<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HOUSEHOLD INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
HOUSEHOLD INTERNATIONAL, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
<TABLE>
<S> <C> <C>
Household International, Inc. 2700 Sanders Road 847.564.5000
Prospect Heights, IL 60070
</TABLE>
[Household Logo]
March 26, 1996
Dear Stockholder:
The Directors and officers of Household International, Inc., cordially invite
you to attend the Annual Meeting of Stockholders which will be held at
Household's corporate headquarters in Prospect Heights, Illinois, on Wednesday,
May 8, 1996, at 9:30 a.m. We envision Household as the premier financial
services organization, recognized as the "best-in-class" in our markets,
respected for our outstanding employees and noted for delivering superior
shareholder returns. We implemented many changes this past year in pursuit of
that vision and look forward to meeting with you to report on the progress and
prospects of Household while providing you with an opportunity to ask questions
about your company.
At this meeting you will be able to elect your new Board of Directors for the
upcoming year and you will be asked to approve the new 1996 Long-Term Executive
Incentive Compensation Plan for employees and non-employee Directors of
Household. This plan will replace our current long-term incentive plan which was
originally adopted by shareholders in 1984. The plan is vital to our ability to
attract and retain qualified individuals and promotes a strong alliance between
Household employees and our stockholders by providing for various forms of
stock-based compensation. As owners of Household, we expect our employees to act
in the best interests of our stockholders in every decision they make. Lastly,
you will vote on whether to ratify the appointment of Arthur Andersen LLP as our
independent auditors for 1996.
Our 1996 Annual Meeting of Stockholders will be the last annual stockholder
meeting Donald C. Clark will host as Chairman of the Board. After more than 40
years of dedicated and loyal service to Household, Mr. Clark has reached the
mandatory retirement age for employee Directors, and therefore, he will be
retiring from the Board at this year's Annual Meeting. We are grateful for his
counsel and leadership, particularly over the past twelve years during which
Household has changed from a diversified conglomerate engaged in a wide range of
financial services, merchandising, manufacturing and transportation businesses
to a focused consumer finance and credit card company. His leadership and broad
range of experience will truly be missed by all of us here at Household.
We feel it is important that as many stockholders as possible be represented
at the meeting as this is your meeting, your opportunity to meet management and
the Board of Directors and to discuss the direction of your company. Last year,
stockholders holding over 90 percent of the outstanding shares entitled to vote
either voted in person or by proxy at the Annual Meeting. We appreciate this
interest of our stockholders in the affairs of Household and hope that those
entitled to vote at this Annual Meeting will again take the time to do so.
Consequently, regardless of whether you now expect to be personally present at
the meeting, please complete, date and sign the enclosed proxy card and return
it promptly.
Sincerely,
<TABLE>
<S> <C>
William F. Aldinger Signature Donald C. Clark Signature
WILLIAM F. ALDINGER DONALD C. CLARK
President and Chairman of the Board
Chief Executive Officer
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Household International, Inc. 2700 Sanders Road 847.564.5000
Prospect Heights, IL 60070
</TABLE>
[Household Logo]
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
March 26, 1996
To the Stockholders of HOUSEHOLD INTERNATIONAL, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of Household
International, Inc. ("Household") will be held at Household's headquarters at
2700 Sanders Road, Prospect Heights, Illinois 60070, on Wednesday, May 8, 1996,
at 9:30 a.m. for the following purposes:
(1) to elect Directors;
(2) to approve the Household International 1996 Long-Term Executive
Incentive Compensation Plan;
(3) to ratify the appointment of Arthur Andersen LLP as the
independent auditors for Household; and
(4) to transact any other business which may properly come before the
meeting.
Stockholders of record of Household's common stock, par value $1.00 per share
("Common Stock") as of the close of business on March 13, 1996, are entitled to
notice of and to vote at the meeting.
YOUR VOTE IS IMPORTANT TO HOUSEHOLD. IF YOU DO NOT EXPECT TO VOTE IN PERSON AT
THE ANNUAL MEETING, WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE ENVELOPE PROVIDED. The giving of such proxy will not affect
your right to vote in person if you attend the meeting.
By Order of the Board of Directors,
Paul R. Shay Signature
PAUL R. SHAY
Assistant General Counsel
and Secretary
<PAGE> 4
<TABLE>
<S> <C> <C>
Household International, Inc. 2700 Sanders Road 847.564.5000
Prospect Heights, IL 60070
</TABLE>
LOGO
PROXY STATEMENT
Your proxy for the Annual Meeting of Stockholders to be held on Wednesday, May
8, 1996 is solicited by Household's Board of Directors. If you return a proxy,
it is revocable by you at any time before it is exercised by delivering written
revocation to the Secretary of Household, by executing a later dated proxy, or
by voting in person at the meeting. This proxy material is being mailed to
stockholders on or about March 26, 1996.
Only stockholders of record at the close of business on March 13, 1996 are
entitled to vote at the meeting. As of the close of business on that date, the
number of outstanding shares of Household Common Stock entitled to vote at the
meeting is 97,351,868 shares (not including 17,879,307 shares of Common Stock
held in treasury). Each share of Common Stock is entitled to one vote; however,
shares of Common Stock which Household holds in treasury cannot be voted.
Shares represented by a properly executed proxy will be voted as specified
thereon; however, if no instructions are indicated on a returned proxy, the
shares will be voted "FOR" each of the listed nominees to the Board of
Directors, "FOR" the approval of the Household International 1996 Long-Term
Executive Incentive Compensation Plan and "FOR" the ratification of the
appointment of Arthur Andersen LLP as the independent auditors for Household.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to have a quorum at the Annual
Meeting of Stockholders. In determining whether shares are present and a quorum
exists at the meeting for each of the matters to be voted on, abstentions and
"non-votes"; i.e., shares which are represented by proxies at the meeting for
which authority to vote on any particular matter is withheld, will be considered
present. The affirmative vote by a majority of the quorum will be required for
the election of Household's fourteen Directors and to ratify Arthur Andersen LLP
as the independent auditors for Household. The vote of the holders of a majority
of the shares voting at the meeting shall be required for the approval of the
Household International 1996 Long-Term Executive Incentive Compensation Plan.
With respect to the election of Directors and the ratification of Arthur
Andersen LLP, abstentions and broker non-votes will have the same effect as a
vote against. With respect to the approval of the Household International 1996
Long-Term Executive Incentive Compensation Plan, abstentions will have the
effect of a vote against such approval and broker non-votes will not be counted
as voting.
If you are a participant in the Household Dividend Reinvestment and Common
Stock Purchase Plan ("DRS Plan"), your proxy represents the number of full and
fractional shares of Common Stock held in your DRS Plan account, as well as
shares of Common Stock registered in your name. If you are a participant in the
Household International Tax Reduction Investment Plan ("TRIP"), an employee
benefit plan of Household, your proxy will also serve as your voting
instructions to the Trustee of TRIP, Vanguard Fiduciary Trust Company, for
shares of Common Stock held in your TRIP account. If your voting instructions
for shares of Common Stock in TRIP are not received by the tabulator, Harris
Trust and Savings Bank, by May 3, 1996, those shares will be voted by the
Trustee in the same manner as the majority of shares for which voting
instructions are received from TRIP participants. For example, with respect to
the election of Directors, the Trustee shall vote all unvoted shares of Common
Stock in TRIP for the fourteen nominees (the number of Directors to be elected
at the Annual Meeting) who receive the most votes pursuant to such voting
instructions.
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The cost of soliciting proxies will be borne by Household. In addition to
solicitations by mail, personal solicitations without special compensation may
be made by officers, Directors, or employees of Household and its subsidiaries
in person or by telephone. Household has also retained Corporate Investor
Communications, Inc., to aid in the solicitation of proxies at a cost of $6,000
plus reimbursement of out-of-pocket expenses.
Household has a policy that all proxies, consents, ballots and voting
materials that identify the vote of specific stockholders will be kept
permanently confidential and will not be disclosed to anyone other than the
inspectors of election and the tabulator; provided, however, that confidential
treatment will not apply when it is not in compliance with law or under
circumstances involving a contested proxy or consent solicitation. The tabulator
will provide all comments written on or accompanying proxies to Household, along
with the name of the stockholder, without indication of the stockholder's vote,
except where the vote is included in the comment or necessary for an
understanding of the comment.
ELECTION OF HOUSEHOLD DIRECTORS
Currently, there are fifteen members of Household's Board of Directors. Donald
C. Clark, a Director of Household since 1974, will be retiring from the Board of
Directors as a result of attaining Household's mandatory retirement age for
employee Directors. The Board of Directors wishes to thank Mr. Clark for his
loyal and dedicated service to Household over the years. With Mr. Clark not
standing for reelection to the Board of Directors, the Board has fixed the
number of Directors of Household at fourteen commencing with the 1996 Annual
Meeting of Stockholders.
The persons named in the accompanying Household proxy intend to vote for the
following fourteen nominees to the Board of Directors to hold office for the
ensuing year and until their successors shall be elected and shall qualify. It
is expected that each of the nominees will be able to serve, but if a vacancy or
vacancies should occur among them for any reason, the said proxies reserve
discretion to vote for, against or to refrain from voting for a substitute
nominee or nominees.
Nominees For Director
<TABLE>
<CAPTION>
Name, Principal Occupation, Committee Year First Elected a
Memberships and Business Associations Age Director of Household
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
WILLIAM F. ALDINGER 48 1994
President and Chief Executive Officer, Household International, Inc.
Member of the Executive Committee.
Mr. Aldinger joined Household in September, 1994, as President and Chief Executive Officer. He
served as Vice Chairman of Wells Fargo Bank and a Director of several Wells Fargo subsidiaries
from 1986 until joining Household. Mr. Aldinger is also a Director of Household Finance
Corporation (a subsidiary of Household) and Stone Container Corporation.
ROBERT J. DARNALL 58 1988
Chairman, President and Chief Executive Officer, Inland Steel Industries, Inc.
(Carbon Steel Manufacturer and Industrial Materials Distributor)
Chairman of the Nominating Committee; member of the Executive Committee.
Mr. Darnall was appointed Chairman and Chief Executive Officer in 1992 and has been President and
a Director of Inland Steel Industries, Inc. since 1986. From 1984 to 1986 he was President and
Chief Operating Officer -- Integrated Steel of Inland Steel Company. Mr. Darnall is also a
Director of Cummins Engine Company, Inc.
</TABLE>
3
<PAGE> 6
Name, Principal Occupation, Committee Year First Elected a
Memberships and Business Associations Age Director of Household
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GARY G. DILLON 61 1984
President and Chief Executive Officer, Schwitzer, Inc.
(Manufacturer of Engine Components)
Member of the Audit and Finance Committees.
Mr. Dillon has been President and Chief Executive Officer of Schwitzer, Inc.
since 1989. He previously served from 1982 through 1989 as President and Chief
Executive Officer of Household Manufacturing, Inc., the former diversified
manufacturing subsidiary of Household. Prior to the 1995 merger of Schwitzer
into Kuhlman Corporation, Mr. Dillon had been a Director of Schwitzer since 1989
and Chairman of the Board since 1992. Mr. Dillon is also a Director of Kuhlman
Corporation.
JOHN A. EDWARDSON 46 1995
President and Chief Operating Officer, UAL Corporation and United Airlines, Inc.
(Air Transportation)
Member of the Audit and Finance Committees.
Mr. Edwardson was appointed President and a member of the Board of Directors of
both UAL Corporation and United Airlines, Inc., in 1994, and Chief Operating
Officer in 1995. He previously served as Executive Vice President and Chief
Financial Officer of Ameritech Corporation, Northwest Airlines, and Imcera
Group, Inc.
MARY JOHNSTON EVANS 66 1977
Director
Member of the Compensation and Nominating Committees.
Mrs. Evans served as Vice Chairman of the Board of AMTRAK (National Railroad
Passenger Corporation) between 1974 and 1979. In addition to being a Director of
Household, Mrs. Evans is a Director of Baxter International Inc., Delta
Air Lines, Inc., The Dun & Bradstreet Corp., Saint-Gobain Corp., Scudder New
Europe Fund, and Sun Company, Inc. She is also a Member of the Advisory Board of
Morgan Stanley & Co. Incorporated and a Trustee of several investment trusts of
the American Association of Retired Persons.
DUDLEY FISHBURN, M.P. 49 1995
Conservative Member of Parliament for Kensington in London
Member of the Audit and Nominating Committees.
Mr. Fishburn has served as the Conservative Member of Parliament for Kensington
in London since 1988. Prior to entering Parliament, Mr. Fishburn was Executive
Editor, The Economist Newspaper Ltd. from 1979 until 1988. From 1990 until his
appointment to Household's Board of Directors, he served as a Director of HFC
Bank plc, Household's primary subsidiary in the United Kingdom. He is also a
Director of Business Post plc and Euclidian plc.
CYRUS F. FREIDHEIM, JR. 60 1992
Vice Chairman, Booz, Allen & Hamilton, Inc.
(Management Consulting Firm)
Member of the Compensation and Finance Committees.
Mr. Freidheim is Vice Chairman of Booz, Allen & Hamilton, Inc., with which he
has been affiliated since 1966. He is also a Director of LaSalle Street Fund
Inc. and Security Capital Group, Inc.
4
<PAGE> 7
<TABLE>
<CAPTION>
Name, Principal Occupation, Committee Year First Elected a
Memberships and Business Associations Age Director of Household
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
LOUIS E. LEVY 61 1992
Director
Chairman of the Audit Committee; member of the Finance Committee.
Mr. Levy retired as Vice Chairman of KPMG Peat Marwick LLP in 1990, having been with the firm
since 1958. Mr. Levy is also a Director of Alex Brown/Flag Investors Group of Mutual Funds and
Kimberly-Clark Corporation.
GEORGE A. LORCH 54 1994
Chairman and Chief Executive Officer, Armstrong World Industries, Inc.
(Manufacturer of Interior Furnishings and Industrial Products)
Vice-Chairman of the Compensation Committee; member of the Nominating Committee.
Mr. Lorch was appointed Chairman of the Board in 1994 and President and Chief Executive Officer in
1993 and has been a Director of Armstrong World Industries, Inc. since 1988. He has been
affiliated with Armstrong since 1963. He is also a Director of The Stanley Works.
JOHN D. NICHOLS 65 1988
Chairman of the Board, Illinois Tool Works Inc.
(Manufacturer of Specialty-Engineered Products and Systems)
Chairman of the Executive Committee; "ex officio" non-voting member of the Audit, Compensation,
Finance and Nominating Committees.
Mr. Nichols has been Chairman of the Board of Illinois Tool Works Inc. since 1986, having
previously served as its President from 1982 through 1986 and Chief Executive Officer from 1982
until September 1, 1995, and has been a Director of Illinois Tool Works Inc. since 1981. He is
also a Director of Philip Morris Companies Inc., Rockwell International Corporation, and Stone
Container Corporation.
JAMES B. PITBLADO 63 1994
Director
Chairman of the Finance Committee; member of the Audit Committee.
Prior to his 1994 retirement, Mr. Pitblado had been a Senior Executive with RBC Dominion
Securities, Inc. of Toronto, Canada and its predecessor companies for 35 years and served as
Chairman from 1985 until 1992. He previously served between 1984 and 1994 as a Director of
Household Financial Corporation Limited (the Canadian business unit of Household). Mr. Pitblado is
a member of the board of Consumers Gas.
S. JAY STEWART 57 1994
Chairman and Chief Executive Officer, Morton International, Inc.
(Diversified Manufacturer)
Member of the Compensation and Executive Committees.
Mr. Stewart became Chairman of the Board and Chief Executive Officer of Morton International,
Inc., in 1994 and has been a Director since 1989. From 1989 through 1994 he was President and
Chief Operating Officer of Morton International.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Name, Principal Occupation, Committee Year First Elected a
Memberships and Business Associations Age Director of Household
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
LOUIS W. SULLIVAN, M.D. 62 1993
President of Morehouse School of Medicine
(Educational Institution)
Member of the Finance and Nominating Committees.
Dr. Sullivan served from 1981 to 1989 and is currently President of the Morehouse School of
Medicine in Atlanta, Georgia. From 1989 to 1993 he served as United States Secretary of Health
and Human Services. Dr. Sullivan is also a Director of Bristol-Myers Squibb Company, CIGNA
Corporation, Equifax Inc., General Motors Corporation, Georgia-Pacific Corporation, and Minnesota
Mining and Manufacturing Company.
RAYMOND C. TOWER 71 1984
Director
Chairman of the Compensation Committee; member of the Executive Committee.
Mr. Tower retired in 1990 as President and Chief Operating Officer of FMC Corporation, a position
he held since 1980. FMC Corporation is a producer of chemicals and machinery for industry,
government, and agriculture. He also retired as Chairman and Chief Executive Officer of FMC Gold
Company in 1990. Mr. Tower is also a Director of Wellman, Inc.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTORS.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The business and affairs of Household are managed under the direction of the
Board of Directors. The Board of Directors has responsibility for establishing
broad corporate policies and for the overall performance of Household rather
than its day-to-day operation. The prime responsibility of the Board of
Directors is to represent the interests of Household's stockholders, as a whole,
in directing the management of Household so as to protect and enhance its assets
and its earnings. As part of this responsibility, the Board selects, evaluates
and provides for the succession of top management and, subject to shareholder
election, Directors; reviews and approves corporate objectives and long-range
plans and strategies; approves proposed major commitments of corporate resources
and participates in decisions that have potential major economic impact upon
Household. The Directors are kept informed of Household's businesses by reports
and documents sent to them or presented at meetings of the Board and its
committees by officers and employees of Household and its subsidiaries.
The Board of Directors held a total of seven meetings during 1995. Each
Director attended 75% or more of the total number of meetings of the Board of
Directors and the committees of which such Director was a member.
Household has standing Audit, Compensation, Executive, Finance and Nominating
Committees of the Board of Directors. The committee membership of each Director
standing for re-election is specified above. In 1995, Mr. Clark was and will
continue as a member of the Executive Committee until the 1996 Annual Meeting.
The AUDIT COMMITTEE provides oversight of the accounting, auditing and
financial reporting practices of Household. Each year it recommends to the Board
the selection of a firm of independent public accountants to serve as auditors.
The committee reviews the scope of the audits conducted by the independent and
internal auditors, together with their audit reports and recommendations made by
them. The Audit Committee also reviews Household's internal compliance controls
with the independent auditors. The committee met four times in 1995 and is
comprised entirely of Directors who are not officers or employees of Household
or any of its subsidiaries.
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The COMPENSATION COMMITTEE determines the annual salary, bonus and other
benefits, including incentive compensation awards, of Household's senior
management and recommends new employee benefit plans and changes to existing
plans to the Board. The Compensation Committee met three times in 1995 and is
comprised entirely of Directors who are not, and were not formerly, officers or
employees of Household or any of its subsidiaries.
The EXECUTIVE COMMITTEE may, with some exceptions, exercise the powers of the
Board in the management of the business and affairs of Household during
intervals between meetings of the Board. The Executive Committee met twice
during 1995.
The FINANCE COMMITTEE reviews the financial policies of Household and makes
recommendations to the Board regarding Household's financial condition, its
dividend policy and the financing requirements and plans of Household and its
subsidiaries. The Finance Committee met twice in 1995 and is composed entirely
of Directors who are not officers or employees of Household or any of its
subsidiaries.
The NOMINATING COMMITTEE recommends to the Board the slate of Directors to be
nominated for election to the Board at each Annual Meeting of Stockholders,
recommends the election of individuals to fill any vacancies which may occur on
the Board, and reviews management succession and development plans. The
Nominating Committee also reviews the size and composition of the Board of
Directors and recommends to the Board any changes in compensation for Directors.
In accordance with the bylaws of Household, the Nominating Committee will
consider proposed nominations recommended by Household's stockholders if such
recommendations are submitted in writing and sent to the Secretary of Household
at Household's headquarters. Any stockholder wishing to submit a recommendation
for a proposed nominee should contact the Secretary to verify the procedures to
be followed for such purpose. The Nominating Committee met twice during 1995 and
is composed entirely of Directors who are not officers or employees of Household
or any of its subsidiaries.
COMPENSATION COMMITTEE INTERLOCKS
Under rules promulgated by the Securities and Exchange Commission ("SEC"), an
interlock relationship is deemed to have existed between Messrs. Clark and
Dillon prior to the May, 1995, acquisition of Schwitzer, Inc., by Kuhlman
Corporation. Mr. Dillon did not serve on the Compensation Committee of
Household, and therefore did not actively participate in the determination of
salaries, bonuses and incentive awards to members of Household's senior
management, including Mr. Clark. However, until Schwitzer was acquired by
Kuhlman Corporation in May, 1995, Mr. Clark served as a member of the
Compensation Committee of Schwitzer, Inc., of which Mr. Dillon was Chairman of
the Board, President and Chief Executive Officer. In such position, Mr. Clark
did participate in discussions relating to Mr. Dillon's compensation from
Schwitzer, Inc.
DIRECTORS' COMPENSATION
In 1995, non-employee Directors of Household received an annual cash retainer
of $30,000, an annual cash retainer of $4,000 for each committee on which a
Director serves, and, in certain instances, shares of Household Common Stock or
phantom stock, as described below. Household does not pay meeting attendance
fees to any of its Directors. The Chairmen of the Audit, Compensation, Finance
and Nominating Committees received an additional $5,000, and the Chairman of the
Executive Committee received an additional $30,000. Directors who are employees
of Household do not receive any additional compensation related to their service
on Household's Board of Directors.
Non-employee Directors may elect to receive all or a portion (in increments of
25%) of their cash compensation in shares of Household Common Stock or to defer
such cash compensation to a future period under the Deferred Fee Plan for
Directors. Pursuant to the Deferred Fee Plan, Directors may choose to have their
deferred compensation invested in either (a) units of phantom shares of
Household Common Stock, with dividends credited toward additional units on each
dividend payment date for Household Common Stock, or (b) cash, with interest
credited at a rate equal to the United States five-year treasury rate plus the
spread over that rate (as dictated by the market) paid by Household Finance
Corporation (the principal subsidiary
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of Household) for borrowings of the same duration. At the end of the deferred
period, all accumulated amounts under the Deferred Fee Plan for Directors will
be paid in cash either in a lump sum or in quarterly or annual installments as
selected by the Director. During 1995, an aggregate of 74% of the Directors'
cash compensation was paid in stock or deferred into phantom shares of Household
Common Stock.
Each Director who is not an officer or employee of Household has been awarded
1,300 shares of Common Stock. These shares, however, are subject to forfeiture
to Household unless "earned" by the Director through continued service on
Household's Board for five successive annual meetings. Pursuant to the award,
200 shares are earned at the first and second annual meeting and 300 shares are
earned at the third, fourth and fifth annual meeting. None of the shares may be
sold by a Director prior to the date of the fifth Annual Meeting of Stockholders
so long as such Director is still serving on Household's Board.
Prior to January 1, 1996, Household offered all non-employee Directors who had
completed ten years of service on the Board, or attained Household's mandatory
retirement age for Directors with three years of service, a Directors'
Retirement Income Plan under which a retiring Director received the annual cash
retainer in effect at the time of their retirement for the period equal to the
Director's years of service on the Board up to a maximum of ten years. However,
in an effort to more closely align the interests of Directors with stockholders,
the Directors' Retirement Income Plan was discontinued as of December 31, 1995.
In place of that plan, Household adopted the Deferred Phantom Stock Plan for
Directors in 1995. Under this plan, the present value of each Director's accrued
benefit under the Directors' Retirement Income Plan was deposited into the
Deferred Phantom Stock Plan for Directors. For those Directors with less than
ten years of service, 250 phantom shares of Household Common Stock will be
deposited into their account on the date of each of the first ten Annual
Meetings of Stockholders at which a Director is elected to the Board of
Directors. In addition, under this plan, beginning with the 1996 Annual Meeting
of Stockholders, each Director elected to the Board of Directors at an Annual
Meeting will receive an additional 200 phantom shares of Household Common Stock.
Payments under the Plan will occur only when a Director leaves the Board due to
death, retirement or resignation.
If the 1996 Long-Term Executive Incentive Compensation Plan is approved by
Stockholders at the 1996 Annual Meeting, beginning in 1997, Directors elected to
the Board at an Annual Meeting of Stockholders will receive an option to
purchase 1,500 shares of Household Common Stock at the per share fair market
value of the stock on the day the option is granted. Such options will be
awarded in lieu of the 200 phantom shares of Household Common Stock to be
awarded annually under the Deferred Phantom Stock Plan for Directors. Director
options will have a term of ten years and one day, will fully vest six months
from the date granted and once vested, are exercisable at any time during the
option term.
Household provides non-employee Directors with $250,000 of accidental death
and dismemberment insurance and a $10 million Personal Excess Liability
Insurance Policy. Also, under Household's Matching Gift Program, Household
matches charitable gifts to qualified organizations (subject to a maximum of
$10,000 per year), with a double match for the first $500 donated to higher
education institutions (both public and private) and eligible non-profit
organizations which promote neighborhood revitalization or economic development
for low and moderate income population. In addition, each non-employee Director
may request Household contribute up to $5,000 annually to charities of the
Director's choice which qualify under Household's philanthropic program.
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<PAGE> 11
SHARES OF HOUSEHOLD STOCK BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the beneficial ownership, as of March 13, 1996, of
Common Stock by each Director and nominee for Director, the executive officers
named in the Summary Compensation Table on page 18, and by all Directors and
such executive officers as a group. "Beneficial ownership" includes shares for
which an individual has direct or indirect voting or investment power and
includes any shares the individual has a right to acquire within 60 days. No
Director or executive officer owns any depository shares representing preferred
stock of Household.
<TABLE>
<CAPTION>
Number Number
of Shares of Common
Beneficially Stock
Name of Beneficial Owner Owned(1) Equivalents(2) Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William F. Aldinger 112,966 0 112,966
- -------------------------------------------------------------------------------------------------------------------------
Donald C. Clark 719,277 61,981 781,258
- -------------------------------------------------------------------------------------------------------------------------
Robert J. Darnall 3,198 1,836 5,034
- -------------------------------------------------------------------------------------------------------------------------
Gary G. Dillon 21,531 1,628 23,149
- -------------------------------------------------------------------------------------------------------------------------
John A. Edwardson 1,332 616 1,948
- -------------------------------------------------------------------------------------------------------------------------
Robert F. Elliott 88,864 2,131 90,995
- -------------------------------------------------------------------------------------------------------------------------
Mary J. Evans 3,986 2,876 6,862
- -------------------------------------------------------------------------------------------------------------------------
Dudley Fishburn 1,422 0 1,422
- -------------------------------------------------------------------------------------------------------------------------
Cyrus F. Freidheim, Jr. 3,417 1,506 4,923
- -------------------------------------------------------------------------------------------------------------------------
Louis E. Levy 3,900 1,387 5,287
- -------------------------------------------------------------------------------------------------------------------------
George A. Lorch 1,544 1,006 2,550
- -------------------------------------------------------------------------------------------------------------------------
John D. Nichols 41,300 3,223 44,523
- -------------------------------------------------------------------------------------------------------------------------
James B. Pitblado 4,081 510 4,591
- -------------------------------------------------------------------------------------------------------------------------
Joseph W. Saunders 103,249 2,856 106,105
- -------------------------------------------------------------------------------------------------------------------------
David A. Schoenholz 52,370 723 53,093
- -------------------------------------------------------------------------------------------------------------------------
S. Jay Stewart 3,026 322 3,348
- -------------------------------------------------------------------------------------------------------------------------
Louis W. Sullivan 1,532 897 2,429
- -------------------------------------------------------------------------------------------------------------------------
Raymond C. Tower 3,128 3,061 6,189
- -------------------------------------------------------------------------------------------------------------------------
Directors and Executive Officers as a Group 1,170,114 86,559 1,256,673(3)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Directors and executive officers have sole voting and investment power over
shares listed above, except as follows. Shares beneficially owned by
non-employee Directors include shares awarded, but not yet earned, as part
of each Director's annual compensation as described under "Directors'
Compensation". Non-employee Directors have sole voting power and no current
investment power over such shares.
The number of shares of Common Stock held by spouses or children in which
voting and investment power is shared (or presumed to be shared) is as
follows: Mr. Clark, 200; Mr. Saunders, 976; and Directors and executive
officers as a group, 1,176. The number of shares of Common Stock held by
spouses or children in which beneficial ownership is disclaimed is as
follows: Mr. Nichols, 4,000; and Directors and executive officers as a
group, 4,000. The number of shares of Common Stock held under Household's
employee benefit plans in which participants have voting rights and/or
investment power is as follows: Mr. Aldinger, 216; Mr. Clark, 125,653; Mr.
Saunders, 9,193; Mr. Elliott, 17,055; Mr. Schoenholz, 6,561; and Directors
and executive officers as a group, 158,678. The number of shares included
in the table above which may be acquired by Household's executive officers
through May 12, 1996, pursuant to the exercise of employee stock options
is: Mr. Aldinger, 92,750; Mr. Clark, 351,092; Mr. Saunders, 74,020; Mr.
Elliott, 37,262; Mr. Schoenholz, 24,075; and Directors and executive
officers as a group, 579,199.
9
<PAGE> 12
(2) Represents the number of Common Stock share equivalents owned by executive
officers of Household under Household's Supplemental TRIP and by Directors
under Household's Deferred Fee Plan for Directors and the Deferred Phantom
Stock Plan for Directors. No voting rights attach to these share equivalents
which perform economically in the same manner as Household's Common Stock.
(3) No Director or executive officer beneficially owns directly or indirectly
more than one percent of Household's Common Stock. Directors and executive
officers as a group beneficially own 1.3% of Household's Common Stock. As a
group, the Directors and executive officers of Household named herein
increased their ownership of Household Common Stock by 72,482 shares or
13.5% during 1995.
The employees of Household are entitled to participate in TRIP and as of
December 29, 1995, TRIP held 4,002,056 shares of Common Stock, excluding
the shares held by Directors and executive officers which are reflected in
the table. In addition, Household's Pooled Investment Fund ("PIF"), which
holds assets of the domestic pension plan of Household, held 1,258,807
shares of Common Stock as of December 31, 1995. As a result, TRIP and PIF
held 5.4% of the Common Stock outstanding on December 31, 1995.
Section 16(a) of the Exchange Act requires Household's Directors and executive
officers, and any persons holding more than ten percent of a registered class of
Household's equity securities to report their initial ownership of Household's
equity securities and any subsequent changes in that ownership to the SEC and
the New York Stock Exchange. Specific due dates for these reports have been
established by the SEC and Household is required to disclose in this Proxy
Statement any failure to file by these dates during 1995. To Household's
knowledge, based solely on review of the copies of such reports furnished to
Household and written representations that no other reports were required, all
Section 16(a) filing requirements applicable to its executive officers,
Directors and greater than ten percent beneficial owners were complied with,
except that Mr. John A. Edwardson, a Director, failed to timely file a report
reflecting an optional cash payment under Household's Dividend Reinvestment and
Common Stock Purchase Plan.
Household believes that stock ownership by its executive officers and key
employees is important to promote an identification of the interests of
management and employees with Household's stockholders. Household previously
established a stock ownership goal for approximately 250 of its employees with
the intent that such individuals would have $60 million invested in Household's
Common Stock by January 1, 1999. However, as a result of Household's recent
efforts to focus on its consumer finance and credit card operations, this
program was modified in 1995. Currently, there are approximately 180 employees
with stock ownership goals, each expected to hold Household Common Stock equal
to a multiple of two to six times (depending on position level) of their annual
base salary at the end of a five-year period. During the five-year period, such
employees are expected to achieve one-fifth of this goal each year. The
following table reflects the stock ownership goals for the named individuals in
the Summary Compensation Table.
<TABLE>
<CAPTION>
Stock Ownership Goal
----------------------
As a
Current Multiple
Stock of Base Number of
Name Title Ownership(1) Salary Shares(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
President & Chief
William F. Aldinger Executive Officer 20,216 6 71,948
- ----------------------------------------------------------------------------------------------
Donald C. Clark Chairman of the Board 430,166 6 69,379
- ----------------------------------------------------------------------------------------------
Group Executive --
U.S. BankCard and
Household Retail
Joseph W. Saunders Services, Inc. 32,085 5 34,261
- ----------------------------------------------------------------------------------------------
Group Executive --
U.S. Consumer Finance
Robert F. Elliott and Canada 53,733 5 34,261
- ----------------------------------------------------------------------------------------------
Executive Vice President --
David A. Schoenholz Chief Financial Officer 29,018 5 26,595
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) For purposes of this program, the number of shares of Common Stock shown are
those credited to the executive's account as of December 29, 1995. Such
amount includes the number of shares held directly
10
<PAGE> 13
and indirectly and the number of shares held under Household's employee
benefit plans, including Common Stock share equivalents held pursuant to
Supplemental TRIP.
(2) Calculated by taking the dollar amount of the executive's base salary
multiplied by the multiple shown and dividing that amount by the fair market
value of the Common Stock on December 29, 1995 ($58 3/8 per share).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table lists the beneficial ownership of Common Stock by all
persons known to Household to be the beneficial owner of more than 5% of the
Common Stock as of March 13, 1996.
<TABLE>
<CAPTION>
Number
of Shares
Name and Address Beneficially Percent
Title of Class of Beneficial Owner Owned of Class
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock FMR Corp. 7,486,139(1) 7.6%
82 Devonshire Street
Boston, MA 02109
- ------------------------------------------------------------------------
</TABLE>
(1) FMR Corp. has filed a Schedule 13G with the SEC disclosing that, as of
December 31, 1995, it had sole dispositive power over 7,486,139 shares of
Household Common Stock, sole voting power over 204,468 shares of Household
Common Stock and no shared voting power over shares of Household Common
Stock.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The disclosure contained in this section of Household's Proxy Statement should
not be incorporated by reference into any prior or future filings by Household
with the SEC pursuant to the Securities Act of 1933, as amended ("Securities
Act") or the Securities Exchange Act of 1934, as amended ("Exchange Act") that
incorporate therein portions of this Proxy Statement.
GENERAL
The Compensation Committee of Household's Board of Directors (the "Committee")
determines salaries and salary ranges, short- and long-term cash and stock
incentive compensation, and other compensation of the executive officers
(including the executive officers named in the Summary Compensation Table
herein) and other employees of Household or its subsidiaries who earn an annual
salary exceeding an amount which the Committee, in its discretion, may fix from
time to time (which amount is currently set at $250,000). The Committee also
recommends to the Board of Directors the creation or amendment of any pension,
profit sharing or tax-qualified employee benefit plan or program of Household,
or any long- or short-term executive compensation plan or program of Household;
and grants options, rights or other awards under any long-term executive
compensation plan or program of Household. The Committee meets annually to
approve the goals (financial, non-financial, objective and subjective) for each
of the executive officers named herein and meets again after the conclusion of
the time period in which such goals were to be performed to determine the level
of performance against those goals and the resulting compensation to be paid to
such officers for such performance. A report pertaining to those goals and such
officer's performance is then presented to and reviewed by the Board of
Directors of Household.
Household has retained the services of Hewitt Associates, a compensation
consulting firm, to assist the Committee in connection with performance of its
various duties. Hewitt Associates has been retained in this capacity since 1980.
Hewitt Associates provides advice to the Committee with respect to the
competitiveness of compensation paid to senior officers of Household. In doing
so, that firm takes into account the compensation programs, payment history and
compensation goals of Household and compares it to compensation plans and
amounts paid by competing companies.
11
<PAGE> 14
Hewitt Associates has reviewed the compensation for the Chief Executive
Officer and the next four most highly paid officers for 1995 and has reported to
the Committee that, in its opinion, the compensation of such officers is within
current market practice.
COMPENSATION PHILOSOPHY AND GOALS
Household's executive compensation policy is designed to attract and retain
exceptional executives by offering compensation for superior performance that is
highly competitive with other well-managed organizations in the financial
services industry. The Committee measures executive performance on an
individual, business unit and corporate basis.
Household aligns the interests of its executives with that of its shareholders
by placing a significant portion of total compensation at risk based upon the
satisfaction of specific performance objectives. The portion at risk for each
executive in 1995 (based upon the maximum bonus opportunity) ranged from 75% to
127.5% of the executive's base salary. The performance objectives are designed
to support the attainment of Household's strategic and financial objectives, and
specifically, to improve shareholder value. A significant portion of each
executive's compensation is dependent on annual improvement in Household's
earnings per share, return on equity and efficiency ratio. In addition, a
portion of each executive's compensation is dependent upon satisfaction of
certain other shared or individual objectives, such as: meeting a targeted loss
reserve ratio for Household or a respective business unit; satisfaction of a
targeted equity to managed assets ratio; reducing expenses and/or charge-offs by
specified percentages; and attaining specified net income and/or operating
efficiency ratios for the executive's respective business unit. The percentage
of compensation at risk with respect to any particular performance objective
varies for each executive and may change from year-to-year as circumstances
warrant.
The compensation policy is intended to encourage stock ownership by
executives, making an executive's personal net worth heavily dependent on
appreciation in the value of Household's stock over the long term. In keeping
with present market practice, in order to maximize a long-term strategic view by
Household's executives, only stock options are currently awarded as long-term
incentive compensation. As more fully described on pages 10-11 of this Proxy
Statement, each executive is required to satisfy stock ownership goals based
upon the base salary for the executive.
There are four components to Household's executive compensation program and
each is consistent with the stated compensation philosophy as follows:
Base Salary: Determined by individual financial and non-financial performance,
position in salary range, and general economic conditions. For purposes of
administering base pay, all executive positions are evaluated and placed in
appropriate salary grades. Salary range midpoint levels are reviewed on an
annual basis to ensure competitiveness.
Annual Bonus: Tied directly to Household's and/or a business unit's financial
performance as well as individual performance. The purpose of the annual bonus
is to reward executives for the achievement of individual, business unit and
corporate financial and operational goals. Annual bonuses are intended to reward
the achievement of excellent performance by placing a significant part of the
executive's total compensation at risk. Therefore, when certain objective or
subjective performance goals are not met, annual bonuses may be reduced or not
paid.
Long-Term Incentives: The purpose of these plans is to create an opportunity
for executives to share in the enhancement of shareholder value through
non-qualified stock options. The overall goal of this component of pay is to
create a link between the management of Household and its shareholders through
management stock ownership and incentive compensation based on the achievement
of specific corporate financial measures.
Executive Benefits: Household provides its executive management with the broad
benefit coverage available to all employees as well as specific, targeted
supplemental benefits and perquisites that are necessary to be competitive in
this area.
12
<PAGE> 15
EXECUTIVE OFFICER COMPENSATION
- - Chief Executive Officer
The 1995 base salary level for the position of Chief Executive Officer was
determined by the Committee through the use of market data prepared by Hewitt
Associates for positions of similar responsibility. The goal of this process was
to assign a value to this position that was representative of similar positions
within a group of industry peers ("Peer Group"). Mr. Aldinger's base salary was
below the 50th percentile of this Peer Group. The Peer Group selected by
Household consists of 15 companies (money center and large regional banks, or
nationally diversified financial institutions) that have assets under management
equivalent, in amount, to those managed by Household. Of these 15 companies, 13
(or 87%) are included in the Standard & Poor's Financials Index ("S&P
Financials") with the others being selected for their geographic or product
relevance and/or the availability of relevant compensation information.
Mr. Aldinger did not receive an annual merit increase in 1995 because Mr.
Aldinger and the Committee mutually agreed that in order to enhance his
long-term strategic focus, more of his compensation would be paid in the form of
stock options. In 1996, none of the executive officers, including Mr. Aldinger,
received a salary merit increase. In regard to Mr. Aldinger's annual bonus,
pursuant to the Household Key Executive Bonus Plan that was approved by the
stockholders of Household in 1994 ("Key Bonus Plan"), the amount awarded was
determined based on the satisfaction of various individual objective
non-financial and financial performance goals. For purposes of the Key Bonus
Plan, the financial performance goals of Household were (a) targeted earnings
per share, (b) targeted return on equity, (c) targeted operating efficiency
ratio, (d) targeted equity to managed assets ratio, and (e) targeted credit loss
reserve ratio for Household (collectively, the "Household Financial Performance
Goals"). Mr. Aldinger had an additional goal in 1995 related to achieving
favorable action by one or more credit rating agency, which was met. For 1995,
Mr. Aldinger's annual bonus opportunity was between zero and 127.5% of his
annual salary (with a target bonus of 85%). The Household Financial Performance
Goals established for Mr. Aldinger represented 92% of Mr. Aldinger's bonus
opportunity. Mr. Aldinger was awarded his maximum bonus opportunity of $892,500
as a result of his performance against these objective goals, as certified by
the Committee.
- - Other Executive Officers
Mr. Clark's annual bonus was paid under the Key Bonus Plan based on the
achievement of his individual goals, while for the other executive officers
named herein, annual bonuses were paid under the Household Corporate Executive
Bonus Plan based on the (i) officer's position level with Household, which
determines the percentage of annual base salary which may be awarded, (this
ranges from 50% to 127.5% of annual base salary); (ii) certain of Household's
Financial Performance Goals (which goals were exceeded); and (iii) the
satisfaction of various individual objective and subjective financial and
non-financial performance goals in respect of Household and the business unit
for which such officer has responsibility.
- - Long-Term Incentive Compensation
All of the named executive officers of Household, including Mr. Aldinger,
participate in the Household Long-Term Executive Incentive Compensation Plan
(see pages 19-22). In 1995, the long-term incentive compensation offered by
Household through the Incentive Plan was comprised solely of stock options. It
is the belief of the Committee that compensation based solely on an increase in
the per share price of Household's Common Stock is the most appropriate method
for determining a fair level of compensation to all executives as all Household
stockholders must benefit in order for executive officers to share in that
success.
In determining the number of options to be granted to Mr. Aldinger and the
other named executive officers, the Committee reviewed information developed and
presented by Hewitt Associates in regard to the value of the long-term incentive
compensation packages being provided in the marketplace for executive positions
of a similar nature. Based on this review and Household's philosophy of
targeting a total compensation package that provides significant rewards only
upon achievement of superior performance, the Committee considered each
executive's performance for the year, the value presented by Hewitt Associates
for the executive's position, the number of previously awarded options,
Restricted Stock Rights, Performance
13
<PAGE> 16
Share Awards and/or Performance Unit Awards currently held by such officer. No
specific weight was accorded to any of the factors noted in this decision
process.
Performance Unit Awards granted under the Incentive Plan in 1993 for the
calendar years 1993, 1994 and 1995 matured on December 31, 1995. The amounts
awarded to the named executive officers were the maximum amounts permitted under
the Incentive Plan as a result of Household achieving an average return-
on-equity ("ROE") for its core businesses ("Core ROE") relative to the Peer
Group for the three-year period ending on December 31, 1995 that was greater
than the 75th percentile of the average ROE for the Peer Group over the same
period.
The Committee has recommended and, subject to approval of the stockholders,
the Board of Directors has adopted a new plan for long-term incentive
compensation (see pages 25-27 and Appendix A herein).
TAX DEDUCTIBILITY
During 1993 the Internal Revenue Code of 1986, as amended (the "Code") was
modified with regard to compensation paid to key executive officers of a public
company. Household has established compensation programs which it believes meet
all the current tests required for compensation to be deductible to Household
for federal income tax purposes. In the future, it is the Committee's intent to
modify, when necessary, compensation plans for Household's executive officers so
that Household's federal tax deduction is at all times maximized. However, the
Committee reserves the right to use good independent judgment, on a case by case
basis, to attract and retain qualified executives to manage Household and to
reward its employees for excellent service while taking into consideration the
financial effects such action may have on Household.
THE COMPENSATION COMMITTEE
It is the Committee's view that the compensation package of Mr. Aldinger and
each of the named executive officers was based on an appropriate balance of (1)
Household's, or a particular business unit's, financial performance in 1995, (2)
the performance of each such officer, and (3) competitive standards. No member
of the Committee is a former or current officer or employee of Household or any
of its subsidiaries.
COMPENSATION COMMITTEE
R. C. Tower, Chairman C. F. Freidheim, Jr.
G. A. Lorch, Vice-Chairman S. J. Stewart
M. J. Evans
14
<PAGE> 17
PERFORMANCE OF HOUSEHOLD
The graphs, tables and the related disclosure contained in this section of the
Proxy Statement should not be incorporated by reference into any prior or future
filings by Household under the Securities Act or the Exchange Act that
incorporate therein portions of this Proxy Statement. The stock price
performance evidenced by the graphs and the tables is not necessarily indicative
of future price performance.
Set forth below are graphs and tables comparing total returns (assuming
reinvestment of dividends) of Household, the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), and the S&P Financials. Household is one of the
companies composing the referenced indices. The graphs assume $100 is invested
in Household Common Stock and that dividends are reinvested on the last day of
the first month indicated. Household has presented information pertaining to
total shareholder return over different time periods since all holders of the
Common Stock did not acquire their investment in Household on the same date.
Household believes a presentation in this format more accurately reflects the
financial return provided to stockholders who have held Common Stock for varying
periods.
ONE-YEAR CUMULATIVE TOTAL RETURN
ASSUMES INVESTMENT OF $100 BEGINNING DECEMBER 31, 1994 AND THE REINVESTMENT OF
DIVIDENDS.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P
(FISCAL YEAR COVERED) HOUSEHOLD S&P 500 FINANCIALS
<S> <C> <C> <C>
12/94 100 100 100
1/95 109 102 106
2/95 118 106 111
3/95 118 110 112
4/95 127 113 116
5/95 134 117 125
6/95 135 120 126
7/95 143 124 130
8/95 153 124 137
9/95 170 130 146
10/95 154 129 141
11/95 172 134 151
12/95 164 137 154
</TABLE>
15
<PAGE> 18
THREE-YEAR CUMULATIVE TOTAL RETURN
ASSUMES INVESTMENT OF $100 BEGINNING DECEMBER 31, 1992 AND THE REINVESTMENT OF
DIVIDENDS.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P
(FISCAL YEAR COVERED) HOUSEHOLD S&P 500 FINANCIALS
<S> <C> <C> <C>
12/92 100 100 100
12/93 114 110 111
12/94 134 112 107
12/95 220 153 165
</TABLE>
FIVE-YEAR CUMULATIVE TOTAL RETURN
ASSUMES INVESTMENT OF $100 BEGINNING DECEMBER 31, 1990 AND THE REINVESTMENT OF
DIVIDENDS.
<TABLE>
S&P
TOTAL RETURN HOUSEHOLD S&P 500 FINANCIALS
<S> <C> <C> <C>
12/90 100 100 100
12/91 163 130 151
12/92 197 140 186
12/93 224 154 206
12/94 264 156 199
12/95 434 215 306
</TABLE>
16
<PAGE> 19
TEN-YEAR CUMULATIVE TOTAL RETURN
ASSUMES INVESTMENT OF $100 BEGINNING DECEMBER 31, 1985 AND THE REINVESTMENT OF
DIVIDENDS.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P
(FISCAL YEAR COVERED) HOUSEHOLD S&P 500 FINANCIALS
<S> <C> <C> <C>
12/85 100 100 100
12/86 118 119 108
12/87 102 125 90
12/88 151 145 106
12/89 172 191 141
12/90 115 185 111
12/91 188 242 167
12/92 227 260 206
12/93 258 286 228
12/94 304 290 221
12/95 500 398 339
</TABLE>
The estimated compound annual total return (which is the stock price
appreciation that occurs over the period of time noted plus the value of
dividends paid to shareholders and reinvested over that same period of time) for
the past one, three, five and ten year periods for Household's Common Stock and
the noted indices was as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ----------- ----------- -----------
(1995) (1993-1995) (1991-1995) (1986-1995)
<S> <C> <C> <C> <C>
Household............................. 64% 30% 34% 17%
S&P 500............................... 37% 15% 17% 15%
S&P Financials........................ 54% 18% 25% 13%
</TABLE>
17
<PAGE> 20
REMUNERATION OF EXECUTIVE OFFICERS
The table below discloses information concerning compensation for services
rendered during 1995, 1994 and 1993 to Household and its subsidiaries by its
Chief Executive Officer and each of the four most highly paid executive officers
of Household as of December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------------
Awards Payouts
Annual Compensation --------------------------------------
------------------------------------ Number
Other Restricted of Shares
Name and Principal Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation Rights Options Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
William F. Aldinger 1995 $700,002 $892,500 $265,849(1) $ 0(2) 242,000 n/a $ 16,712(3)
President, Chief 1994 185,770 500,000 (1) 1,960,219(2) 250,000 n/a 1,418
Executive Officer 1993 n/a n/a n/a n/a n/a n/a n/a
and Director
- -----------------------------------------------------------------------------------------------------------------------------------
Donald C. Clark 1995 $687,502 $860,625 (1) $ 0(2) 115,000 $400,000(4) $135,234(3)
Chairman of the Board 1994 997,119 880,000 (1) 220,275(2) 180,200 700,800(5) 88,038
and Director 1993 923,118 823,815 (1) 242,250(2) 62,200 700,800(6) 135,735
- -----------------------------------------------------------------------------------------------------------------------------------
Joseph W. Saunders 1995 $399,809 $332,000 (1) $ 0(2) 91,000 $ 80,000(4) $ 51,726(3)
Group Executive -- U.S. 1994 389,403 390,000 $113,485(1) 66,750(2) 25,000 131,800(5) 31,793
BankCard and Household 1993 346,912 247,390 (1) 44,625(2) 16,000 131,800(6) 37,495
Retail Services, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Robert F. Elliott 1995 $397,501 $361,000 (1) $ 0(2) 81,000 $ 60,000(4) $ 50,133(3)
Group Executive -- U.S. 1994 333,936 310,435 (1) 56,738(2) 21,000 118,000(5) 31,627
Consumer Finance and 1993 299,358 215,940 (1) 38,250(2) 12,000 118,000(6) 34,095
Canada
- -----------------------------------------------------------------------------------------------------------------------------------
David A. Schoenholz 1995 $297,693 $219,000 (1) $ 0(2) 57,300 $ 25,000(4) $ 29,623(3)
Executive Vice 1994 224,039 168,000 (1) 23,363(2) 10,000 79,200(5) 15,146
President-Chief 1993 179,003 129,550 (1) 19,125(2) 7,000 79,200(6) 19,158
Financial Officer
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The named officers of Household are entitled to additional forms of
compensation, such as car allowances ($15,000 for Messrs. Aldinger and
Clark, and $11,000 for Messrs. Saunders, Elliott and Schoenholz), financial
planning services, club initiation fees, and medical physicals. In 1995,
except with respect to Mr. Aldinger, the aggregate amount of such other
annual compensation did not exceed $50,000 for any officer, or 10% of the
annual salary and bonus of each named executive officer. In accordance with
Mr. Aldinger's agreement to join Household in September, 1994, the amount
shown includes total payments of $119,419 related to relocation expenses. In
1994, Mr. Saunders received $100,000 for country club initiation fees.
(2) During 1995, no Restricted Stock Rights were awarded to executive officers
of Household due to the Compensation Committee's decision to reward
executive officers' performance solely in stock options to more closely
align long-term incentive compensation with that of Household's
shareholders. The Restricted Stock Right values shown for the years 1994 and
1993 reflect the fair market value of the underlying Household Common Stock
on the date of grant. This valuation does not take into account the
diminution in value attributable to the restrictions applicable to the
underlying shares. Based on a closing Common Stock price of $59 1/2 per
share on December 29, 1995, the aggregate value of the Restricted Stock
Rights is as follows: Mr. Aldinger, 51,500 shares ($3,064,250); Mr. Clark,
14,200 shares ($844,900); Mr. Saunders, 3,400 shares ($202,300); Mr.
Elliott, 2,900 shares ($172,550); and Mr. Schoenholz, 1,300 shares
($77,350). All Restricted Stock Rights vest on the fifth anniversary of the
date of grant. Dividend equivalents, in the form of additional income, are
paid on all underlying shares for the Restricted Stock Rights at the same
rate as paid to all Common Stock shareholders. In the case of Messrs.
Aldinger and Clark, the payment of such dividend equivalents, as well as the
vesting, is contingent upon the satisfaction of certain performance goals
related to an increase in the per share
18
<PAGE> 21
price of Household Common Stock which were established for the Restricted
Stock Rights to meet the IRS tests for deductibility as previously
discussed. These price conditions were satisfied during 1995. See page 20
for further information pertaining to the Restricted Stock Rights.
(3) Includes $7,020, $41,184, $4,338, $7,657, and $1,681, for Messrs. Aldinger,
Clark, Saunders, Elliott, and Schoenholz, respectively, relating to life
insurance premiums paid by Household in 1995 for the benefit of the named
executive officer with the remaining amounts shown being Household's
contribution for the executive officer's participation in TRIP or
Supplemental TRIP (see pages 23-24 hereof).
(4) The payment shown for 1995 represented Performance Unit Award payouts for
the years 1993, 1994 and 1995 pursuant to the Incentive Plan (see pages
19-22 hereof).
(5) The payment in 1994 represented Performance Unit Award payouts for the years
1992, 1993 and 1994 pursuant to the Incentive Plan.
(6) The payment reflected for 1993 represented Performance Unit Award payouts
for the years 1992 and 1993 pursuant to the Incentive Plan. During 1992 the
Compensation Committee provided for annual vs. biennial grants and reduced
target awards by 50% to level compensation in future years.
INCENTIVE AND STOCK OPTION PLANS
Household's stockholders previously approved a Long-Term Executive Incentive
Compensation Plan ("Incentive Plan"). The Compensation Committee of the Board of
Directors (the "Committee") in its discretion selects employees of Household and
its subsidiaries to receive awards under the Incentive Plan. The Committee may
award stock options, Stock Appreciation Rights, Performance Unit Awards,
Performance Share Awards, and Restricted Stock Rights under the Incentive Plan.
The Incentive Plan contains a provision to protect participant's rights
thereunder in the event of a change in control of Household.
The Committee may grant any type of option to purchase shares of Household
Common Stock that is permitted by law at the time of grant. Options will
generally not be exercisable less than one year nor more than ten years and one
day from the date of grant; provided, however, the Committee, in its discretion,
may extend the expiration date of any option other than options which are
intended to qualify as Incentive Stock Options pursuant to the Code, provided
the expiration date of such options does not exceed fifteen years from the date
of the grant of such options. The Committee has not extended the expiration date
of any option granted to any of the named executive officers beyond the typical
option term. The option price per share will not be less than the fair market
value of one share of Household Common Stock on the date of grant. Payment for
options may be made with cash or, in the discretion of the Committee, with
shares of Household Common Stock or both cash and shares.
As of March 13, 1996, there are 792,611 shares of Household Common Stock
available for issuance under the Incentive Plan, which shares will be
proportionately adjusted for any stock dividends, stock splits, consolidations
or reclassifications. Shares of Common Stock issued pursuant to the Incentive
Plan may be authorized but unissued shares, or treasury shares or shares
purchased in the open market. Any unissued shares or shares subject to option
grants which expire in accordance with their terms will be carried forward and
available for issuance by the Committee pursuant to the Incentive Plan in future
years.
In accordance with the Incentive Plan, in certain instances the Committee had
granted Stock Appreciation Rights ("SARs") in tandem with options. As of the
date of this Proxy Statement, there are no outstanding SARs.
The Incentive Plan also authorizes the Committee to grant Performance Unit
Awards and Performance Share Awards. Upon granting such awards, the Committee
will establish a performance period over which the performance of a holder of a
Performance Unit Award or Performance Share Award will be measured. The
Committee will also establish maximum and minimum performance target levels
(subject to such later revisions as the Committee deems appropriate to reflect
significant, unforeseen events or changes). Each Performance Unit Award will
have an initial value of $100 per unit, and each Performance Share Award will
initially represent one share of Household Common Stock. The value of
Performance Unit Awards and the number of shares of Household Common Stock
represented by Performance Share Awards may increase or
19
<PAGE> 22
decrease depending on the extent to which the holder of such award achieves the
performance targets by the end of the performance period. Payment will be made
in a lump sum or on a deferred basis, in which case interest will accrue on such
deferred amounts until paid.
At year-end 1995 there were 4,800 outstanding Performance Unit Awards granted
for the 1994-96 performance period to Household's executive officers. At the end
of the performance period, payment (if any) on Performance Unit Awards will be
based on the extent to which certain return on equity goals previously
established by the Committee are achieved. Each Performance Unit Award has an
initial payment value of $100, which may increase (to a maximum of $200) or
decrease based on Household's level of achievement in reaching the performance
goals.
At year-end 1995 there were also 47,000 outstanding Performance Share Awards
that were granted on February 1, 1994 to Household's executive officers. The
awards have a five-year term and will vest as follows on the grant date
anniversary: 25% on the third anniversary, 25% on the fourth anniversary and 50%
on the fifth anniversary. No shares will be issued unless a payment has been
made from a Performance Unit Award cycle, if one is applicable, in the year in
which the Performance Share Awards become vested; i.e., for the 25% vesting on
the third anniversary, there must be a payment under the 1994-96 Performance
Unit Award cycle.
The Incentive Plan also authorizes the Committee to grant Restricted Stock
Rights ("RSRs"). RSRs entitle an executive to receive a stated number of shares
of Household Common Stock if the employee remains continuously employed by
Household for a number of years (the "restricted period") specified by the
Committee. However, the Committee in its sole discretion may accelerate the
payment of Household Common Stock prior to the termination of the restricted
period if the Committee believes factors warrant such acceleration, such as the
holder of the RSR achieves certain performance levels established at the time
the RSR is granted or if there is a change in control of Household. A holder of
RSRs will not be entitled to any of the rights of a holder of Household Common
Stock prior to the payment of such shares; however, at the discretion of the
Committee, Household will pay an amount in cash equal to the cash dividends
declared on Household Common Stock for each share of stock subject to an RSR.
During 1995, no RSRs were granted to Household's executive officers pursuant to
the Incentive Plan. However, during 1993 and 1994, RSRs were granted to the
named executive officers herein as follows:
<TABLE>
<CAPTION>
Name 1994 1993 Total
- --------------------------------------------------------
<S> <C> <C> <C>
William F. Aldinger 51,500 0 51,500
- --------------------------------------------------------
Donald C. Clark 6,600 7,600 14,200
- --------------------------------------------------------
Joseph W. Saunders 2,000 1,400 3,400
- --------------------------------------------------------
Robert F. Elliott 2,000 1,200 3,200
- --------------------------------------------------------
David A. Schoenholz 700 600 1,300
- --------------------------------------------------------
</TABLE>
The average purchase price for all outstanding options held by the 358
participants in the Incentive Plan at December 31, 1995, was $33.9672 with
expiration dates for such options ranging from 1996 to 2005. The following table
shows as to the named executive officers the number of shares of Household
Common Stock acquired during 1995 on exercise of an option granted pursuant to
the Incentive Plan, the value realized (market value less option price) and the
number of unexercised options and the potential value thereof as of December 31,
1995.
20
<PAGE> 23
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1995 December 31, 1995(1)
Shares Acquired ------------------------------ ------------------------------
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
William F. Aldinger 0 $ 0 62,500 308,500 $1,269,531 $5,926,094
- -----------------------------------------------------------------------------------------------------------------------------------
Donald C. Clark 0 $ 0 283,860 269,250 $9,156,865 $6,353,663
- -----------------------------------------------------------------------------------------------------------------------------------
Joseph W. Saunders 0 $ 0 49,520 71,750 $1,592,847 $1,528,870
- -----------------------------------------------------------------------------------------------------------------------------------
Robert F. Elliott 21,250 $569,173 15,762 65,750 $ 557,384 $1,368,215
- -----------------------------------------------------------------------------------------------------------------------------------
David A. Schoenholz 16,818 $496,777 11,250 40,040 $ 326,689 $ 815,146
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated based on the fair market value of Household Common Stock on
December 29, 1995 ($58 3/8 per share).
The Committee may authorize an extension of credit from Household to direct
reports to the Board of Directors or the Chief Executive Officer of Household to
assist the employee in the purchase of Household Common Stock through a stock
option awarded under the Incentive Plan. Under current policy adopted pursuant
to provisions of the Incentive Plan, Household may extend or guarantee loans
with a maximum term of eight years. Loans extended under the Incentive Plan bear
interest at a variable rate that is adjusted each year to equal the greater of
the average annual rate for three-year U.S. Treasury notes for the immediately
preceding calendar year, currently at 6.24% for 1995, and the applicable rate in
effect under Section 1274(d) of the Code at the time the loan is made (currently
5.45 percent for loans made in March, 1996).
The following table gives information concerning the unpaid principal balances
for the named executive officers with loans outstanding under the Incentive Plan
during 1995 and for all executive officers as a group.
<TABLE>
<CAPTION>
Balance as of Maximum Balance
Name December 31, 1995 December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert F. Elliott $ 883,398 $ 883,398
- ------------------------------------------------------------------------------------------------------------------------
David A. Schoenholz 614,257 614,257
- ------------------------------------------------------------------------------------------------------------------------
All Executive Officers as a Group(1) $1,989,015 $1,989,015
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The balance as of December 31, 1995 and the maximum balance during 1995
represent loans to four persons.
The following table shows, as to the named executive officers, the number of
stock options granted in 1995, the percentage of the total number of option
grants to employees during the last fiscal year represented by each grant to a
named individual, the per share exercise or base price and the expiration date.
In addition, the table presents the potential realizable value for each grant to
the named officers and the resulting benefit to all Household Common Stock
shareholders if the assumed appreciation in stock price occurs. The presentation
of stock options in the table below is required by the rules of the SEC and
therefore, is not intended to forecast possible future appreciation, if any, of
the Common Stock price. Household did not use any alternative formula for a
grant date valuation as Household is not aware of any formula which will
determine, with reasonable accuracy, a present value for stock options based on
future unknown or volatile factors.
21
<PAGE> 24
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Individual Grants(1) Realizable Value at
- --------------------------------------------------------------------------------------- Assumed Annual
Number of % of Total Rates of Stock Price
Shares Options Exercise Appreciation
Underlying Granted to or Base for Option Term
Options Employees Price Expiration -------------------------------------
Name Granted in Fiscal Year ($/Share) Date 0% 5% 10%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Common Shareholders(2) n/a n/a $40 7/8 n/a $0 $2,497,640,860 $6,329,512,317
n/a n/a $59 5/8 n/a $0 $3,643,347,676 $9,232,958,334
- -------------------------------------------------------------------------------------------------------------------------------
All Optionees(3) 883,100 100% $40 7/8 2/7/05 $0 $ 22,701,029 57,528,863
535,500 100% $59 5/8 11/13/05 $0 $ 20,080,094 50,886,902
- -------------------------------------------------------------------------------------------------------------------------------
Optionee Gain as % of All Common n/a n/a n/a n/a n/a 9% 9%
Shareholders Gain n/a n/a n/a n/a n/a 6% 6%
- -------------------------------------------------------------------------------------------------------------------------------
William F. Aldinger 121,000 8.4% $40 7/8 2/7/05 $0 $ 3,110,434 7,882,451
121,000 8.4% $59 5/8 11/13/05 $0 $ 4,537,239 11,498,254
- -------------------------------------------------------------------------------------------------------------------------------
Donald C. Clark 115,000 8.0% $40 7/8 2/7/05 $0 $ 2,956,198 7,491,586
- -------------------------------------------------------------------------------------------------------------------------------
Joseph W. Saunders 41,000 2.8% $40 7/8 2/7/05 $0 $ 1,053,949 2,670,913
50,000 3.5% $59 5/8 11/13/05 $0 $ 1,874,892 4,751,345
- -------------------------------------------------------------------------------------------------------------------------------
Robert F. Elliott 41,000 2.8% $40 7/8 2/7/05 $0 $ 1,053,949 2,670,913
40,000 2.8% $59 5/8 11/13/05 $0 $ 1,499,914 3,801,076
- -------------------------------------------------------------------------------------------------------------------------------
David A. Schoenholz 27,300 1.9% $40 7/8 2/7/05 $0 $ 701,776 1,778,437
30,000 2.1% $59 5/8 11/13/05 $0 $ 1,124,935 2,850,807
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In the past, option grants were considered by the Committee in February of
each year. However, beginning in November, 1995, option grants will be
considered by the Committee in November of each year to more effectively
align long-term incentive compensation awards with Household's year-end
performance evaluation process. Therefore, 1995 was a transition year and
options were granted on both February 7, and November 13, 1995 (except with
respect to Mr. Clark who, in accordance with Household's policy, did not
receive an option grant on November 13, 1995, because he is within one year
of retirement). Options are exercisable starting twelve months after the
grant date, with 25% of the shares covered thereby becoming exercisable at
that time and with an additional 25% of the option shares becoming
exercisable on each successive anniversary date, with full vesting occurring
on the fourth anniversary date. Under the terms of the Incentive Plan, the
Committee retains discretion, subject to Incentive Plan limits, to modify
the terms of outstanding options and to reprice the options. During 1995, no
options granted to any of the named executive officers pursuant to the
Incentive Plan were repriced.
The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares of Common Stock or by offset of
the underlying shares, subject to certain conditions.
The options were granted for a term of ten years and one day, subject to
earlier termination or certain events related to termination of employment.
(2) All common shareholders are shown for comparison purposes only. The
Potential Realizable Value to all common shareholders is the aggregate net
gain for all common shareholders, assuming a starting market price of
$40 7/8 (the fair market value option price determined on February 7, 1995)
and $59 5/8 (the fair market value option price determined on November 13,
1995), and appreciation at assumed annual rates of 5% and 10% for a ten year
period. There can be no assurance that the Common Stock will perform at the
assumed annual rates shown in the table. Household will neither make nor
endorse any predictions as to future stock performance.
(3) The option prices shown for the "All Optionees" lines are $40 7/8 and
$59 5/8, respectively (the fair market value option prices as determined on
the respective grant dates of February 7, 1995 and November 13, 1995).
Correspondingly, the expiration dates for the "All Optionees" lines are
February 7, 2005 and November 13, 2005.
22
<PAGE> 25
EMPLOYMENT AGREEMENTS
Executive officers of Household have employment contracts which have been
approved by Household's Compensation Committee. With some exceptions, the term
of each contract is 18 months, automatically renewed monthly, unless Household
chooses not to renew such contract. During the term of the contract, each
executive officer receives a minimum specified annual salary (which may be
increased but not decreased), is entitled to receive benefits from Household's
executive bonus and incentive plans, employee benefit plans, and medical and
life insurance plans, and is guaranteed the level of pension benefits under the
current terms of Household's pension plan. Household may terminate any contract
for cause. An executive may terminate a contract if he or she is transferred,
executive compensation is reduced, or Household gives notice of non-renewal of a
contract, in which case the executive shall receive a lump sum payment,
expressed as a multiple of the executive's base salary, which approximates the
present value of salary, bonuses, benefits and long-term incentives continued
for 18 months.
Under such contracts, an executive whose position is adversely influenced
following a change in control of Household is entitled to receive a severance
payment equal to or approximating the foregoing lump sum payment representing an
additional 18 months of total compensation. Except in the case of Messrs.
Aldinger and Clark, no executive will receive the additional severance payment
unless, following the change in control of Household, the executive loses his or
her job or experiences certain other adverse changes in compensation or job
conditions. In the case of Messrs. Aldinger and Clark, they are entitled to
resign and receive all payments under the contract following a change in control
of Household.
If any payments to an executive would constitute an "excess parachute payment"
within the meaning of Section 280G(b) of the Code, and if the aggregate of all
such payments to the executive can be reduced by 10% or less and thereby avoid
any such excess payments, then the payments shall be so reduced. Otherwise, the
contracts provide that Household will pay the executive an additional amount
equal to the excise tax imposed under Section 4999 of the Code plus a further
amount to equal the income tax payable with respect to the payment of such
excise tax amount and such income tax amount.
Executive officers and Directors of Household have from time to time been
customers of, or had transactions with, Household's banking, finance or
securities brokerage subsidiaries, or may become customers thereof in the
future. Such transactions, which include margin loans, credit cards and mortgage
loans, are made by such subsidiaries in the ordinary course of business on
substantially the same terms, including interest rate and collateral, if any, as
those prevailing at the time for comparable transactions with other persons and
do not involve more than the normal risk of collectibility or present other
unfavorable features.
SAVINGS-STOCK OWNERSHIP AND PENSION PLANS
Household has established its Tax Reduction Investment Plan ("TRIP"), which is
a deferred profit-sharing and savings plan for eligible employees of Household
and its participating subsidiaries. With certain exceptions an employee at least
21 years of age with one year of service (three years of service if under age
21) and not part of a collective bargaining unit may contribute into TRIP, on a
pre-tax and after-tax basis, up to 15% of the participant's cash compensation
(subject to a maximum annual pre-tax contribution by a participant of $9,500, as
adjusted for cost of living increases, and subject to certain other limitations
imposed by the Code) and invest such contributions in Household Common Stock or
separate equity or income funds. Each participant's own contribution is matched
in whole or in part by Household contributions at a rate determined by
Household, but Household's matching contributions may not exceed 6% of a
participant's compensation. Household matching contributions are invested in
Household Common Stock. As of September 30, 1995, the graduated vesting schedule
providing for partial vesting in the Household matching contributions on the
basis of years of plan participation was eliminated. The plan now provides for
immediate vesting of all contributions. With certain exceptions, a participant's
after-tax contributions which have not been matched by Household may be
withdrawn at any time. A participant's after-tax contributions which have been
matched by Household and such Household contributions may be withdrawn after
five years of plan participation. A participant's pre-tax contributions may not
be withdrawn except for an immediate financial
23
<PAGE> 26
hardship, upon termination of employment, or after attaining age 59 1/2. In
addition, participants may obtain loans from their TRIP accounts under certain
circumstances.
Household has also established the Supplemental Tax Reduction Investment Plan
("Supplemental TRIP") and the Household International Excess Benefit Plan (the
"Excess Plan"), which are unfunded plans for eligible employees of Household and
its participating subsidiaries who are limited as to their participation in TRIP
due to restrictions in the Code. Only matching contributions required to be made
by Household pursuant to TRIP are invested in Supplemental TRIP through a credit
to a bookkeeping account maintained by Household which deems such contributions
to be invested in Common Stock share equivalents.
Household's pension plan, the Household Retirement Income Plan ("Retirement
Plan"), is a non-contributory, defined benefit plan for employees of Household
and its U.S. subsidiaries who are at least 21 years of age with one year of
service and not part of a collective bargaining unit. Annual pension benefits
equal a percentage of an employee's "Final Average Salary" (as defined below)
not in excess of "Covered Compensation" (as defined below) plus a percentage of
an employee's Final Average Salary that exceeds Covered Compensation. "Covered
Compensation" is the average of the Social Security taxable wage base over the
35 year period ending in the year of retirement or earlier termination of
employment. "Final Average Salary" equals the average of salary plus bonus,
whether paid in cash or stock, for the four successive highest paid years out of
the employee's last 10 years of service. The percentage applied to Final Average
Salary and Covered Compensation is determined on the basis of years of
employment and age at retirement. This percentage increases as years of
employment and age at retirement increase. Participants become fully vested in
their accrued pension benefits after five years of employment. Payment of vested
pension benefits normally begins at age 65, but an early retirement benefit at
reduced levels may be paid if a participant is at least 55 years of age with 10
years of service or, if the participant was an employee on December 31, 1989, is
at least 50 years of age with 15 years of service.
A portion of the benefits payable under the Retirement Plan to certain
executive officers (including those named in the Summary Compensation Table) may
be paid by Household through the Supplemental Retirement Income Plan
("Supplemental RIP"). The Supplemental RIP was established due to the
limitations imposed on the Retirement Plan by certain federal laws which
restrict the amount of benefits payable under tax-qualified plans. Payments made
by Household under the Supplemental RIP to certain officers have been deposited
by such officers in secular trusts which they created.
The following table on an incremental basis illustrates the amount of the
Retirement Plan's (including the Supplemental RIP and any secular trust created
in connection therewith) total annual pension benefits on a straight-life
annuity basis for eligible employees retiring at age 65 who were employed on or
before December 31, 1995. The amounts in this table are not subject to deduction
for Social Security or other offset amounts and do not reflect any limitations
on benefits imposed by ERISA or federal tax laws.
<TABLE>
<CAPTION>
Average Annual
Compensation
Used as Basis 15 to 30 35 Years 40 or More
For Computing Pension Years of Service of Service Years of Service
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
$ 400,000 $ 226,345 $ 236,345 $ 246,345
- ----------------------------------------------------------------------------------
$ 600,000 $ 340,345 $ 355,345 $ 370,345
- ----------------------------------------------------------------------------------
$ 800,000 $ 454,345 $ 474,345 $ 494,345
- ----------------------------------------------------------------------------------
$1,000,000 $ 568,345 $ 593,345 $ 618,345
- ----------------------------------------------------------------------------------
$2,000,000 $1,138,345 $1,188,345 $1,238,345
- ----------------------------------------------------------------------------------
</TABLE>
The years of service of Messrs. Aldinger, Clark, Saunders, Elliott and
Schoenholz for purposes of the Retirement Plan are, respectively, 1 year, 40
years, 10 years, 32 years, and 11 years.
24
<PAGE> 27
APPROVAL OF 1996 LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
The purpose of the Household International 1996 Long-Term Executive Incentive
Compensation Plan (the "1996 Incentive Plan") is to further the long-term growth
of Household International, Inc. ("Household") and its subsidiaries by
motivating its employees to achieve or exceed personal and corporate performance
goals. The 1996 Incentive Plan strengthens Household's ability to retain and
attract outstanding employees, to provide them with an effective means to
acquire and maintain Household Common Stock, and offer competitive compensation
opportunities compared to other major corporations. Household senior executives,
in particular, are charged with enhancing shareholder value and except under
extraordinary circumstances, will only receive options under the 1996 Incentive
Plan. The options, if granted, will comprise a significant portion of a senior
executive's total annual compensation. For the same reasons, the 1996 Incentive
Plan provides for options to purchase Household Common Stock to non-employee
Directors of Household in order to facilitate ownership of Household Common
Stock by Directors and to more fully align their interests with those of our
Common stockholders.
The Board of Directors adopted the 1996 Incentive Plan on March 12, 1996,
subject to approval by the stockholders at the Annual Meeting. The Board
recommends stockholders approve the 1996 Incentive Plan to replace the 1984
Incentive Plan (the "Prior Plan"), which was approved by stockholders at the
1984 Annual Meeting, and was amended as approved by stockholders at the 1991
Annual Meeting.
In keeping with our stated compensation philosophy, the 1996 Incentive Plan
revises the Prior Plan in several ways, most significantly by eliminating
Performance Unit Awards, Performance Share Awards, Stock Appreciation Rights,
and Incentive Stock Options in order to clearly focus our employees on the
importance of shareholder value.
A summary of the significant features of the 1996 Incentive Plan is set forth
below. This summary is qualified in its entirety by reference to the full text
of the 1996 Incentive Plan which is attached to this Proxy Statement as Appendix
A.
EMPLOYEE STOCK OPTIONS
The Committee may grant to employees any type of option to purchase shares of
Household Common Stock that is permitted by law at the time of grant. Options
will generally not be exercisable less than one year nor more than ten years and
one day from the date of grant; provided, however, the Committee, in its
discretion, may extend the expiration date of any option, provided the
expiration date of such options does not exceed fifteen years from the date of
the grant of such options. The option price per share will not be less than the
fair market value of one share of Household Common Stock on the date of grant.
Payment for exercised options may be made with cash or, in the discretion of the
Committee, with shares of Household Common Stock or both cash and shares.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
Beginning with the 1997 Annual Meeting of Stockholders, each Director elected
to the Board at an Annual Meeting will receive an option for 1,500 shares of
Household Common Stock. Such options will be exercisable during the period
beginning six months from the grant date and ending ten years and one day from
the grant date. All non-employee Director options will be exercisable at a per
share option price equal to the fair market value of Household Common Stock on
the grant date. Payment for exercised options may be made with cash, with shares
of Household Common Stock previously owned or a combination of cash and shares.
Neither the Committee or the Board of Directors will have the discretion to
alter any aspect of the option awards to non-employee Directors.
RESTRICTED STOCK RIGHTS
The 1996 Incentive Plan also authorizes the Committee to grant Restricted
Stock Rights ("RSRs") to employees. RSRs entitle an employee to receive a stated
number of shares of Household Common Stock if the employee remains continuously
employed by Household for a number of years (the "restricted period")
25
<PAGE> 28
specified by the Committee. However, the Committee in its sole discretion may
accelerate the payment of Household Common Stock prior to the termination of the
restricted period if the Committee believes factors warrant such acceleration,
such as the holder of the RSR attains certain performance goals established at
the time the RSR is granted by the Committee or if there is a change in control
of Household.
OTHER SIGNIFICANT PLAN FEATURES
- - DIVIDEND EQUIVALENTS
The Committee may provide that any awards to employees under the 1996
Incentive Plan earn dividend equivalents. Such dividend equivalents may be paid
currently or may be credited to an employee's account. Any crediting of dividend
equivalents may be subject to such restrictions and conditions as the Committee
may establish, including reinvestment in additional shares or share equivalents.
- - OTHER STOCK-BASED AWARDS
The Committee may make awards of unrestricted Household Common Stock to
eligible employees in recognition of outstanding achievements.
- - CHANGE IN CONTROL
The 1996 Incentive Plan contains a provision to protect participants' rights
thereunder in the event of a change in control of Household.
- - TRANSFERABILITY
Awards granted under the 1996 Incentive Plan shall not be transferable other
than by will or the laws of descent and distribution. However, to the extent
permitted under Rule 16b-3 under the Exchange Act and rules established by the
Committee, the terms of employee options may be modified to permit transfer of
such awards.
LIMITATIONS ON AWARDS
The 1996 Incentive Plan authorizes the issuance of up to four million shares
of Common Stock, plus any shares of Common Stock remaining available under the
Prior Plan, which shares will be proportionately adjusted for any stock
dividends, stock splits, consolidations or reclassifications. In addition, any
shares of Common Stock from awards under the 1996 Incentive Plan or the Prior
Plan that are forfeited, expired, canceled, settled without issuance of shares,
or received as consideration of an option exercise shall again become available
for grant under the 1996 Incentive Plan. A maximum of 400,000 shares or share
equivalents may be issued in one year to any one participant. Shares of Common
Stock issued pursuant to the 1996 Incentive Plan may be treasury shares,
authorized but unissued shares or shares purchased in the open market.
ADMINISTRATION
The Compensation Committee of the Board of Directors in its discretion selects
employees of Household and its subsidiaries to receive awards under the 1996
Incentive Plan. The Committee may award stock options, Restricted Stock Rights,
or other stock-based awards under the 1996 Incentive Plan. The Committee has
full authority to interpret the 1996 Incentive Plan as it relates to employee
awards, to establish rules for its administration and to delegate certain
administrative responsibilities to Household's officers.
TAX DEDUCTIBILITY
The 1996 Incentive Plan meets the strict requirements of Section 162(m) of the
Code regarding performance based compensation as it relates to tax deductibility
by Household.
26
<PAGE> 29
EXPIRATION DATE
The 1996 Incentive Plan will become effective upon its approval by the
stockholders of Household. No awards have been granted under the 1996 Incentive
Plan. Unless previously terminated by the Board, the 1996 Incentive Plan will
expire on May 8, 2006.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE HOUSEHOLD
INTERNATIONAL 1996 LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN.
SELECTION OF AUDITORS
Based upon the recommendation of the Audit Committee, and subject to
ratification by Household's stockholders, Household's Board of Directors has
voted to appoint Arthur Andersen LLP to serve as the independent certified
public accountants for the fiscal year ending December 31, 1996. Although it is
not required to do so, the Board is submitting the selection of auditors for
ratification in order to obtain stockholders' approval of this appointment. If
the selection is not ratified, the Board of Directors will reconsider the
appointment. Representatives of Arthur Andersen LLP will be present at the
Annual Meeting with the opportunity to make a statement to stockholders if they
so desire and will respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ARTHUR
ANDERSEN LLP AS THE INDEPENDENT AUDITORS FOR HOUSEHOLD FOR 1996.
OTHER BUSINESS
The management of Household knows of no business other than that stated in
this Proxy Statement which will be presented for action at the Annual Meeting.
If, however, other business should properly come before the meeting, the
proxyholders will vote or refrain from voting in respect thereof in accordance
with their best judgment.
The 1995 Annual Report is being mailed to stockholders on or about March 26,
1996 with this proxy material. If for any reason you did not receive a copy of
the report, another will be sent upon request.
HOUSEHOLD WILL PROVIDE WITHOUT COST TO ANY HOUSEHOLD STOCKHOLDER A COPY OF
HOUSEHOLD'S REPORT ON FORM 10-K FOR ITS MOST RECENT FISCAL YEAR, WHICH HOUSEHOLD
IS REQUIRED TO FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN
REQUESTS FOR THE REPORT SHOULD BE DIRECTED TO THE CORPORATE COMMUNICATIONS
DEPARTMENT, HOUSEHOLD INTERNATIONAL, INC., 2700 SANDERS ROAD, PROSPECT HEIGHTS,
ILLINOIS 60070.
1997 ANNUAL MEETING OF HOUSEHOLD STOCKHOLDERS
Stockholder proposals intended to be presented at the 1997 Annual Meeting must
be received by Household on or before November 28, 1996, in order to be eligible
for inclusion in Household's proxy materials relating to that meeting.
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APPENDIX A
HOUSEHOLD INTERNATIONAL
1996 LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE
The purpose of the Household International 1996 Long-Term Executive Incentive
Compensation Plan (the "Plan") is to further the long-term growth of Household
International, Inc. and its subsidiaries ("Household") by strengthening the
ability of Household to attract and retain employees of outstanding ability, to
provide an effective means for employees to acquire and maintain ownership of
Household Common Stock, to motivate such employees to achieve long-range
performance goals and objectives, and to provide incentive compensation
opportunities competitive with those of other major corporations. Household
senior executives, in particular, are charged with enhancing shareholder value
and except under extraordinary circumstances, will only receive options under
this Plan. The options, if granted, to Household senior executives will comprise
a significant portion of their total annual compensation. In addition, the Plan
provides for the issuance of options to purchase Household Common Stock to
non-employee Directors of Household in order to facilitate ownership of
Household Common Stock by Directors and to more fully align the interests of
Household's Directors with that of its Common stockholders.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of Household's
Board of Directors (the "Committee"), a committee of the Board appointed from
time to time by the Board consisting solely of two or more non-employee
directors, each of whom shall be an "outside director" as defined in Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations thereunder and a "disinterested person" as defined in Rule 16b-3
under Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act").
The Committee shall have such powers to administer the Plan as are delegated to
it by the Plan and the Board of Directors, including, to the extent permissible
under the terms of the Plan, the power to interpret the Plan and any agreements
executed thereunder, to prescribe rules and regulations relating to the Plan, to
determine the terms, restrictions, and provisions of any agreement relating to
awards granted pursuant to the Plan, and to make all other determinations
necessary or advisable for administering the Plan. Except as required by Rule
16b-3 (or any successor Rule thereto) with respect to grants of awards to
individuals who are subject to Section 16 of the Exchange Act or as otherwise
required for compliance with Rule 16b-3 or other applicable law, the Committee
may delegate all or any part of its authority under the Plan to any officer of
Household. All decisions made by the Committee, or (unless the Committee has
specified an appeal process to the contrary) any other person to whom the
Committee has delegated authority pursuant to the provisions hereof, shall be
final and binding on all persons.
3. GRANT OF AWARDS; SHARES SUBJECT TO PLAN
(a) The Committee may grant any type of award permitted under the terms of the
Plan to employees (all such awards in the aggregate being hereinafter referred
to as "Awards"). Employees of Household and its subsidiaries may be selected by
the Committee for Awards under the Plan. In addition, non-employee Directors of
Household will receive options pursuant to the provisions of Section 6.
(b) The number of shares of Common Stock of Household that may be issued under
the Plan is equal to the sum of the number of shares remaining available under
the Household International Long-Term Executive Incentive Compensation Plan (the
"1984 Plan") plus 4,000,000, all of which shares may be made subject to options.
The shares issued pursuant to an Award may consist of authorized and unissued
shares of Household's Common Stock, Common Stock held in Household's treasury or
Common Stock purchased on the open market. If any Award granted under the Plan
or the 1984 Plan shall terminate or lapse for any reason, any shares of Common
Stock subject to such Award shall again be available for grant under the Plan.
The maximum number of shares or share equivalents that may be granted through an
Award to any one participant in one year is 400,000 shares.
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(c) In the event of corporate changes affecting Household's Common Stock, this
Plan or Awards granted to employees and options granted to non-employee
Directors hereunder (including, without limiting the generality of the
foregoing, stock dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, or other relevant changes in capitalization),
appropriate adjustments in price, number and kind of shares of Common Stock or
other consideration subject to such Awards or in the terms of such Awards, shall
be made so as to prevent dilution or enlargement of rights under the Awards. In
addition, the aggregate number or remaining number or kind of shares which may
be issued under the Plan will be adjusted to equitably reflect any such
corporate changes.
(d) The Committee may, in its discretion and subject to such rules as it may
adopt, permit an employee to satisfy, in whole or in part, withholding tax
obligations incurred in connection with Awards: (i) by electing to have
Household withhold shares of Household Common Stock (otherwise deliverable to
the employee in connection with an Award) in payment for such withholding tax
obligation or (ii) by delivering shares of Household Common Stock owned by such
employee in payment for such withholding tax obligation. Any shares of Common
Stock surrendered by an employee in full or partial payment of withholding tax
obligations must have been held by such employee at least six months prior to
the date such shares are surrendered in payment.
(e) The Committee may provide that any Award to employees under the Plan earn
dividend equivalents. Such dividend equivalents may be paid currently or may be
credited to a participant's account, including during any deferral period. Any
crediting of dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
shares or share equivalents. However, the payment of dividend equivalents will
not be conditioned upon the employee exercising an option.
(f) Except as may be provided in the agreement for any specific employee Award
or otherwise limited in this Plan, the Committee may, in its sole discretion, in
whole or in part, waive any restrictions or conditions applicable to, or
accelerate the vesting of, any Award to an employee.
(g) To the extent the Committee deems it necessary, appropriate or desirable
to comply with foreign law or practice and to further the purpose of this Plan,
the Committee may, without amending this Plan, (i) establish special rules
applicable to Awards granted to employees who are foreign nationals, are
employed outside the United States, or both, including rules that differ from
those set forth in this Plan and (ii) grant Awards to such employees in
accordance with those rules.
4. EMPLOYEE OPTIONS
(a) The Committee may grant to employees any type of statutory or
non-statutory option to purchase shares of Household Common Stock as is
permitted by law at the time the option is granted. The term of the initial
grant of each option shall not be more than ten years and one day from the date
of grant and may be exercised at the rate set by the Committee or as stated
herein; provided, however, that no option shall be exercised less than one year
from the date of grant, except as provided herein. The Committee may, in its
discretion, extend the expiration date of certain outstanding employee options,
provided no expiration date of any option may exceed fifteen years from the date
of the grant of that option.
(b) The per share purchase price of Household Common Stock which may be
acquired pursuant to an employee option shall be at least 100% of the fair
market value of one share of Common Stock of Household on the date on which the
option is granted. Within this limitation, such price shall be determined by the
Committee.
(c) Payment for shares purchased upon the exercise of an employee option shall
be made in cash or, in the discretion of the Committee, in shares of Common
Stock of Household valued at the then fair market value of such shares or by a
combination of cash and shares of Common Stock. Any shares of Common Stock
surrendered by an employee in full or partial payment of the exercise price of
an option must have been held by such employee at least six months prior to the
date such shares are surrendered in payment.
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(d) The Committee may, in its discretion and subject to such rules as it may
adopt, authorize an extension of credit from Household to an employee holding an
option granted under this Plan (including an employee who is an officer or
director of Household) to assist the employee in exercising the option.
Household may extend or guarantee loans under this provision. Loans extended
under the Plan will bear interest at a variable rate that is adjusted annually
to equal the greater of the average annual rate for three-year U.S. Treasury
notes for the calendar year immediately preceding the year in which the
adjustment is to be made and the applicable rate in effect under Section 1274(d)
of the Internal Revenue Code on the day the loan is made. Payment terms will be
established by the Committee and may or may not require periodic payments of
interest and/or principal. The term of loans will be established by the
Committee, as well as provisions governing the acceleration of maturity upon
termination of employment or default. Loans financed or guaranteed by Household
will be secured by retention of the issued stock certificates by Household and
execution of an agreement with respect to such shares. To the extent necessary
to satisfy the provisions of Regulation G or another similar regulatory
restriction, other security may be required by the Committee.
5. TRANSFER OF EMPLOYEE OPTIONS; EXERCISE OF EMPLOYEE OPTIONS FOLLOWING
TERMINATION OF EMPLOYMENT
(a) Options may be exercised only by the employee and shall not be
transferable other than by will or the laws of descent and distribution. These
restrictions on transferability shall not apply to the extent (i) such
restrictions are not at the time required for the Plan to continue to meet the
requirements of Rule 16b-3 of the Exchange Act, or any successor Rule, (ii) the
Committee has established rules concerning the transferability of employee
options and (iii) the agreement relating to an Award so specifies or the holder
has received notice from the Office of the Secretary of Household that such
restrictions are no longer applicable. If the holder of an option shall cease to
be an employee of Household or a subsidiary, and unless otherwise provided by
the Committee, all rights under such option shall immediately terminate, except:
(i) in the event of termination of employment of a holder to which
Section 11(b) hereof applies, or of a holder who is retirement-eligible
under the terms of a pension plan of Household or a subsidiary, the option
may be exercised within five years of the date of termination of employment
or as otherwise provided in the agreement for the Award;
(ii) in the event of termination of employment due to permanent and
total disability, and the holder is not retirement-eligible under the terms
of a pension plan of Household or a subsidiary, the option may be exercised
within twelve months following the date of such termination of employment
or as otherwise provided in the agreement for the Award;
(iii) in the event of death during employment, the option may be
exercised by the executor, administrator, or other personal representative
of the holder within five years succeeding death if such holder was
retirement-eligible under the terms of a pension plan of Household or a
subsidiary, or twelve months if such holder was not retirement-eligible
under the terms of a pension plan of Household or a subsidiary or as
otherwise provided in the agreement for the Award;
(iv) except in the event an employee is terminated for cause,
following termination of employment other than as set forth in subsections
(i), (ii) or (iii) above, the option may be exercised within three months
following the date of termination, or prior to the expiration of the
option, whichever period is shorter; or
(v) in the event of death of a holder of an option following
termination of employment, the option may be exercised by the executor,
administrator, or other personal representative of the holder,
notwithstanding the time period specified in (i), (ii), (iii) or (iv)
above, within a) twelve months following death or b) the remainder of the
period in which the holder was entitled to exercise the option, whichever
period is longer.
If the Committee determines that the termination is for cause, the option will
not under any circumstances be exercisable following termination of employment.
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(b) An option may not be exercised pursuant to this Section after the
expiration of the term of such option and may be exercised only to the extent
that the holder was entitled to exercise such option on the date of termination
of employment.
6. NON-EMPLOYEE DIRECTOR OPTIONS
(a) Each non-employee Director of Household will be granted an option for
1,500 shares of Household Common Stock on the date of each Annual Meeting of
Stockholders at which such Director is elected to the Board of Directors,
beginning with the 1997 Annual Meeting of Stockholders. The Committee will have
no discretion to select which non-employee Directors will be granted options or
to determine the number of option shares, price, vesting schedule or any other
term of the options granted to non-employee Directors. All options granted to
non-employee Directors will be non-qualified stock options.
(b) The per share purchase price of Common Stock which may be acquired
pursuant to a non-employee Director option shall be 100% of the fair market
value of one share of Common Stock on the date the option is granted. For
purposes of establishing the fair market value of Household's Common Stock on
any day under Section 6 of this Plan, such value shall be the average of the
highest and lowest sales prices per share of the Common Stock as reported in the
NYSE-Composite Transactions in The Wall Street Journal for such date. However,
if the NYSE is not open for trading on a given day, the fair market value will
be the average of the highest and lowest sales prices per share on the next
succeeding business day.
(c) Subject to Section 11 of this Plan, each option granted to a non-employee
Director vests and shall be fully exercisable beginning six months from the date
the option was granted. Each such option expires ten years and one day from the
date of the grant. However, if a non-employee Director ceases to be a Director
of Household, outstanding vested options are exercisable as follows:
(i) in the event service on the Board of Directors terminates due to
permanent and total disability, outstanding options may be exercised within
twelve months following the date such service terminates or prior to the
expiration of the outstanding options, whichever period is shorter;
(ii) in the event of death of a non-employee Director whether during
service as a Director of Household or after ceasing such service,
outstanding options may be exercised by the executor, administrator, or
other personal representative of such Director within twelve months after
the death of the Director or prior to the expiration of the outstanding
options, whichever period is longer;
(iii) in the event a non-employee Director's service on the Board of
Directors terminates because such Director has reached the mandatory
retirement age of 70 (or age 72 if a Director was serving on the Board as
of January 1, 1989) or if a non-employee Director retires from the Board
prior to reaching the mandatory retirement age but after having served on
the Board of Directors continuously for at least fifteen years, outstanding
options may be exercised at any time prior to the expiration of the
outstanding options; and
(iv) in the event service on the Board of Directors terminates other
than as set forth in subsections (i), (ii) or (iii) above, outstanding
options may be exercised within three months following the date such
service terminates or prior to the expiration of the outstanding options,
whichever period is shorter.
(d) Payment for shares purchased upon exercise of a non-employee Director
option shall be made in cash, in shares of Household Common Stock valued at the
then fair market value of such shares or by a combination of cash and
shares of Common Stock. Any shares of Common Stock surrendered in full or
partial payment of the exercise price of an option must have been held by such
Director at least six months prior to the date such shares are surrendered in
payment.
A non-employee Director may also satisfy, in whole or in part, income tax
obligations incurred in connection with the exercise of an option by (i)
electing to have Household withhold shares of Common Stock (otherwise
deliverable to the Director in connection with the exercise of an option) in
payment for such income tax obligation or (ii) by delivering shares of Household
Common Stock owned by such Director in
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payment for such income tax obligation. Any shares of Common Stock surrendered
in full or partial payment of income tax obligations must have been held by such
Director at least six months prior to the date such shares are surrendered.
(e) Non-employee Director options are not transferable other than by will and
the laws of descent and distribution.
7. RESTRICTED STOCK RIGHTS
(a) Upon such terms as it deems appropriate, the Committee from time to time
may grant Restricted Stock Rights ("RSRs") to any employee selected by the
Committee, which entitle such employee to receive a stated number of shares of
Common Stock of Household. The RSRs are subject to forfeiture if the employee
fails to remain continuously employed by Household or any subsidiary for the
period(s) stipulated by the Committee (each, a "Restricted Period").
(b) RSRs shall be subject to the following restrictions and limitations: (i)
the RSRs may not be transferred except by will or the laws of descent and
distribution; and (ii) except as otherwise provided in Paragraphs (d) and (e) of
this Section 7, an RSR and the shares subject to an RSR shall be forfeited and
all rights of a holder of an RSR shall terminate without any payment of
consideration by Household if such employee fails to remain continuously
employed by Household or any subsidiary for the Restricted Period. A holder of
an RSR shall remain continuously employed if such holder leaves the employ of
Household or any subsidiary for immediate reemployment with Household or any
subsidiary.
(c) Other than as may be specified pursuant to Section 3(e), the holder of an
RSR shall not be entitled to any of the rights of a holder of the Common Stock
with respect to the shares subject to such RSR prior to the issuance of such
shares pursuant to the Plan.
(d) The Committee in its sole discretion may accelerate the payment of
Household Common Stock under an RSR prior to the termination of the Restricted
Period if the holder of an RSR has achieved certain performance levels
established by the Committee at the time an RSR is granted. The Committee in its
sole judgment may revise such performance levels as it deems appropriate to
reflect significant, unforeseen events or changes.
(e) In the event that the employment of a holder of an RSR terminates by
reason of death or permanent and total disability or as a result of Section
11(b) hereof, such holder shall be entitled to receive the number of shares
subject to the RSR multiplied by a fraction (x) the numerator of which shall be
the number of full months between the date of grant of each such RSR and the
date of such termination of employment, and (y) the denominator of which shall
be the number of full months in the respective Restricted Period; provided,
however, no fractional share shall be awarded. A holder of an RSR whose
employment terminates for reasons other than those listed in this paragraph will
forfeit all rights under any outstanding RSR. This automatic forfeiture may be
waived in whole or in part by the Committee in its sole discretion.
(f) When a holder shall be entitled to receive shares pursuant to an RSR,
Household shall issue the appropriate number of shares registered in the name of
the holder.
8. OTHER STOCK-BASED AWARDS
The Committee may make awards of unrestricted shares of Household Common Stock
to eligible employees in recognition of outstanding achievements.
9. FORFEITURE
If it is determined that an employee or former employee, while employed by
Household or any subsidiary or otherwise associated with Household or any
subsidiary as a consultant, advisor or in another similar capacity, engaged at
any time in any activity in competition with any activity of Household or any
subsidiary
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or inimical, contrary or harmful to the interests of Household or any subsidiary
including, but not limited to: (i) conduct related to the participant's position
for which either criminal or civil penalties against the participant may be
sought, (ii) violation of Household policies, notwithstanding Household's
decision or inability to, or not to, terminate the participant for such
violation, (iii) accepting employment with or serving as a consultant, advisor
or in any other capacity to an employer that is in competition with or acting
against the interests of Household or any subsidiary, including employing or
recruiting any present employee of Household or any subsidiary for such
competitor, (iv) disclosing or misusing any confidential information or material
concerning Household or any subsidiary, or (v) participating in a hostile
takeover attempt of Household, then the Committee, in its sole discretion, may
cancel any unexpired or unpaid Award at any time.
10. AMENDMENT AND TERMINATION OF THE PLAN
This Plan will expire on May 8, 2006. However, the Board of Directors may
terminate the Plan at any time except as provided in Section 11(d), but such
termination shall not affect Awards previously granted under the Plan. During
the Plan term, the Committee may amend the Plan or any Award granted to an
employee under the Plan at any time, except (i) the Plan may not be amended or
terminated in the circumstances set forth in Section 11(d), (ii) the Committee
may not, without shareholder approval, and except as permitted by Section 3(c),
increase the number of shares of Common Stock of Household which may be issued
pursuant to the Plan, change the purchase price of an Option, and (iii) the
Committee may not make any other amendment to the Plan which is required by law
to be approved by the shareholders of Household.
Notwithstanding the preceding paragraph, the provisions of Section 6 of the
Plan relating to non-employee Directors may not be amended more than once every
six months, except to comply with changes to the Code or the rules and
regulations thereunder.
11. CHANGE IN CONTROL
(a) In order to protect participants in the Plan who have outstanding Awards
in the event there is a "Change in Control" (as defined below), (i) all
outstanding Options will immediately vest and will become fully exercisable and
(ii) as to any other Awards to employees, the Committee, in its sole discretion
(notwithstanding any contrary provision in Section 3(f)), may:
(i) accelerate the time periods for exercising or realizing any
Awards, notwithstanding any minimum holding or restricted periods set forth
in the Plan or established by the Committee at the time of the grant of the
Award;
(ii) provide for the purchase by Household of any Awards in cash equal
to the amount that could have been received upon the exercise or
realization of such Awards had the Awards been currently exercisable or
payable on the day before said cash payment is made;
(iii) make such adjustments, including the granting of additional
Awards, to any outstanding Award as the Committee deems appropriate to
reflect the Change in Control; and
(iv) cause outstanding Awards to be assumed, or new rights of equal
value to be substituted therefor, by any corporation that is the successor
to Household.
(b) Any employee whose position with Household or any of its subsidiaries is
"Materially Changed" (as defined below) within twenty-four (24) months after a
Change in Control shall be deemed to be involuntary terminated without "cause"
(as defined below) from Household and be entitled to exercise or receive the
payment of Awards previously granted to the employee that were outstanding
immediately prior to the event causing such termination or were awarded
subsequent to the event causing such termination, in each case, in accordance
with Sections 5(a)(i) or 7(e) of the Plan, without any action by the Committee
or Board of Directors.
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(c) For purposes of this Section and to determine the rights of any
participant who has an outstanding Award, the term:
(i) "Change in Control" means:
(1) any individual, firm, corporation or other entity (including
any successor of such entity) other than: (x) a trustee or
other fiduciary of securities held under an employee benefit
plan of Household, or (y) Household or any subsidiary thereof
becomes a beneficial owner, directly or indirectly, of common
stock of Household representing ten percent (10%) or more of
the total voting power of Household's then outstanding Common
Stock and Household acquires actual knowledge thereof;
(2) a tender offer is made for thirty percent (30%) or more of the
common stock of Household, which tender offer has not been
approved by the Board of Directors of Household; or
(3) a solicitation subject to Rule 14a-11 under the Exchange Act
(or any successor Rule) relating to the election or removal of
50% or more of the Board of Directors is made by any person
other than Household or less than 50% of the members of the
Household Board of Directors are "Continuing Directors" (as
defined below).
Notwithstanding subsection (c)(i)(1) above, if the Board of
Directors of Household determines in good faith that a person
who has met the foregoing definition has done so inadvertently,
and such person divests as promptly as practicable a sufficient
number of shares to be below the noted threshold, then such
person, in regard to that event, shall not trigger a "Change in
Control" for purposes of the Plan.
(ii) "Materially Changed" means the occurrence of one or more of the
following events:
(1) the termination of the employee, without cause, and other than
by reason of death, permanent and total disability or
retirement under the terms of a pension plan of Household or
any subsidiary;
(2) the employee was assigned to a position of lesser rank or
status;
(3) the employee's annual target bonus or targeted performance unit
awards were reduced and compensation equivalent in aggregate
value was not substituted;
(4) the employee's annual salary was reduced;
(5) the employee's 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 the
employee's benefits under HSRIP, if applicable, were reduced;
(6) the employee's other benefits or perquisites were reduced and
such reductions were not uniformally applied with respect to
all similarly situated employees; or
(7) the employee was reassigned to a geographical area outside of
the metropolitan area in which the employee was assigned at the
time of the Change in Control.
(iii) "cause" means willful and deliberate misconduct, which is
detrimental in a significant way to the interests of Household or any
subsidiary thereof;
(iv) "Continuing Director" means a director of Household who either
(i) was a Director of Household on May 8, 1996, or (ii) is an individual
whose election, or nomination for election, as a Director of Household was
approved by a vote of at least two-thirds of the Directors then still in
office who were Continuing Directors other than an individual whose initial
assumption of office is in
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connection with an active or threatened election contest relating to the
election of Directors of Household which would be subject to Rule 14a-11
under the Exchange Act (or any successor Rule).
(d) Notwithstanding anything set forth in Section 11 hereof, with the
occurrence of a Change in Control the Plan may not be amended or terminated by
the Committee, the Board of Directors or the stockholders of Household.
12. MISCELLANEOUS
(a) The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments or deliveries of shares of Household
Common Stock not yet made to a participant by Household, nothing contained
herein shall give any rights to a participant that are greater than those of a
general creditor of Household. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver shares of Household Common Stock or payments hereunder consistent with
the foregoing.
(b) With respect to participants subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
provisions of Rule 16b-3 or its successor under the Exchange Act. To the extent
any provision of the Plan or action by the Committee or its designee fails to so
comply, it shall be deemed null and void.
(c) This Plan and each agreement with respect to an Award shall be construed
and administered in accordance with the laws of the State of Delaware without
giving effect to principles relating to conflict of laws.
(d) Neither the adoption of the Plan nor any Award granted hereunder shall
confer upon any participant any right to continued employment or service with
Household or any subsidiary thereof, nor shall the Plan or any Award interfere
in any way with the right of Household or a subsidiary to terminate the
employment or relationship of any of the participants at any time.
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[HOUSEHOLD LOGO]
PROXY/VOTING INSTRUCTION CARD FOR 1996 ANNUAL MEETING OF STOCKHOLDERS
HOUSEHOLD INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.J. Darnall, J.D. Nichols and R.C.
Tower, and each of them, true and lawful proxies, with power of subsitution, to
vote all shares of common stock of the undersigned, at the Annual Meeting of
Stockholders of Household International, Inc. to be held May 8, 1996, and at
any adjournment thereof, on any business that may properly come before the
meeting, including the proposals set forth on the reverse side of this card,
which are referred to in the Notice of 1996 Annual Meeting of Stockholders and
Proxy Statement provided.
IMPORTANT --- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
- --------------------------------------------------------------------------------
[GRAPHIC]
Household's headquarters is located on Sanders Road in Prospect
Heights, Illinois, approximately 25 miles northwest of downtown Chicago.
Stockholders attending the meeting who will be using the Tri-State Tollway
(Interstate Route 294) should exit at Willow Road, travel west on Willow Road
to Sanders Road, and turn left at Sanders Road. Household's corporate
headquarters is not served by public transportation.
Parking facilities will be available for all those attending, and
refreshments will be served beginning at 9:00 a.m.
<PAGE> 39
HOUSEHOLD INTERNATIONAL
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING USING DARK INK ONLY.
A VOTE FOR ITEMS 1, 2, AND 3 IS RECOMMENDED BY THE BOARD OF DIRECTORS.
SHARES WILL BE SO VOTED UNLESS YOU OTHERWISE INDICATE.
For All
1. Election of Directors. For Withheld Except
Nominees: W.F. Aldinger, / / / / / /
R.J. Darnall, G.G. Dillon,
J.A. Edwardson, M.J. Evans,
J.D. Fishburn, C.F. Freidheim, Jr.,
L.E. Levy, G.A. Lorch,
J.D. Nichols, J.B. Pitblado,
S.J. Stewart, L.W. Sullivan,
R.C. Tower
(INSTRUCTION: To withhold authority to vote for any individual nominee, check
the "For All Except" box above and strike a line through the nominee's name
listed above.)
2. Approval of Household International 1996 For Against Abstain
Long-Term Executive Incentive Compensation Plan. / / / / / /
3. Ratification of Appointment of Arthur For Against Abstain
Andersen LLP as Independent Auditors. / / / / / /
Date: _______________________________
Please Sign: ________________________
Please Sign: ________________________
NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON. FOR JOINT ACCOUNTS
BOTH OWNERS SHOULD SIGN. WHEN SIGNING
AS EXECUTOR, ADMINISTRATOR, ATTORNEY,
TRUSTEE OR GUARDIAN, ETC., PLEASE
SIGN YOUR FULL TITLE.
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DETACH PROXY CARD HERE
To Our Stockholders:
Whether or not you are able to attend our 1996 Annual Meeting of Stockholders,
it is important that your shares be represented, no matter how many shares you
own. Accordingly, please complete and sign the proxy provided above, detach
it at the perforation, and mail it in the enclosed postage-paid envelope
addressed to Household International, c/o Harris Trust and Savings Bank.
We would like to remind shareholders that your vote will be kept permanently
confidential as described in the enclosed proxy statement.
Please note that in order to reduce the number of duplicate mailings of
proxy materials, Household has consolidated on a single proxy/voting
instruction card all of your holdings in Household Common Stock registered
under the identical name and tax identification number, including ownership
that may be attributed to Household's Tax Reduction Investment Plan ("TRIP"),
an employee benefit plan. Therefore, the proxy also provides voting
instructions for shares of Household Common Stock held in TRIP as disclosed in
the proxy statement.
We look forward to receiving your voted proxy shortly!
