out of the Trust and in accordance with the
provisions of the Plan, providing a full and fair review of the denial of any
claimed contribution, loan, withdrawal or distribution out of the Plan with a
written notice setting out the specific reason for the denial of his claim
written in a manner calculated to be understood by the Participant, preparing
and submitting all reports, notices, insurance premiums and applications with
respect to the Plan and the Trust required by law and for the continual
qualification of the Plan and the Trust under Sections 401 and 501 of the Code,
preparing and furnishing all reports and communications required by law or as it
deems appropriate to persons to whom benefits are being paid or may become
payable under the Plan, and taking such further actions as may be necessary for
the administration of the Plan.
Any construction, interpretation or application of the Plan by the
Committee shall be final, conclusive and binding on the Company, and all
Participants and their beneficiaries and other successors in interest.
Limitations and interpretations under the Plan shall be determined to the best
of the ability of the Committee based on such information as is reasonably
available at the time a decision is made. All actions by the Committee shall be
taken pursuant to uniform standards consistently applied to all persons
similarly situated.
18.3 CONCLUSIVENESS OF RECORDS.
In administering the Plan, the Committee may conclusively rely upon
the Company's and any Affiliate's payroll and personnel records maintained in
the ordinary course of business.
18.4 EXPENSES.
The expenses of administering the Plan, other than compensation of
persons on the payroll of the Company, but including fees of the Trustee,
counsel, accountants or other experts appointed under the Plan, shall be paid
out of the Trust Fund to the extent not paid by the Company.
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18.5 CLAIMS PROCEDURE.
(A) FILING OF CLAIM. Any claim, including but not limited to a claim
for distribution, loan or withdrawal shall be submitted to the Committee through
the designee which it has appointed for the Company facility where the
Participant with respect to whom the payment is claimed, is, or was last
employed, or, if no such designee has been appointed, then to the Administrative
and Investment Committee, Household International, Inc., 2700 Sanders Road,
Prospect Heights, Illinois 60070. Submissions shall be made in the form and
within the time period designated by the Committee. Satisfactory proof of
eligibility and information necessary to determine the amount of such
distribution, loan, or withdrawal, including, where appropriate, age, date of
death of a Participant or a prior beneficiary, appointment as executor,
administrator or guardian and such other information as is reasonably required
in the circumstances must be submitted. The Committee shall authorize or deny
requests for a loan or payment of any claimed amount within a reasonable period
of time.
(B) NOTICE OF DENIAL OF CLAIM. If a claim is denied, the Committee
shall notify the claimant in writing. Such written notice shall contain:
(a) the specific reason or reasons for denial;
(b) a specific reference to the provisions of the Plan on which
such denial is based;
(c) a description of any additional material or information
necessary for such person to perfect such claim, with an explanation
of why such additional material or information is necessary; and
(d) an explanation of the Plan's review procedure as set forth
in Article 18.5(C). This written notice of denial of claim shall be
written in a manner calculated to be understood by the claimant.
(C) RIGHT OF REVIEW. Each claimant whose claim has been denied in
whole or in part, and any authorized representative of such person, may review
all documents pertinent to such denial and, within 60 days after receipt by such
claimant of the notification provided for in Article 18.5(B), may request, by
written notice sent to the Committee, a review of such denial and may submit to
the Committee written issues and comments for consideration as part of such
review. No claimant or representative shall have any right to appear
personally, nor shall the Committee be obligated to hold any meetings with any
claimant or representative, or hold any hearings, as part of such review. The
Committee shall conduct such review as expeditiously as reasonably possible, and
shall give due consideration to all written issues and comments submitted by or
on
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behalf of the claimant. A decision on such review shall be made, if reasonably
possible, within 60 days after receipt of the request for such review, but in
any event not later than 120 days after receipt of such request. The decision
shall be in writing and shall include specific reasons for the decision, written
in a manner calculated to be understood by the claimant, and shall also include
specific references to the pertinent Plan provisions on which the decision is
based.
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ARTICLE 19
AMENDMENT, TERMINATION AND MERGER
19.1 AMENDMENTS.
Household International, Inc. hopes and intends to continue the Plan
indefinitely but reserves the right to amend, suspend, or terminate the Plan and
the Trust for itself and its direct and indirect subsidiaries and to discontinue
or modify Company contributions, at any time. Except to the extent required or
permitted by the Code and other applicable law, the accrued benefit of any
Participant, former Participant, or beneficiary shall not be adversely affected
retroactively by any such action.
19.2 PLAN TERMINATION.
In case of the termination of the Plan by Household International,
Inc., the complete discontinuance of contributions to the Plan, or a partial
termination of the Plan with respect to a group of Participants, the account
balance of each affected Participant shall become 100% vested. In any such
event, the Committee shall determine the manner and timing of distributions.
19.3 DISTRIBUTIONS UPON CERTAIN SALES.
There may be a single sum distribution from the Plan to any
Participant affected by (i) a disposition by a Company of substantially all of
the assets used by the Company in a trade or business, but only if the
Participant continues employment with the corporation acquiring such assets, or
(ii) a disposition by a Company of its interest in a subsidiary, but only if the
Participant continues employment with such subsidiary, or (iii) a disposition by
a Company of a portion of the assets used by the Company in a trade or business,
to the extent such distribution does not contravene any requirement of the Code
or other applicable law.
19.4 SUCCESSOR EMPLOYER.
In the event of the dissolution, merger, consolidation or
reorganization of Household International, Inc. or any participating
subsidiaries, provision may be made by the Committee by which the Plan and the
Trust shall be continued by the successor company, in which case such successor
company shall be substituted for its predecessor under the Plan. The
substitution of the successor company shall constitute an assumption of Plan
liabilities by the successor company, and the successor company shall have all
powers, duties and responsibilities of its predecessor under the Plan.
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19.5 MERGER, CONSOLIDATION OR TRANSFER.
There shall be no merger or consolidation of the Plan with, or
transfer of assets or liabilities of the Plan to, any other plan of deferred
compensation maintained or to be established for the benefit of all or some of
the Participants of the Plan, unless each Participant would (if either this Plan
or such other plan then terminated) receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
the Participant would have been entitled to receive immediately before the
merger, consolidation or transfer (if this Plan had then terminated).
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ARTICLE 20
MISCELLANEOUS
20.1 EXCLUSIVE BENEFIT OF PARTICIPANTS AND BENEFICIARIES.
All assets of the Trust shall be maintained for the exclusive benefit
of Participants, and their beneficiaries, and shall be used only to pay benefits
to such persons or to pay the fees and expenses of the Trust. The assets of the
Trust shall not revert to the benefit of the Company except as provided in
Article 11.3
20.2 NON-GUARANTEE OF EMPLOYMENT.
Nothing contained in this Plan shall be construed as a contract of
employment between an Employee and the Company, or as a right of any Employee to
be continued in the employment of the Company, or as a limitation of the right
of the Company to discharge any of its Employees, with or without cause, and no
Employee or any other person shall have any right or claim to any benefit or
right under the Plan which has not arisen under the express provisions of the
Plan.
20.3 RIGHTS TO TRUST ASSETS.
No Employee, Participant, or beneficiary shall have any right to, or
interest in, any assets of the Trust upon termination of employment or
otherwise, except as provided under the Plan. All payments of benefits under
the Plan shall be made solely out of the assets of the Trust.
20.4 NON-ALIENATION OF THE RIGHT TO RECEIVE PAYMENTS.
Except as provided under Article 17 with respect to loans, and except
as may otherwise be required by law, benefits payable under the Plan shall not
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, prior to actually being received by the
person entitled to the benefit under the terms of the Plan, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any right to benefits payable under the Plan shall be void.
It is expressly provided that qualified domestic relations orders in compliance
with the Retirement Equity Act of 1984 may override the distribution provisions
of this Plan, and notwithstanding any other provisions of the Plan, a
distribution may be made to an alternate payee under a qualified domestic
relations order at the time specified in the order, regardless of any
restrictions on distributions that may then apply to the participant to whom the
order applies.
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20.5 CONTROLLING LAW.
The interpretation of the Plan and other questions arising in the
administration of the Plan shall be determined by ERISA, and (to the extent that
state law is applicable) by the laws of Illinois.
20.6 PLAN CONTROLS.
The Trust Agreement is a part of the Plan. In case of any
inconsistency between their respective provisions, the Plan shall control. In
the event of any conflict between the Plan and any summary thereof, from
whatever source, the language of the Plan shall govern.
20.7 CONSTRUCTION.
Unless the context otherwise indicates, words of the masculine gender
include the feminine, the singular shall include the plural, and the plural
shall include the singular. Titles of articles are inserted for convenience
only and shall not affect the meaning or construction of the Plan.
20.8 EFFECT OF MISTAKE.
In the event of a mistake or misstatement as to age or eligibility of
any person, or the amount or kind of contributions, withdrawals or distributions
made or to be made to a Participant, or other person, the Committee shall, to
the extent it deems possible, make such adjustment as will in its judgment
accord to such person the credits or distributions to which he is properly
entitled under the Plan.
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ARTICLE 21
TOP-HEAVY PROVISIONS
21.1 TOP-HEAVY PROVISIONS.
If the Plan is or becomes top-heavy as defined below in any Plan Year,
these provisions of Article 21 will supersede any conflicting provisions in the
Plan or Company election document.
21.2 DEFINITIONS.
For purposes of this Article 21 the following terms shall have the
following meanings:
(A) "KEY EMPLOYEE" means any Employee (and the beneficiaries of such
Employee) under this Plan who at any time during the determination period was:
(a) An officer of the Company if such individual's annual
compensation exceeds 150 percent of the dollar limitation under
Section 415(c)(1)(A) of the Code; provided, however, that the number
of individuals treated as Key Employees by reason of being officers
shall not exceed the lesser of fifty (50) or ten percent (10%) of all
Employees and provided, further, that if the number of individuals
treated as officers is limited to fifty (50) hereunder, the
individuals treated as Key Employees shall be those who, while
officers, received the greatest annual compensation in the Plan Year
and any of the 4 preceding Plan Years (without regard to the
limitation set forth in Section 416(d) of the Code;
(b) An individual who was one of the 10 Employees owning or
considered as owning more than a one-half percent (1/2%) interest in
value and the largest interests in value in the Company who has annual
compensation in the applicable Plan Year in excess of the dollar
limitation under Section 415(c)(1)(A) of the Code, as increased under
Section 415(d) of the Code;
(c) A five percent (5%) owner of the Company; or
(d) A one percent (1%) owner of the Company who has an annual
compensation of more than $150,000. The determination period is the
Plan Year containing the determination date and the 4 preceding Plan
Years.
The determination of who is a key employee will be made in accordance
with Section 416(i)(1) of the Code and the regulations thereunder.
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(B) "TOP-HEAVY PLAN" means that for any Plan Year, any of the
following conditions exists:
(a) The top-heavy ratio for this Plan exceeds 60 percent and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) This Plan is part of a required aggregation group of plans
but not part of a permissive aggregation group and the top-heavy ratio
for the group of plans exceeds 60 percent.
(c) This Plan is a part of a required aggregation group and part
of a permissive aggregation group of plans and the top-heavy ratio for
the permissive aggregation group exceeds 60 percent.
(C) "TOP-HEAVY RATIO" means:
(a) If the Company maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and the Company
has not maintained any defined benefit plan which during the 5-year
period ending on the determination date(s) has or has had accrued
benefits, the top-heavy ratio for this Plan alone or for the required
or permissive aggregation group as appropriate is a fraction, the
numerator of which is the sum of the account balances of all Key
Employees as of the determination date(s) (including any part of any
account balance distributed in the 5-year period ending on the
determination date(s)) and the denominator of which is the sum of all
account balances (including any part of any account balance
distributed in the 5-year period ending on the determination date(s)),
both computed in accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and denominator of the
top-heavy ratio are adjusted to reflect any contribution not actually
made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the
regulations thereunder.
(b) If the Company maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and the Company
maintains or has maintained one or more defined benefit plans which
during the 5-year period ending on the determination date(s) has or
has had any accrued benefits, the top-heavy ratio for any required or
permissive aggregation group as appropriate is a fraction, the
numerator of which is the sum of account balances under the aggregated
defined contribution plan or plans for all Key Employees, determined
in accordance with (a) above, and the present value of accrued
benefits under
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the aggregated defined benefit plan or plans for all Key Employees as
of the determination date(s), and the denominator of which is the sum
of the account balances under the aggregated defined contribution plan
or plans for all participants, determined in accordance with (a)
above, and the present value of accrued benefits under the defined
benefit plan or plans for all participants as of the determination
date(s), all determined in accordance with Section 416 of the Code and
the regulations thereunder. The accrued benefits under a defined
benefit plan in both the numerator and denominator of the top-heavy
ratio are adjusted for any distribution of an accrued benefit made in
the five-year period ending on the determination date.
(c) For purposes of (a) and (b) above the value of account
balances and the present value of accrued benefits will be determined
as of the most recent valuation date that falls within or ends with
the 12-month period ending on the determination date, except as
provided in Section 416 of the Code and the regulations thereunder for
the first and second Plan Years of a defined benefit plan. The
account balances and accrued benefits of a participant (1) who is not
a key employee but who was a key employee in a prior year, or (2) who
has not received any compensation from any Company maintaining the
Plan at any time during the 5-year period ending on the determination
date will be disregarded. The calculation of the top-heavy ratio, and
the extent to which distributions, rollovers, and transfers are taken
into account will be made in accordance with Section 416 of the Code
and the regulations thereunder. Deductible employee contributions
will not be taken into account for purposes of computing the top-heavy
ratio. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the
determination dates that fall within the same calendar year.
(D) "PERMISSIVE AGGREGATION GROUP" means the required aggregation
group of plans plus any other plan or plans of the Company which, when
considered as a group with the required aggregation group, would continue to
satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(E) "REQUIRED AGGREGATION GROUP" means (1) each qualified plan of the
Company in which at least one key employee participates, and (2) any other
qualified plan of the Company which enables a plan described in (1) to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
(F) "DETERMINATION DATE" means for any Plan Year the last day of the
preceding Plan Year.
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(G) "PRESENT VALUE" shall be based upon the interest rate and
mortality table used to determine actuarial equivalence under the provisions of
the applicable defined benefit plan or plans.
(H) "VALUATION DATE" means the Valuation Date on the last day of the
Plan Year as of which account balances or accrued benefits are valued for
purposes of calculating the top-heavy ratio.
21.3 MINIMUM ALLOCATION.
(A) IN GENERAL. Except as otherwise provided in (C) and (D) below,
the Company contributions and forfeitures allocated on behalf of any participant
who is not a key employee shall not be less than the lesser of three percent of
such participant's compensation or in the case where the Company has no defined
benefit plan which designates this plan to satisfy Section 401 of the Code, the
largest percentage of Company contributions and forfeitures, as a percentage of
the first $200,000 of the key employee's compensation, allocated on behalf of
any key employee for that year. The minimum allocation is determined without
regard to any Social Security contribution. This minimum allocation shall be
made even though, under other Plan provisions, the participant would not
otherwise be entitled to receive an allocation, or would have received a lesser
allocation of the year because of (i) the participant's failure to complete
1,000 hours of service (or any equivalent provided in the Plan), or (ii) the
participant's failure to make mandatory Employee contributions to the Plan, or
(iii) compensation less than a stated amount.
(B) COMPENSATION. For purposes of computing the minimum allocation,
compensation will mean earnings for the taxable year ending with or within the
Plan Year which are subject to tax under Section 3101(a) of the Code without
regard to the dollar limitation of Section 3121(a).
(C) EMPLOYEES COVERED. The provisions in (A) above shall not apply
to any participant who was not employed by the Company on the last day of the
Plan Year.
(D) MORE THAN ONE PLAN. To the extent the participant is covered
under any other plan or plans of the Company the minimum allocation or benefit
requirement applicable to top-heavy plans will be met in this Plan. If a
participant is covered by no other plan maintained by the Company, the minimum
allocation will be met in this Plan. Whenever a non-key employee participates
in both a defined benefit plan and a defined contribution plan maintained by the
Company which are top-heavy, the contributions and forfeitures of this Plan in
which he participates shall equal 5% of compensation for each year the Plan is
top-heavy and no other top-heavy contributions will be made to any other plan on
his account.
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21.4 NONFORFEITABILITY OF MINIMUM ALLOCATION.
The minimum allocation required (to the extent required) to be
nonforfeitable under Section 416(b) may not be forfeited under Section
411(a)(3)(B) or 411(a)(3)(D) of the Code.
21.5 COMPENSATION LIMITATION.
For any Plan Year in which the Plan is top-heavy, only the first
$200,000 (or such larger amount as may be prescribed by the Secretary or his
delegate) of a participant's annual compensation shall be taken into account for
purposes of determining Company contributions under the Plan. Such amount shall
be adjusted automatically for each Plan Year to the amount prescribed by the
Secretary of the Treasury or his delegate pursuant to regulations for the
calendar year in which such Plan Year commences.
21.6 MINIMUM VESTING SCHEDULES.
For any Plan Year in which this Plan is top-heavy, the nonforfeitable
interest of each Employee (who has completed an Hour of Service during any Plan
Year in which the Plan is top-heavy) in his account balance attributable to
Company contributions shall be 100% vested after three Years of Service.
If the vesting schedule under the Plan shifts in or out of the above
schedule for any Plan Year because of the Plan's top-heavy status, such shift is
an amendment to the vesting schedule and any participant with three or more
Years of Service will be given an option to remain under the prior (i.e. top-
heavy) vesting schedule.
21.7 COLLECTIVE BARGAINING RULES.
The provisions of this Article do not apply with respect to any
employee included in a unit of employees covered by a collective bargaining
agreement unless the application of this Article has been agreed upon with the
collective bargaining agent.
21.8 TEMPORARY EFFECT.
This Article 21 is designed to meet the requirements of Section 416 of
the Code and regulations issued pursuant thereto. If there is any discrepancy
between the provisions of this Article 21 and Section 416 of the Code, such
discrepancy shall be resolved in such a way to give full effect to the
provisions of Section 416 and ERISA. However, no benefit in excess of that
required by law and regulation is intended to be conferred by the Company. This
Article 21 shall automatically become inoperative and of no effect whenever not
required by the Code or its regulations.
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ARTICLE 22
FORMER EMPLOYEES OF FREEDOM FEDERAL SAVINGS BANK
22.1 APPLICATION.
This Article 22 applies to any individual who became an Employee on
August 3, 1988 and who immediately prior thereto was an employee of Freedom
Federal Savings Bank.
22.2 PARTICIPATION.
An individual described in Article 22.1 who was a participant in the
Freedom Federal Incentive Savings Plan (the "Freedom Plan") shall become a
Participant in TRIP as of October 1, 1988 if he then is an Employee.
22.3 SERVICE CREDIT.
As of October 1, 1988, years of service credited under the terms of
the Freedom Plan for eligibility and vesting purposes shall be credited
hereunder for such purposes.
22.4 RIGHTS WITH RESPECT TO TRANSFERRED ACCOUNT BALANCES.
Account balances under the Freedom Plan were transferred hereto as of
December 13, 1988. The following rights shall apply thereto:
(A) 100% VESTING AS OF JULY 29, 1988. The account balance of an
individual who was a participant in the Freedom Plan as of July 29, 1988,
adjusted for gains and losses subsequent thereto, is 100% vested.
(B) WITHDRAWALS. A Participant who was a participant in the Freedom
Plan may make a withdrawal during his employment with a Company of all or a
portion of the balance of the amount described in (A) hereof to the extent such
portion is attributable to his after-tax contributions to the Freedom Plan.
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ARTICLE 23
HOUSEHOLD MANUFACTURING, INC. DIVESTITURE
23.1 BACKGROUND.
Prior to April 1, 1989, salaried exempt and non-exempt employees of
Household Manufacturing, Inc. and certain subsidiaries and divisions thereof
were eligible for participation in the Plan. In 1989, Household International,
Inc. undertook to divest itself of its manufacturing businesses. Three new
companies, Eljer Industries, Inc., Schwitzer, Inc. and Scotsman Industries, Inc.
(the "Spinoff Companies") were formed, and common stock of such Spinoff
Companies was distributed to shareholders of Household International, Inc. in
April, 1989. Various employees formerly eligible for participation in the Plan
became employees of subsidiaries of the Spinoff Companies, effective as of the
close of business on March 31, 1989. Other employees formerly eligible for
participation in the Plan became employees of Albion Industries, Inc.,
King-Seeley, Inc., Omni Products International, Inc., The Thermos Company, G.C.
Thorsen, Inc. or WaterTest Corporation (the "Sale Companies") or subsidiaries or
divisions thereof, effective as of the close of business on March 31, 1989. It
is intended that Household International, Inc. will sell such Sale Companies to
persons not affiliated with Household International, Inc. as of various dates
following the spinoff of stock of the Spinoff Companies.
23.2 DISCONTINUANCE OF PARTICIPATION BY SPINOFF COMPANY EMPLOYEES.
Effective as of the close of business on March 31, 1989, an individual
who is an employee of a subsidiary of a Spinoff Company shall cease to be
eligible to contribute to, or to have contributions made on his behalf to, the
Plan. As soon as administratively practicable following such date, there shall
be a transfer to a plan maintained by such Spinoff Company subsidiary of his
account balance hereunder. Pending such date, his account in the Plan shall
continue to be administered hereunder in accordance with procedures established
by the Committee.
23.3 CONTINUED PARTICIPATION BY SALE COMPANY EMPLOYEES.
Until such date determined by Household International, Inc., any
individual who is an Employee of a Sale Company or a subsidiary or division
thereof and who is in a classification of employment that prior to April 1, 1989
was eligible to participate in the Plan shall continue to be eligible to
participate in the Plan. The following special provisions shall apply to Sale
Company Employees:
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(A) ELAPSED TIME METHOD OF CREDITING SERVICE. The Household
Manufacturing, Inc. method of determining a Years of Service for purposes of
eligibility to participate in the Plan under Article 3 on the elapsed time
basis, as in effect on March 31, 1989, shall continue to be applicable to Sale
Company employees after such date. To that end, a "Year of Service" for
purposes of Article 3 shall have the same meaning as a "year of employment" as
defined in Article 14.1(B).
(B) MATCHING COMPANY CONTRIBUTIONS. The rate of Matching Company
Contributions under Article 4.5 for each Sale Company shall be fifty cents for
each dollar contributed under Articles 4.1 and 4.3; provided, however, that no
Matching Company Contributions will be made with respect to Tax Reduction
Contributions or Investment Plan Contributions that exceed 6% of a Sale Company
Participant's Compensation.
23.4 ELJER, SCHWITZER AND SCOTSMAN STOCK FUNDS.
Spinoff Company stock received by the Plan as a consequence of the
distribution of such stock to shareholders of Household International, Inc. will
be held and managed in three separate Investment Funds, the "Eljer Stock Fund",
the "Schwitzer Stock Fund" and the "Scotsman Stock Fund". The following
provisions shall apply to such Spinoff Company stock and Investment Funds:
(A) REINVESTMENT IN OTHER INVESTMENT FUNDS. A Participant may elect
in accordance with the rules and procedures of the Committee that all or a
portion of his interest in the Eljer Stock Fund, Schwitzer Stock Fund or
Scotsman Stock Fund shall be reinvested in another Investment Fund (excluding,
however, the Eljer, Schwitzer and Scotsman Stock Funds themselves).
Notwithstanding the foregoing, that portion of a Participant's interest in the
Eljer, Schwitzer and Scotsman Stock Funds that is derived from the portion of
the Participant's interest in Fund A attributable to Matching Company
Contributions only may be reinvested in Fund A.
(B) DIVIDENDS. Dividends attributable to Eljer, Schwitzer and
Scotsman stock shall be added to Fund A.
(C) LIQUIDATION OF ELJER, SCHWITZER OR SCOTSMAN FUNDS. The
Committee, in its discretion, at any time may liquidate the Eljer, Schwitzer or
Scotsman Stock Fund and transfer the proceeds to one or more of the other
Investment Funds under the Plan.
(D) TREATMENT AS COMPANY STOCK. Except as otherwise provided herein
or as determined by the Committee, in its discretion, Eljer, Schwitzer and
Scotsman stock shall be treated as Company Stock for purposes of the Plan.
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(E) INVESTMENT. No investment of contributions into or transfers
into Funds D, E, or F shall be permitted.
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ARTICLE 24
SPECIAL PLAN PROVISIONS FOR
TRANSITION PERIOD
24.1 BACKGROUND.
Between the periods of September 1, 1990 and March 1, 1991 which date
may be extended or rescinded by the Committee, the Plan will be operated under
special transition provisions in this Article 24 which will supersede other
provisions of the Plan to the contrary.
24.2 INVESTMENT OF FUND C.
Effective December 31, 1990 all assets invested in the Fidelity Equity
Income Fund will be converted to cash and invested in the Vanguard, Windsor II
Fund.
24.3 SUSPENSION OF ACTIVITY IN THE PLAN.
During the period between November 30, 1990 until March 1, 1991 which
date may be extended or rescinded the Committee, no loans, transfers,
withdrawals, or distributions will be permitted from the Plan.
24.4 SPECIAL TRANSFER DATE.
Transfer elections received before November 1, 1990 (but not before
September 1, 1990) will be effective November 30, 1990.
24.5 PLAN LIMITATIONS ON EVENTS.
The limitations on the number of transfers or withdrawals which can be
made per Plan Year are hereby waived during the transition period.
24.6 MATCHING COMPANY CONTRIBUTIONS.
The Matching Company Contributions will be made as of November 30,
1990 for Tax Reduction and Investment Plan contributions made for the period of
October and November 1990. The Company Matching Contributions for December will
be made in January, 1991.
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EXHIBIT 5A
February 8, 1993
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
RE: Household International Tax Reduction Investment Plan
Registration Statement on Form S-8
Ladies and Gentlemen:
As Assistant General Counsel and Secretary of Household International, Inc. (the
"Company"), I am generally familiar with the proceedings in connection with the
Company's Registration Statement on Form S-8 in which Interests in the Household
International Tax Reduction Investment Plan (the "Plan") and shares of the
Company's Common Stock ($1.00 par value per share) offered pursuant to the Plan
are being registered. In accordance with the foregoing, I have examined such
corporate records, certificates, public documents and other documents, and have
reviewed such questions of law, as considered necessary or appropriate for the
purpose of this opinion.
Upon the basis of such examination, it is my opinion that:
1. The Company has been duly incorporated and is an existing corporation in
good standing under the laws of the State of Delaware.
2. The Interests in the Plan and the shares of Common Stock have been duly
authorized by the Company, and when (i) the registration statement on Form
S-8 by the Company with respect to the Interests in the Plan and the shares
of Common Stock (the "Registration Statement") shall have been filed with
the Commission
<PAGE>
Household International, Inc.
February 8, 1994
Page 2
under the Act and (ii) the Interests in the Plan are issued and sold, and
when shares of the Company's Common Stock are distributed pursuant to the
plan, such shares will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement. In giving said consent, I do not admit that I am in the category of
persons where consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
John W. Blenke
JWB:kw
<PAGE>
EXHIBIT 5B
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
P O BOX A-3617 DPN20-6
CHICAGO, IL 60690
Employer Identification Number:
36-3121988
Date: JUNE 3, 1991 File Folder Number:
360042664
Person to Contact:
LAWRENCE REID
HOUSEHOLD INTERNATIONAL INC Contact Telephone Number:
2700 SANDERS ROAD (314)425-3041
PROSPECT HEIGHTS, IL 60070 Plan Name:
TAX REDUCTION INVESTMENT PLAN
Plan Number: 005
Dear Applicant:
We have made a favorable determination on your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend
on its effect in operation. (See section 1.401-1(b)(3) of the Income Tax
Regulations.) We will review the status of the plan in operation
periodically.
The enclosed document explains the significance of this favorable
determination letter, points out some features that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the
publication.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other
federal or local statutes.
This determination is subject to your adoption of the proposed
amendments submitted in your letter dated 3-19-91 & 4-19-91. The proposed
amendments should be adopted on or before the date prescribed by the
regulations under Code section 401(b).
Letter 835(DO/CG)
<PAGE>
-2-
HOUSEHOLD INTERNATIONAL INC
This determination letter is applicable for the amendment(s) adopted on
JULY 26 1989.
The information on the enclosed addendum is an integral part of this
determination. Please be sure to read and keep it with this letter.
We have sent a copy of this letter to your representative as indicated
in the power of attorney.
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely yours,
R. S. Wintrode, Jr.
District Director
Enclosures:
Publication 794
PWBA 515
Addendum
Letter 835(DO/CG)
<PAGE>
-3-
HOUSEHOLD INTERNATIONAL INC
This is also a determination regarding proposed amendment(s) dated 9-25-
90.
This determination letter is also applicable for the amendment(s)
adopted on 10-16-89 & 12-21-89.
Letter 835(DO/CG)
<PAGE>
EXHIBIT 5C
UNDERTAKING TO FILE AMENDMENTS
TO TAX REDUCTION INVESTMENT PLAN
WITH THE INTERNAL REVENUE SERVICE
The Registrant hereby undertakes to file with the Internal Revenue Service
("IRS"), in a timely manner, all amendments and restatements of the Household
International Tax Reduction Investment Plan (the "Plan") which were adopted
subsequent to the IRS' Determination Letter dated June 3, 1991 (such letter
included as Exhibit 5B to this Registration Statement.) The Registrant further
undertakes to make all changes required by the IRS in order to qualify the Plan
under Section 401 of the Internal Revenue Code.
<PAGE>
EXHIBIT 23A
CONSENT OF INDENPENDENT PUBLIC ACCOUNTANTS
------- -- ------------ ------ -----------
Household International, Inc.:
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement on Form S-8 relating to the
offering of 25,000 Interests in the Household International Tax Reduction
Investment Plan and 1,000,000 shares of Household International, Inc. Common
Stock, to be filed with the Securities and Exchange Commission on or about
February 8, 1994, of our report dated February 2, 1993, included in Household
International, Inc.'s Form 10-K for the year ended December 31, 1992, and of
our report dated June 25, 1993, included in the Household International Tax
Reduction Investment Plan's Form 11-K for the year ended December 31, 1992, and
to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
February 8, 1994
