<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-8198
------
HOUSEHOLD INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3121988
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
2700 Sanders Road, Prospect Heights, Illinois 60070
- ------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 564-5000
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
At October 31, 1996, there were 96,983,565 shares of registrant's
common stock outstanding.
<PAGE>
<PAGE> 2
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
Table of Contents
Page
PART I. Financial Information ----
Item 1. Financial Statements
Condensed Consolidated Statements of Income
(Unaudited) - Three and Nine Months
Ended September 30, 1996 and 1995. . . . . . . . . 2
Condensed Consolidated Balance Sheets -
September 30, 1996 (Unaudited) and
December 31, 1995. . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Nine Months Ended
September 30, 1996 and 1995. . . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . 5
Notes to Interim Condensed Consolidated Financial
Statements (Unaudited) . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 21
Signature. . . . . . . . . . . . . . . . . . . . . 22
<PAGE>
<PAGE> 3
Part 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------
All dollar amounts except per share data are stated in millions.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance income . . . . . . . . . . . . . . . . . . . . . . . $755.6 $752.3 $2,136.4 $2,147.5
Interest income from noninsurance investment securities. . . 12.1 19.8 71.4 104.9
Interest expense . . . . . . . . . . . . . . . . . . . . . . 384.7 404.1 1,121.8 1,181.6
---------------------------------------
Net interest margin. . . . . . . . . . . . . . . . . . . . . 383.0 368.0 1,086.0 1,070.8
Provision for credit losses on owned receivables . . . . . . 169.5 188.2 537.3 569.7
---------------------------------------
Net interest margin after provision for credit losses. . . . 213.5 179.8 548.7 501.1
---------------------------------------
Securitization income. . . . . . . . . . . . . . . . . . . . 282.0 201.1 841.9 633.4
Insurance premiums and contract revenues . . . . . . . . . . 63.6 87.8 185.9 262.2
Investment income. . . . . . . . . . . . . . . . . . . . . . 34.8 145.5 128.0 423.3
Fee income . . . . . . . . . . . . . . . . . . . . . . . . . 62.1 48.3 165.3 139.1
Other income . . . . . . . . . . . . . . . . . . . . . . . . 31.5 58.0 195.4 189.4
---------------------------------------
Total other revenues . . . . . . . . . . . . . . . . . . . . 474.0 540.7 1,516.5 1,647.4
---------------------------------------
Salaries and fringe benefits . . . . . . . . . . . . . . . . 131.4 134.1 392.3 420.9
Occupancy and equipment expense. . . . . . . . . . . . . . . 48.3 53.5 163.6 170.1
Other marketing expenses . . . . . . . . . . . . . . . . . . 132.3 86.9 374.5 268.1
Other servicing and administrative expenses. . . . . . . . . 104.7 129.8 377.7 370.8
Policyholders' benefits. . . . . . . . . . . . . . . . . . . 57.2 133.7 183.6 416.6
---------------------------------------
Total costs and expenses . . . . . . . . . . . . . . . . . . 473.9 538.0 1,491.7 1,646.5
---------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . 213.6 182.5 573.5 502.0
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . 73.7 63.9 198.5 181.1
---------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $139.9 $118.6 $ 375.0 $ 320.9
=======================================
Earnings per common share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $139.9 $118.6 $ 375.0 $ 320.9
Preferred dividends. . . . . . . . . . . . . . . . . . . . (4.2) (8.4) (12.5) (22.2)
---------------------------------------
Earnings available to common shareholders. . . . . . . . . $135.7 $110.2 $ 362.5 $ 298.7
=======================================
Average common and common equivalent shares. . . . . . . . 98.2 99.9 98.4 99.1
---------------------------------------
Fully diluted earnings per common share. . . . . . . . . . $ 1.38 $ 1.10 $ 3.68 $ 3.01
---------------------------------------
Primary earnings per common share. . . . . . . . . . . . . 1.38 1.11 3.68 3.02
---------------------------------------
Dividends declared per common share. . . . . . . . . . . . . .39 .34 1.07 .97
---------------------------------------
</TABLE>
See notes to interim condensed consolidated financial statements.<PAGE>
<PAGE> 4
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------
In millions.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
September 30, December 31,
1996 1995
- --------------------------------------------------------------------------------
ASSETS (Unaudited)
- ------
<S> <C> <C>
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 289.6 $ 270.4
Investment securities. . . . . . . . . . . . . . . . 2,312.9 4,639.5
Receivables, net . . . . . . . . . . . . . . . . . . 24,361.9 21,844.1
Acquired intangibles . . . . . . . . . . . . . . . . 985.1 578.5
Property and equipment . . . . . . . . . . . . . . . 339.9 391.7
Real estate owned. . . . . . . . . . . . . . . . . . 137.6 136.5
Other assets . . . . . . . . . . . . . . . . . . . . 1,469.7 1,358.1
-------------------------
Total assets . . . . . . . . . . . . . . . . . . . . $29,896.7 $29,218.8
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Debt:
Deposits . . . . . . . . . . . . . . . . . . . . . $ 2,220.5 $ 4,708.8
Commercial paper, bank and other borrowings. . . . 6,485.2 6,659.4
Senior and senior subordinated debt (with original
maturities over one year). . . . . . . . . . . . 15,285.5 11,227.9
-------------------------
Total debt . . . . . . . . . . . . . . . . . . . . . 23,991.2 22,596.1
Insurance policy and claim reserves. . . . . . . . . 1,172.9 2,229.3
Other liabilities. . . . . . . . . . . . . . . . . . 1,567.9 1,422.5
-------------------------
Total liabilities. . . . . . . . . . . . . . . . . . 26,732.0 26,247.9
-------------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts* . . . . . . . . . 175.0 75.0
-------------------------
Preferred stock. . . . . . . . . . . . . . . . . . . 205.0 205.0
-------------------------
Common shareholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . 115.2 115.2
Additional paid-in capital . . . . . . . . . . . . 388.4 383.4
Retained earnings. . . . . . . . . . . . . . . . . 2,955.2 2,696.6
Foreign currency translation adjustments . . . . . (129.4) (127.1)
Unrealized gain (loss) on investments, net . . . . (32.3) 94.3
Common stock in treasury . . . . . . . . . . . . . (512.4) (471.5)
-------------------------
Total common shareholders' equity. . . . . . . . . . 2,784.7 2,690.9
-------------------------
Common and preferred shareholders' equity. . . . . . 2,989.7 2,895.9
-------------------------
Total liabilities and shareholders' equity . . . . . $29,896.7 $29,218.8
=========================
</TABLE>
* As described in note 7 to the condensed financial statements, the sole
asset of the trusts are Junior Subordinated Deferrable Interest Notes
issued by Household International, Inc. in June 1996 and June 1995,
bearing interest at 8.70 and 8.25 percent, and with principal balances of
$103.1 and $77.3 million, respectively.
See notes to interim condensed consolidated financial statements.<PAGE>
<PAGE> 5
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------
In millions.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Nine months ended September 30 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375.0 $ 320.9
Adjustments to reconcile net income to net cash provided by operations:
Provision for credit losses on owned receivables. . . . . . . . . . . 537.3 569.7
Insurance policy and claim reserves . . . . . . . . . . . . . . . . . 57.0 378.4
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 178.4 211.8
Net realized gains from sales of assets . . . . . . . . . . . . . . . (119.0) (114.4)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203.9 (145.6)
------------------------
Cash provided by operations . . . . . . . . . . . . . . . . . . . . . . 1,232.6 1,220.8
------------------------
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,880.9) (3,841.7)
Matured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684.7 1,166.4
Sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,262.9 2,868.1
Short-term investment securities, net change. . . . . . . . . . . . . . 252.2 468.9
Receivables, excluding Visa*/MasterCard*:
Originated or purchased . . . . . . . . . . . . . . . . . . . . . . . (10,549.0) (9,423.8)
Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,284.5 5,309.2
Sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,208.7 2,801.7
Visa/MasterCard receivables:
Originated or collected, net. . . . . . . . . . . . . . . . . . . . . (15,839.7) (14,939.8)
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,434.0) -
Sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,838.1 14,048.6
Disposition of consumer banking operations:
Assets sold, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 472.3 155.0
Deposits and other liabilities sold . . . . . . . . . . . . . . . . . (2,809.8) (3,356.6)
(Acquisition) disposition of portfolios, net. . . . . . . . . . . . . . (620.1) 204.9
Properties and equipment purchased. . . . . . . . . . . . . . . . . . . (58.1) (58.1)
Properties and equipment sold . . . . . . . . . . . . . . . . . . . . . 11.4 9.7
------------------------
Cash decrease from investments in operations. . . . . . . . . . . . . . (5,176.8) (4,587.5)
------------------------
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt and demand deposits, net change . . . . . . . . . . . . (43.4) 1,970.0
Time certificates, net change . . . . . . . . . . . . . . . . . . . . . 299.1 796.5
Senior and senior subordinated debt issued. . . . . . . . . . . . . . . 6,759.0 2,641.4
Senior and senior subordinated debt retired . . . . . . . . . . . . . . (2,706.0) (1,909.7)
Policyholders' benefits paid. . . . . . . . . . . . . . . . . . . . . . (484.0) (774.0)
Cash received from policyholders. . . . . . . . . . . . . . . . . . . . 192.4 669.4
Shareholders' dividends . . . . . . . . . . . . . . . . . . . . . . . . (116.4) (116.8)
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . . . (48.9) -
Issuance of common stock. . . . . . . . . . . . . . . . . . . . . . . . 11.4 23.4
Issuance of company obligated mandatorily redeemable
preferred securities of subsidiary trusts . . . . . . . . . . . . . . 100.0 75.0
Repurchase of preferred stock . . . . . . . . . . . . . . . . . . . . . - (115.0)
------------------------
Cash increase from financing and capital transactions . . . . . . . . . 3,963.2 3,260.2
------------------------
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . .2 23.0
------------------------
Increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . 19.2 (83.5)
Cash at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 270.4 541.2
------------------------
Cash at September 30. . . . . . . . . . . . . . . . . . . . . . . . . . $ 289.6 $ 457.7
========================
Supplemental cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,116.8 $ 1,124.6
------------------------
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . 220.4 216.8
------------------------
</TABLE>
See notes to interim condensed consolidated financial statements.
*VISA and MasterCard are registered trademarks of VISA USA, Inc.
and MasterCard International, Incorporated respectively.<PAGE>
<PAGE> 6
Household International, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
- --------------------
All dollar amounts are stated in millions.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . $ 139.9 $ 118.6 $ 375.0 $ 320.9
--------------------------------------------
Revenues . . . . . . . . . . . . . . . . . . . . . . 1,241.7 1,312.8 3,724.3 3,899.8
--------------------------------------------
Return on average common shareholders'
equity <F1> <F2> . . . . . . . . . . . . . . . . . 19.8% 17.5% 17.8% 16.6%
--------------------------------------------
Return on average owned assets <F1> 1.87 1.35 1.71 1.22
--------------------------------------------
Managed basis efficiency ratio, normalized <F3>. . . 39.9 43.3 41.5 48.8
--------------------------------------------
All dollar amounts are stated in millions.
- ---------------------------------------------------------------------------------------------------
September 30, December 31,
1996 1995
- ---------------------------------------------------------------------------------------------------
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,896.7 $29,218.8
---------------------------------
Total shareholders' equity as a percent of owned assets <F4> . . 10.59% 10.17%
---------------------------------
Total shareholders' equity as a percent of managed assets <F4> . 6.69 6.74
---------------------------------
<FN>
<F1> Annualized.
<F2> Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" had no
significant impact on the return on average common shareholders'
equity for the periods presented.
<F3> Ratio of operating expenses to managed net interest margin and
other revenues less policyholders' benefits. The normalized
efficiency ratio excludes certain nonrecurring items. The
managed basis efficiency ratio, including nonrecurring items,
was 42.4 percent for the first nine months of 1996, and 42.8
and 47.3 percent in the third quarter and first nine months of
1995, respectively. There were no nonrecurring items in the
third quarter of 1996.
<F4> Includes company obligated mandatorily redeemable preferred
securities of subsidiary trusts.
</FN>
</TABLE>
See notes to interim condensed consolidated financial statements.<PAGE>
<PAGE> 7
Household International, Inc. and Subsidiaries
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited condensed consolidated financial statements
of Household International, Inc. and its subsidiaries (the "company")
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
Certain prior period amounts have been reclassified to conform with the
current period's presentation. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three and nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
company's annual report on Form 10-K for the year ended December 31, 1995.
2. INVESTMENT SECURITIES
---------------------
Investment securities consisted of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
In millions. September 30, 1996 December 31, 1995
---------------------------------------------------------------------------------
Amortized Carrying Amortized Carrying
Cost Value Cost Value
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE INVESTMENTS
Marketable equity securities . . . $ 229.0 $ 226.9 $ 321.6 $ 327.1
Corporate debt securities. . . . . 944.1 910.5 1,433.2 1,560.0
Government debt securities . . . . 166.2 160.1 140.2 142.1
Mortgage-backed securities . . . . 291.1 279.5 1,046.5 1,053.7
Policy loans . . . . . . . . . . . - - 821.4 821.4
Other. . . . . . . . . . . . . . . 706.0 706.0 689.7 690.9
--------------------------------------------
Subtotal . . . . . . . . . . . . . 2,336.4 2,283.0 4,452.6 4,595.2
--------------------------------------------
Accrued investment income. . . . . 29.9 29.9 44.3 44.3
--------------------------------------------
Total investment securities. . . . $2,366.3 $2,312.9 $4,496.9 $4,639.5
============================================
</TABLE>
For available-for-sale investments, carrying value equals fair value,
in accordance with the Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
<PAGE>
<PAGE> 8
3. RECEIVABLES
-----------
Receivables consisted of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage . . . . . . . . . . . . . . . . . . . . . . $ 1,652.9 $ 2,066.9
Home equity. . . . . . . . . . . . . . . . . . . . . . . . 4,662.0 4,148.2
Visa/MasterCard. . . . . . . . . . . . . . . . . . . . . . 7,702.2 5,512.0
Merchant participation . . . . . . . . . . . . . . . . . . 4,443.7 3,696.2
Other unsecured. . . . . . . . . . . . . . . . . . . . . . 4,631.3 5,019.2
Commercial . . . . . . . . . . . . . . . . . . . . . . . . 1,045.3 1,289.6
-------------------------------
Total owned receivables . . . . . . . . . . . . . . . . . 24,137.4 21,732.1
Accrued finance charges. . . . . . . . . . . . . . . . . . 392.6 381.6
Credit loss reserve for owned receivables. . . . . . . . . (862.5) (720.4)
Unearned credit insurance premiums and claims reserves . . (169.6) (159.9)
Amounts due and deferred from receivables sales. . . . . . 1,529.4 1,067.7
Reserve for receivables serviced with limited recourse . . (665.4) (457.0)
-------------------------------
Total owned receivables, net . . . . . . . . . . . . . . . 24,361.9 21,844.1
Receivables serviced with limited recourse . . . . . . . . 17,438.8 14,884.6
-------------------------------
Total managed receivables, net . . . . . . . . . . . . . . $41,800.7 $36,728.7
===============================
</TABLE>
The outstanding balance of receivables serviced with limited recourse
consisted of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C>
Home equity. . . . . . . . . . . . . . . . . . . . . . . . $ 3,961.6 $ 4,661.9
Visa/MasterCard. . . . . . . . . . . . . . . . . . . . . . 9,245.3 7,831.1
Merchant participation . . . . . . . . . . . . . . . . . . 604.4 750.0
Other unsecured. . . . . . . . . . . . . . . . . . . . . . 3,627.5 1,641.6
-------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $17,438.8 $14,884.6
===============================
</TABLE>
The combination of receivables owned and receivables serviced with
limited recourse, which the company considers its managed portfolio,
is shown below:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
September 30, December 31,
In millions. 1996 1995
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First mortgage . . . . . . . . . . . . . . . . . . . $ 1,652.9 4.0% $ 2,066.9 5.7%
Home equity. . . . . . . . . . . . . . . . . . . . . 8,623.6 20.7 8,810.1 24.1
Visa/MasterCard. . . . . . . . . . . . . . . . . . . 16,947.5 40.8 13,343.1 36.4
Merchant participation . . . . . . . . . . . . . . . 5,048.1 12.1 4,446.2 12.1
Other unsecured. . . . . . . . . . . . . . . . . . . 8,258.8 19.9 6,660.8 18.2
Commercial . . . . . . . . . . . . . . . . . . . . . 1,045.3 2.5 1,289.6 3.5
--------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . $41,576.2 100.0% $36,616.7 100.0%
======================================
</TABLE>
<PAGE>
<PAGE> 9
The amounts due and deferred from receivables sales of $1,529.4 million
at September 30, 1996 included unamortized excess servicing assets and
funds established pursuant to the recourse provisions and holdback
reserves for certain sales totaling $1,520.9 million. The amounts due
and deferred also included customer payments not yet remitted by the
securitization trustee to the company. In addition, the company has
made guarantees relating to certain securitizations of $90.2 million
plus unpaid interest and has subordinated interests in certain
transactions, which are recorded as receivables, for $213.9 million at
September 30, 1996. The company has an agreement with a "AAA"-
rated third party who will indemnify the company for up to $21.2
million in losses relating to certain securitization transactions.
The company maintains credit loss reserves pursuant to the recourse
provisions for receivables serviced with limited recourse which are
based on estimated probable losses under such provisions. These
reserves totaled $665.4 million at September 30, 1996 and represent
the company's best estimate of probable losses on receivables serviced
with limited recourse.
See Note 4, "Credit Loss Reserves" for an analysis of credit loss
reserves for receivables. See "Management's Discussion and Analysis"
on pages 19 and 20 for additional information related to the credit
quality of receivables.
Effective January 1, 1996 other unsecured receivables in the United
States and Canadian consumer finance operations are charged off if
an account is nine months contractually delinquent and minimum
payments have not been received in six months. In any event, these
receivables are charged off when the accounts are 18 months
contractually delinquent. Previously, such accounts were charged off
when they were nine months contractually delinquent. Delinquency
statistics will continue to be reported on a contractual basis for
these receivables. Procedures for secured and credit card receivables
were unaffected. The implementation of this new procedure did not
have a material impact on the company's financial statements for the
first nine months of 1996.
4. CREDIT LOSS RESERVES
--------------------
An analysis of credit loss reserves for the nine months ended
September 30 was as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
In millions. 1996 1995
--------------------------------------------------------------------------------------------
<S> <C> <C>
Credit loss reserves for owned receivables at January 1. . . . . . . . $ 720.4 $ 546.0
Provision for credit losses - owned receivables. . . . . . . . . . . . 537.3 569.7
Owned receivables charged off. . . . . . . . . . . . . . . . . . . . . (561.3) (563.9)
Recoveries on owned receivables. . . . . . . . . . . . . . . . . . . . 91.6 96.6
Credit loss reserves on receivables purchased, net . . . . . . . . . . 87.4 4.7
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12.9) 14.7
-------------------
TOTAL CREDIT LOSS RESERVES FOR OWNED RECEIVABLES AT SEPTEMBER 30 . . . 862.5 667.8
-------------------
Credit loss reserves for receivables serviced with
limited recourse at January 1. . . . . . . . . . . . . . . . . . . . 457.0 336.5
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . 663.2 297.2
Chargeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (475.3) (300.4)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 13.0
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.8) 2.9
-------------------
TOTAL CREDIT LOSS RESERVES FOR RECEIVABLES SERVICED WITH
LIMITED RECOURSE AT SEPTEMBER 30 . . . . . . . . . . . . . . . . . . 665.4 349.2
-------------------
TOTAL CREDIT LOSS RESERVES FOR MANAGED RECEIVABLES AT SEPTEMBER 30 . . $1,527.9 $1,017.0
===================
</TABLE>
5. INCOME TAXES
------------
Effective tax rates for the third quarter of 1996 and 1995 of 34.5
and 35.0 percent, respectively, and for the nine months ended
September 30, 1996 and 1995 of 34.6 and 36.1 percent, respectively,
differ from the statutory federal income tax rates for the respective
periods primarily because of the effects of (a) domestic and foreign
loss carry forwards, (b) amortization and write-offs of intangible
assets, (c) state and local income taxes, (d) reduction of noncurrent
tax requirements and (e) leveraged lease tax benefits.<PAGE>
<PAGE> 10
6. EARNINGS PER COMMON SHARE
-------------------------
Computations of earnings per common share for the nine months ended
September 30 were as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1996 1995
------------------ ------------------
Fully Fully
In millions, except per share data. Primary Diluted Primary Diluted
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings:
Net income . . . . . . . . . . . . . . . . . . $375.0 $375.0 $320.9 $320.9
Preferred dividends. . . . . . . . . . . . . . (12.5) (12.5) (22.3) (22.2)
----------------------------------------
Net income available to common shareholders. . . $362.5 $362.5 $298.6 $298.7
========================================
Average shares:
Common . . . . . . . . . . . . . . . . . . . . 97.1 97.1 97.4 97.4
Common equivalents . . . . . . . . . . . . . . 1.3 1.3 1.4 1.7
----------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . 98.4 98.4 98.8 99.1
========================================
Earnings per common share. . . . . . . . . . . . $ 3.68 $ 3.68 $ 3.02 $ 3.01
========================================
</TABLE>
Common share equivalents assume exercise of stock options, if dilutive.
The fully diluted earnings per share computation for 1995 also assumes
conversion of dilutive convertible preferred stock into common
equivalents.
7. COMPANY OBLIGATED MANDATORILY REDEEMABLE
PREFERRED SECURITIES OF SUBSIDIARY TRUSTS
-----------------------------------------
In June 1996 Household Capital Trust II ("HCT II"), a wholly-owned
subsidiary of the company, issued 4 million 8.70 percent Trust
Preferred Securities ("preferred securities") at $25 per preferred
security. The sole asset of HCT II is $103.1 million of 8.70 percent
Junior Subordinated Deferrable Interest Notes issued by the company.
The junior subordinated notes held by HCT II mature on June 30, 2036
and are redeemable by the company in whole or in part beginning on
June 30, 2001, at which time the HCT II preferred securities are
callable. Net proceeds from the issuance of preferred securities
were used for general corporate purposes.
In June 1995 Household Capital Trust I ("HCT I"), a wholly-owned
subsidiary of the company, issued 3 million 8.25 percent preferred
securities at $25 per preferred security. The sole asset of HCT I
is $77.3 million of 8.25 percent Junior Subordinated Deferrable
Interest Notes issued by the company. The junior subordinated
notes held by HCT I mature on June 30, 2025 and are redeemable by
the company in whole or in part beginning June 30, 2000, at which
time the HCT I preferred securities are callable. HCT I may elect
to extend the maturity of its preferred securities to June 30, 2044.
The obligations of the company with respect to the junior subordinated
notes, when considered together with certain undertakings of the
company with respect to HCT I and HCT II, constitute full and
unconditional guarantees by the company of HCT I's and HCT II's
obligations under the respective preferred securities. The preferred
securities are classified in the company's balance sheets as company
obligated mandatorily redeemable preferred securities of subsidiary
trusts (representing the minority interest in the trusts) at their
face and redemption amount of $175 million at September 30, 1996.
The preferred securities have a liquidation value of $25 per
preferred security. Dividends on the preferred securities are
cumulative, payable quarterly in arrears, and are deferable at the
company's option for up to five years from date of issuance. The
company cannot pay dividends on its preferred and common stocks
during such deferments. Dividends on the preferred securities have
been classified as interest expense in the statements of income.
<PAGE>
<PAGE> 11
8. NON-RECURRING ITEMS
-------------------
During the second quarter of 1996, the company recorded approximately
$78 million of pretax nonrecurring charges related to the rationalization
of certain office space, the settlement of litigation and other similar
matters.<PAGE>
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATIONS SUMMARY
------------------
Net income for the third quarter and first nine months of 1996 was
$139.9 and $375.0 million, up 18 and 17 percent from the respective
1995 periods. Earnings growth in the company's core businesses
exceeded these rates of increase, as 1995 net income included earnings
from businesses that were sold or exited. Fully diluted earnings per
share were $1.38 per share in the third quarter and $3.68 per share
for the first nine months of 1996, up from $1.10 and $3.01 per share in
the same periods in 1995. The company's annualized return on average
common shareholders' equity for the third quarter and first nine months
of 1996 was 19.8 and 17.8 percent, respectively, compared to 17.5 and
16.6 percent in the respective year-ago periods. The annualized return
on average owned assets improved to 1.87 and 1.71 percent in the third
quarter and first nine months of 1996, respectively, up from 1.35 and
1.22 percent in the same year-ago periods.
- The following is a summary of the operating results of the company's
businesses for the third quarter and first nine months of 1996
compared to the corresponding prior year periods:
The domestic consumer finance business increased earnings in the
third quarter and first nine months of 1996 as operations continued
to benefit from solid receivables growth. This growth led to higher
net interest margin, partially offset by higher credit losses, and
to improved efficiency.
Earnings for the Visa*/MasterCard* business increased from the prior
year periods due to higher net interest margin and fee income,
partially offset by higher credit costs resulting primarily from
increased personal bankruptcy filings. This business continued to
benefit from the company's association with the General Motors credit
card ("GM Card") program. Additionally, the Union Privilege
Visa/MasterCard portfolio acquired in June 1996 began to contribute
to earnings in the third quarter of 1996.
The private-label credit card business reported higher earnings in
the third quarter and first nine months compared to the year-ago
periods due to portfolio growth.
Net income increased in the United Kingdom operation primarily due
to improved efficiency, as well as higher net interest margin and
insurance premiums, driven by growth in other unsecured and
Visa/MasterCard receivables, including the GM Card from Vauxhall.
The Canadian operation had higher profits in the third quarter and
first nine months of 1996 compared to the year-ago periods,
primarily as a result of improved efficiency. Net interest margin
for the first nine months of 1996 benefited from wider spreads and
a shift in product mix toward unsecured receivables, but was offset
by lower asset levels compared to a year ago.
The commercial business reported higher earnings in the third quarter
and first nine months compared to last year. Earnings in the third
quarter benefited from increased gains on the disposition of assets
and, in the first nine months, also benefited from lower credit costs.
*VISA and MasterCard are registered trademarks of VISA USA, Inc.
and MasterCard International, Incorporated respectively.<PAGE>
<PAGE> 13
- The company recorded approximately $49 million, after tax, of
nonrecurring charges related to litigation, rationalization
of office space and other matters in the second quarter of 1996.
- The company's normalized managed basis efficiency ratio was 39.9
and 41.5 percent for the third quarter and first nine months of
1996, respectively, compared to 43.3 and 48.8 percent in 1995.
The efficiency ratio is the ratio of operating expenses to managed
net interest margin and other revenues less policyholders' benefits
(operating expenses include salaries and fringe benefits, occupancy
and equipment expense, other marketing expenses, and other servicing
and administrative expenses). The normalized efficiency ratio
excludes nonrecurring gains and losses and charges. There were no
nonrecurring items in the third quarter of 1996. The improvement
in the managed ratio over the prior year periods was primarily due
to lower expenses resulting from sales of less-efficient businesses
during 1995.
- During the third quarter of 1996, legislation was passed by the
Congress of the United States requiring the company's thrift
subsidiary to pay a one-time premium to the Savings Association
Insurance Fund based upon qualifying deposits the thrift subsidiary
held at March 31, 1995, the effective date of the legislation.
Although a portion of the deposits were under contract for sale at
that time and the majority were sold subsequent to the effective
date of the legislation, the thrift subsidiary is still required to
pay the assessment on those deposits. The company accrued for the
one-time premium in connection with the completion of its exit from
the consumer banking business in the second quarter of 1996. Thus,
third quarter earnings have not been impacted by this assessment.
BALANCE SHEET REVIEW
--------------------
- Owned consumer receivables were $23.1 billion at September 30,
1996, up from $22.5 billion at June 30, 1996 and $21.2 billion at
September 30, 1995. The increase from the prior quarter was
attributable to the acquisition of approximately $400 million of
other unsecured receivables related to expanding the lending
relationship to AFL-CIO members. The increase from the prior year
was due to the acquisition of the AFL-CIO's $3.4 billion Union
Privilege Visa/MasterCard portfolio in June 1996. Changes in
owned receivables from period to period may vary depending on the
timing and significance of securitization transactions. In the
third quarter of 1996, the company securitized and sold, excluding
replenishment of certificate holder interests, approximately $1.4
billion of other unsecured receivables.
- The following table summarizes managed consumer receivables (owned
and serviced with limited recourse) at September 30, 1996 and the
percentage increase in those balances from June 30, 1996 (annualized)
and September 30, 1995:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
September 30, Quarter-over-Quarter Year-over-Year
1996 Growth (Annualized) Growth
Managed consumer receivables
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Credit cards <F1> . . . . . . $21,995.6 4% 39%
-------------------------------------------------
Other unsecured . . . . . . . 8,258.8 53 32
-------------------------------------------------
Core products <F2>. . . . . . 38,878.0 14 26
-------------------------------------------------
<FN>
<F1> Includes Visa/MasterCard and merchant participation receivables.
<F2> Includes home equity receivables. Home equity receivables were
up slightly compared to the prior quarter, but down somewhat
compared to the prior year period.
</FN>
/TABLE
<PAGE>
<PAGE> 14
- The company increased its managed credit loss reserves from $1,017.0
million at September 30, 1995 to $1,527.9 million at September 30,
1996. Credit loss reserves as a percent of managed receivables
increased to 3.67 percent, compared to 3.59 percent at June 30, 1996
and 2.87 percent at September 30, 1995 due to the uncertainty about
the trend in personal bankruptcies and the shift in its product mix
to unsecured receivables. Reserves as a percent of nonperforming
managed receivables were 126.6 percent at September 30, 1996, compared
to 133.4 percent at June 30, 1996 and 105.2 percent at September 30,
1995. Consumer two-months-and-over contractual delinquency
("delinquency") as a percent of managed consumer receivables was
3.75 percent, compared to 3.43 percent at June 30, 1996 and 3.26
percent at September 30, 1995. The annualized total consumer
managed chargeoff ratio in the third quarter of 1996 was 3.52
percent, compared to 3.33 percent in the prior quarter and 2.97
percent in the year-ago quarter.
- The ratio of common and preferred shareholders' equity (including
trust originated securities) to total owned assets was 10.59
percent compared to 10.17 percent at December 31, 1995. The ratio
of total shareholders' equity to managed assets was 6.69 percent
compared to 6.74 percent at December 31, 1995.
- In October 1996 the company entered into an agreement with Barnett
Banks, Inc. ("Barnett") to service without recourse Barnett's
existing $1.0 billion credit card portfolio in Barnett's core
market of Florida and Georgia. As these receivables will be
serviced without recourse, they will not be included in the company's
total managed assets. Additionally, the company will purchase
approximately $780 million of credit card receivables, the majority
of which are held by customers outside of Barnett's core market.
The transaction is expected to close in the fourth quarter of 1996.
<PAGE>
<PAGE> 15
FUNDING AND LIQUIDITY
- ---------------------
The major use of cash by the company's subsidiaries is the origination or
purchase of receivables or investment securities. The main sources of
cash for the company's subsidiaries are the collection and sales of
receivable balances; maturities or sales of investment securities;
proceeds from the issuance of debt and deposits; and cash provided by
operations.
The following describes major changes in the company's funding base from
December 31, 1995 to September 30, 1996:
- Deposits decreased 53 percent from $4.7 billion to $2.2 billion
primarily due to the sale of the company's Illinois consumer banking
operations in the second quarter.
- Senior and senior subordinated debt (with original maturities over
one year) increased 37 percent from $11.2 billion to $15.3 billion
to replace the deposits sold and to fund the company's purchase of
the $3.4 billion AFL-CIO Visa/MasterCard portfolio.
- The company issued $100 million of company obligated mandatorily
redeemable preferred securities of subsidiary trusts in the second
quarter of 1996.
- The company had securitized home equity, Visa/MasterCard, merchant
participation and other unsecured receivables outstanding of $17.4
and $14.9 billion at September 30, 1996 and December 31, 1995.
During the three months and nine months ended September 30, 1996
the company securitized approximately $1.4 and $4.8 billion of
receivables, respectively. The composition of these securitizations
by type is as follows (in millions):
<TABLE>
<CAPTION>
--------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1996
--------------------------------------------------------------------
<S> <C> <C>
Home Equity . . . . . . . . . $ - $ 840
Visa/MasterCard . . . . . . . - 1,736
Other unsecured . . . . . . . 1,388 2,228
---------------------------
Total . . . . . . . . . . . . $1,388 $4,804
===========================
</TABLE>
The market for securities backed by receivables is a reliable, efficient
and cost-effective source of funds, which the company plans to continue
to utilize in the future.
The current ratings of the company's debt and preferred stock securities
by the nationally recognized statistical rating organizations which provide
such ratings, including any recent action taken by such organizations, are
set forth in an exhibit to this report which has been filed with the
Securities and Exchange Commission.
<PAGE>
<PAGE> 16
PRO FORMA MANAGED INCOME DATA
-----------------------------
Securitizations and sales of consumer receivables have been, and will
continue to be, an important source of liquidity for the company.
The company continues to service the securitized receivables after
such receivables are sold and retains a limited recourse obligation.
Securitizations impact the classification of revenues and expenses
in the income statement. Amounts related to receivables serviced,
including net interest margin, fee income and provision for credit
losses on receivables serviced with limited recourse are reported as
a net amount in securitization income in the company's statements of
income.
Management monitors the company's operations on a managed basis as
well as on the historical owned basis reflected in its statements of
income. The managed basis assumes that the receivables securitized
and sold are instead still held in the portfolio. Pro forma statements
of income on a managed basis for the third quarter and nine months
ended September 30, 1996 and 1995 are presented below. For purposes
of this analysis, the results do not reflect the differences between
the company's accounting policies for owned receivables and receivables
serviced with limited recourse. Accordingly, net income on the pro
forma managed basis equals net income on a historical owned basis.
Pro Forma Managed Statements of Income
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
All dollar amounts are September 30, September 30,
stated in millions. 1996 1995 1996 1995
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income . . . . . . . $ 1,360.1 13.04%* $ 1,165.8 12.75%* $ 3,829.6 12.69%* $ 3,423.7 12.43%*
Interest income from
noninsurance investment
securities . . . . . . . . 12.1 .12 19.8 .21 71.4 .24 104.9 .38
Interest expense . . . . . . 639.2 6.13 592.5 6.48 1,831.1 6.07 1,782.9 6.47
-----------------------------------------------------------------------------------
Net interest margin. . . . . 733.0 7.03 593.1 6.48 2,069.9 6.86 1,745.7 6.34
Provision for credit losses 414.5 357.3 1,200.5 866.9
-----------------------------------------------------------------------------------
Net interest margin after
provision for credit losses 318.5 235.8 869.4 878.8
-----------------------------------------------------------------------------------
Insurance premiums and
contract revenues. . . . . 63.6 87.8 185.9 262.2
Investment income. . . . . . 34.8 145.5 128.0 423.3
Fee income . . . . . . . . . 239.1 193.4 686.5 394.8
Other income . . . . . . . . 31.5 58.0 195.4 189.4
-----------------------------------------------------------------------------------
Total other revenues . . . . 369.0 484.7 1,195.8 1,269.7
-----------------------------------------------------------------------------------
Salaries and fringe benefits 131.4 134.1 392.3 420.9
Occupancy and equipment
expense . . . . . . . . . . 48.3 53.5 163.6 170.1
Other marketing expenses . . 132.3 86.9 374.5 268.1
Other servicing and
administrative expenses. . 104.7 129.8 377.7 370.8
Policyholders'
benefits. . . . . . . . . 57.2 133.7 183.6 416.6
-----------------------------------------------------------------------------------
Total costs and expenses . . 473.9 538.0 1,491.7 1,646.5
-----------------------------------------------------------------------------------
Income before taxes. . . . . 213.6 182.5 573.5 502.0
Income taxes . . . . . . . . 73.7 63.9 198.5 181.1
-----------------------------------------------------------------------------------
Net income . . . . . . . . . $ 139.9 $ 118.6 $ 375.0 $ 320.9
===================================================================================
Average managed
receivables. . . . . . . . $40,896.6 $35,193.5 $38,577.4 $34,263.3
Average noninsurance
investments. . . . . . . . 829.3 1,390.9 1,670.2 2,450.6
-----------------------------------------------------------------------------------
Average managed interest
earning assets . . . . . . $41,725.9 $36,584.4 $40,247.6 $36,713.9
===================================================================================
*As a percent, annualized, of average managed interest-earning assets (excluding insurance investments).
/TABLE
<PAGE>
<PAGE> 17
The following discussion on revenues, where applicable, and provision for
credit losses includes comparisons to amounts reported on the company's
historical statements of income ("Owned Basis") as well as on the above
pro forma statements of income ("Managed Basis").
Net interest margin
-------------------
Net interest margin on an Owned Basis was $383.0 and $1,086.0 million
for the third quarter and first nine months of 1996, up from $368.0 and
$1,070.8 million, respectively, in the prior year periods. Owned
receivable growth was offset by a higher proportion of merchant
participation receivables, which earned narrower spreads compared to
the prior year.
Net interest margin on a Managed Basis was $733.0 and $2,069.9 million
for the third quarter and first nine months of 1996, up 24 and 19 percent,
respectively, compared to the same year-ago periods. Net interest margin
as a percent of average managed interest-earning assets, annualized, was
7.03 percent compared to 6.64 percent in the previous quarter and 6.48
percent in the year-ago quarter. The net interest margin percentage on a
Managed Basis in the second quarter of 1996 was affected by temporary
investments that were used to fund the disposition of consumer banking
deposits, as well as the acquisition of the AFL-CIO Visa/MasterCard
portfolio in June 1996. Excluding the impact of these temporary
investments, net interest margin as a percent of average managed
interest-earning assets, annualized, was 7.04 percent in the second
quarter of 1996. Approximately one-half of the increase over the year-ago
quarter was due to the continued shift in product mix toward unsecured
receivables, with the remainder of the increase primarily due to improved
pricing.
Provision for credit losses
---------------------------
The provision for credit losses for receivables on an Owned Basis for the
third quarter and first nine months of 1996 totaled $169.5 and $537.3
million, down 10 and 6 percent from $188.2 and $569.7 million in the
comparable prior year periods. The provision as a percent of average
owned receivables, annualized, was 2.98 percent in the third quarter of
1996 compared to 3.43 percent in the third quarter of 1995. The level of
provision for credit losses on an Owned Basis may vary from quarter to
quarter, depending on the amount of securitizations and sales of receivables
in a particular period.
The provision for credit losses for receivables on a Managed Basis totaled
$414.5 and $1,200.5 million in the third quarter and first nine months of
1996, up 16 percent from $357.3 million and 38 percent from $866.9 million
in the comparable periods of 1995. As a percent of average managed
receivables, annualized, the provision increased to 4.15 percent from
3.37 percent in the first nine months of 1995. The Managed Basis
provision includes the over-the-life reserve requirement on securitized
receivables. These provisions are impacted by the type and amount of
receivables securitized in a given period and substantially offset the
income recorded on the securitization transactions, as discussed below.
In the third quarter of 1996, the company securitized approximately $1.4
billion of other unsecured receivables, compared to approximately $1.0
billion of such receivables a year ago. For the first nine months of
1996, the company securitized approximately $4.8 billion of other
unsecured, Visa/MasterCard and home equity receivables compared to
approximately $2.4 billion of the same types of receivables in 1995.
See the credit quality section for further discussion of factors
affecting the provision for credit losses.
Other revenues
--------------
Securitization income on an Owned Basis consists of income associated
with the securitizations and sales of receivables with limited recourse,
including net interest income, fee and other income and provision for
credit losses related to those receivables. The 40 percent increase in
securitization income on an Owned Basis compared to the third quarter of
1995 was primarily due to the 41 percent increase in average securitized
receivables. Securitization income for the first nine months of 1996
increased 33 percent compared to a year ago primarily due to the 29
percent increase in average securitized receivables. In addition,
securitization income for the first nine months of 1996 was favorably
impacted by wider spreads resulting from the growth in securitized
Visa/MasterCard and other unsecured receivables. The components of
securitization income are reclassified to the applicable lines in the
statements of income on a Managed Basis.
<PAGE>
<PAGE> 18
Insurance premiums and contract revenues decreased from the third quarter
and first nine months of 1995 due to the sale of the individual life and
annuity lines of business in the fourth quarter of 1995. Insurance
premiums and contract revenues of the specialty and credit business
improved from the third quarter and first nine months of 1995 due to
growth in the company's domestic and United Kingdom receivable base.
Investment income in the third quarter and first nine months of 1996 was
below the year-ago periods primarily due to the sale of the individual
life and annuity lines of business in the fourth quarter of 1995.
Fee income on an Owned Basis includes revenues from fee-based products
such as credit cards and consumer banking deposits. Fee income was $62.1
and $165.3 million in the third quarter and first nine months of 1996, up
from $48.3 and $139.1 million in the comparable periods of the prior year
primarily due to higher interchange and other fees as a result of the
increase in the amount of owned credit card receivables compared to the
prior year. Fee income on a Managed Basis, which in addition to the items
discussed above includes fees and other income related to receivables
serviced with limited recourse, increased to $239.1 and $686.5 million in
the third quarter and first nine months of 1996 from $193.4 and $394.8
million in the same periods in 1995. The increase was due to higher
interchange and other fee income resulting from growth in the managed
credit card portfolio and increased transaction volume. In addition,
fee income in the third quarter and first nine months of 1996 included
higher income associated with the securitization and sale of a larger
amount of receivables compared to a year ago. Income recorded on these
securitization transactions was substantially offset by the over-the-life
reserve for estimated credit losses on the securitized receivables, as
previously discussed.
Other income decreased compared to the third quarter of 1995, as the 1995
amount included the premium received on the sales of the company's banking
operations in Ohio and Indiana. The increase in other income in the first
nine months of 1996 compared to the year-ago period is due to receipt of a
higher premium on the sale of the consumer banking operations in Illinois
in June 1996 compared to the premiums received on the sales of the company's
banking operations in the second and third quarters of 1995.
Expenses
--------
Operating expenses for the third quarter and first nine months of 1996
were $416.7 and $1,308.1 million, respectively, up 3 and 6 percent from
$404.3 and $1,229.9 million, respectively, in the comparable prior year
periods.
As previously discussed, during the first nine months of 1996, the company
recorded approximately $78 million of nonrecurring charges related to the
rationalization of certain office space, the settlement of litigation and
other similar matters.
Salaries and fringe benefits were $131.4 and $392.3 million compared to
$134.1 and $420.9 million in the third quarter and first nine months of
1995. The improvement was primarily due to fewer employees compared to
the prior year resulting from actions taken throughout 1995 and 1996 to
improve the operating efficiency of certain businesses and to exit others.
Occupancy and equipment expense decreased compared to the third quarter
and first nine months of 1995. The decrease in occupancy and equipment
expense is due to lower ongoing expenses resulting from initiatives
undertaken in 1995 and 1996, including the sales of businesses and
reductions in office space.
Other marketing expenses for the third quarter and first nine months of
1996 totaled $132.3 and $374.5 million, up from $86.9 and $268.1 million
in the comparable prior year periods. The increase resulted from higher
expenses related to the credit card portfolio.
Other servicing and administrative expenses were lower than the third
quarter of 1995 primarily due to the sales of businesses in 1995,
partially offset by increased expenses associated with portfolio growth
in the company's retained businesses. These expenses increased on a
year-to-date basis as the reduction attributable to businesses sold in
1995 was more than offset by the nonrecurring charges recorded in the
second quarter of 1996 related to the settlement of litigation and other
matters, and higher portfolio expenses as mentioned above.
<PAGE>
<PAGE> 19
Policyholders' benefits were lower than the prior year periods due to the
sale of the individual life and annuity lines of business in the fourth
quarter of 1995. Policyholders' benefits of the retained specialty and
credit business were essentially flat compared to the year-ago periods.
CREDIT LOSS RESERVES
--------------------
The company's credit portfolios and credit management policies are divided
into two distinct components - consumer and commercial. For consumer
products, credit policies focus on product type and specific portfolio
risk factors. The consumer credit portfolio is diversified by product
and geographic location. The commercial credit portfolio is monitored
on an individual transaction basis and is also evaluated based on overall
risk factors. See Note 3, "Receivables" in the accompanying financial
statements for receivables by product type.
Total managed credit loss reserves, which include reserves for recourse
obligations for receivables sold, were as follows (in millions):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
September 30, June 30, December 31, September 30,
1996 1996 1995 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Owned . . . . . . . . . . . . . . $ 862.5 $ 858.3 $ 720.4 $ 667.8
Serviced with limited recourse. . 665.4 592.8 457.0 349.2
-----------------------------------------------------
Total . . . . . . . . . . . . . . $1,527.9 $1,451.1 $1,177.4 $1,017.0
=====================================================
</TABLE>
Managed credit loss reserves were up 5 percent from June 30, 1996 and
up 50 percent from September 30, 1995. Managed credit loss reserves
as a percent of nonperforming managed receivables were 126.6 percent,
compared to 133.4 percent at June 30, 1996 and 105.2 percent at
September 30, 1995.
Total owned and managed credit loss reserves as a percent of receivables
were as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
September 30, June 30, December 31, September 30,
1996 1996 1995 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Owned . . . . . . . . . . . . . . 3.57% 3.64% 3.31% 2.94%
Managed . . . . . . . . . . . . . 3.67 3.59 3.22 2.87
-------------------------------------------------
</TABLE>
The level of reserves for consumer credit losses is based on delinquency
and chargeoff experience by product and judgmental factors. The level
of reserves for commercial credit losses is based on a regular review
process for all commercial credits and management's evaluation of probable
future losses in the portfolio as a whole given its geographic and industry
diversification and historical loss experience. Management also evaluates
the potential impact of existing and anticipated national and regional
economic conditions on the managed receivable portfolio when establishing
consumer and commercial credit loss reserves. While management allocates
all reserves among the company's various products, all reserves are
considered to be available to cover total loan losses. See Note 4, "Credit
Loss Reserves" in the accompanying financial statements for analyses of
reserves.
<PAGE>
<PAGE> 20
CREDIT QUALITY
--------------
Delinquency and chargeoff levels in the consumer portfolio were higher
compared to the prior and year-ago quarters. Delinquency and chargeoff
levels are monitored on a managed basis which includes both receivables
owned and receivables serviced with limited recourse. The latter
portfolio is included since it is subjected to underwriting standards
comparable to the owned portfolio, is managed by operating personnel
without regard to portfolio ownership and results in a similar credit
loss exposure for the company.
Delinquency
-----------
Two-Months-and-Over Contractual Delinquency (as a percent of managed
consumer receivables):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
9/30/96 6/30/96 3/31/96 12/31/95 9/30/95
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First mortgage . . . . . . 3.82% 3.64% 3.28% 3.29% 2.16%
Home equity. . . . . . . . 3.55 3.35 3.20 3.24 3.14
Visa/MasterCard. . . . . . 2.54 2.05 2.42 2.22 2.29
Merchant participation*. . 4.80 4.54 4.74 4.51 4.25
Other unsecured. . . . . . 5.79 5.95 5.71 5.60 5.10
-------------------------------------------------
Total* . . . . . . . . . . 3.75% 3.43% 3.60% 3.46% 3.26%
=================================================
</TABLE>
* In the second quarter of 1996, the chargeoff policy for different
components of the merchant participation portfolio was standardized.
For comparability of quarterly trends, second and third quarter 1996
amounts exclude the impact of this change. Including the impact of
this change, merchant participation and total delinquency was 5.43
and 3.83 percent, respectively, for the third quarter of 1996 and
5.04 and 3.49 percent, respectively, for the second quarter of 1996.
Delinquency as a percent of managed consumer receivables increased from
the prior quarter and a year ago. The increase in delinquency from
June 30, 1996 is due to the aging of the AFL-CIO Visa/MasterCard portfolio.
This portfolio had an insignificant amount of delinquency when it was
acquired in June 1996 and is maturing as expected. The company's remaining
portfolios experienced delinquency performance in line with management's
expectations and industry trends.
The increase in the delinquency ratio compared to a year ago was
primarily due to seasoning of the portfolios, the company's continued
shift in product mix away from traditional first mortgages and toward
unsecured products, and a slower consumer payment pattern, including
higher personal bankruptcies.
<PAGE>
<PAGE> 21
Net Chargeoffs of Consumer Receivables
--------------------------------------
Net Chargeoffs of Consumer Receivables (as a percent, annualized, of
average managed consumer receivables):
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
1996 1996 1996 1995 1995
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First mortgage . . . . . . . . . .50% .46% .51% .47% .32%
Home equity. . . . . . . . . . . .98 .89 .89 .95 1.12
Visa/MasterCard. . . . . . . . . 4.71 4.86 4.44 4.67 4.24
Merchant participation*. . . . . 3.54 3.82 4.51 5.14 4.63
Other unsecured. . . . . . . . . 4.35 3.58 3.91 3.46 3.45
------------------------------------------------
Total* . . . . . . . . . . . . . 3.52% 3.33% 3.24% 3.28% 2.97%
================================================
</TABLE>
* In the second quarter of 1996, the chargeoff policy for different
components of the merchant participation portfolio was standardized.
For comparability of quarterly trends, second and third quarter 1996
amounts exclude the impact of this change. Including the impact of
this change, merchant participation and total net chargeoffs were
2.89 and 3.44 percent, respectively, for the third quarter of 1996
and 1.69 and 3.07 percent, respectively, for the second quarter of 1996.
Net chargeoffs as a percent of average managed consumer receivables for the
third quarter of 1996 increased compared to both the prior and year-ago
periods. Although the company's chargeoff ratio for the third and second
quarters of 1996 benefited from the acquisition of the AFL-CIO portfolio,
it increased in the third quarter due to higher levels of personal
bankruptcies in the Visa/MasterCard portfolio. The remainder of the
increase was attributable to continued seasoning of other unsecured
receivables. The increase in net chargeoffs is in line with management's
expectations and industry trends.
Approximately 90 percent of the year-over-year increase in the total
chargeoff ratio was due to increased personal bankruptcy filings in the
Visa/MasterCard portfolio. The remaining increase was primarily due to
seasoning of the other unsecured portfolio.
Nonperforming Assets
--------------------
Nonperforming assets consisted of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
In millions. 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual managed receivables. . . . $ 741.1 $ 713.9 $ 740.1 $ 768.5 $ 711.0
Accruing managed consumer receivables
90 or more days delinquent* . . . . 446.1 353.6 269.2 267.2 233.6
Renegotiated commercial loans . . . . 19.9 19.9 20.4 21.2 22.0
-----------------------------------------------------
Total nonperforming managed
receivables . . . . . . . . . . . . 1,207.1 1,087.4 1,029.7 1,056.9 966.6
Real estate owned . . . . . . . . . . 137.6 131.9 123.1 136.5 148.7
-----------------------------------------------------
Total nonperforming assets. . . . . . $1,344.7 $1,219.3 $1,152.8 $1,193.4 $1,115.3
=====================================================
Managed credit loss reserves
as a percent of nonperforming
managed receivables* . . . . . . . 126.6% 133.4% 125.4% 111.4% 105.2%
-----------------------------------------------------
</TABLE>
* In the second quarter of 1996, the chargeoff policy for different
components of the merchant participation portfolio was standardized.
For comparability of quarterly trends, second and third quarter 1996
amounts exclude the impact of this change. Including the impact of this
change, accruing managed consumer receivables 90 or more days delinquent
were $479.0 and $378.5 million at September 30 and June 30, 1996,
respectively. Managed credit loss reserves as a percent of nonperforming
managed receivables, including the impact of this change were 123.2 and
130.4 percent at September 30 and June 30, 1996, respectively.
<PAGE>
<PAGE> 22
Part II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Restated Certificate of Incorporation of Household
International, as amended.
10.9 Executive Employment Agreement between the Company and
W.F. Aldinger.
10.11 Executive Employment Agreement between the Company and
J.W. Saunders.
10.12 Executive Employment Agreement between the Company and
R.F. Elliott.
10.13 Executive Employment Agreement between the Company and
D.A. Schoenholz.
12 Statement of Computation of Ratio of Earnings to Fixed
Charges and to Combined Fixed Charges and Preferred Stock
Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
99.1 Debt and Preferred Stock Securities Ratings.
(b) Reports on Form 8-K
During the third quarter of 1996, the Registrant filed a Current
Report on Form 8-K with respect to the declaration by the Board
of Directors of Household International, Inc., on July 9, 1996,
of a dividend of one preferred share purchase right for each
outstanding share of common stock, par value $1.00 per share of
the company, payable on July 29, 1996, to stockholders of record
on that date.
<PAGE>
<PAGE> 23
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date: November 13, 1996 By: /s/ David A. Schoenholz
----------------- ----------------------------
David A. Schoenholz,
Executive Vice President -
Chief Financial Officer
and on behalf of
Household International, Inc.
<PAGE>
<PAGE> 24
Exhibit Index
-------------
3(i) Restated Certificate of Incorporation of Household
International, as amended.
10.9 Executive Employment Agreement between the Company and
W.F. Aldinger.
10.11 Executive Employment Agreement between the Company and
J.W. Saunders.
10.12 Executive Employment Agreement between the Company and
R.F. Elliott.
10.13 Executive Employment Agreement between the Company and
D.A. Schoenholz.
12 Statement of Computation of Ratio of Earnings to Fixed
Charges and to Combined Fixed Charges and Preferred Stock
Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
99.1 Debt and Preferred Stock Securities Ratings.
<PAGE> 1
HOUSEHOLD INTERNATIONAL, INC.
RESTATED CERTIFICATE OF INCORPORATION INDEX
PAGE DATE DESCRIPTION
- ---- -------- -----------
2 9/4/81 Restated Certificate of Incorporation
12 7/25/84 Certificate of Change of Address of
Registered Office and of Registered Agent
14 5/13/87 Certificate of Amendment (Article VII)
16 8/5/91 Certificate of Designation, Preferences and
Rights of 9-1/2% Cumulative Preferred Stock,
Series 1991-A
21 10/14/92 Certificate of Designation, Preferences and
Rights of 8-1/4% Cumulative Preferred Stock,
Series 1992-A
26 5/12/93 Certificate of Amendment (Article IV)
27 9/1/93 Certificate of Designation, Preferences and
Rights of 7.35% Cumulative Preferred Stock,
Series 1993-A
32 7/9/96 Certificate of Designations of Series A
Junior Participating Preferred Stock
<PAGE>
<PAGE> 2
RESTATED
CERTIFICATE OF INCORPORATION
OF
HOUSEHOLD INTERNATIONAL, INC.
This Restated Certificate of Incorporation was duly adopted
by the Board of Directors of Household International, Inc. in
accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware. This Restated
Certificate of Incorporation only restates and integrates and
does not further amend the provisions of the Corporation's
certificate of incorporation as heretofore amended or
supplemented, and there is no discrepancy between those
provisions and the provisions of this Restated Certificate of
Incorporation. The original Certificate of Incorporation was
filed with the Secretary of State of Delaware on February 20,
1981.
ARTICLE I
The name of the corporation is Household International, Inc.
ARTICLE II
The address of the Corporation's registered office in the
State of Delaware is 100 West Tenth Street, Wilmington, Delaware
19899. The name of its registered agent at such address is The
Corporation Trust Company, in the county of New Castle.
ARTICLE III
The Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
The total number of shares that may be issued by the
Corporation is 75,655,004 of which 8,155,004 shares shall be
Preferred Stock without par value and 67,500,000 shares shall be
Common Stock of the par value of $1 per share.
The 8,155,004 shares of Preferred Stock may be issued from
time to time in one or more series, which may have such
designations, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated in the resolution or
resolutions (authorizing resolutions) providing for the issue of
such shares adopted by the Board of Directors. Without otherwise
limiting the generality of the foregoing provision, the Board of
Directors is expressly authorized to provide, with respect to
each such series, that:
(a) the shares of such series shall be subject to redemption
(including redemption through a sinking fund or analogous fund)
at such time or times and at such price or prices as shall be
stated in the authorizing resolutions;
(b) the holders of the shares of such series shall be
entitled to receive dividends at such rates, on such conditions
and at such times, payable in preference, or in such relation, to
the dividends payable on any other class or classes or of any
other series of stock of the Corporation, and cumulative or non-
cumulative, all as shall be stated in the authorizing
resolutions;
(c) the holders of the shares of such series shall be
entitled to such rights upon the dissolution, or upon any
distribution of the assets, of the Corporation as shall be stated
in the authorizing resolutions;
(d) the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock,
or of any series thereof, of the Corporation at such price or
prices or at such rate or rates and with such adjustments, all as
shall be stated in the authorizing resolutions;
<PAGE>
<PAGE> 3
(e) the shares of such series shall have such voting powers,
full or limited, or no voting powers, as shall be stated in the
authorizing resolutions.
The following is a statement of the powers, preferences, and
rights, and the qualifications, limitations or restrictions
thereof, in respect of the Preferred Stock, except such thereof
as the Board of Directors is herein authorized to provide for,
and in respect of the Common Stock:
(1) Except as otherwise provided in authorizing resolutions
creating series of Preferred Stock, each share of Preferred Stock
shall rank on a parity with each other share of Preferred Stock,
regardless of series, in preference to the Common Stock, with
respect to the payment of dividends at the respectively
designated rates. No dividend shall be declared or paid on the
shares of any particular series of Preferred Stock unless at the
same time a dividend in like proportion to the respectively
designated dividend rates shall be declared or paid on the shares
of each other series of Preferred Stock then issued and
outstanding ranking prior to or on a parity with such particular
series with respect to the payment of dividends. Except as
otherwise provided in the authorizing resolutions creating
additional series of Preferred Stock, each share of Preferred
Stock shall rank on a parity with each other share of Preferred
Stock, regardless of series, in preference to the Common Stock,
with respect to the distribution of assets according to the
amounts to which the shares of the respective series are
thereupon entitled.
(2) The holders of shares of the Preferred Stock shall be
entitled to receive, when and as declared by the Board of
Directors, out of any funds legally available for that purpose,
dividends in cash at such respective rates, payable on such dates
in each year and in respect of such dividend periods, all as
stated in the authorizing resolutions, before any dividends shall
be declared or paid or set apart for payment upon the Common
Stock. Dividends on the shares of each series of the Preferred
Stock shall be cumulative or non-cumulative and, if cumulative,
shall be cumulative from such date, all as stated in the
authorizing resolutions.
At any time after all dividends shall have been paid, as
above provided, on the Preferred Stock of all series then
outstanding and after, or concurrently with, the declaration and
setting aside of a sum for the payment of full dividends on the
Preferred Stock of each series then outstanding for the then
current dividend period established for such series, then, but
not prior thereto, such dividends (payable either in cash, stock,
or otherwise) as may be determined by the Board of Directors may
be declared and paid on the Common Stock out of any remaining
assets legally available for the declaration of dividends and the
Preferred Stock shall not be entitled to participate in any such
dividends whether payable in cash, stock, or otherwise. No
Preferred Stock or Common Stock may be purchased by the
Corporation if any Preferred Stock dividends are in arrears, and
no Preferred Stock may be redeemed in such case unless all issued
and outstanding shares of Preferred Stock are redeemed.
(3) The whole or any part of the Preferred Stock, of any one
or more series, redeemable pursuant to provisions stated in the
respective authorizing resolutions, at the time outstanding, may,
at the option of the Board of Directors, be redeemed, in
accordance with such authorizing resolutions, at any time or from
time to time, by the payment or by making provision for payment
of such price or prices per share in the case of every such
redemption as shall be stated in such authorizing resolutions,
and, in every case, a sum equal to accrued and unpaid dividends,
if any, with respect to each such share to be so redeemed, at the
rate of the dividends fixed therefor, to the date fixed for
redemption.
In case of redemption of a part only of any series of the
Preferred Stock at the time outstanding, such redemption shall be
made by lot or pro rata in such manner as may be prescribed by
resolution of the Board of Directors. The Board of Directors
shall have full power and authority, subject to the limitations
and provisions herein contained and stated in the respective<PAGE>
<PAGE> 4
authorizing resolutions, to prescribe the manner in which and the
terms and conditions upon which Preferred Stock shall be redeemed
from time to time.
Notice of the Corporation's intention to redeem Preferred
Stock, specifying the date of redemption, shall be published in
newspapers of general circulation in New York, New York, and
Chicago, Illinois, and shall be mailed not less than forty-five
nor more than ninety days before the redemption date to the
holders of record of such stock to be redeemed at their
respective addresses as the same shall appear on the books of the
Corporation, and, if less than all the shares owned by any such
stockholder are then to be redeemed, the notice shall specify the
number of shares thereof which are to be redeemed.
If notice shall be given as aforesaid and the funds
necessary to redeem such stock shall have been set aside by the
Corporation (other than by the trust deposit hereinafter provided
for) separate and apart from its other funds for the benefit of
the holders of the shares called for redemption, such stock shall
be redeemed upon such date of redemption and shall cease to be
outstanding; the right to receive dividends thereon shall cease
to accrue from and after such date of redemption and all rights
of holders of the Preferred Stock so called for redemption shall
forthwith on such redemption date cease and terminate except only
the right of the holders thereof, upon presentation and surrender
of their respective certificates representing said shares, to
receive the redemption price therefor but without interest, and
the right of conversion, if any.
Anything herein contained to the contrary notwithstanding,
if notice shall be given as aforesaid and before the redemption
date an amount sufficient to redeem the shares so called for
redemption shall be deposited in trust to be applied to such
redemption with a bank or with bankers authorized to conduct
banking business or with a trust company, in the Borough of
Manhattan, City of New York, or in the City of Chicago, having a
combined capital and surplus of at least $5,000,000, then, from
and after the date of such deposit, such shares shall be deemed
to be redeemed and to cease to be outstanding, and all rights of
the holders of the shares called for redemption, as stockholders
of the Corporation, shall cease except (i) the right, upon
presentation and surrender of their respective certificates
representing said shares, to receive from such bank or bankers or
trust company on or after such redemption date the moneys so
deposited in trust, but without interest, and (ii) the right of
conversion, if any. The Corporation shall be entitled to any
interest payable on the funds so deposited. Any redemption funds
unclaimed at the end of six years shall be repaid to the
Corporation, after which holders of the redeemed shares shall
look only to the Corporation for payment of the redemption price,
but without interest thereon.
(4) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the
holders of the Preferred Stock shall be entitled to be paid or to
have set apart for payment such sum or sums per share as shall be
stated in the respective authorizing resolutions, together in
each case with a sum equal to accrued and unpaid dividends, if
any, at the rate of the dividends fixed therefor, to the date
fixed for payment of such price or prices, before any
distribution or payment shall be made to the holders of the
Common Stock. No consolidation or merger of the Corporation with
another corporation or corporations and no sale by the
Corporation of its assets as an entirety or substantially as an
entirety shall be deemed to be a liquidation, dissolution, or
winding up of the Corporation within the meaning of this
subdivision (4).
(5) The Corporation shall not, without the consent
(expressed either in writing or by affirmative vote at a meeting
called for that purpose) of the holders of two-thirds of the then
outstanding Preferred Stock of all series, other than series in
respect of which the authorizing resolutions expressly provide
that such consent shall not be required:
(i) consolidate or merge with another corporation or
corporations or sell its assets as an entirety or<PAGE>
<PAGE> 5
substantially as an entirety, provided, however, that the
purchase for cash, stock, or otherwise by the Corporation of
all or any part of the assets, stock or other securities of
another corporation or corporations shall not be deemed to
be a consolidation or merger;
(ii) issue Preferred Stock of any series if there shall
be cumulative dividends in arrears on outstanding Preferred
Stock, irrespective of series;
(iii) increase the authorized amount of the Preferred
Stock, or create or issue any class of stock ranking prior
to or on a parity with the Preferred Stock, or any series
thereof, as to the payment of dividends or the distribution
of assets;
(iv) adopt any amendment to the Certificate of
Incorporation of the Corporation which adversely alters any
preference, power, or special right of the Preferred Stock,
or of the holders thereof; provided, however, that if any
such amendment would adversely alter any preference, power,
or special right of one or more but not all of the series of
the Preferred Stock or of the holders thereof, then the
consent (expressed as above provided) only of the holders of
two-thirds of the then outstanding shares of all series so
affected, voting as a class, other than series in respect of
which the authorizing resolutions expressly provide that
such consent shall not be required, shall be required for
the adoption of such amendment.
(6) In the event that any four quarterly cumulative
dividends, whether consecutive or not, upon the Preferred Stock,
or any series thereof, shall be in arrears, the holders of
Preferred Stock of all series, other than series in respect of
which the right is expressly withheld by the authorizing
resolutions, shall have the right, at the next meeting of
stockholders called for the election of directors, to elect one-
third of the members of the Board of Directors out of the number
fixed by the by-laws, and the holders of such Preferred Stock
shall continue to have such right until all unpaid dividends upon
the Preferred Stock shall have been paid in full. In the event
that any eight quarterly cumulative dividends, whether
consecutive or not, upon the Preferred Stock, or any series
thereof, shall be in arrears, the holders of Preferred Stock of
all series, other than series in respect of which the right is
expressly withheld by the authorizing resolutions, shall have the
right, at the next meeting of stockholders called for the
election of directors, to elect a majority of the members of the
Board of Directors out of the numbers fixed by the by-laws, and
the holders of such Preferred Stock shall continue to have such
right until all unpaid dividends upon the Preferred Stock shall
have been paid in full.
(7) The holders of the Common Stock shall be entitled to
vote at all meetings of the stockholders and, subject to the
rights of holders of Preferred Stock to elect directors in
accordance with the provisions of the foregoing subdivision (6),
shall be entitled to one vote for each share of Common Stock
held.
ARTICLE V
There is hereby created a series of Preferred Stock of the
Corporation, such series to be within the class of Preferred
Stock authorized by Article IV hereof; to be designated $6.25
Cumulative Convertible Voting Preferred Stock (the "$6.25
Preferred Stock"); to consist of 3,454,635 shares; to have the
powers, preferences and rights and the qualifications,
limitations and restrictions set forth in, and to be subject to
all of the terms and provisions of, Article IV hereof (except to
the extent that the same may be inconsistent with this Article
V); and to have the following additional powers, preferences,
rights, qualifications, limitations, restrictions, terms and
provisions:
(a) $6.25 per share is fixed as the amount per annum at
which the holders of $6.25 Preferred Stock shall be entitled to
receive dividends when and as declared by the Board of Directors,<PAGE>
<PAGE> 6
such dividends to be paid only from retained earnings of the
Corporation; and such dividends shall be cumulative and shall
accrue, whether or not earned or declared, from the Issue Date
(as hereinafter defined), and shall be payable quarterly on the
fifteenth day of January, April, July and October in each year to
holders of record on the respective business days next preceding
the first days of those months (and the quarterly dividend
periods shall commence on the first days of those months);
provided, however, that as to any shares of $6.25 Preferred Stock
issued less than 60 days prior to a dividend payment date, the
dividend that would otherwise be payable on such dividend payment
date will be payable on the next succeeding dividend payment
date; and provided, further, that no dividend shall be declared
or paid if (i) the Corporation is insolvent or would be rendered
insolvent by payment of such dividend or (ii) the payment of such
dividend would impair the Corporation's capital (i.e., the fair
market value of the remaining assets of the Corporation would be
less than the sum of its liabilities and the liquidation value of
any classes and series of its Preferred Stock ranking prior to or
on a parity with the $6.25 Preferred Stock). The "Issue Date"
shall mean the day on which occurs the merger of Wallace-Murray
Corporation, a Delaware corporation, into Household Acquisition
Corporation Second, a Delaware corporation, or other subsidiary
of the Corporation. An "Anniversary Date" shall mean any
anniversary date of the Issue Date.
(b) The shares of $6.25 Preferred Stock shall be subject to
redemption at the option of the Corporation at any time, and from
time to time, in whole or in part, at the redemption price of $50
per share plus the amount of accrued and unpaid dividends, if
any, thereon to the date fixed for redemption; provided, however,
that no such optional redemption shall be made unless (i) the
date fixed for redemption is on or after the fifth Anniversary
Date, and (ii) at all times during the twelve-month period
terminating on the date on which notice of such redemption is
first given, the annualized rate of dividends in respect of the
outstanding shares of Common Stock of the Corporation shall have
equalled or exceeded the quotient obtained by dividing $6.25 by
the conversion rate specified in paragraph (d) hereof (as said
conversion rate may have been adjusted pursuant to the provisions
of said paragraph). As used herein, the term "annualized rate of
dividends" shall mean, as of any particular time, the aggregate
per share amount of regular cash dividends (excluding special and
extraordinary dividends) paid on shares of the Common Stock of
the Corporation generally, in respect of the most recently
completed twelve-month period.
(c) The amount to which shares of $6.25 Preferred Stock
shall be entitled upon liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, shall be $50
per share, plus the amount of accrued and unpaid dividends, if
any, thereon to the date fixed for payment, and no more.
(d) The shares of $6.25 Preferred Stock shall be convertible
at any time after issue at the option of the record holder
thereof, in the manner hereinafter provided, into fully paid and
nonassessable shares of Common Stock of the Corporation at the
rate of 1.923 shares (adjusted to 2.327 shares as of close of
business on April 7, 1989 and 4.654 shares as of close of
business on October 15, 1993) of Common Stock for each share of
$6.25 Preferred Stock; provided, however, that as to any shares
of $6.25 Preferred Stock which shall have been called for
redemption, the right of conversion shall terminate at the close
of business on the fifth full business day prior to the date
fixed for redemption. No payment or adjustment shall be made for
dividends accrued on any shares of $6.25 Preferred Stock that
shall be converted or for dividends on any shares of Common Stock
that shall be issuable upon such conversion, but all dividends
accrued and unpaid on such shares of $6.25 Preferred Stock up to
the dividend payment date immediately preceding the date of
conversion shall be payable to the converting shareholder, and no
dividend shall be paid upon the shares of Common Stock until the
same shall be paid or sufficient funds set apart for the payment
thereof.
The conversion rate provided for above shall be subject to
the following adjustments:
<PAGE>
<PAGE> 7
(i) In case the Corporation shall declare and pay to
the holders of the shares of Common Stock a dividend in
shares of Common Stock, the conversion rate in effect
immediately prior to the time fixed for the determination of
shareholders entitled to such dividend shall be
proportionately increased (adjusted to the nearest, or if
there shall be no nearest then to the next lower, one-
thousandth of a share of Common Stock), such adjustment to
become effective immediately after the time fixed for such
determination.
(ii) In case the Corporation shall subdivide the
outstanding shares of Common Stock into a greater number of
shares of Common Stock or combine the outstanding shares of
Common Stock into a smaller number of shares of Common
Stock, the conversion rate in effective immediately prior to
such subdivision or combination, as the case may be, shall
be proportionately increased or decreased (adjusted to the
nearest, or if there shall be no nearest then to the next
lower, one-thousandth of a share of Common Stock), as the
case may require, such increase or decrease, as the case may
be, to become effective when such subdivision or combination
becomes effective.
(iii) In case of any reclassification or change of
outstanding shares of Common Stock of the class issuable
upon conversion of the shares of $6.25 Preferred Stock, or
in case of any consolidation or merger of the Corporation
with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially
all of the property of the Corporation, the holder of each
share of $6.25 Preferred Stock then outstanding shall have
the right thereafter, so long as his conversion right
hereunder shall exist, to convert such share into the kind
and amount of shares of stock and other securities and
property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock of the Corporation into
which such shares of $6.25 Preferred Stock might have been
converted immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance, and shall
have no other conversion rights under these provisions;
provided, however, that effective provision shall be made,
in the Articles or Certificate of Incorporation of the
resulting, surviving, or successor corporation or otherwise,
so that the provisions set forth herein for the protection
of the conversion rights of the shares of $6.25 Preferred
Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and
other securities and property deliverable upon conversion of
the shares of $6.25 Preferred Stock remaining outstanding or
other convertible preferred shares received by the holders
in place thereof; and provided, further, that any such
resulting, surviving, or successor corporation shall
expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares,
securities, or property as the holders of the shares of
$6.25 Preferred Stock remaining outstanding, or other
convertible preferred shares received by the holders in
place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provision for the protection
of the conversion right as above provided. In case
securities or property other than shares of Common Stock
shall be issuable or deliverable upon conversion as
aforesaid, then all references in this paragraph shall be
deemed to apply, so far as appropriate and as nearly as may
be, to such other securities or property. The subdivision
or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of
Common Stock (whether with or without par value) shall not
be deemed to be a reclassification of the Common Stock of
the Corporation for the purposes of this subparagraph (iii).
(iv) Unless the holders of shares of the $6.25
Preferred Stock shall be issued subscription rights or
warrants on a reasonably equivalent basis, in case the
Corporation shall issue to the holders of shares of any
class of its capital stock subscription rights or warrants<PAGE>
<PAGE> 8
entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Average Market
Price (as hereinafter defined) at the time fixed for
determination of shareholders entitled to such subscription
rights or warrants, the conversion rate in effect
immediately prior to the time of said determination shall be
increased (adjusted to the nearest, or if there shall be no
nearest then to the next lower, one-thousandth of a share of
Common Stock) by multiplying said rate by a fraction of
which the numerator shall be the sum of the number of shares
of Common Stock outstanding at the time of such
determination and the number of additional shares of Common
Stock so offered for subscription or purchase, and of which
the denominator shall be the sum of the number of shares of
Common Stock outstanding at the time of such determination
and the number of shares of Common Stock which the aggregate
subscription price of the total number of shares so offered
would purchase at the Average Market Price, such adjustment
to become effective immediately after the time fixed for
such determination; provided, however, that if such
subscription rights or warrants shall have a term not
exceeding 45 days and if any such subscription rights or
warrants expire unexercised, then the conversion rate will
be readjusted, effective immediately after the expiration of
such term, to the conversion rate which would have obtained
if such unexercised subscription rights or warrants had not
been issued.
For the purposes of any computation under this
subparagraph (iv) or subparagraph (v), the "Average Market
Price" per share of Common Stock for any time shall be the
average of the daily closing prices for the 30 consecutive
business days commencing 45 business days before the time in
question. The closing price for each day shall be the last
sales price regular way or, in case no such sale takes place
on such day, the average of the closing bid and asked prices
regular way, in either case as recorded on the New York
Stock Exchange (or, if the Common Stock is not regularly
traded on the New York Stock Exchange, on the principal
market or system on which trades in the Common Stock are
recorded).
(v) Unless the holders of shares of the $6.25 Preferred
Stock shall be distributed evidences of indebtedness or
other assets on a reasonably equivalent basis, in case the
Corporation shall distribute to the holders of the shares of
Common Stock evidences of indebtedness of the Corporation or
other assets of the Corporation (other than cash dividends
to the extent paid from retained earnings, dividends in
shares of Common Stock or subscription rights or warrants
entitling them to subscribe for or purchase shares of Common
Stock, but including securities convertible into capital
stock of the Corporation), the conversion rate in effect
immediately prior to the time fixed for determination of
shareholders entitled to such distribution shall be
increased (adjusted to the nearest, or if there shall be no
nearest then to the next lower, one-thousandth of a share of
Common Stock) by multiplying said rate by a fraction of
which the numerator shall be the number of shares of Common
Stock outstanding at the time of such determination, and of
which the denominator shall be the difference between the
number of shares of Common Stock outstanding at the time of
such determination and a number of shares of Common Stock
having an aggregate Average Market Price at the time of such
determination equal to the fair value (as determined by the
Board of Directors of the Corporation in good faith) of the
evidences of indebtedness or other assets so distributed,
such adjustment to become effective immediately after the
time fixed for such determination.
Except as provided in the foregoing subparagraphs (i)
through (v), there shall be no adjustments to the conversion rate
set forth above.
In order to convert shares of $6.25 Preferred Stock into
shares of Common Stock, the holder thereof shall surrender the
certificate or certificates for shares of $6.25 Preferred Stock,
duly endorsed to the Corporation or in blank, at the office of<PAGE>
<PAGE> 9
any Transfer Agent for the shares of $6.25 Preferred Stock (or
such other place as may be designated by the Corporation), and
shall give written notice to the Corporation at said office that
he elects to convert the same and shall state in writing therein
the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, deliver at
said office to such holder of shares of $6.25 Preferred Stock or
to his nominee or nominees, a certificate or certificates for the
number of full shares of Common Stock to which he shall be
entitled as aforesaid and shall make appropriate payment in cash
for any fractional shares. Shares of $6.25 Preferred Stock shall
be deemed to have been converted as of the date of the surrender
of such shares for conversion as provided above, and the person
or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on
such date.
No fractions of shares of Common Stock shall be issued upon
conversion, but in lieu thereof the Corporation shall adjust such
fractional interest by payment to the holders of an amount in
cash equal (computed to the nearest cent) to the same fraction of
the closing price (as defined in subparagraph (iv) above) on the
business day immediately preceding such conversion.
A number of authorized shares of Common Stock sufficient to
provide for the conversion of the shares of $6.25 Preferred Stock
outstanding upon the bases hereinbefore provided shall at all
times be reserved for such conversion.
(e) There shall be a sinking fund (the "Sinking Fund") for
the benefit of the shares of $6.25 Preferred Stock. For the
purposes of the Sinking Fund, out of any net assets of the
Corporation legally available therefor (but only from retained
earnings and subject to the provisions of the last sentence of
paragraph (2) of Article IV of the Certificate of Incorporation),
before any dividends, in cash or property, shall be paid or
declared, or any distribution ordered or made on the Common Stock
of the Corporation, and before any shares of Common Stock of the
Corporation shall be purchased, redeemed, or otherwise acquired
for value by the Corporation or any subsidiary, the Corporation
shall have paid or set aside in cash annually on the day prior to
each Anniversary Date commencing with the tenth Anniversary Date,
so long as there shall be outstanding any shares of $6.25
Preferred Stock, an amount sufficient to redeem, on the day prior
to each such Anniversary Date prior to the thirtieth, 4% of the
number of shares of $6.25 Preferred Stock issued on the Issue
Date (or such lesser number as remains outstanding) and, on the
day prior to the thirtieth Anniversary Date, all such shares of
$6.25 Preferred Stock as remain outstanding, at a price of $50
per share plus the amount of accrued and unpaid dividends, if
any, thereon to the date so fixed for redemption; provided,
however, that there shall be allowed to the Corporation as a
credit thereagainst any shares of $6.25 Preferred Stock which the
Corporation may have acquired (as a result of the conversion of
such shares or otherwise, which it may have redeemed pursuant to
paragraph (b) hereof, or which it may have redeemed pursuant to
this paragraph (e) (otherwise than through the operation of the
Sinking Fund), which have not theretofore been used for the
purpose of any such credit or any credit against a redemption of
$6.25 Preferred Stock at the Corporation's election as
hereinafter in this paragraph (e) provided for and which shares
shall have been set aside by the Corporation for the purpose of
the Sinking Fund; and provided, further, that no monies shall be
paid or set aside for the Sinking Fund if at the day prior to any
such Anniversary Date the Corporation is in arrears in respect of
a sinking fund obligation under any other series of Preferred
Stock ranking prior to or on a parity with the $6.25 Preferred
Stock except to the extent that, in the case of any series
ranking on a parity with the $6.25 Preferred Stock, provision is
made for the payment or setting aside of monies for the Sinking
Fund and for the sinking funds of such other series in proportion
to the respective aggregate amounts then required to be paid or
set aside therefor; and provided, further, that no monies shall
be paid or set aside for the Sinking Fund if (i) the Corporation
is insolvent or would be rendered insolvent by the payment or
setting aside of such monies or (ii) the payment or setting aside<PAGE>
<PAGE> 10
of such monies would impair the Corporation's capital (i.e., the
fair market value of the remaining assets of the Corporation
would be less than the sum of its liabilities and the liquidation
value of classes and series of its Preferred Stock ranking prior
to or on a parity with the $6.25 Preferred Stock). The Sinking
Fund shall be cumulative so that if on the day prior to any such
Anniversary Date, the net assets of the Corporation legally
available therefor or the retained earnings of the Corporation
shall be insufficient to permit any such amount be paid or set
aside in full, or if for any other reason such amount shall not
have been paid or set aside in full, the amount of the deficiency
shall be paid or set aside, but without interest, before any
dividend, in cash or property, shall be paid or declared, or any
other distribution ordered or made, on the Common Stock of the
Corporation, and before any shares of Common Stock of the
Corporation shall be purchased, redeemed or otherwise acquired
for value by the Corporation or by any subsidiary of the
Corporation. The Corporation may elect to redeem, on any Sinking
Fund redemption date, up to an additional 4% of the number of
shares of $6.25 Preferred Stock issued on the Issue Date, at a
price of $50 per share plus the amount of accrued and unpaid
dividends, if any, thereon to the date fixed for redemption;
provided, however, that there shall be allowed to the Corporation
as a credit thereagainst any shares of $6.25 Preferred Stock
which the Corporation may have acquired or redeemed otherwise
than pursuant to paragraph (b) above and this paragraph (e) which
have not theretofore been used for the purpose of any such credit
or for the purpose of any credit against a redemption of $6.25
Preferred Stock pursuant to the Sinking Fund. Such optional
right shall not be cumulative and, if unexercised in a particular
year, may not be carried forward to subsequent years.
(f) The holders of $6.25 Preferred Stock shall be entitled
to vote at all meetings of the stockholders, and at each such
meeting shall be entitled to one vote for each share held.
(g) To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, in respect
of additional series of Preferred Stock, none of the preferences
or rights of any such additional series as fixed by the Board of
Directors shall be prior or superior in any respect to those of
the $6.25 Preferred Stock. Without limiting the rights conferred
by paragraph (5) of Article IV of the Certificate of
Incorporation of the Corporation, the Corporation shall not,
without the consent of the holders of two-thirds of the then
outstanding shares of $6.25 Preferred Stock, adopt any amendment
to the Certificate of Incorporation of the Corporation or take
other action, whether by the Board of Directors or stockholders,
which adversely alters the preferences, powers and special rights
conferred by the provisions of paragraphs (b), d(iv), d(v) or (e)
hereof.
ARTICLE VI
In furtherance, and not in limitation, of the powers
conferred by statute, the Board of Directors of the Corporation
is expressly authorized:
(1) To make, alter, amend and rescind the by-laws of
the Corporation.
(2) To determine from time to time, whether and to what
extent, and at what times and places, and under what
conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them
shall be open to inspection of the stockholders; and no
stockholder shall have any right to inspect any account,
book or document of the Corporation, except as conferred by
statute, unless authorized by a resolution of the
stockholders then entitled to vote thereon or the Board of
Directors.
IN WITNESS WHEREOF, said Household International, Inc. has
caused its corporate seal to be hereunto affixed and this
certificate to be signed by D. C. Clark, its President, and<PAGE>
<PAGE> 11
attested by J. D. Pinkerton, its Secretary, this 4th day of
September, 1981.
Household International, Inc.
By: /s/ D. C. Clark
---------------
President
[SEAL]
Attest:
By: /s/ J. D. Pinkerton
-------------------
Secretary
A:\WP51\IC9481.WP
<PAGE>
<PAGE> 12
CERTIFICATE OF CHANGE OF ADDRESS OF
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
To: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Federal Street
Dover, Delaware 19903
Pursuant to the provisions of Section 134 of Title 8 of the
Delaware Code, the undersigned Agent for service of process, in
order to change the address of the registered office of the
corporations for which it is registered agent, hereby certifies
that:
1. The name of the agent is: The Corporate Trust Company
2. The address of the old registered office was:
100 West Tenth Street
Wilmington, Delaware 19801
3. The address to which the registered office is to be
changed is:
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
The new address will be effective on July 30, 1984.
4. The names of the corporation represented by said agent
are set forth on the list annexed to this certificate
and made a part hereof by reference.
IN WITNESS WHEREOF, said agent has caused this certificate
to be signed on its behalf by its Vice-President and Assistant
Secretary this 25th day of July, 1984.
THE CORPORATION TRUST COMPANY
(Name of Registered Agent)
By: Virginia Colwell
----------------
(Vice-President)
Attest:
Mick Nurman
- ---------------------
(Assistant Secretary) <PAGE>
<PAGE> 13
PAGE 796
STATE OF DELAWARE - DIVISION OF CORPORATIONS
CHANGE OF ADDRESS FILING FOR
CORPORATION TRUST AS OF JULY 27, 1984
DOMESTIC
0908612 HOUSEHOLD INTERNATIONAL, INC. 02/21/1981 D DE
A:\WP51\IC72584.WP<PAGE>
<PAGE> 14
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Household International, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Restated Certificate of Incorporation, as
heretofore amended, of said Corporation has been further amended
by inserting the following as Article VII:
ARTICLE VII
(1) Elimination of Certain Liability of Directors. A
director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or
successor provision, or (iv) for any transaction from which
the director derived an improper personal benefit. Any
repeal or amendment to this Section shall not adversely
affect any right or protection of a director of the
Corporation for any act or occurrence taking place prior to
such repeal or amendment.
(2) Indemnification and Insurance.
(a) Each person who was or is made a party or is
threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or
was a director, officer, or employee of the Corporation or
is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation
or of a partnership, joint venture, trust, or other
enterprise, including service with respect to employee
benefit plans, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law
permitted the Corporation to provide prior to such
amendment), against all expense, liability, and loss
(including attorneys' fees, judgments, fines, ERISA excise
taxes, or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person
in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit
of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (b) hereof,
the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors
of the Corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include
the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its
final disposition upon delivery to the Corporation of an
undertaking to repay all amounts so advanced if it shall
ultimately be determined that such person is not entitled to
be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors,
provide indemnification to agents of the Corporation with
the same scope and effect as the foregoing indemnification
of directors, officers, and employees.<PAGE>
<PAGE> 15
(b) If a claim under paragraph (a) of this
Section is not paid in full by the Corporation, the claimant
may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered
to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the
Delaware General Corporation Law and paragraph (a) of this
Section for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the
circumstances because he or she has met the applicable
standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of
its final disposition conferred in this Section shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this
Certificate of Incorporation, bylaw, agreement, contract,
vote of stockholders or disinterested directors, or
otherwise.
(d) The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of
this Section, the Delaware General Corporation Law, or
otherwise.
SECOND: That the aforesaid amendment of the Restated
Certificate of Incorporation of said Corporation, set forth in
Paragraph FIRST hereinabove, has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by
D. C. Clark, its Chairman of the Board and Chief Executive
Officer, and J. D. Pinkerton, its Senior Vice President -
Administration and Secretary, this 13th day of May, 1987.
HOUSEHOLD INTERNATIONAL, INC.
[SEAL]
By: /s/ D. C. Clark
-------------------------
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ J. D. Pinkerton
- ----------------------------
Senior Vice President -
Administration and Secretary
A:\WP51\IC51387.WP<PAGE>
<PAGE> 16
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
9-1/2% Cumulative Preferred Stock, Series 1991-A
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), HEREBY CERTIFIES that the following resolutions
were duly adopted by the Board of Directors of the Corporation
and by the Preferred Stock Committee of the Board of Directors,
pursuant to authority conferred upon the Board of Directors by
the provisions of the Restated Certificate of Incorporation, as
amended, of the Corporation, and pursuant to authority conferred
upon the Preferred Stock Committee by the resolutions of the
Board of Directors set forth herein and in accordance with
Section 141(c) of the General Corporation Law of the State of
Delaware.
1. The Board of Directors has adopted the following
resolutions designating a Preferred Stock Committee of the Board
of Directors and authorizing the Preferred Stock Committee to act
on behalf of the Board of Directors (within certain limitations)
in connection with the designation, issuance and sale of shares
in one or more series of Preferred Stock of the Corporation:
"RESOLVED, that a Preferred Stock Committee of the
Board of Directors is hereby designated which shall have and
may exercise, to the fullest extent permitted by law, the
full power and authority of the Board of Directors with
respect to the issuance and sale of one or more new series
of the Corporation's Preferred Stock without par value (each
such series herein referred to as the "New Preferred
Stock"), including, without limitation, establishing the
purchase price therefor, and fixing the designations and any
of the preferences, powers, rights (other than voting powers
or voting rights which shall be fixed by the Board of
Directors) and relative, participating, optional or other
special rights and qualifications, limitations or
restrictions thereof, of such shares of each series of New
Preferred Stock, and fixing the number of shares of each
series of New Preferred Stock.
"FURTHER RESOLVED, that the Committee is authorized to
take such additional actions and adopt such additional
resolutions as it deems necessary or appropriate for the
purpose of authorizing and implementing the issuance, offer,
and sale for cash of New Preferred Stock, including, without
limiting the generality of the foregoing, the authorization
and execution of agreements (including underwriting
agreements) relating to the offer and sale of New Preferred
Stock, authorization and approval of listing applications
(including amendments or supplements thereto) for the
listing of such New Preferred Stock on a stock exchange,
approval of forms of stock certificates and authorization of
issuance of New Preferred Stock in uncertificated form, any
actions which may be necessary to qualify the offering and
sale of New Preferred Stock under Blue Sky Laws of the
various states, any necessary filings with the Secretary of
State of Delaware and other jurisdictions, and the
appointment of a transfer agent.
"FURTHER RESOLVED, that notwithstanding the foregoing
resolutions, the Preferred Stock Committee may not authorize
the sale of New Preferred Stock for more than $250 million
cash consideration in the aggregate, and the power and
authority of the Preferred Stock Committee set forth in the
preceding resolutions shall expire on September 12, 1991.
"FURTHER RESOLVED, that the members of the Preferred
Stock Committee shall be D. C. Clark, E. P. Hoffman, and
G. P. Osler. In the absence of Mr. Osler, A. E. Rasmussen
is designated as an alternate member of the Preferred Stock
Committee to serve in his place." <PAGE>
<PAGE> 17
2. The Board of Directors has adopted the following
resolution pertaining to the voting rights for series of
Preferred Stock authorized for issuance by the Preferred Stock
Committee of the Board of Directors:
"RESOLVED, that notwithstanding the resolution of the
Board of Directors adopted on October 17, 1989, the holders
of the Corporation's Flexible Rate Auction Preferred Stock,
Series A, and Flexible Rate Auction Preferred Stock, Series
B, and any other series of Preferred Stock which on or after
July 10, 1990, is authorized by the Preferred Stock
Committee of the Board of Directors to be issued and sold
pursuant to authority granted to the Preferred Stock
Committee by the Board of Directors (each such series herein
referred to as the "New Preferred Stock") shall have no
voting rights, and their consent shall not be required for
taking any corporate action, except as otherwise set forth
herein, except as otherwise required by law, and except as
otherwise provided by the Board of Directors with respect to
any particular series of New Preferred Stock.
The consent of the holders of the New Preferred Stock
with respect to the matters set forth in sub-sections (i)
and (iii) of paragraph (5) of Article IV of the
Corporation's Restated Certificate of Incorporation
("Paragraph (5)") shall not be required, except with respect
to the creation or issuance of any class of stock ranking
prior to or on a parity with the Preferred Stock, or any
series thereof, as to the payment of dividends or the
distribution of assets; but the other provisions of
Paragraph (5) shall be applicable to the New Preferred
Stock. The holders of the New Preferred Stock shall have no
right to elect directors pursuant to paragraph (6) of
Article IV of the Corporation's Restated Certificate of
Incorporation ("Paragraph (6)"), such right hereby being
expressly withheld.
In the event that any six quarterly cumulative
dividends (which shall be deemed to include dividends in
respect of a number of non-quarterly dividend periods
containing not less than 540 days), whether consecutive or
not, upon the New Preferred Stock shall be in arrears, the
holders of the New Preferred Stock shall have the right,
voting separately as a class with holders of shares of any
one or more other series of Preferred Stock ranking on a
parity with the New Preferred Stock either as to payment of
dividends or the distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and upon which like voting rights have been
conferred (which shall include the Corporation's 9-1/2%
Cumulative Preferred Stock, Series 1989-A) and are then
exercisable, at the next meeting of stockholders called for
the election of directors, to elect two members of the Board
of Directors. The right of such holders of such shares of
the New Preferred Stock, voting separately as a class, to
elect (together with the holders of shares of any one or
more other series of Preferred Stock ranking on such a
parity) members of the Board of Directors of the Corporation
as aforesaid shall continue until such time as all dividends
accumulated on such shares of the New Preferred Stock shall
have been paid in full, at which time such right shall
terminate, except as herein or by law expressly provided,
subject to revesting in the event of each and every
subsequent failure to pay dividends of the character above
mentioned.
Upon any termination of the right of the holders of the
New Preferred Stock as a class to elect directors as herein
provided, the term of office of all directors so elected
shall terminate immediately. If the office of any director
elected by such holders voting as a class becomes vacant by
reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the remaining director
elected by such holders voting as a class may choose a
successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Whenever the term
of office of the directors elected by such holders voting as
a class shall end and the special voting powers vested in<PAGE>
<PAGE> 18
such holders as provided in this resolution shall have
expired, the number of directors shall thereupon be such
number as may be provided for in the Corporation's Bylaws
irrespective of any increase made pursuant to the provisions
of this resolution.
Until all unpaid dividends on the New Preferred Stock
shall have been paid in full, and in order to permit the
holders of the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, and any other series of Preferred
Stock issued by the Corporation having the voting rights set
forth in Paragraph (6) to exercise fully the right to elect
directors as granted by and provided in paragraph (6), the
number of directors constituting the whole Board of
Directors of the Corporation shall not be less than seven.
If, upon any such arrearage in dividends, the number of
directors constituting the whole Board of Directors shall be
less than seven, the size of the Board of Directors shall,
immediately prior to the next meeting of stockholders called
for the election of directors, automatically be increased by
such number as shall be necessary to cause the number of
directors constituting the whole Board of Directors to be no
less than seven.
To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof in
respect of additional series of Preferred Stock, none of the
preferences or rights of any such additional series as fixed
by the Board of Directors shall rank prior to the New
Preferred Stock as to payment of dividends or the
distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary, without the
consent of the holders of two-thirds of the outstanding
shares of such series of New Preferred Stock voting as a
class.
The foregoing voting provisions shall not apply to any
series of New Preferred Stock if, at or prior to the time
when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of
such series of New Preferred Stock shall have been redeemed
or sufficient funds shall have been deposited in trust to
effect such redemption.
On any item in which the holders of New Preferred Stock
are entitled to vote, such holders shall be entitled to one
vote for each share held."
3. The Preferred Stock Committee of the Board of Directors
has adopted the following resolution pursuant to authority
conferred upon the Preferred Stock Committee of the Board of
Directors by the resolution of the Board of Directors set forth
in paragraph 1 above of this Certificate of Designation,
Preferences and Rights:
"RESOLVED, that the issue of a series of Preferred
Stock without par value of the Corporation is hereby
authorized and the designation, preferences and privileges,
relative, participating, optional and other special rights,
and qualifications, limitations and restrictions thereof, in
addition to those set forth in the Restated Certificate of
Incorporation, as amended, of the Corporation, are hereby
fixed as follows:
9-1/2% Cumulative Preferred Stock, Series 1991-A
(1) Number of Shares and Designation. 550,000 shares
of Preferred Stock without par value of the Corporation are
hereby constituted as a series of Preferred Stock without
par value and designated as 9-1/2% Cumulative Preferred
Stock, Series 1991-A (hereinafter called the "9-1/2%
Preferred Stock").
(2) Dividends. The holders of shares of the 9-1/2%
Preferred Stock shall be entitled to receive cash dividends,
when and as declared by the Board of Directors of the<PAGE>
<PAGE> 19
Corporation, out of assets legally available for such
purpose, at the rate determined as provided below. Such
dividends shall be cumulative from the date of original
issue of such shares and shall be payable quarterly in
arrears, when and as declared by the Board of Directors of
the Corporation, on the fifteenth day of January, April,
July and October in each year to holders of record on the
respective business days next preceding the first days of
those months (and the quarterly dividend periods shall
commence on the first days of those months).
Dividends on the 9-1/2% Preferred Stock for quarterly
dividend periods will be payable at the rate of 9-1/2% per
annum from the date of original issue applied to the amount
of $100 per share of 9-1/2% Preferred Stock. The amount of
dividends payable on each share of 9-1/2% Preferred Stock
for each full quarterly dividend period shall be computed by
dividing the dividend rate by four and applying the dividend
rate to the amount of $100 per share. The amount of
dividends payable for any dividend period shorter or longer
than a full quarterly dividend period shall be computed on
the basis of 30-day months, a 360-day year and the actual
number of days elapsed in the period.
(3) Liquidation Preference. The amount to which shares
of 9-1/2% Preferred Stock shall be entitled upon
liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, shall be $100 per share,
plus an amount equal to all accrued and unpaid dividends, if
any, thereon to the date fixed for payment, and no more.
(4) Redemption. The shares of 9-1/2% Preferred Stock
shall be subject to redemption in whole or in part at the
option of the Corporation on or after August 13, 1996, at
$100 per share, plus an amount equal to all accrued and
unpaid dividends, if any, thereon to the date fixed for
redemption, and no more.
(5) Shares to be Retired. All shares of 9-1/2%
Preferred Stock purchased or redeemed by the Corporation
shall be retired and cancelled and shall be restored to the
status of authorized but unissued shares of the class of
Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of
9-1/2% Preferred Stock.
(6) Conversion or Exchange. The holders of shares of
9-1/2% Preferred Stock shall not have any rights herein to
convert such shares into or exchange such shares for shares
of any other series of any class or classes of capital stock
(or any other security) of the Corporation.
(7) Ranking. The 9-1/2% Preferred Stock shall rank on
a parity with the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, 9-1/2% Cumulative Preferred Stock,
Series 1989-A, Flexible Rate Auction Preferred Stock, Series
A, Flexible Rate Auction Preferred Stock, Series B, and 11-
1/4% Enhanced Rate Cumulative Preferred Stock as to payment
of dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred
Stock as to payment of dividends and distribution of assets
upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, and prior to any other series of
stock authorized to be issued by the Corporation which ranks
junior to the $6.25 Cumulative Convertible Voting Preferred
Stock, 9-1/2% Cumulative Preferred Stock, Series 1989-A,
Flexible Rate Auction Preferred Stock, Series A, Flexible
Rate Auction Preferred Stock, Series B and 11-1/4% Enhanced
Rate Cumulative Preferred Stock as to payment of dividends
and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be signed
by David D. Wesselink, Vice President and Treasurer of the<PAGE>
<PAGE> 20
Corporation, and attested by Susan Casey, Assistant Secretary,
this 5th day of August, 1991.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ D. D. Wesselink
----------------------------
Vice President and Treasurer
Attest:
/s/ S. E. Casey
- -------------------
Assistant Secretary
A:\WP51\IC8591.WP<PAGE>
<PAGE> 21
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
8-1/4% Cumulative Preferred Stock, Series 1992-A
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), HEREBY CERTIFIES that the following resolutions
were duly adopted by the Board of Directors of the Corporation
and by the Preferred Stock Committee of the Board of Directors,
pursuant to authority conferred upon the Board of Directors by
the provisions of the Restated Certificate of Incorporation, as
amended, of the Corporation, and pursuant to authority conferred
upon the Preferred Stock Committee by the resolutions of the
Board of Directors set forth herein and in accordance with
Section 141(c) of the General Corporation Law of the State of
Delaware.
1. The Board of Directors has adopted the following
resolutions designating a Preferred Stock Committee of the Board
of Directors and authorizing the Preferred Stock Committee to act
on behalf of the Board of Directors (within certain limitations)
in connection with the designation, issuance and sale of shares
in one or more series of Preferred Stock of the Corporation:
"RESOLVED, that a Preferred Stock Committee of the
Board of Directors is hereby designated which shall have and
may exercise, to the fullest extent permitted by law, the
full power and authority of the Board of Directors with
respect to the issuance and sale of one or more new series
of the Corporation's Preferred Stock without par value (each
such series herein referred to as the "New Preferred
Stock"), including, without limitation, establishing the
purchase price therefor, and fixing the designations and any
of the preferences, powers, rights (other than voting powers
or voting rights which shall be fixed by the Board of
Directors) and relative, participating, optional or other
special rights and qualifications, limitations or
restrictions thereof, of such shares of each series of New
Preferred Stock, and fixing the number of shares of each
series of New Preferred Stock.
"FURTHER RESOLVED, that the Preferred Stock Committee
is authorized to take such additional actions and adopt such
additional resolutions as it deems necessary or appropriate
for the purpose of authorizing and implementing the
issuance, offer, and sale for cash of New Preferred Stock,
including, without limiting the generality of the foregoing,
the authorization and execution of agreements (including
underwriting agreements) relating to the offer and sale of
New Preferred Stock, authorization and approval of listing
applications (including amendments or supplements thereto)
for the listing of such New Preferred Stock on a stock
exchange, approval of forms of stock certificates and
authorization of issuance of New Preferred Stock in
uncertificated form, any actions which may be necessary to
qualify the offering and sale of New Preferred Stock under
Blue Sky Laws of the various states, any necessary filings
with the Secretary of State of Delaware and other
jurisdictions, and the appointment of a transfer agent.
"FURTHER RESOLVED, that notwithstanding the foregoing
resolutions, the Preferred Stock Committee may not authorize
the sale of New Preferred Stock for more than $150 million
cash consideration in the aggregate, and the power and
authority of the Preferred Stock Committee set forth in the
preceding resolutions shall expire on December 31, 1994,
unless extended by further action of the Board of Directors
of the Corporation.
"FURTHER RESOLVED, that the members of the Preferred
Stock Committee shall be D. C. Clark, E. P. Hoffman, and<PAGE>
<PAGE> 22
G. P. Osler. In the absence of Mr. Osler, A. E. Rasmussen
is designated as an alternate member of the Preferred Stock
Committee to serve in his place."
2. The Board of Directors has adopted the following
resolution pertaining to the voting rights for series of
Preferred Stock authorized for issuance by the Preferred Stock
Committee of the Board of Directors:
"RESOLVED, that holders of each series of the
Corporation's New Preferred Stock which is authorized by the
Preferred Stock Committee of the Board of Directors shall
have no voting rights, and their consent shall not be
required for taking any corporate action, except as
otherwise set forth herein, or as otherwise required by law,
and except as otherwise provided by the Board of Directors
with respect to any particular series of New Preferred
Stock.
The consent of the holders of the New Preferred Stock
with respect to the matters set forth in sub-sections (i)
and (iii) of paragraph (5) of Article IV of the
Corporation's Restated Certificate of Incorporation
("Paragraph (5)") shall not be required, except with respect
to the creation or issuance of any class of stock ranking
prior to or on a parity with the New Preferred Stock, or
any series thereof, as to the payment of dividends or the
distribution of assets; but the other provisions of
Paragraph (5) shall be applicable to the New Preferred
Stock. The holders of the New Preferred Stock shall have no
right to elect directors pursuant to paragraph (6) of
Article IV of the Corporation's Restated Certificate of
Incorporation ("Paragraph (6)"), such right hereby being
expressly withheld.
In the event that any six quarterly cumulative
dividends, whether consecutive or not, upon the New
Preferred Stock shall be in arrears, the holders of the New
Preferred Stock shall have the right, voting separately as a
class with holders of shares of any one or more other series
of Preferred Stock of the Corporation ranking on a parity
with the New Preferred Stock either as to payment of
dividends or the distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and upon which like voting rights have been
conferred and are then exercisable, at the next meeting of
stockholders called for the election of directors, to elect
two members of the Board of Directors. The right of such
holders of such shares of the New Preferred Stock, voting
separately as a class, to elect (together with the holders
of shares of any one or more other series of Preferred Stock
of the Corporation ranking on such a parity) members of the
Board of Directors of the Corporation as aforesaid shall
continue until such time as all dividends accumulated on
such shares of the New Preferred Stock shall have been paid
in full, at which time such right shall terminate, except as
herein or by law expressly provided, subject to revesting in
the event of each and every subsequent failure to pay
dividends of the character above mentioned.
Upon any termination of the right of the holders of the
New Preferred Stock as a class to elect directors as herein
provided, the term of office of all directors so elected
shall terminate immediately. If the office of any director
elected by such holders voting as a class becomes vacant by
reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the remaining director
elected by such holders voting as a class may choose a
successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Whenever the term
of office of the directors elected by such holders voting as
a class shall end and the special voting powers vested in
such holders as provided in this resolution shall have
expired, the number of directors shall thereupon be such
number as may be provided for in the Corporation's Bylaws
irrespective of any increase made pursuant to the provisions
of this resolution.
<PAGE>
<PAGE> 23
Until all unpaid dividends on the New Preferred Stock
shall have been paid in full, and in order to permit the
holders of the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, and any other series of Preferred
Stock issued by the Corporation having the voting rights set
forth in Paragraph (6) to exercise fully the right to elect
directors as granted by and provided in Paragraph (6), the
number of directors constituting the whole Board of
Directors of the Corporation shall not be less than seven.
If, upon any such arrearage in dividends, the number of
directors constituting the whole Board of Directors shall be
less than seven, the size of the Board of Directors shall,
immediately prior to the next meeting of stockholders called
for the election of directors, automatically be increased by
such number as shall be necessary to cause the number of
directors constituting the whole Board of Directors to be no
less than seven.
To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof in
respect of additional series of Preferred Stock, none of the
preferences or rights of any such additional series as fixed
by the Board of Directors shall rank prior to the New
Preferred Stock as to payment of dividends or the
distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary, without the
consent of the holders of two-thirds of the outstanding
shares of such series of New Preferred Stock voting as a
class.
The foregoing voting provisions shall not apply to any
series of New Preferred Stock if, at or prior to the time
when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of
such series of New Preferred Stock shall have been redeemed
or sufficient funds shall have been deposited in trust to
effect such redemption.
On any item in which the holders of New Preferred Stock
are entitled to vote, such holders shall be entitled to one
vote for each share held."
3. The Preferred Stock Committee of the Board of Directors
has adopted the following resolution pursuant to authority
conferred upon the Preferred Stock Committee of the Board of
Directors by the resolution of the Board of Directors set forth
in paragraph 1 above of this Certificate of Designation,
Preferences and Rights:
"RESOLVED, that the issue of a series of Preferred
Stock without par value of the Corporation is hereby
authorized and the designation, preferences and privileges,
relative, participating, optional and other special rights,
and qualifications, limitations and restrictions thereof, in
addition to those set forth in the Restated Certificate of
Incorporation, as amended, of the Corporation, are hereby
fixed as follows:
8-1/4% Cumulative Preferred Stock, Series 1992-A
(1) Number of Shares and Designation. 50,000 shares of
Preferred Stock without par value of the Corporation are
hereby constituted as a series of Preferred Stock without
par value and designated as 8-1/4% Cumulative Preferred
Stock, Series 1992-A (hereinafter called the "8-1/4%
Preferred Stock").
(2) Dividends. The holders of shares of the 8-1/4%
Preferred Stock shall be entitled to receive cash dividends,
when and as declared by the Board of Directors of the
Corporation, out of assets legally available for such
purpose, at the rate determined as provided below. Such
dividends shall be cumulative from the date of original
issue of such shares and shall be payable quarterly in
arrears, when and as declared by the Board of Directors of
the Corporation, on the fifteenth day of January, April,<PAGE>
<PAGE> 24
July and October in each year to holders of record on the
respective business days next preceding the first days of
those months (and the quarterly dividend periods shall
commence on the first days of those months).
Dividends on the 8-1/4% Preferred Stock for quarterly
dividend periods will be payable at the rate of 8-1/4% per
annum from the date of original issue applied to the amount
of $1,000 per share of 8-1/4% Preferred Stock. The amount
of dividends payable on each share of 8-1/4% Preferred Stock
for each full quarterly dividend period shall be computed by
dividing the dividend rate by four and applying the dividend
rate to the amount of $1,000 per share. The amount of
dividends payable for any dividend period shorter or longer
than a full quarterly dividend period shall be computed on
the basis of 30-day months, a 360-day year and the actual
number of days elapsed in the period.
(3) Liquidation Preference. The amount to which shares
of 8-1/4% Preferred Stock shall be entitled upon
liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, shall be $1,000 per share,
plus an amount equal to all accrued and unpaid dividends, if
any, thereon to the date fixed for payment, and no more.
(4) Redemption. The shares of 8-1/4% Preferred Stock
shall be subject to redemption in whole or in part at the
option of the Corporation on or after October 15, 2002, at
$1,000 per share, plus an amount equal to all accrued and
unpaid dividends, if any, thereon to the date fixed for
redemption, and no more.
(5) Shares to be Retired. All shares of 8-1/4%
Preferred Stock purchased or redeemed by the Corporation
shall be retired and cancelled and shall be restored to the
status of authorized but unissued shares of the class of
Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of
8-1/4% Preferred Stock.
(6) Conversion or Exchange. The holders of shares of
8-1/4% Preferred Stock shall not have any rights herein to
convert such shares into or exchange such shares for shares
of any other series of any class or classes of capital stock
(or any other security) of the Corporation.
(7) Ranking. The 8-1/4% Preferred Stock shall rank on
a parity with the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, 9-1/2% Cumulative Preferred Stock,
Series 1989-A, Flexible Rate Auction Preferred Stock, Series
A, Flexible Rate Auction Preferred Stock, Series B, 11-1/4%
Enhanced Rate Cumulative Preferred Stock and 9-1/2%
Cumulative Preferred Stock, Series 1991-A as to payment of
dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred
Stock as to payment of dividends and distribution of assets
upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, and prior to any other series of
stock authorized to be issued by the Corporation which ranks
junior to the $6.25 Cumulative Convertible Voting Preferred
Stock, 9-1/2% Cumulative Preferred Stock, Series 1989-A,
Flexible Rate Auction Preferred Stock, Series A, Flexible
Rate Auction Preferred Stock, Series B, 11-1/4% Enhanced
Rate Cumulative Preferred Stock and 9-1/2% Cumulative
Preferred Stock, Series 1991-A as to payment of dividends
and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be signed
by J. Richard Hull, Senior Vice President-Secretary of the<PAGE>
<PAGE> 25
Corporation, and attested by John W. Blenke, Assistant Secretary,
this 14th day of October, 1992.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ J. Richard Hull
----------------------
Senior Vice President-
Secretary
Attest:
/s/ John W. Blenke
- -------------------
Assistant Secretary
A:\WP51\IC101492.WP<PAGE>
<PAGE> 26
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Household International, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Restated Certificate of Incorporation, as
heretofore amended, of said Corporation has been further amended
by deleting, in its entirety, the first paragraph of Article IV
thereof and inserting the following as the new first paragraph of
Article IV:
The total number of shares that may be issued by
the Corporation is 158,155,004 of which 8,155,004
shares shall be Preferred Stock without par value and
150,000,000 shares shall be Common Stock of the par
value of $1 per share.
SECOND: That the aforesaid amendment of the Restated
Certificate of Incorporation of said Corporation, set forth in
Paragraph FIRST hereinabove, has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by
D. C. Clark, its Chairman of the Board and Chief Executive
Officer and J. W. Blenke, Assistant General Counsel and Assistant
Secretary, this 12th day of May, 1993.
HOUSEHOLD INTERNATIONAL, INC.
[SEAL]
By: /s/ D. C. Clark
-------------------------
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ J. W. Blenke
- -----------------------------
Assistant General Counsel and
Assistant Secretary
A:\WP51\IC51293.WP
<PAGE>
<PAGE> 27
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
7.35% Cumulative Preferred Stock, Series 1993-A
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), HEREBY CERTIFIES that the following resolutions
were duly adopted by the Board of Directors of the Corporation
and by the Offering Committee of the Board of Directors, pursuant
to authority conferred upon the Board of Directors by the
provisions of the Restated Certificate of Incorporation, as
amended, of the Corporation, and pursuant to authority conferred
upon the Offering Committee by the resolutions of the Board of
Directors set forth herein and in accordance with Section 141(c)
of the General Corporation Law of the State of Delaware.
1. The Board of Directors on May 12, 1993 has adopted the
following resolutions designating an Offering Committee of the
Board of Directors and authorizing the Offering Committee to act
on behalf of the Board of Directors (within certain limitations)
in connection with the designation, issuance and sale of shares
in one or more series of Preferred Stock, without par value, of
the Corporation:
"FURTHER RESOLVED, that an Offering Committee of the
Board of Directors is hereby designated which shall have and
may exercise, to the fullest extent permitted by law, the
full power and authority of the Board of Directors with
respect to the issuance and sale of (i) the Common Stock,
(ii) the Debt Securities or (iii) one or more new series of
the Corporation's Preferred Stock, including, without
limitation, establishing the purchase price therefore, and
fixing the designations and any of the preferences, powers,
rights (other than voting powers or voting rights which
shall be fixed by the Board of Directors) and relative,
participating, optional or other special rights and
qualifications, limitations or restrictions thereof, of such
shares of each series of Preferred Stock; and
"FURTHER RESOLVED, that notwithstanding the foregoing
resolutions, the power and authority of the Offering
Committee set forth in the preceding resolution shall expire
on June 30, 1995, unless extended by further action of the
Board of Directors of the Corporation; and
"FURTHER RESOLVED, that the members of the Offering
Committee shall be D. C. Clark, A. E. Rasmussen and G. P.
Osler. In the absence of any of the named directors, any
current director of the Corporation is designated as an
alternate member of the Offering Committee to serve in such
named director's place; and
"FURTHER RESOLVED, that the Offering Committee is
authorized to take such additional actions and adopt such
additional resolutions as it deems necessary or appropriate
for the purpose of authorizing and implementing the
issuance, offer, and sale for cash of Preferred Stock,
including, without limiting the generality of the foregoing,
the authorization and execution of agreements (including
underwriting agreements) relating to the offer and sale of
Preferred Stock, approval of forms of stock certificates and
authorization of issuance of Preferred Stock in
uncertificated form, any actions which may be necessary to
qualify the offering and sale of Preferred Stock under Blue
Sky Laws of the various states, any necessary filings with
the Secretary of State of Delaware and other jurisdictions,
and the appointment of a transfer agent; and
"FURTHER RESOLVED, that the Offering Committee is
hereby empowered, in connection with the issuance and sale
of any new series of the Corporation's Preferred Stock, to<PAGE>
<PAGE> 28
authorize the issuance and sale of depositary shares and
depositary receipts for such depositary shares with respect
to any such series of Preferred Stock, and to authorize the
appointment of a depositary, registrar, and transfer agent
for such depositary shares and depositary receipts, the
execution of a depositary agreement, and any additional
agreements or actions in connection therewith as the
Offering Committee deems necessary or appropriate."
2. The Board of Directors, on May 12, 1993, has adopted
the following resolution pertaining to the voting rights for
series of Preferred Stock, without par value, authorized for
issuance by the Offering Committee of the Board of Directors:
"FURTHER RESOLVED, that holders of each series of the
Corporation's Preferred Stock which is authorized by the
Offering Committee of the Board of Directors shall have no
voting rights, and their consent shall not be required for
taking any corporate action, except as otherwise set forth
herein or as otherwise required by law, and except as
otherwise provided by the Board of Directors with respect to
any particular series of Preferred Stock:
The consent of the holders of the Preferred Stock with
respect to the matters set forth in sub-sections (i) and
(iii) of paragraph (5) of Article IV of the Corporation's
Restated Certificate of Incorporation ("Paragraph (5)")
shall not be required, except with respect to the creation
or issuance of any class of stock ranking prior to or on a
parity with the Preferred Stock, or any series thereof, as
to the payment of dividends or the distribution of assets;
but the other provisions of Paragraph (5) shall be
applicable to the Preferred Stock. The holders of the
Preferred Stock shall have no right to elect directors
pursuant to paragraph (6) of Article IV of the Corporation's
Restated Certificate of Incorporation ("Paragraph (6)"),
such right hereby being expressly withheld.
In the event that any six quarterly cumulative
dividends, whether consecutive or not, upon the Preferred
Stock shall be in arrears, the holders of the Preferred
Stock shall have the right, voting separately as a class
with holders of shares of any one or more other series of
preferred stock of the Corporation ranking on a parity with
the Preferred Stock either as to payment of dividends or the
distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary, and upon which
like voting rights have been conferred and are then
exercisable, at the next meeting of stockholders called for
the election of directors, to elect two members of the Board
of Directors. The right of such holders of such shares of
the Preferred Stock, voting separately as a class, to elect
(together with the holders of shares of any one or more
other series of preferred stock of the Corporation ranking
on such a parity) members of the Board of Directors of the
Corporation as aforesaid shall continue until such time as
all dividends accumulated on such shares of the Preferred
Stock shall have been paid in full, at which time such right
shall terminate, except as herein or by law expressly
provided, subject to revesting in the event of each and
every subsequent failure to pay dividends of the character
above mentioned.
Upon any termination of the right of the holders of the
Preferred Stock as a class to elect directors as herein
provided, the term of office of all directors so elected
shall terminate immediately. If the office of any director
elected by such holders voting as a class becomes vacant by
reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the remaining director
elected by such holders voting as a class may choose a
successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Whenever the term
of office of the directors elected by such holders voting as
a class shall end and the special voting powers vested in
such holders as provided in this resolution shall have
expired, the number of directors shall thereupon be such
number as may be provided for in the Corporation's Bylaws<PAGE>
<PAGE> 29
irrespective of any increase made pursuant to the provisions
of this resolution.
Until all unpaid dividends on the Preferred Stock shall
have been paid in full, and in order to permit the holders
of the Corporation's $6.25 Cumulative Convertible Voting
Preferred Stock, and any other series of preferred stock
issued by the Corporation having the voting rights set forth
in Paragraph (6) to exercise fully the right to elect
directors as granted by and provided in Paragraph (6), the
number of directors constituting the whole Board of
Directors of the Corporation shall not be less than seven.
If, upon any such arrearage in dividends the number of
directors constituting the whole Board of Directors shall be
less than seven, the size of the Board of Directors shall,
immediately prior to the next meeting of stockholders called
for the election of directors, automatically be increased by
such number as shall be necessary to cause the number of
directors constituting the whole Board of Directors to be no
less than seven.
To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof in
respect of additional series of preferred stock, none of the
preferences or rights of any such additional series as fixed
by the Board of Directors shall rank prior to the Preferred
Stock as to payment of dividends or the distribution of
assets upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, without the consent of the holders
of two-thirds of the outstanding shares of such series of
Preferred Stock voting as a class.
The foregoing voting provisions shall not apply to any
series of Preferred Stock, if at or prior to the time when
the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of such
series of Preferred Stock shall have been redeemed or
sufficient funds shall have been deposited in trust to
effect such redemption.
On any item in which the holders of Preferred Stock are
entitled to vote, such holders shall be entitled to one vote
for each share held."
3. The Offering Committee of the Board of Directors has on
August 30, 1993 adopted the following resolution pursuant to
authority conferred upon the Offering Committee of the Board of
Directors by the resolutions of the Board of Directors set forth
in paragraph 1 above of this Certificate of Designation,
Preferences and Rights:
"RESOLVED, that the issue of a series of Preferred
Stock without par value of the Corporation is hereby
authorized and the designation, preferences and privileges,
relative, participating, optional and other special rights,
and qualifications, limitations and restrictions thereof, in
addition to those set forth in the Restated Certificate of
Incorporation, as amended, of the Corporation, are hereby
fixed as follows:
7.35% Cumulative Preferred Stock, Series 1993-A
(1) Number of Shares and Designation. 100,000 shares
of Preferred Stock without par value of the Corporation are
hereby constituted as a series of Preferred Stock without
par value and designated as 7.35% Cumulative Preferred
Stock, Series 1993-A (hereinafter called the "7.35%
Preferred Stock").
(2) Dividends. The holders of shares of the 7.35%
Preferred Stock shall be entitled to receive cash dividends,
when and as declared by the Board of Directors of the
Corporation, out of assets legally available for such
purpose, at the rate determined as provided below. Such
dividends shall be cumulative from the date of original
issue of such shares and shall be payable quarterly in<PAGE>
<PAGE> 30
arrears, when and as declared by the Board of Directors of
the Corporation, on the fifteenth day of January, April,
July and October in each year to holders of record on the
respective business days next preceding the first days of
those months (and the quarterly dividend periods shall
commence on the first days of those months).
Dividends on the 7.35% Preferred Stock for quarterly
dividend periods will be payable at the rate of 7.35% per
annum from the date of original issue applied to the amount
of $1,000 per share of 7.35% Preferred Stock. The amount of
dividends payable on each share of 7.35% Preferred Stock for
each full quarterly dividend period shall be computed by
dividing the dividend rate by four and applying the dividend
rate to the amount of $1,000 per share. The amount of
dividends payable for any dividend period shorter or longer
than a full quarterly dividend period shall be computed on
the basis of 30-day months, a 360-day year and the actual
number of days elapsed in the period.
(3) Liquidation Preference. The amount to which shares
of 7.35% Preferred Stock shall be entitled upon liquidation,
dissolution, or winding up of the Corporation, whether
voluntary or involuntary, shall be $1,000 per share, plus an
amount equal to all accrued and unpaid dividends, if any,
thereon to the date fixed for payment, and no more.
(4) Redemption. The shares of 7.35% Preferred Stock
shall be subject to redemption in whole or in part at the
option of the Corporation on or after October 15, 1998 at
$1,000 per share, plus an amount equal to all accrued and
unpaid dividends, if any, thereon to the date fixed for
redemption, and no more.
(5) Shares to be Retired. All shares of 7.35%
Preferred Stock purchased or redeemed by the Corporation
shall be retired and cancelled and shall be restored to the
status of authorized but unissued shares of the class of
Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of
7.35% Preferred Stock.
(6) Conversion or Exchange. The holders of shares of
7.35% Preferred Stock shall not have any rights herein to
convert such shares into or exchange such shares for shares
of any other series of any class or classes of capital stock
(or any other security) of the Corporation.
(7) Ranking. The 7.35% Preferred Stock shall rank on a
parity with the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, 9-1/2% Cumulative Preferred Stock,
Series 1989-A, Flexible Rate Auction Preferred Stock, Series
B, 11-1/4% Enhanced Rate Cumulative Preferred Stock, 9-1/2%
Cumulative Preferred Stock, Series 1991-A and 8-1/4%
Cumulative Preferred Stock, Series 1992-A as to payment of
dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred
Stock as to payment of dividends and distribution of assets
upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, and prior to any other series of
stock authorized to be issued by the Corporation which ranks
junior to the $6.25 Cumulative Convertible Voting Preferred
Stock, 9-1/2% Cumulative Preferred Stock, Series 1989-A,
Flexible Rate Auction Preferred Stock, Series B, 11-1/4%
Enhanced Rate Cumulative Preferred Stock, 9-1/2% Cumulative
Preferred Stock, Series 1991-A and 8-1/4% Cumulative
Preferred Stock, Series 1992-A as to payment of dividends
and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be signed
by J. Richard Hull, Senior Vice President-Secretary and General
Counsel of the Corporation, and attested by John W. Blenke,<PAGE>
<PAGE> 31
Assistant General Counsel and Assistant Secretary, this 1st day
of September, 1993.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ J. Richard Hull
----------------------
Senior Vice President-
Secretary and General
Counsel
Attest:
/s/ John W. Blenke
- -----------------------------
Assistant General Counsel and
Assistant Secretary
<PAGE>
<PAGE> 32
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
HOUSEHOLD INTERNATIONAL, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Household International, Inc., a corporation organized
and existing under the General Corporation Law of the State of
Delaware (hereinafter called the "Corporation"), hereby certifies
that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on
July 9, 1996:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (hereinafter
called the "Board of Directors" or the "Board") in accordance
with the provisions of the Restated Certificate of Incorporation,
the Board hereby creates a series of Preferred Stock, without par
value (the "Preferred Stock"), of the Corporation and hereby
states the designation and number of shares, and fixes the
relative rights, preferences, and limitations thereof as follows:
FURTHER RESOLVED, that pursuant to the authority
granted to and vested in the Board in accordance with the
provisions of the Restated Certificate of Incorporation, the
consent of the holders of Series A Preferred Stock with respect
to the matters set forth in sub-sections (i) and (iii) of para-
graph (5) of Article IV of the Corporation's Restated Certificate
of Incorporation ("Paragraph (5)") shall not be required; but the
other provisions of Paragraph (5) shall be applicable to the
Series A Preferred Stock. The holders of the Series A Preferred
Stock shall have no right to elect directors per paragraph (6) of
Article IV of the Corporation's Restated Certificate of
Incorporation, such right hereby being expressly withheld:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock") and the number
of shares constituting the Series A Preferred Stock shall be
150,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided that no decrease
shall reduce the number of shares of Series A Preferred Stock to
a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible
into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock)
ranking prior and superior to the Series A Preferred Stock
with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common
Stock, par value $1.00 per share (the "Common Stock"), of
the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the fifteenth day
January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of
(a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in<PAGE>
<PAGE> 33
shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issu-
ance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share
on the Series A Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of
Series A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment here-
inafter set forth, each share of Series A Preferred Stock
shall entitle the holder thereof to 1,000 votes on all
matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of<PAGE>
<PAGE> 34
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred
Stock or any similar stock, or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of
the Corporation.
(C) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking
any corporate action.
(D) The consent of the holders of Series A Preferred
Stock with respect to the matters set forth in sub-sections
(i) and (iii) of paragraph (5) of Article IV of the
Corporation's Restated Certificate of Incorporation
("Paragraph 5") shall not be required, ; but the other
provisions of Paragraph (5) shall be applicable to the
Series A Preferred Stock. The holders of the Series A
Preferred Stock shall have no right to elect directors
pursuant to paragraph (6) of Article IV of the Corporation's
Restated Certificate of Incorporation, such right hereby
being expressly withheld.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation, dis-
solution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding
up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the
Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend<PAGE>
<PAGE> 35
rates and other relative rights and preferences of the
respective series and classes, shall determine in good
faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless
the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time
and in such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the Corpo-
ration, no distribution shall be made (1) to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1,000 per share, plus an
amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount to be distributed per
share to holders of shares of Common Stock, or (2) to the holders
of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series
A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately
prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the de-
nominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject
to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of<PAGE>
<PAGE> 36
shares of Series A Preferred Stock shall be adjusted by mul-
tiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A
Preferred Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall
rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class
of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incor-
poration of the Corporation shall not be amended in any manner
which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Chief Executive
Officer or Chief Financial Officer and attested by its Secretary
this 9th day of July, 1996.
/s/ William F. Aldinger
--------------------------
Chief Executive Officer or
Chief Financial Officer
Attest:
/s/ Paul R. Shay
- ----------------
Secretary
U:\LAW\EDGAR\IC7996.WP
<PAGE> 1
July 9, 1996
Mr. William F. Aldinger
2700 Sanders Road
Prospect Heights, IL 60070
Dear Bill:
SUBJECT: Amendment and Restatement of Employment Agreement
Dated February 13, 1995
- -----------------------------------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction arising
out of uncertain personal circumstances in a change in control
environment. We recognize that in the event of a Change in
Control of Household (as such term is defined herein) it is
likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Chairman and
Chief Executive Officer. In that capacity you are
entitled to the following:
a. A minimum annual salary of $700,000;
b. An annual bonus having a targeted value equal to
100% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if
any, will depend on the achievement of the corporate
goals and your individual goals established for that
year and the terms of the Household International
Corporate Executive Bonus Plan, and any successor or
substitute plan or plans (the "Bonus Plan"). Your
bonus will be prorated based on the number of
elapsed months in the performance period in the case
of death, permanent and total disability, or
retirement under the Household Retirement Income
Plan or any successor tax qualified defined benefit
plan;
c. An annual grant of stock options under the Household
International 1996 Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 40% of your then annual salary at
the time of the grant. Stock options will be valued
at their economic value at the date of grant; and
d. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to termination as provided herein, the term of
this Agreement shall be for 18 whole calendar months,
shall commence on the date hereof, and shall be
"evergreen"; that is shall continue monthly as an 18
month term, unless the Corporation gives to you not less
than 17 whole calendar months notice that the term as
monthly continued shall not be so continued; provided
further, that in no event shall the term be continued
beyond your sixty-fifth birthday.
3. During your employment with Household you will devote
your reasonably full time and energies to the faithful
and diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it
is mutually agreed that:
<PAGE>
<PAGE> 2
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because
within 6 whole calendar months of your resignation
one or more of the following events occurred to you:
i. your annual salary was reduced;
ii. your annual target bonus or the targeted
value of stock options calculated as provided
in paragraph 1c was reduced and compensation
equivalent in aggregate value was not
substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified
status and such reductions were not
supplemented in the Household Supplemental
Retirement Income Plan ("HSRIP"); or your
benefits under HSRIP were reduced;
iv. your other benefits or perquisites were
reduced and such reductions were not
uniformally applied with respect to all
similarly situated employees;
v. you were reassigned to a geographical area
outside of the Chicago, Illinois metropolitan
area;
vi. any successor to the Corporation by
acquisition of stock or substantially all of
the assets, by merger or otherwise, failed to
expressly adopt or otherwise repudiated this
Employment Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount
equal to 200% of your then annual salary (prior to any
of the aforesaid reductions) plus 200% of the average of
the last two years' bonuses; provided, however, if the
term of this Agreement is less than 18 months because
you are within 18 months of becoming age 65, the amount
shall be multiplied by a fraction the numerator of which
is the number of months left in the term, and the
denominator of which is 18. This payment shall be in
addition to all other compensation and benefits accrued
to the date of termination of employment.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position for any reason
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including
the lump sum payment) described in paragraph 4<PAGE>
<PAGE> 3
regardless of whether you are otherwise entitled to them
under paragraph 4. In addition, Household or its
successor shall promptly make a lump sum cash payment to
you in an amount equal to 200% of your then annual
salary (prior to any reduction) plus 200% of the average
of the last two years' bonuses; provided, however, if
the term of this Agreement is less than 18 months
because you are within 18 months of becoming age 65, the
amount shall be multiplied by a fraction the numerator
of which is the number of months left in the term, and
the denominator of which is 18.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d)
and Section 14(d)(2) of the Securities Exchange Act
of 1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the
Board of Directors of Household or its successor by
merger, consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you
as the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. This Agreement was entered into prior to March 29, 1995,
which was the date that regulations were proposed by the
Federal Deposit Insurance Corporation (the "FDIC")
limiting golden parachute and indemnification payments
by insured depository institutions and their holding
companies. At that March date the Agreement provided
for a lump sum payment equal to 600% of your annual
salary. In view of the foregoing, if the lump sum
payments under paragraphs 4 and 5 are otherwise limited
by the FDIC regulations, any limits on "golden
parachute" payments resulting from regulations issued by
the FDIC should not reduce the lump sum payments under
this Agreement below the lesser of 600% of your then
annual salary (prior to any reduction) or the lump sum
amounts calculated under paragraphs 4 and 5.
8. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event
that any excise tax is assessed against you pursuant to
the provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or
its successor shall assume that you are taxed at the
highest individual federal and state income tax rates
(without regard to Section 1(g) of the Code or successor
provisions thereto).
<PAGE>
<PAGE> 4
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning
of section 280G(b)(2)(A) of the Code, and a reduction of
the amount by 10% or less would totally avoid the
imposition of any excise tax, such amounts shall be
reduced so that the aggregate present value of the
amounts constituting such parachute payments will be
equal to 299% of your "annualized includible
compensation for the base period," as such term is
defined in section 280G(d)(1) of the Code. For the
purpose of this subparagraph, present value shall be
determined in accordance with section 280G(d)(4) of the
Code.
9. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so
has expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of
such a judgment, all reasonable legal and other
professional fees and expenses incurred by you in
contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing
your claim will be promptly paid by Household or its
successor with interest thereon at the highest statutory
rate of your state of domicile for interest on judgments
against private parties from the date of payment thereof
by you to the date of reimbursement to you by Household
or its successor.
10. You agree that you will not, without prior written
consent of the Board of Directors of Household, during
the term of or after the termination of your employment
under this Agreement, directly or indirectly, disclose
to any individual, corporation, or other entity (other
than Household, or any subsidiary or affiliate thereof,
or its officers, directors, or employees entitled to
such information, or any other person or entity to whom
such information is regularly disclosed in the normal
course of Household's business), or use for your own
benefit or for the benefit of such individual,
corporation or other entity, any information whether or
not reduced to written or other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall
cease to be subject to the restrictions of this
paragraph.
11. The provisions of this Agreement shall be construed, to
the extent possible, so as to guarantee their
enforceability. In case any one or more of the
provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of
this Agreement, and this Agreement shall be construed as
if such invalid, illegal, or unenforceable provision had
never been contained in it.
12. This Agreement is an Amendment and Restatement of the
Employment Agreement dated February 13, 1995, between<PAGE>
<PAGE> 5
you and Household and supersedes said Agreement, in
furtherance of the objectives authorized and deemed by
the Board of Directors of Household to serve the best
interests of the Corporation.
13. Any successor to the Corporation, by acquisition of
stock or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
14. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require
the segregation of any funds or property.
Notwithstanding the foregoing, in the discretion of the
Corporation, the Corporation may establish a grantor
trust or other vehicle to assist it in meeting its
obligations hereunder, but any such trust or other
vehicle shall not create a funded account or security
interest for you.
15. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Raymond C. Tower
--------------------
Raymond C. Tower
Chairman of the
Compensation Committee
/s/ William F. Aldinger
-----------------------
William F. Aldinger
U:\LAW\EDGAR\IEX109.AS1
<PAGE> 1
July 9, 1996
Mr. Joseph W. Saunders
Household Credit Services, Inc.
1441 Schilling Place
Salinas, CA 93901
Dear Joe:
SUBJECT: Amendment and Restatement of Employment Agreement
Dated July 11, 1994
- -----------------------------------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction arising
out of uncertain personal circumstances in a change in control
environment. We recognize that in the event of a Change in
Control of Household (as such term is defined herein) it is
likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Group
Executive. In that capacity you are entitled to the
following:
a. A minimum annual salary of $400,000;
b. An annual bonus having a targeted value equal to
90% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if
any, will depend on the achievement of the corporate
goals and your individual goals established for that
year and the terms of the Household International
Corporate Executive Bonus Plan, and any successor or
substitute plan or plans (the "Bonus Plan"). Your
bonus will be prorated based on the number of
elapsed months in the performance period in the case
of death, permanent and total disability, or
retirement under the Household Retirement Income
Plan or any successor tax qualified defined benefit
plan;
c. An annual grant of stock options under the Household
International 1996 Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. The performance unit awards
granted in prior years will continue to be earned
over a three year cycle, which will be prorated on
the number of elapsed months in the performance
period in the case of death, permanent and total
disability or retirement under the Household
Retirement Income Plan or any successor tax
qualified defined benefit plan. Stock options will
be valued at their economic value at the date of
grant; and
d. A one-time grant on February 1, 1994, of Performance
Share Awards which will vest at 25% on the third
anniversary of the date of grant if a performance
unit award payment is made with respect to the award
granted for the three-year cycle 1994-1996, 25% on
the fourth anniversary if a performance unit award
payment is made with respect to the award granted
for the three-year cycle 1995-1997, and 50% on the
fifth anniversary if a performance unit award
payment is made with respect to the award granted
for the three-year cycle 1996-98. In the event that
your employment is terminated pursuant to the
provisions of paragraph 4a or if you resign pursuant
to the provisions of paragraph 4b(i), 4b(vi),<PAGE>
<PAGE> 2
4b(vii) or 5c, you will receive 100% of the shares
represented by the Performance Share Award on your
last day of employment regardless of whether you
have completed the vesting period or the performance
condition has been met; and
e. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to termination as provided herein, the term of
this Agreement shall be for 18 whole calendar months,
shall commence on the date hereof, and shall be
"evergreen"; that is shall continue monthly as an 18
month term, unless the Corporation gives to you not less
than 17 whole calendar months notice that the term as
monthly continued shall not be so continued; provided
further, that in no event shall the term be continued
beyond your sixty-fifth birthday.
3. During your employment with Household you will devote
your reasonably full time and energies to the faithful
and diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it
is mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because
within 6 whole calendar months of your resignation
one or more of the following events occurred to you:
i. your annual salary was reduced;
ii. your annual target bonus or the targeted
value of stock options calculated as provided
in paragraph 1c was reduced and compensation
equivalent in aggregate value was not
substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified
status and such reductions were not
supplemented in the Household Supplemental
Retirement Income Plan ("HSRIP"); or your
benefits under HSRIP were reduced;
iv. your other benefits or perquisites were
reduced and such reductions were not
uniformally applied with respect to all
similarly situated employees;
v. you were reassigned to a geographical area
outside of the Salinas, California area;
vi. any successor to the Corporation by
acquisition of stock or substantially all of
the assets, by merger or otherwise, failed to
expressly adopt or otherwise repudiated this
Employment Agreement; or<PAGE>
<PAGE> 3
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount
equal to 200% of your then annual salary (prior to any
of the aforesaid reductions) plus 200% of the average of
the last two years' bonuses; provided, however, if the
term of this Agreement is less than 18 months because
you are within 18 months of becoming age 65, the amount
shall be multiplied by a fraction the numerator of which
is the number of months left in the term, and the
denominator of which is 18. This payment shall be in
addition to all other compensation and benefits accrued
to the date of termination of employment. Also, the
Compensation Committee of Household's Board of Directors
has determined that you will be entitled to receive a
portion of your performance unit awards for the
performance period in which your employment terminates.
Such portion will be determined on the basis of the
portion of the performance period elapsed as of your
date of termination over the total performance period,
and it will be assumed that individual and corporate
target levels have been met.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including
the lump sum payment) described in paragraph 4
regardless of whether you are otherwise entitled to them
under paragraph 4. In addition, Household or its
successor shall promptly make a lump sum cash payment to
you in an amount equal to 200% of your then annual
salary (prior to any reduction) plus 200% of the average
of the last two years' bonuses; provided, however, if
the term of this Agreement is less than 18 months
because you are within 18 months of becoming age 65, the
amount shall be multiplied by a fraction the numerator
of which is the number of months left in the term, and
the denominator of which is 18.
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not
receive at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of stock options under the Long-Term Plan
for years in which awards were payable under the
Long-Term Plan as it existed prior to the Change in
Control,
both at corporate and individual target levels as those
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign,
payments shall be made to you as outlined earlier in
this paragraph 5.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
<PAGE>
<PAGE> 4
A. any "person" (as the term is used in Section 13(d)
and Section 14(d)(2) of the Securities Exchange Act
of 1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the
Board of Directors of Household or its successor by
merger, consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you
as the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. This Agreement was entered into prior to March 29, 1995,
which was the date that regulations were proposed by the
Federal Deposit Insurance Corporation (the "FDIC")
limiting golden parachute and indemnification payments
by insured depository institutions and their holding
companies. At that March date the Agreement provided
for a lump sum payment equal to 582% of your annual
salary. In view of the foregoing, if the lump sum
payments under paragraphs 4 and 5 are otherwise limited
by the FDIC regulations, any limits on "golden
parachute" payments resulting from regulations issued by
the FDIC should not reduce the lump sum payments under
this Agreement below the lesser of 582% of your then
annual salary (prior to any reduction) or the lump sum
amounts calculated under paragraphs 4 and 5.
8. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event
that any excise tax is assessed against you pursuant to
the provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or
its successor shall assume that you are taxed at the
highest individual federal and state income tax rates
(without regard to Section 1(g) of the Code or successor
provisions thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning
of section 280G(b)(2)(A) of the Code, and a reduction of
the amount by 10% or less would totally avoid the
imposition of any excise tax, such amounts shall be
reduced so that the aggregate present value of the
amounts constituting such parachute payments will be
equal to 299% of your "annualized includible
compensation for the base period," as such term is
defined in section 280G(d)(1) of the Code. For the
purpose of this subparagraph, present value shall be
determined in accordance with section 280G(d)(4) of the
Code.<PAGE>
<PAGE> 5
9. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so
has expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of
such a judgment, all reasonable legal and other
professional fees and expenses incurred by you in
contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing
your claim will be promptly paid by Household or its
successor with interest thereon at the highest statutory
rate of your state of domicile for interest on judgments
against private parties from the date of payment thereof
by you to the date of reimbursement to you by Household
or its successor.
10. You agree that you will not, without prior written
consent of the Chief Executive Officer or the General
Counsel of Household, during the term of or after the
termination of your employment under this Agreement,
directly or indirectly, disclose to any individual,
corporation, or other entity (other than Household, or
any subsidiary or affiliate thereof, or its officers,
directors, or employees entitled to such information, or
any other person or entity to whom such information is
regularly disclosed in the normal course of Household's
business), or use for your own benefit or for the
benefit of such individual, corporation or other entity,
any information whether or not reduced to written or
other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall
cease to be subject to the restrictions of this
paragraph.
11. The provisions of this Agreement shall be construed, to
the extent possible, so as to guarantee their
enforceability. In case any one or more of the
provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of
this Agreement, and this Agreement shall be construed as
if such invalid, illegal, or unenforceable provision had
never been contained in it.
12. This Agreement is an Amendment and Restatement of the
Employment Agreement dated July 11, 1994, between you
and Household and supersedes said Agreement. This
Agreement also supersedes the Employment Agreement dated
April 22, 1994, the Employment Agreement dated May 28,
1993, the Employment Agreement dated May 1, 1991, and
the Employment Agreement dated August 16, 1990, between
you and Household, all in furtherance of the objectives
authorized and deemed by the Board of Directors of
Household to serve the best interests of the
Corporation.
13. Any successor to the Corporation, by acquisition of
stock or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the<PAGE>
<PAGE> 6
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
14. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require
the segregation of any funds or property.
Notwithstanding the foregoing, in the discretion of the
Corporation, the Corporation may establish a grantor
trust or other vehicle to assist it in meeting its
obligations hereunder, but any such trust or other
vehicle shall not create a funded account or security
interest for you.
15. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
-----------------------
William F. Aldinger
Chief Executive Officer
/s/ Joseph W. Saunders
----------------------
Joseph W. Saunders
U:\LAW\EDGAR\IEX1011.AS1
<PAGE> 1
July 9, 1996
Mr. Robert F. Elliott
2700 Sanders Road
Prospect Heights, IL 60070
Dear Bob:
SUBJECT: Amendment and Restatement of Employment Agreement
Dated July 11, 1994
- -----------------------------------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction arising
out of uncertain personal circumstances in a change in control
environment. We recognize that in the event of a Change in
Control of Household (as such term is defined herein) it is
likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Group
Executive. In that capacity you are entitled to the
following:
a. A minimum annual salary of $400,000;
b. An annual bonus having a targeted value equal to
90% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if
any, will depend on the achievement of the corporate
goals and your individual goals established for that
year and the terms of the Household International
Corporate Executive Bonus Plan, and any successor or
substitute plan or plans (the "Bonus Plan"). Your
bonus will be prorated based on the number of
elapsed months in the performance period in the case
of death, permanent and total disability, or
retirement under the Household Retirement Income
Plan or any successor tax qualified defined benefit
plan;
c. An annual grant of stock options under the Household
International 1996 Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. The performance unit awards
granted in prior years will continue to be earned
over a three year cycle, which will be prorated on
the number of elapsed months in the performance
period in the case of death, permanent and total
disability or retirement under the Household
Retirement Income Plan or any successor tax
qualified defined benefit plan. Stock options will
be valued at their economic value at the date of
grant; and
d. A one-time grant on February 1, 1994, of Performance
Share Awards which will vest at 25% on the third
anniversary of the date of grant if a performance
unit award payment is made with respect to the award
granted for the three-year cycle 1994-1996, 25% on
the fourth anniversary if a performance unit award
payment is made with respect to the award granted
for the three-year cycle 1995-1997, and 50% on the
fifth anniversary if a performance unit award
payment is made with respect to the award granted
for the three-year cycle 1996-98. In the event that
your employment is terminated pursuant to the
provisions of paragraph 4a or if you resign pursuant<PAGE>
<PAGE> 2
to the provisions of paragraph 4b(i), 4b(vi),
4b(vii) or 5c, you will receive 100% of the shares
represented by the Performance Share Award on your
last day of employment regardless of whether you
have completed the vesting period or the performance
condition has been met; and
e. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to termination as provided herein, the term of
this Agreement shall be for 18 whole calendar months,
shall commence on the date hereof, and shall be
"evergreen"; that is shall continue monthly as an 18
month term, unless the Corporation gives to you not less
than 17 whole calendar months notice that the term as
monthly continued shall not be so continued; provided
further, that in no event shall the term be continued
beyond your sixty-fifth birthday.
3. During your employment with Household you will devote
your reasonably full time and energies to the faithful
and diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it
is mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because
within 6 whole calendar months of your resignation
one or more of the following events occurred to you:
i. your annual salary was reduced;
ii. your annual target bonus or the targeted
value of stock options calculated as provided
in paragraph 1c was reduced and compensation
equivalent in aggregate value was not
substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified
status and such reductions were not
supplemented in the Household Supplemental
Retirement Income Plan ("HSRIP"); or your
benefits under HSRIP were reduced;
iv. your other benefits or perquisites were
reduced and such reductions were not
uniformally applied with respect to all
similarly situated employees;
v. you were reassigned to a geographical area
outside of the Chicago, Illinois metropolitan
area;
vi. any successor to the Corporation by
acquisition of stock or substantially all of
the assets, by merger or otherwise, failed to<PAGE>
<PAGE> 3
expressly adopt or otherwise repudiated this
Employment Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount
equal to 200% of your then annual salary (prior to any
of the aforesaid reductions) plus 200% of the average of
the last two years' bonuses; provided, however, if the
term of this Agreement is less than 18 months because
you are within 18 months of becoming age 65, the amount
shall be multiplied by a fraction the numerator of which
is the number of months left in the term, and the
denominator of which is 18. This payment shall be in
addition to all other compensation and benefits accrued
to the date of termination of employment. Also, the
Compensation Committee of Household's Board of Directors
has determined that you will be entitled to receive a
portion of your performance unit awards for the
performance period in which your employment terminates.
Such portion will be determined on the basis of the
portion of the performance period elapsed as of your
date of termination over the total performance period,
and it will be assumed that individual and corporate
target levels have been met.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including
the lump sum payment) described in paragraph 4
regardless of whether you are otherwise entitled to them
under paragraph 4. In addition, Household or its
successor shall promptly make a lump sum cash payment to
you in an amount equal to 200% of your then annual
salary (prior to any reduction) plus 200% of the average
of the last two years' bonuses; provided, however, if
the term of this Agreement is less than 18 months
because you are within 18 months of becoming age 65, the
amount shall be multiplied by a fraction the numerator
of which is the number of months left in the term, and
the denominator of which is 18.
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not
receive at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of stock options under the Long-Term Plan
for years in which awards were payable under the
Long-Term Plan as it existed prior to the Change in
Control,
both at corporate and individual target levels as those
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign,
payments shall be made to you as outlined earlier in
this paragraph 5.
<PAGE>
<PAGE> 4
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d)
and Section 14(d)(2) of the Securities Exchange Act
of 1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the
Board of Directors of Household or its successor by
merger, consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you
as the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. This Agreement was entered into prior to March 29, 1995,
which was the date that regulations were proposed by the
Federal Deposit Insurance Corporation (the "FDIC")
limiting golden parachute and indemnification payments
by insured depository institutions and their holding
companies. At that March date the Agreement provided
for a lump sum payment equal to 879% of your annual
salary. In view of the foregoing, if the lump sum
payments under paragraphs 4 and 5 are otherwise limited
by the FDIC regulations, any limits on "golden
parachute" payments resulting from regulations issued by
the FDIC should not reduce the lump sum payments under
this Agreement below the lesser of 879% of your then
annual salary (prior to any reduction) or the lump sum
amounts calculated under paragraphs 4 and 5.
8. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event
that any excise tax is assessed against you pursuant to
the provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or
its successor shall assume that you are taxed at the
highest individual federal and state income tax rates
(without regard to Section 1(g) of the Code or successor
provisions thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning
of section 280G(b)(2)(A) of the Code, and a reduction of
the amount by 10% or less would totally avoid the
imposition of any excise tax, such amounts shall be
reduced so that the aggregate present value of the
amounts constituting such parachute payments will be
equal to 299% of your "annualized includible
compensation for the base period," as such term is
defined in section 280G(d)(1) of the Code. For the
purpose of this subparagraph, present value shall be<PAGE>
<PAGE> 5
determined in accordance with section 280G(d)(4) of the
Code.
9. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so
has expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of
such a judgment, all reasonable legal and other
professional fees and expenses incurred by you in
contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing
your claim will be promptly paid by Household or its
successor with interest thereon at the highest statutory
rate of your state of domicile for interest on judgments
against private parties from the date of payment thereof
by you to the date of reimbursement to you by Household
or its successor.
10. You agree that you will not, without prior written
consent of the Chief Executive Officer or the General
Counsel of Household, during the term of or after the
termination of your employment under this Agreement,
directly or indirectly, disclose to any individual,
corporation, or other entity (other than Household, or
any subsidiary or affiliate thereof, or its officers,
directors, or employees entitled to such information, or
any other person or entity to whom such information is
regularly disclosed in the normal course of Household's
business), or use for your own benefit or for the
benefit of such individual, corporation or other entity,
any information whether or not reduced to written or
other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall
cease to be subject to the restrictions of this
paragraph.
11. The provisions of this Agreement shall be construed, to
the extent possible, so as to guarantee their
enforceability. In case any one or more of the
provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of
this Agreement, and this Agreement shall be construed as
if such invalid, illegal, or unenforceable provision had
never been contained in it.
12. This Agreement is an Amendment and Restatement of the
Employment Agreement dated July 11, 1994, between you
and Household and supersedes said Agreement. This
Agreement also supersedes the Employment Agreement dated
April 22, 1994, the Employment Agreement dated May 28,
1993, the Employment Agreement dated May 1, 1991, and
the Employment Agreement dated August 16, 1990, between
you and Household, all in furtherance of the objectives
authorized and deemed by the Board of Directors of
Household to serve the best interests of the
Corporation.<PAGE>
<PAGE> 6
13. Any successor to the Corporation, by acquisition of
stock or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
14. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require
the segregation of any funds or property.
Notwithstanding the foregoing, in the discretion of the
Corporation, the Corporation may establish a grantor
trust or other vehicle to assist it in meeting its
obligations hereunder, but any such trust or other
vehicle shall not create a funded account or security
interest for you.
15. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
-----------------------
William F. Aldinger
Chief Executive Officer
/s/ Robert F. Elliott
---------------------
Robert F. Elliott
U:\LAW\EDGAR\IEX1012.AS1
<PAGE> 1
July 9, 1996
Mr. David A. Schoenholz
2700 Sanders Road
Prospect Heights, IL 60070
Dear Dave:
SUBJECT: Amendment and Restatement of Employment Agreement
Dated July 11, 1994
- -----------------------------------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction arising
out of uncertain personal circumstances in a change in control
environment. We recognize that in the event of a Change in
Control of Household (as such term is defined herein) it is
likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Executive
Vice President. In that capacity you are entitled to
the following:
a. A minimum annual salary of $300,000;
b. An annual bonus having a targeted value equal to
80% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if
any, will depend on the achievement of the corporate
goals and your individual goals established for that
year and the terms of the Household International
Corporate Executive Bonus Plan, and any successor or
substitute plan or plans (the "Bonus Plan"). Your
bonus will be prorated based on the number of
elapsed months in the performance period in the case
of death, permanent and total disability, or
retirement under the Household Retirement Income
Plan or any successor tax qualified defined benefit
plan;
c. An annual grant of stock options under the Household
International 1996 Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. The performance unit awards
granted in prior years will continue to be earned
over a three year cycle, which will be prorated on
the number of elapsed months in the performance
period in the case of death, permanent and total
disability or retirement under the Household
Retirement Income Plan or any successor tax
qualified defined benefit plan. Stock options will
be valued at their economic value at the date of
grant; and
d. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to termination as provided herein, the term of
this Agreement shall be for 18 whole calendar months,
shall commence on the date hereof, and shall be
"evergreen"; that is shall continue monthly as an 18
month term, unless the Corporation gives to you not less
than 17 whole calendar months notice that the term as
monthly continued shall not be so continued; provided<PAGE>
<PAGE> 2
further, that in no event shall the term be continued
beyond your sixty-fifth birthday.
3. During your employment with Household you will devote
your reasonably full time and energies to the faithful
and diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it
is mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because
within 6 whole calendar months of your resignation
one or more of the following events occurred to you:
i. your annual salary was reduced;
ii. your annual target bonus or the targeted
value of stock options calculated as provided
in paragraph 1c was reduced and compensation
equivalent in aggregate value was not
substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified
status and such reductions were not
supplemented in the Household Supplemental
Retirement Income Plan ("HSRIP"); or your
benefits under HSRIP were reduced;
iv. your other benefits or perquisites were
reduced and such reductions were not
uniformally applied with respect to all
similarly situated employees;
v. you were reassigned to a geographical area
outside of the Chicago, Illinois metropolitan
area;
vi. any successor to the Corporation by
acquisition of stock or substantially all of
the assets, by merger or otherwise, failed to
expressly adopt or otherwise repudiated this
Employment Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount
equal to 200% of your then annual salary (prior to any
of the aforesaid reductions) plus 200% of the average of
the last two years' bonuses; provided, however, if the
term of this Agreement is less than 18 months because
you are within 18 months of becoming age 65, the amount
shall be multiplied by a fraction the numerator of which
is the number of months left in the term, and the
denominator of which is 18. This payment shall be in
addition to all other compensation and benefits accrued
to the date of termination of employment. Also, the
Compensation Committee of Household's Board of Directors<PAGE>
<PAGE> 3
has determined that you will be entitled to receive a
portion of your performance unit awards for the
performance period in which your employment terminates.
Such portion will be determined on the basis of the
portion of the performance period elapsed as of your
date of termination over the total performance period,
and it will be assumed that individual and corporate
target levels have been met.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including
the lump sum payment) described in paragraph 4
regardless of whether you are otherwise entitled to them
under paragraph 4. In addition, Household or its
successor shall promptly make a lump sum cash payment to
you in an amount equal to 200% of your then annual
salary (prior to any reduction) plus 200% of the average
of the last two years' bonuses; provided, however, if
the term of this Agreement is less than 18 months
because you are within 18 months of becoming age 65, the
amount shall be multiplied by a fraction the numerator
of which is the number of months left in the term, and
the denominator of which is 18.
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not
receive at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of stock options under the Long-Term Plan
for years in which awards were payable under the
Long-Term Plan as it existed prior to the Change in
Control,
both at corporate and individual target levels as those
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign,
payments shall be made to you as outlined earlier in
this paragraph 5.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d)
and Section 14(d)(2) of the Securities Exchange Act
of 1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the
Board of Directors of Household or its successor by
merger, consolidation or sale of assets.
<PAGE>
<PAGE> 4
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you
as the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. This Agreement was entered into prior to March 29, 1995,
which was the date that regulations were proposed by the
Federal Deposit Insurance Corporation (the "FDIC")
limiting golden parachute and indemnification payments
by insured depository institutions and their holding
companies. At that March date the Agreement provided
for a lump sum payment equal to 560% of your annual
salary. In view of the foregoing, if the lump sum
payments under paragraphs 4 and 5 are otherwise limited
by the FDIC regulations, any limits on "golden
parachute" payments resulting from regulations issued by
the FDIC should not reduce the lump sum payments under
this Agreement below the lesser of 560% of your then
annual salary (prior to any reduction) or the lump sum
amounts calculated under paragraphs 4 and 5.
8. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event
that any excise tax is assessed against you pursuant to
the provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or
its successor shall assume that you are taxed at the
highest individual federal and state income tax rates
(without regard to Section 1(g) of the Code or successor
provisions thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning
of section 280G(b)(2)(A) of the Code, and a reduction of
the amount by 10% or less would totally avoid the
imposition of any excise tax, such amounts shall be
reduced so that the aggregate present value of the
amounts constituting such parachute payments will be
equal to 299% of your "annualized includible
compensation for the base period," as such term is
defined in section 280G(d)(1) of the Code. For the
purpose of this subparagraph, present value shall be
determined in accordance with section 280G(d)(4) of the
Code.
9. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so
has expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of
such a judgment, all reasonable legal and other
professional fees and expenses incurred by you in
contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing
your claim will be promptly paid by Household or its
successor with interest thereon at the highest statutory
rate of your state of domicile for interest on judgments
against private parties from the date of payment thereof<PAGE>
<PAGE> 5
by you to the date of reimbursement to you by Household
or its successor.
10. You agree that you will not, without prior written
consent of the Chief Executive Officer or the General
Counsel of Household, during the term of or after the
termination of your employment under this Agreement,
directly or indirectly, disclose to any individual,
corporation, or other entity (other than Household, or
any subsidiary or affiliate thereof, or its officers,
directors, or employees entitled to such information, or
any other person or entity to whom such information is
regularly disclosed in the normal course of Household's
business), or use for your own benefit or for the
benefit of such individual, corporation or other entity,
any information whether or not reduced to written or
other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall
cease to be subject to the restrictions of this
paragraph.
11. The provisions of this Agreement shall be construed, to
the extent possible, so as to guarantee their
enforceability. In case any one or more of the
provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of
this Agreement, and this Agreement shall be construed as
if such invalid, illegal, or unenforceable provision had
never been contained in it.
12. This Agreement is an Amendment and Restatement of the
Employment Agreement dated July 11, 1994, between you
and Household and supersedes said Agreement. This
Agreement also supersedes the Employment Agreement dated
January 3, 1994, the Employment Agreement dated May 28,
1993, the Employment Agreement dated December 1, 1989,
the Senior Executive Employment Agreement dated
January 1, 1988, and the Supplemental Employment
Agreement dated January 1, 1988, between you and
Household, all in furtherance of the objectives
authorized and deemed by the Board of Directors of
Household to serve the best interests of the
Corporation.
13. Any successor to the Corporation, by acquisition of
stock or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
14. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require
the segregation of any funds or property.
Notwithstanding the foregoing, in the discretion of the
Corporation, the Corporation may establish a grantor
trust or other vehicle to assist it in meeting its
obligations hereunder, but any such trust or other
vehicle shall not create a funded account or security
interest for you.
<PAGE>
<PAGE> 6
15. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
-----------------------
William F. Aldinger
Chief Executive Officer
/s/ David A. Schoenholz
-----------------------
David A. Schoenholz
U:\LAW\EDGAR\IEX1013.AS1
----------
EXHIBIT 12
----------
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
All dollar amounts are stated in millions.
Nine months ended September 30 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Net income $ 375.0 $ 320.9
- --------------------------------------------------------------------------
Income taxes 198.5 181.1
- --------------------------------------------------------------------------
Fixed charges:
Interest expense <F1> 1,124.7 1,186.0
Interest portion of rentals <F2> 21.3 25.6
- --------------------------------------------------------------------------
Total fixed charges 1,146.0 1,211.6
- --------------------------------------------------------------------------
Total earnings as defined $1,719.5 $1,713.6
==========================================================================
Ratio of earnings to fixed charges 1.50 1.41
- --------------------------------------------------------------------------
Preferred stock dividends <F3> $ 19.2 $ 34.9
- --------------------------------------------------------------------------
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.48 1.37
- --------------------------------------------------------------------------
<FN>
<F1> For financial statement purposes, interest expense includes income
earned on temporary investment of excess funds, generally resulting
from over-subscriptions of commercial paper.
<F2> Represents one-third of rentals, which approximates the portion
representing interest.
<F3> Preferred stock dividends are grossed up to their pretax equivalent
based upon an effective tax rate of 34.6 and 36.1 percent for
September 30, 1996 and 1995, respectively.
</FN>
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF HOUSEHOLD INTERNATIONAL, INC.
- ---------------------------------------------
As of September 30, 1996, the following subsidiaries were
directly or indirectly owned by the Registrant. Certain
subsidiaries which in the aggregate do not constitute significant
subsidiaries may be omitted.
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Hamilton Investments, Inc. Delaware 100%
Craig-Hallum Corporation Delaware 100%
Craig-Hallum, Inc. Minnesota 100%
Household Bank, f.s.b U.S. 100%
HHTS, Inc. Illinois 100%
Household Home Title Services, Inc. II Maryland 100%
Household Bank (SB), N.A. U.S. 100%
Household Affinity Funding Corporation Delaware 100%
Household Service Corporation
of Illinois, Inc. Illinois 100%
Household Insurance Services, Inc. Illinois 100%
Housekey Financial Corporation Illinois 100%
Associations Service Corporation Indiana 100%
Household Mortgage Services, Inc. Delaware 100%
Security Investment Corporation Maryland 100%
Household Capital Corporation Delaware 100%
Household Commercial Canada Inc. Canada 100%
Household Finance Corporation Delaware 100%
HFC Auto Credit Corp. Delaware 100%
HFC Funding Corporation Delaware 100%
HFC Revolving Corporation Delaware 100%
HFS Funding Corporation Delaware 100%
Household Bank (Nevada), N.A. U.S. 100%
Household Card Funding Corporation Delaware 100%
Household Receivables Funding Corporation Nevada 100%
Household Receivables Funding Delaware 100%
Corporation II
Household Receivables Funding, Inc. Delaware 100%
Household Capital Markets, Inc. Delaware 100%
Household Card Services, Inc. Nevada 100%
Household Bank (Illinois), N.A. U.S. 100%
Household Consumer Loan Corporation Nevada 100%
Household Corporation Delaware 100%
Household Credit Services, Inc. Delaware 100%
Household Credit Services of Mexico, Inc. Delaware 100%
<PAGE>
<PAGE> 2
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Household Finance Receivables Corporation IIDelaware 100%
Household Financial Services, Inc. Delaware 100%
Household Group, Inc. Delaware 100%
AHLIC Investment Holdings Corporation Delaware 100%
Household Insurance Agency, Inc. Michigan 100%
Household Insurance Company Michigan 100%
Household Life Insurance Co. of Arizona Arizona 100%
Household Life Insurance Company Michigan 100%
Prospect Life Insurance Company Arizona 100%
Cal-Pacific Services, Inc. California 100%
Household Business Services, Inc. Delaware 100%
Household Commercial Financial Delaware 100%
Services, Inc.
Business Realty Inc. Delaware 100%
Business Lakeview, Inc. Delaware 100%
Capital Graphics, Inc. Delaware 100%
Color Prelude Inc. Delaware 100%
HCFS Business Equipment Corporation Delaware 100%
HCFS Corporate Finance Venture, Inc. Delaware 100%
HFC Commercial Realty, Inc. Delaware 100%
G.C. Center, Inc. Delaware 100%
Cast Iron Building Corporation Delaware 100%
Com Realty, Inc. Delaware 100%
Lighthouse Property Corporation Delaware 100%
MRP General, Inc. Delaware 100%
Household OPEB I, Inc. Illinois 100%
Land of Lincoln Builders, Inc. Illinois 100%
PPSG Corporation Delaware 100%
Steward's Glenn Corporation Delaware 100%
HFC Leasing, Inc. Delaware 100%
First HFC Leasing Corporation Delaware 100%
Second HFC Leasing Corporation Delaware 100%
Valley Properties Corporation Tennessee 100%
Fifth HFC Leasing Corporation Delaware 100%
Sixth HFC Leasing Corporation Delaware 100%
Seventh HFC Leasing Corporation Delaware 100%
Eighth HFC Leasing Corporation Delaware 100%
Tenth HFC Leasing Corporation Delaware 100%
Eleventh HFC Leasing Corporation Delaware 100%
Thirteenth HFC Leasing Corporation Delaware 100%
Fourteenth HFC Leasing Corporation Delaware 100%
Seventeenth HFC Leasing Corporation Delaware 100%
Nineteenth HFC Leasing Corporation Delaware 100%
Twenty-second HFC Leasing Corporation Delaware 100%
Twenty-sixth HFC Leasing Corporation Delaware 100%<PAGE>
<PAGE> 3
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Beaver Valley, Inc. Delaware 100%
Hull 752 Corporation Delaware 100%
Hull 753 Corporation Delaware 100%
Third HFC Leasing Corporation Delaware 100%
Macray Corporation California 100%
Fourth HFC Leasing Corporation Delaware 100%
Pargen Corporation California 100%
Fifteenth HFC Leasing Corporation Delaware 100%
Hull Fifty Corporation Delaware 100%
Household Capital Investment Corporation Delaware 100%
B&K Corporation Michigan 94%
Household Commercial of California, Inc. California 100%
Household Real Estate Equities, Inc. Delaware 100%
SPG General, Inc. Delaware 100%
OLC, Inc. Rhode Island 100%
OPI, Inc. Virginia 100%
Household Finance Consumer Discount CompanyPennsylvania 100%
Overseas Leasing Two FSC, Ltd. Bermuda 99%
Household Finance Corporation II Delaware 100%
Household Finance Corporation of Alabama Alabama 100%
Household Finance Corporation of CaliforniaDelaware 100%
Household Finance Corporation of Nevada Delaware 100%
Household Finance Realty Corporation of Delaware 100%
New York
Household Finance Industrial Loan Company Iowa 100%
of Iowa
Household Finance Realty Corporation of Delaware 100%
Nevada
Household Finance Corporation III Delaware 100%
Amstelveen FSC, Ltd. Bermuda 99%
HFC Agency of Connecticut, Inc. Connecticut 100%
HFC Agency of Michigan, Inc. Michigan 100%
Night Watch FSC, Ltd. Bermuda 99%
Household Realty Corporation Delaware 100%
Overseas Leasing One FSC, Ltd. Bermuda 100%
Overseas Leasing Four FSC, Ltd. Bermuda 99%
Overseas Leasing Five FSC, Ltd. Bermuda 99%
Household Retail Services, Inc. Delaware 100%
HRSI Funding, Inc. Nevada 100%
Household Financial Center Inc. Tennessee 100%
Household Industrial Finance Company Minnesota 100%
Household Industrial Loan Co. of Kentucky Kentucky 100%
Household Insurance Agency, Inc. Nevada 100%
Household Recovery Services Corporation Delaware 100%<PAGE>
<PAGE> 4
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Household Relocation Management, Inc. Illinois 100%
Mortgage One Corporation Delaware 100%
Mortgage Two Corporation Delaware 100%
Sixty-First HFC Leasing Corporation Delaware 100%
Household Receivables Acquisition Company Delaware 100%
Household Financial Group, Ltd. Delaware 100%
Household Global Funding, Inc. Delaware 78%
Household International (U.K.) Limited England 100%
D.L.R.S. Limited Cheshire 100%
HFC Bank plc England 100%
Hamilton Financial Planning Services
Limited England 100%
Hamilton Insurance Company Limited England 100%
Hamilton Life Assurance Co. Limited England 100%
HFC Pension Plan Limited England 100%
Household Funding Limited England 100%
Household Investments Limited England/Wales 100%
Household Leasing Limited England 100%
Household Management Corporation Limited England/Wales 100%
Household Overseas Limited England 100%
Household International Netherlands, B.V. Netherlands 100%
Household Financial Corporation Limited Ontario 100%
Household Finance Corporation of Canada Canada 100%
Household Realty Corporation Limited Ontario 100%
Household Trust Company Canada 100%
Merchant Retail Services Limited Ontario 100%
Household Reinsurance Ltd. Bermuda 100%
U:\LAW\EDGAR\IEX21.WP1 (10/31/96)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SUMMARY FINANCIAL INFORMATION OF THE COMPANY AND ITS
SUBSIDIARIES IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION
AND FINANCIAL STATEMENTS PREVIOUSLY FILED WITH THE SECURITIES &
EXCHANGE COMMISSION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 289,600
<SECURITIES> 2,312,900
<RECEIVABLES> 24,137,400
<ALLOWANCES> 1,527,900
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 766,600
<DEPRECIATION> 426,700
<TOTAL-ASSETS> 29,896,700
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 15,285,500
<COMMON> 115,200
0
205,000
<OTHER-SE> 2,844,500
<TOTAL-LIABILITY-AND-EQUITY> 29,896,700
<SALES> 0
<TOTAL-REVENUES> 3,724,300
<CGS> 0
<TOTAL-COSTS> 1,491,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 537,300
<INTEREST-EXPENSE> 1,121,800
<INCOME-PRETAX> 573,500
<INCOME-TAX> 198,500
<INCOME-CONTINUING> 375,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 375,000
<EPS-PRIMARY> 3.68
<EPS-DILUTED> 3.68
<FN>
<F1>FINANCIAL STATEMENTS OF THE COMPANY WERE PREPARED IN ACCORDANCE WITH
FINANCIAL INSTITUTION INDUSTRY STANDARDS. ACCORDINGLY, THE COMPANY'S
BALANCE SHEETS WERE NON-CLASSIFIED.
</FN>
</TABLE>
EXHIBIT 99.1
------------
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
DEBT AND PREFERRED STOCK SECURITIES RATINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Duff &
Standard Moody's Fitch Phelps
& Poor's Investors Investors Credit Thomson
Corporation Service Services Rating Co. BankWatch
- --------------------------------------------------------------------------------------------------------------
At September 30, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Household International, Inc.
Senior A A3 A A A
Commercial paper A-1 P-2 F-1 Duff 1 TBW-1
Preferred stock A- baa1 A- A- BBB+
- --------------------------------------------------------------------------------------------------------------
Household Finance Corporation
Senior A A2 A+ A+ A+
Senior subordinated A- A3 A A A
Commercial paper A-1 P-1 F-1 Duff 1+ TBW-1
Preferred stock A- a3 A- A- A-
- --------------------------------------------------------------------------------------------------------------
Household Bank, f.s.b.
Senior A A2 A A NR
Subordinated A- A3 A- A- A
Certificates of deposit (long/short term) A/A-1 A2/P-1 A/F-1 A/Duff 1 TBW-1
Thrift notes A-1 P-1 F-1 Duff 1 TBW-1
- --------------------------------------------------------------------------------------------------------------
</TABLE>
In October 1996 Moody's Investors Service ("Moody's") revised its outlook
for The long-term debt obligations of the company and its subsidiaries from
neutral to negative reflecting management's strategic repositioning toward
unsecured receivable origination and the sale of its retail consumer deposit
branches. Moody's outlook for the ratings of commercial paper and
short-term obligations Issued by the company and its subsidiaries was
unaffected.
