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REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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HOUSEHOLD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
2700 SANDERS ROAD, PROSPECT HEIGHTS, IL
(Address of Principal Executive Offices)
36-3121988
(I.R.S. Employer
Identification No.)
60070
(Zip Code)
HOUSEHOLD INTERNATIONAL TAX REDUCTION INVESTMENT PLAN
(Full title of the plan)
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LAURIE S. MATTENSON, ESQ.
ASSOCIATE GENERAL COUNSEL -- CORPORATE FINANCE
HOUSEHOLD INTERNATIONAL, INC.
2700 SANDERS ROAD
PROSPECT HEIGHTS, IL 60070
(Name and address of agent for service)
(708) 564-6557
(Telephone number, including area code, of agent for service)
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER OFFERING REGISTRATION FEE
INTEREST/SHARE(2) PRICE(2)
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Household International, Inc. 2,000,000
Common Stock, $1 par Shares Not applicable $109,000,000 $37,587
value......................
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(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to
be offered or sold pursuant to the employee benefit plan described herein.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) and (h) under the Securities Act of 1933 on the
basis of the average of the high and low prices of the Common Stock as
reported on the New York Stock Exchange on January 17, 1996.
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PURSUANT TO RULE 429 THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT IS A
COMBINED PROSPECTUS WHICH ALSO RELATES TO REGISTRATION STATEMENT NO. 33-52211.
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HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
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This Prospectus contains important information about the Household
International Tax Reduction Investment Plan (referred to herein as the "Plan" or
"TRIP"). The Plan has been adopted to encourage eligible employees to establish
a regular savings program and to provide such employees with additional benefits
through employer contributions and through tax benefits resulting from
participating in the Plan. A total of 5,500,000 shares of Household
International, Inc. common stock ($1 par value) and an indeterminable number of
Interests in the Plan have been or are being offered pursuant to the Plan. If
you have any questions concerning the Plan, you should contact Employee Benefits
at the Home Office.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS APPENDIX OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is January 24, 1996
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TABLE OF CONTENTS
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PAGE
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Introductory Statement................................................................ 3
Description of the Plan............................................................... 3
General............................................................................. 3
Eligibility......................................................................... 3
Administration of the Plan.......................................................... 3
Contributions....................................................................... 5
Investment Funds.................................................................... 7
Performance of the Investment Funds................................................. 10
Changing Investment Options in the Investment Funds................................. 11
Transfer Restrictions............................................................... 11
Vesting............................................................................. 12
Withdrawals......................................................................... 12
Dividend Withdrawals................................................................ 13
Special Rules for Hardship Withdrawals.............................................. 13
Distributions Upon Termination of Employment........................................ 14
Loans to Participants............................................................... 15
Federal Income Tax Effects to Participants............................................ 15
General............................................................................. 15
Contributions to Employee Accounts.................................................. 15
Withdrawals While Employed.......................................................... 15
Withdrawals of Dividends............................................................ 16
Distributions Upon Termination of Employment........................................ 16
Excess Tax Reduction Contributions.................................................. 17
Excise Tax on Excess Distributions.................................................. 17
Rollover of a Distribution.......................................................... 17
Internal Revenue Service Approval................................................... 17
Special Tax Notice Regarding Plan Payments............................................ 18
Summary............................................................................. 18
Payments Eligible to be Rolled Over................................................. 18
Direct Rollover..................................................................... 19
Payment Paid to a Participant....................................................... 19
Surviving Spouses, Alternate Payees and other Beneficiaries......................... 21
How to Obtain Additional Information................................................ 22
Other Important Information........................................................... 22
Available Information and Incorporation of Certain Documents by Reference............. 23
Legal Opinions........................................................................ 23
Experts............................................................................... 23
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INTRODUCTORY STATEMENT
In this Prospectus, Household International, Inc. is referred to as
"Household" or the "Corporation". The address of Household's general
administrative office is 2700 Sanders Road, Prospect Heights, Illinois 60070
(Telephone: (847) 564-5000). A copy of the Corporation's latest Annual Report to
shareholders is being delivered with this Prospectus to employees, except to
employees who have previously received a copy of such Report; however, Household
will promptly send without charge an additional Annual Report to any such
employee at the employee's request.
DESCRIPTION OF THE PLAN
GENERAL
The Plan and the trust fund established thereunder are intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and meet the requirements under Section 401(k) of the Code as well as
the applicable requirements under Section 409 of the Code pertaining to an
Employee Stock Ownership Plan. The Plan is also subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") which are
applicable to "defined contribution plans". These provisions include reporting,
disclosure, participation, vesting and fiduciary responsibilities. Because the
Plan is not a defined benefit plan, Participants are not guaranteed a specific
amount by the Plan, and the benefit is not insured by the Pension Benefit
Guaranty Corporation. Consequently, Title IV (plan termination insurance) of
ERISA does not apply to this Plan.
ELIGIBILITY
Household and each of its participating subsidiaries (the "Employers") will
each contribute to the Plan for its own employee participants (the
"Participants"). Any employee of Household International, Inc. and its U.S.
subsidiaries (including Household Finance Corporation, Household Finance
Corporation II, Household Finance Corporation III, Household Financial Group
Ltd., Household Finance Consumer Discount Company, Household Bank, f.s.b.,
Household Insurance Services, Inc., Household Credit Services, Inc., Household
Credit Services of Mexico, Inc., Household Finance Corporation of Alabama,
Household Financial Center, Inc., Hamilton Investments, Inc., Household Retail
Services, Inc., Household Commercial Financial Services, Inc. and Household Life
Insurance Company), except for an employee in a collective bargaining unit or of
Color Prelude, Inc., Capital Graphics, Inc. or B & K Corporation is eligible to
participate in the Plan on the first day of the calendar quarter coinciding with
or following the earlier of (i) the completion of three years of service, or
(ii) the attainment of age 21 and completion of one year of service. Any
eligible employee may begin participation in the Plan if the employee meets the
minimum years of service requirement specified in the preceding sentence. An
employee who chooses not to participate in the Plan at such time as he becomes
eligible may elect to participate in the Plan effective on the first day of any
calendar quarter in accordance with the terms of the Plan, by completing the
proper form and submitting it to Household at least 30 days prior to the first
day of that calendar quarter. If an election form is received later than 30 days
prior to the start of a calendar quarter, the employee will be admitted into the
Plan on the first day of the second calendar quarter immediately following the
date the form is received.
ADMINISTRATION OF THE PLAN
The Plan's Administrative and Investment Committee (the "Committee") has
responsibility for administration of the Plan, including interpreting provisions
of the Plan, reviewing claims arising under the Plan, and filing reports and
other notices required for the continual qualification of the Plan under the
Code. Committee members are appointed and serve at the discretion of Household's
Chief Executive Officer.
Household has entered into a Trust Agreement with Vanguard Fiduciary Trust
Company ("Vanguard" or, the "Trustee") under which Vanguard will be Trustee of
the trust fund (the "Trust") and recordkeeper for the Plan. The Trustee has
responsibility for the administration of the Trust and the management of the
assets held by it. The Trustee may be removed, and a new Trustee appointed, at
the discretion of the Committee.
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Additional information about the Plan, the Committee and Vanguard can be
obtained from Household at its address previously noted herein or by calling
Employee Benefits at the Home Office, telephone number (847) 564-5000.
THIS PLAN OFFERS PARTICIPANTS THE OPPORTUNITY TO DIRECT INVESTMENTS OF
THEIR ACCOUNTS, BUT ONLY IN A VERY LIMITED MANNER AS TO THE COMPANY MATCHING
ACCOUNT (DESCRIBED BELOW). IT IS THE INTENTION OF THE COMPANY AND THE COMMITTEE
THAT THE FIDUCIARIES OF THE PLAN ARE TO BE RELIEVED OF LIABILITY FOR ANY LOSSES
WHICH ARE THE DIRECT AND NECESSARY RESULT OF INVESTMENT INSTRUCTIONS GIVEN BY A
PARTICIPANT OR BENEFICIARY.
Administrative expenses of the Plan, including fees of the Trustee,
counsel, accountants, or other experts appointed under the Plan, will be paid
out of the Trust to the extent not paid by Household.
The following Administrative expenses of the Plan are paid out of the
Trust:
Household Common Stock Fund: Vanguard assesses an administrative fee
of ten basis points (0.10%) per annum on the first fifty million dollars
($50,000,000) of the aggregate value of the common stock in this fund and
five basis points (0.05%) per annum on any remaining amount exceeding fifty
million dollars ($50,000,000) of the aggregate value of the common stock in
this fund using a daily accrual rate that is recorded on the stock ledger
for this fund. At the end of each calendar quarter, Vanguard redeems the
accrued fee from funds on deposit in a separate Vanguard Money Market
Reserves account which is a part of the Common Stock Fund.
Fixed Income Security Fund: Vanguard assesses a $10,000 annual
administrative fee for the guaranteed investment contracts that existed in
the portfolio at the time of Vanguard's appointment as Trustee on January
1, 1991. This fee is assessed at a daily rate and is deducted from the
assets of this fund on a monthly basis. For the portion of this fund that
is invested in the Vanguard Investment Contract Trust, thirty basis points
(0.30%) is deducted from income to this fund prior to distribution to
Participant accounts.
Vanguard Extended Market Index Trust Fund: Vanguard will assess a
0.50% fee on shares purchased in this fund at the time shares are purchased
to cover transaction costs consisting of bid/ask spreads, commissions, and
market impact (liquidity costs). The fee will assure that transaction costs
are spread equitably among shareholders of the portfolio. Since the fee is
paid directly by the portfolio, this fee is not, and should not be
construed as, a sales load.
Loan Fee: Participants will be charged a $40 administrative fee for
each new loan drawn from the Plan after January 1, 1996. This fee may be
changed from time to time by the Committee.
Deferred Distribution Fee: Beginning July 1, 1994, Participants who
defer distribution of their accounts beyond the first day of July following
the calendar year in which their employment terminates will be charged an
annual fee of $30 until distribution is initiated.
With respect to shares of Household's common stock and shares in the
Windsor II Fund, Quantitative Portfolio Fund, Extended Market Index Trust Fund,
Wellington Fund and Money Market Reserves -- Federal Portfolio Prime Cap Fund
and International Growth Portfolio Fund held by the Trust, each Participant may
instruct the Trustee on how shares held in the Participant's account are to be
voted. Any shares of Household's common stock for which voting instructions are
not received from a Participant will be voted by the Trustee (i) in the same
manner as the majority of shares for which voting directions are received by the
Trustee, and (ii) with respect to the election of directors, the Trustee will
vote for the nominees who receive the most votes pursuant to such voting
directions.
By resolution of the Board of Directors of Household, all proxies,
consents, ballots and voting materials that identify the vote of specific
stockholders are to be kept confidential except in the case of a contested
proxy, consent solicitation or to meet applicable legal requirements. All such
documents are to be returned to the tabulator and are to be made available to
the Inspectors of Election to enable them to certify the results of the vote.
The tabulator for each proxy solicitation and the Inspectors of Election will be
appointed by the Board of Directors prior to the meeting of shareholders for
which the proxy solicitation is required. The tabulator will provide all
comments written on or accompanying proxy cards to the Corporation, along with
the
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name of the stockholder, without indication of the vote of the stockholder
except where the vote is included in the comment or is necessary for an
understanding of the comment.
Both Vanguard and the tabulator have been informed of this confidential
position and neither will reveal any information relating to the purchase, sale
and holding and exercise of voting and similar rights with respect to such
securities to any officer, employee or agent of the Company except as required
by law or regulation. The TRIP Committee is designated to monitor Plan
compliance with these procedures. The TRIP Committee's address is 2700 Sanders
Road, Prospect Heights, Illinois 60070. Phone: (847) 564-5000.
Other voting securities held in the Trust by the Trustee will be voted by
the Trustee in accordance with instructions given by the Committee. In the event
of a tender offer or exchange offer for shares of Household's common stock, each
Participant will be given the opportunity to decide individually whether shares
held in the Participant's account will be tendered or exchanged.
CONTRIBUTIONS
Investment Plan and Tax Reduction Contributions. The Plan allows a
Participant to elect to make Tax Reduction Contributions and Investment Plan
Contributions to a Plan account through payroll deductions from 1% to 15% (in
whole percentages only) of eligible compensation. A contribution designated as a
Tax Reduction Contribution reduces the gross income of the Participant for
federal income tax purposes (except for social security taxes) at the time of
such contribution, whereas an Investment Plan Contribution is made on an
after-tax basis. Participants may make both Investment Plan Contributions and
Tax Reduction Contributions, but in no event may a combination of such
contributions exceed 15% of the Participant's compensation. Eligible
compensation includes salary, bonuses, commissions, overtime payments, severance
pay, and pay in lieu of vacation, but as of the date of this Prospectus may not
exceed $150,000 annually. (The maximum amount of eligible compensation is
adjusted annually for changes in the cost of living pursuant to regulations
issued by the Secretary of the Treasury). Participants may also be subject to
other limitations on the amount of contributions, as described elsewhere herein.
Please refer to "Description of the Plan -- Withdrawals" and "-- Special
Rules for Hardship Withdrawals" for important information regarding certain
restrictions on the ability of Participants to withdraw contributions and
earnings from their accounts. Reference is also made to "Federal Income Tax
Effects to Participants" for information regarding the different tax
considerations applicable to Investment Plan Contributions and Tax Reduction
Contributions.
Investment Elections. Participants must submit an investment election form
to Household designating the Investment Funds in which they wish their
contributions to be invested. Contributions to individual Investment Funds must
be made in multiples of 10% of the total of a Participant's Tax Reduction
Contributions and Investment Plan Contributions. The Investment Funds are
described elsewhere herein.
Rollover Contributions. In addition to the contributions specified above,
employees who receive a "qualifying distribution" under the Code from any other
tax qualified plan (as defined in the Plan) may have all or part of such
distribution transferred to a rollover account established in the name of the
employee for that purpose (a "Rollover Contribution"). Such Rollover
Contributions are subject to regulations imposed by the Code. Household
recommends that Participants consult with their tax advisors with respect to the
impact of such regulations. An investment election form must be submitted with
the Rollover Contribution which directs that such Rollover Contribution be
invested in the Investment Fund(s) of the Participant's choosing in multiples of
10% of the Participant's Rollover Contribution.
Trustee-to-Trustee Transfer Contributions. In connection with the
distribution resulting from the termination of the Household International Tax
Credit Stock Ownership Plan ("PAYSOP"), participants in PAYSOP were permitted
during 1988 to transfer their PAYSOP account balances (which were primarily
invested in shares of Household common stock) into the Household Common Stock
Fund of the Plan (as described herein) ("Trustee-to-Trustee Contributions").
Employer Matching Contributions. Subject to certain limitations, each
Participant's Employer may at its option elect to make contributions each month
to Participant accounts in an amount determined by the
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Employer. Each Employer's matching contribution ("Employer Matching
Contributions") will not be more than 6% of each Participant's compensation and
the amount of each Participant's Tax Reduction Contributions and Investment Plan
Contributions which are eligible to be matched by the Employer may not exceed 4%
of the Participant's compensation. Employer Matching Contributions may be made
in cash or in Household's common stock, at the discretion of Household. However,
all Employer Matching Contributions made in cash will be invested in the
Household Common Stock Fund. Employer Matching Contributions shall be made first
to match a Participant's Tax Reduction Contributions and then to match a
Participant's Investment Plan Contributions.
As of the date of this Prospectus, subject to the 6% of Participant
compensation limitation described above, Employer Matching Contributions will be
made each month at a rate equal to 300% of a Participant's Tax Reduction
Contributions and Investment Plan Contributions on the first 1% of a
Participant's compensation and 100% of such contributions on the next 2% through
4% of a Participant's compensation.
Suspending or Changing Contributions. Participants may suspend Tax
Reduction Contributions and/or Investment Plan Contributions at any time. The
effective date of such a suspension will be as soon as reasonably possible
following receipt by Household of a notice of such suspension of such
contributions. Participants may resume Tax Reduction Contributions and/or
Investment Plan Contributions as of the first day of a calendar quarter. In no
event may such contributions resume prior to the first day of the calendar
quarter at least 30 days following Household's receipt of a Participant's
written election to resume contributions.
Participants may increase or decrease the amount of their Investment Plan
Contributions and/or their Tax Reduction Contributions, effective the first day
of a calendar quarter, by submitting a properly executed election form to
Household at least 30 days prior to the effective date of the change. Election
forms received less than 30 days prior to a calendar quarter will be effective
on the first day of the subsequent calendar quarter.
Limitations on Contributions. The total contributions allocated to a
Participant's Plan account for any calendar year are limited pursuant to
requirements of the Code. In general, the Code requires that Tax Reduction
Contributions, Investment Plan Contributions, and Employer Matching
Contributions, forfeitures, and certain defined Participant contributions cannot
exceed the lesser of (i) 25% of the Participant's annual compensation, or (ii)
an amount, which as of the date of this Prospectus is $30,000, (this amount may
be adjusted annually for changes in the cost of living in accordance with
regulations issued by the Secretary of the Treasury), or (iii) an amount which,
when considered together with benefits or contributions for the Participant
under other tax-qualified plans of Household and its subsidiaries, does not
cause the Participant's benefits or contributions under all such plans to exceed
certain limitations imposed by the Code.
In addition, a Participant may not contribute, as of the date of this
Prospectus, more than $9,500 of Tax Reduction Contributions in any year, but
such limit may be adjusted annually for changes in the cost of living in
accordance with regulations issued by the Secretary of the Treasury. Any
contributions by a Participant in excess of $9,500 during a year which were
designated as Tax Reduction Contributions will be automatically treated as
Investment Plan Contributions. Reference is made to "Federal Income Tax Effects
to Participants -- Excess Tax Reduction Contributions" herein for further
information on excess Tax Reduction Contributions.
There are also limitations on contributions made by individuals who are
considered by the Internal Revenue Service to be "highly compensated
individuals". Elections to make Tax Reduction Contributions and Investment Plan
Contributions by Participants who are highly compensated individuals will be
valid only to the extent that the total of such contributions made bears a
required relationship, set forth in the Code, to such contributions made by all
other individuals in the Plan. Contributions made by Participants who are not
highly compensated individuals will not be affected by these rules. Tax
Reduction Contributions of highly compensated individuals that exceed this
limitation must be reduced until the required relationship is met. In such
event, the reduced Tax Reduction Contributions of a Participant, and earnings
thereon, may be deemed Investment Plan Contributions or may be returned to the
Participant. Investment Plan Contributions and Employer Matching Contributions
of Participants who are highly compensated individuals must also be
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reduced in order to meet the required relationship. Reduced Employer Matching
Contributions, to the extent not vested, may be forfeited, and reduced
Investment Plan Contributions, vested Employer Matching Contributions, and
earnings thereon, may be returned to the Participants who are highly
compensated. Employer Matching Contributions and earnings on all contributions
will be taxed as regular income. Reduced Tax Reduction Contributions cannot be
deemed to be Investment Plan Contributions to the extent that such treatment
will cause Investment Plan Contributions by highly compensated individuals to
exceed the required relationship.
Total Tax Reduction Contributions and Employer Matching Contributions,
which are deductible by Household as an expense for federal income tax purposes,
will be limited to the maximum amount which Household is permitted to deduct
during any year.
INVESTMENT FUNDS
The Plan is intended to be a "participant directed plan" as described in
Section 404(c) of ERISA, and Title 29 of the Code of Federal Regulations Section
2550.404c-1. The fiduciaries of the Plan may be relieved of liability for any
losses which are the direct and necessary result of investment instruction given
by the Participant or beneficiary.
Participants may direct the investment of their contributions into one of
the following nine investment funds (the "Investment Funds"):
Household Common Stock Fund. This fund will primarily be invested in shares
of common stock of Household. Temporary cash balances may be invested in a
short-term money market account. Any dividends, net of Plan expenses
attributable to the Household Common Stock Fund, will be reinvested in
Household's common stock, unless the Participant has elected to have such cash
dividends distributed. Reference is made to "Description of the Plan -- Dividend
Withdrawals" for further information on such distributions. The Trustee may
purchase Household's common stock at market prices in transactions over
securities exchanges and may also purchase newly-issued or treasury stock
directly from Household at such prices and on such terms as it deems proper.
Fixed Income Securities Fund. Assets in this fund, as well as ongoing
employee contributions, are primarily invested in the Vanguard Fiduciary Trust
Company Investment Contract Trust (formerly named The Vanguard Variable Rate GIC
Trust). In addition, future proceeds received upon the maturity, termination or
sale of the existing individual investment contracts held by this fund with the
insurance companies specified below under "Performance of the Investment Funds"
will be invested in the Vanguard Fiduciary Trust Company Investment Contract
Trust. Vanguard Fiduciary Trust Company has the authority to sell or terminate
the investment contracts currently in effect if it deems it to be in the best
interests of Participants to do so, and it may choose to exercise this
discretion in the future. Any gain or loss (if any) realized on such termination
or sale will be borne by Participants with investments in this fund following
such termination or sale. The Vanguard Fiduciary Trust Company Investment
Contract Trust seeks to provide safety of principal and a level of current
income consistent with other instruments with a two- to three-year average
maturity. The Trust is a collective trust invested primarily in guaranteed
investment contracts issued by insurance companies and bank investment contracts
issued by commercial banks. The Trust intends to maintain a constant net asset
value of $1.00 per share. There is no assurance that the fund will be able to
maintain a stable net asset value of $1.00 per share.
The interest earnings for any year is a blend or average of all the
investments in this fund and, consequently, the interest rate on this fund will
fluctuate based on the interest rate earned on individual investments held by
the fund. Using a single blended rate has the effect of smoothing rate
fluctuations from year to year. The Vanguard Fiduciary Trust Company Investment
Contract Trust return will be blended with the return on the other contracts.
Windsor II Fund. Vanguard's Windsor II Fund is a mutual fund designed to
provide long-term capital growth and a reasonable level of current income from
dividends. The fund's policy is to invest in a diversified portfolio of common
stocks listed on exchanges in the United States. Windsor II follows a flexible
investment
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strategy emphasizing income-producing common stocks which are, in the investment
adviser's opinion, undervalued in the marketplace at the time of purchase. For
the most part, these securities are characterized by above-average income yields
and below-average price-earnings ratios, relative to the stock market in
general, as measured in the Standard & Poor's 500 Composite Stock Price Index
("S&P 500 Index"). The price per share is determined by dividing the total
market value of the fund's investments and other assets, less any liabilities,
by the number of outstanding shares of the fund. Price per share is determined
as of the close of the New York Stock Exchange (the "Exchange") on each day that
the Exchange is open, and on any other day on which there is sufficient trading
in the fund's portfolio securities to materially affect the fund's price per
share. Dividend income is credited to Participants' Plan accounts and is used to
purchase additional shares of the Windsor II Fund.
Quantitative Portfolio Fund. Vanguard's Quantitative Portfolio Fund is a
mutual fund which is designed to provide investment results that correspond to
the price and yield performance of publicly traded common stocks, in the
aggregate, as represented by the S&P 500 Index. The fund's policy is to be fully
invested in common stocks, and it is expected that cash or cash items would
normally be less than 1% of net assets. Temporary cash balances may be invested
in short-term money market instruments. The fund generally selects about 200
stocks, most of which are in the S&P 500 Index. The selection of these 200
stocks is made with quantitative and mathematical analysis to achieve an overall
portfolio which replicates very closely the investment performance of the S&P
500 Index. In addition, the stock selection is made to identify stocks with
superior relative value, seeking thereby to marginally outperform the S&P 500
Index. The price per share is determined by dividing the total market value of
the fund investments and other assets, less any liabilities, by the total
outstanding shares of the fund. Price per share is determined as of the close of
the Exchange on each day that the Exchange is open, and on any other day on
which there is sufficient trading in the portfolio securities to materially
affect the fund's price per share. Dividend income under this fund is credited
to Participants' Plan accounts and is used to purchase additional shares of the
Quantitative Portfolio Fund.
Extended Market Portfolio of Index Trust. This Vanguard managed mutual fund
attempts to invest in a reliable sample of all U.S. stocks not in the S&P 500
Index, in percentages corresponding to their proportion of the Wilshire 4500
Index. Because many of these stocks are too small in capitalization to own or
trade without undue liquidity risk, the portfolio is constructed to approximate
the Wilshire 4500 Index. The performance of the portfolio will therefore vary
within a reasonable range from the performance of the Wilshire 4500 Index. The
price per share is determined by dividing the total market value of the fund's
investments and other assets, less any liabilities, by the number of outstanding
shares of the fund. Price per share is determined as of the close of the
Exchange on each day that the Exchange is open, and on any other day on which
there is sufficient trading in the fund's portfolio securities to materially
affect the fund's price per share. Dividend income is credited to Participants'
Plan accounts and is used to purchase additional shares of the Extended Market
Index Trust.
PrimeCAP Fund. The Vanguard PrimeCAP Fund seeks long-term growth by
investing principally in common stocks of companies which the investment adviser
anticipates will experience significant long-term capital growth. Income from
dividends is expected to be minimal. Growth stocks, which are the Fund's primary
investments, are likely to be more volatile in price than the stock market as a
whole. The price per share is determined by dividing the total market value of
the fund's investments and other assets, less any liabilities, by the number of
outstanding shares of the fund. Price per share is determined as of the close of
the Exchange on each day the Exchange is open. Dividend income is credited to
Participants' Plan accounts and is used to purchase additional shares of the
PrimeCAP Fund.
Wellington Fund. This Vanguard mutual fund is a "balanced fund", meaning
that it will hold varying amounts of bonds, U.S. preferred and common stocks,
and cash. The Wellington Fund's objective is conservation of principal,
reasonable income return, and modest profits without undue risk. The amount held
in each asset class will fluctuate within a range according to the portfolio
manager's assessment of the risk and reward of each asset class given the then
current economic conditions. Normally, 60% to 70% of the Wellington Fund's
assets will be invested in U.S. common stocks. The price per share is determined
by dividing the total market value of the fund's investments and other assets,
less any liabilities, by the number of outstanding shares of the fund. Price per
share is determined as of the close of the Exchange on each day that
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the Exchange is open, and on any other day on which there is sufficient trading
in the fund's portfolio securities to materially affect the fund's price per
share. Dividend income is credited to Participants' Plan Accounts and is used to
purchase additional shares of the Wellington Fund.
International Growth Portfolio Fund. This Vanguard managed mutual fund
seeks to provide long-term capital growth by investing in a diversified
portfolio of common stocks of companies based outside the United States. The
investment adviser to the fund seeks to acquire securities which are undervalued
or which offer opportunities for significant future growth. Income from
dividends may be received, but is not an objective of the fund. The price per
share is determined by dividing the total market value of the fund's investments
and other assets, less any liabilities, by the number of outstanding shares of
the fund. Price per share is determined as of the close of the Exchange on each
day the Exchange is open. Dividend income is credited to Participants' Plan
accounts and is used to purchase additional shares of the International Growth
Portfolio Fund.
The stocks in this fund will be affected by various factors which are
likely to cause the price performance of such stocks to be different than U.S.
stocks and, in some cases, more volatile. Such factors include differences in
the tax laws, accounting practices and financial reporting standards of the U.S.
and the country in which the companies are based and fluctuations in the value
of currencies in which the stocks are denominated.
Money Market Reserves -- Federal Portfolio. This Vanguard managed mutual
fund seeks the maximum current income that is consistent with preservation of
capital and liquidity by investing in short-term securities issued by the U.S.
Treasury and agencies of the U.S. government and repurchase agreements
collateralized by such securities. The liabilities of such agencies may not be
backed by the full faith and credit of the U.S. Government. The portfolio
maintains a weighted average maturity of less than ninety days.
This portfolio intends to maintain a constant net asset value of $1.00 per
share. Investments in money market funds such as this are, however, neither
insured nor guaranteed by the U.S. Government, and there is no assurance that
the fund will be able to maintain a stable net asset value of $1.00 per share.
The Fixed Income Securities Fund, Windsor II Fund, Quantitative Portfolio
Fund, Extended Market Index Trust, PrimeCAP Fund, Wellington Fund, International
Growth Portfolio Fund and Money Market Reserves -- Federal Portfolio comprise
part of the Vanguard Group of Investment Companies. Household in its discretion
may add to, subtract from, or substitute different funds for the nine Investment
Funds currently available to Participants in the Plan. A prospectus on the eight
Vanguard funds is available by writing to Vanguard at 1400 Morris Drive, Wayne,
PA 19087, or by calling (800) 523-1188. Participants should request prospectuses
and read them prior to investment in a fund. Copies of the most recent
prospectus relating to Household common stock is available by writing to
Household at 2700 Sanders Road, Prospect Heights, IL 60070, or by calling (847)
564-5000.
9
<PAGE> 11
PERFORMANCE OF THE INVESTMENT FUNDS
The table below presents certain historical information on the investment
performance of each of the Investment Funds. The rates of return presented below
are not intended to predict what the future performance of the Investment Funds
will be, and neither Household nor the Plan guarantees the performance of any of
the Investment Funds. The past return on an individual Participant's account
balance may differ from the annualized rates of return disclosed herein due to
the timing of when contributions in the various Investment Funds were made and
how long such investments were maintained by the Participant, as well as other
factors.
The table below shows annual rates of return for the various investment
alternatives, as well as indices of some relevant asset classes which are widely
used for comparative purposes. The annual rates of return take into
consideration the reinvestment of income (dividend and interest) and the price
changes of the fund or asset, if any.
<TABLE>
<CAPTION>
% ANNUAL RATES OF RETURN
-------------------------------------------
1990 1991 1992 1993 1994
------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
HISTORICALLY AVAILABLE INVESTMENTS
Household Common Stock Fund(1)......................... (32.69) 63.10 20.70 13.78 17.52
Fixed Income Securities Fund(2)........................ 9.31 8.75 8.42 7.91 8.01
Windsor II Fund........................................ (9.98) 28.70 16.50 13.60 (1.16)
Quantitative Portfolio Fund............................ (2.44) 30.29 7.01 13.83 (0.61)
Extended Market Portfolio of Index Trust............... (14.91) 41.85 12.47 14.49 (1.76)
PrimeCAP Fund.......................................... (2.79) 33.14 8.99 18.03 11.41
Wellington Fund........................................ (2.81) 23.65 7.93 13.52 (0.49)
International Growth Portfolio Fund.................... (12.05) 4.74 (5.79) 44.74 0.76
Money Market Reserves -- Federal Portfolio............. 8.07 5.95 3.67 2.98 4.03
INDICES OF ASSET CLASSES
S&P 500 Index(3)....................................... (3.12) 30.34 7.61 10.06 1.31
Wilshire 4500(4)....................................... (13.56) 43.45 11.87 14.57 (2.66)
Wilshire 5000(5)....................................... (6.18) 34.20 8.97 11.28 (0.06)
Shearson Lehman Corp/Gov.(6)........................... 2.28 14.62 7.58 11.03 (10.56)
</TABLE>
- -------------------------
(1) The total performance of a share of Household common stock including
dividends and changes in market value during the year.
(2) The Fixed Income Securities Fund was invested in the insurance company
contracts in the following percentages of total assets of the fund as of
December 31, 1994: Aetna Life Insurance Company: 27%; Principal Mutual Life
Insurance Company: 29%. The remaining 44% was invested in the Vanguard
Investment Contract Trust Fund.
(3) This widely used index includes 500 stocks of U.S. companies with large
capitalization. The market value of this index at December 31, 1994 was $3.3
trillion.
(4) This widely used index includes virtually all of the stocks of U.S.
companies which are not in the S&P 500 Index. These are generally stocks of
smaller capitalized companies whose aggregate performance the Extended
Market Fund intends to approximate. The market value of this index at
December 31, 1994 was $1.5 trillion.
(5) This widely used index includes virtually all U.S. stocks, and had a market
value at December 31, 1994 of $4.8 trillion.
(6) This widely used index includes most publicly traded corporate and
government bonds and had a market value at December 31, 1994 of $2.7
trillion.
10
<PAGE> 12
CHANGING INVESTMENT OPTIONS IN THE INVESTMENT FUNDS
A Participant may elect to change the Investment Funds into which the
Participant's ongoing Tax Reduction Contributions and Investment Plan
Contributions are invested, or may choose to transfer previously-made Investment
Plan Contributions, Tax Reduction Contributions, Rollover Contributions,
Trustee-to-Trustee Transfer Contributions, and earnings on such contributions,
among the various Investment Funds by notifying Vanguard by phone at (800)
523-1188 or in writing at 1400 Morris Drive, Wayne, PA 19087. Written
confirmation of a transfer will be sent by Vanguard to the Participant's home
address. Such changes will be effective as soon as reasonably possible following
receipt by Vanguard of notification of the requested change, except for changes
involving the Fixed Income Securities Fund, which will be effective as of the
first day of the calendar quarter following notification to Vanguard of the
requested change. Changes in investment directions and transfers among the
Investment Funds may generally be made as often and whenever the Participant
chooses. Following any change in investment directions, contributions to each
Investment Fund must continue to be made in multiples of 10% of the total of the
Participant's contributions. Transfer from one Investment Fund to another may
generally be made in any amount of the Participant's choosing. Transfer of
Employer Matching Contributions (invested in the Household Common Stock Fund) to
other Investment Funds is generally not permitted, except in the limited
situations described below.
Effective as of January 1, 1996, the Plan is also intended to qualify as an
Employee Stock Ownership Plan ("ESOP"). Accordingly, beginning in 1996, there
will be expanded diversification rights for certain Participants with respect to
the amounts invested in the Household Common Stock Fund. If a Participant
reaches age 55 and has either completed 10 years of employment or 10 years of
participation in the Plan, whichever is earlier, such Participant has the right
to diversify a portion of the shares in the Household Common Stock Fund that are
attributed to Employer Matching Contributions. This means that such Participant
can invest up to 25% of such shares in another Investment Fund.
This diversification right will continue for six years (provided that if a
Participant has already reached age 55 and has 10 years of employment, this
right to diversify must be exercised by March 31, 2001). In the sixth year, the
diversification right will extend to 50% of the shares invested in the Household
Common Stock Fund that are attributed to Employer Matching Contributions. This
amount will include any such shares previously diversified as the result of an
earlier election. The Participant must exercise this right to diversify within
the first 90 days of any calendar year.
The value of Household Common Stock attributed to Employer Matching
Contributions in the Household Common Stock Fund must be at least $500 to
receive this diversification right.
There are also certain Participants who, pursuant to a sale agreement, have
transferred to employment with Jefferson-Pilot Corporation ("J-P") or its
affiliates in 1995 and have become participants in the J-P 401(k) plan. The
account balances of these Participants will be transferred to the J-P plan but
such transfer may not occur until sometime in 1996. In the interim, such
Participants may elect to have all or part of their account balance which is
invested in the Household Common Stock Fund and which is attributed to Employer
Matching Contributions transferred to one of the other Investment Funds.
However, such amounts transferred out of the Household Common Stock Fund cannot
be transferred back in.
TRANSFER RESTRICTIONS
Certain conditions of the Vanguard Fiduciary Trust Company Investment
Contract Trust require that the Plan impose restrictions on transfers both into
and out of the Fixed Income Securities Fund. These conditions also impose
restrictions on transfers from the Fixed Income Securities Fund directly to the
Money Market Reserves -- Federal Portfolio. Due to these limitations, the Plan
permits transfers both into and out of the Fixed Income Securities Fund only
once per calendar quarter.
Assets withdrawn from the Fixed Income Securities Fund must be deposited
and remain in an eligible equity fund for a minimum of ninety calendar days
prior to becoming eligible for transfer back into the Fixed Income Securities
Fund or for transfer to the Money Market Reserves -- Federal Portfolio. Such
assets are eligible for transfer to funds other than the Money Market Reserves
- -- Federal Portfolio on a daily basis. The
11
<PAGE> 13
following funds are eligible equity funds: Household Common Stock Fund; Windsor
II Fund; Quantitative Portfolio Fund; Extended Market Portfolio of Index Trust;
PrimeCAP Fund; Wellington Fund; and International Growth Portfolio Fund.
Exchanges from the Money Market Reserves -- Federal Portfolio may be made
directly into the Fixed Income Securities Fund without a ninety day investment
in an eligible equity fund.
VESTING
Participants who terminate from employment on or after September 30, 1995
are fully vested at all times in all of their account balances.
WITHDRAWALS
Subject to certain limitations, employees who are Participants in the Plan
may withdraw all or part of their account balance, subject to a minimum
withdrawal of $500 or the balance of the account, whichever is less. For
purposes of withdrawals, the value of a Participant's account balance will be
determined as soon as reasonably practicable following receipt by Vanguard of
the Participant's written withdrawal request. Withdrawals of account balances
will be made from all amounts in each category below (in the order in which such
categories are listed) before amounts in the next category may be withdrawn, and
are subject to the limitations set forth below:
1) Investment Plan Contributions (excluding earnings thereon) made
prior to January 1, 1987, which have not been matched by Employer Matching
Contributions.
2) Investment Plan Contributions (including earnings thereon) made
after January 1, 1987 which have not been matched by Employer Matching
Contributions; and, if the Participant is a former participant in PAYSOP
who transferred a PAYSOP account balance into the Plan pursuant to a
Trustee-to-Trustee Transfer Contribution, the amount equal to such
Participant's own contributions (if any) into PAYSOP (excluding earnings
thereon).
3) Investment Plan Contributions (excluding earnings thereon) made
prior to January 1, 1987, which have been matched by Employer Matching
Contributions, providing that the Participant has been in the Plan for five
years; and, if the Participant is a former participant in PAYSOP who
transferred a PAYSOP account balance into the Plan pursuant to a
Trustee-to-Trustee Transfer Contribution, earnings on such Participant's
employee contributions (if any).
4) Investment Plan Contributions (including earnings thereon) made
after January 1, 1987, which have been matched by Employer Matching
Contributions, provided that the Participant has been in the Plan for five
years.
5) Employer Matching Contributions, including earnings thereon,
provided that the Participant has been in the Plan for five years.
6) Trustee-to-Trustee Transfer Contributions (except any amount
attributable to such contributions previously distributed, as described
above) and Rollover Contributions, plus earnings thereon.
7) Investment Plan Contributions (excluding earnings thereon) of
Participants who have been in the Plan for less than five years, which have
been matched by Employer Matching Contributions.
8) Tax Reduction Contributions, plus earnings thereon, by Participants
who have attained age 59 1/2, or in order to meet immediate financial
hardships as defined by the Code and regulations thereunder. Participants
who have not attained age 59 1/2 may withdraw account balances attributable
to Tax Reduction Contributions (excluding earnings thereon that were earned
on or after January 1, 1989) during employment with Household or a
subsidiary only to meet immediate financial hardships. Except to meet
immediate financial hardships, Participants under age 59 1/2 may not make
withdrawals attributable to Tax Reduction Contributions during employment
with Household or a subsidiary. The
12
<PAGE> 14
rules concerning withdrawals for financial hardships are described under
"Special Rules for Hardship Withdrawals" herein.
A Participant with less than five years of participation in the Plan who
withdraws Investment Plan Contributions which have been matched by Employer
Matching Contributions will not be able to make contributions into the Plan (and
thereby receive Employer Matching Contributions) for a six month period
following such withdrawal.
Participants who terminated employment after attaining age 55 and who were
also at that time eligible for normal or early retirement may withdraw all or
part of their account balance, subject to a minimum withdrawal of $500 or the
balance in their account, whichever is less. No more than two (2) such
withdrawals are permitted in a Plan Year. Withdrawals may be made of all amounts
eligible for withdrawal in each category below (in the order in which such
categories are listed) before amounts in the next category may be withdrawn:
1. Investment Plan contributions (excluding earnings thereon) made
prior to January 1, 1987.
2. Investment Plan Contributions made after January 1, 1987 and
earnings attributable to both pre 1987 and post 1986 Investment Plan
Contributions.
3. Employer Matching Contributions, including earnings thereon.
4. Trustee-to-Trustee Transfer Contributions (except any amount
attributable to such contributions previously distributed, as described
above) and Rollover Contributions, plus earnings thereon.
5. Tax Reduction Contributions, plus earnings thereon.
Payments of withdrawals will be made in cash, except that non-hardship
withdrawals from the Household Common Stock Fund may be made in cash, shares, or
a combination of cash and shares at the Participant's option, subject to the
Committee's discretion to determine the minimum number of shares which the Plan
may distribute to a Participant in lieu of cash. Reference is made to "Federal
Income Tax Effects to Participants" for tax consequences of withdrawals of
account balances from the Plan during employment.
DIVIDEND WITHDRAWALS
Except as provided below, cash dividends earned during a Plan Year on
shares of common stock of Household credited to a Participant's account and
invested in the Household Common Stock Fund shall be reinvested in such Fund.
However, beginning in 1996, a Participant may elect, on an annual basis, to have
distributed to him/her the cash dividends earned in the Plan Year which are
attributable to the Household common stock credited to his/her account. An
election once made shall continue in effect for all subsequent Plan Years unless
the election to have dividends distributed is discontinued by filing a timely
election with the Committee prior to the beginning of the quarter in which the
dividends are paid.
SPECIAL RULES FOR HARDSHIP WITHDRAWALS
A Participant may only make a hardship withdrawal if the withdrawal is made
on account of an immediate and heavy financial need of the Participant and if
the withdrawal is necessary to satisfy such financial need. A withdrawal will be
deemed to be made on account of an immediate and heavy financial need if used
for one of the following purposes: the purchase of a principal residence (use of
withdrawals to make mortgage payments is not permissible); payment of tuition
for the next semester, trimester, or quarter of post-secondary education for
Participants, their spouses, or dependents; the need to prevent the eviction of
Participants from their principal residence or foreclosure on a mortgage of any
such residence; and certain medical expenses described in the Code.
A distribution will not be treated as necessary to satisfy an immediate and
heavy financial need to the extent the amount of the withdrawal is in excess of
the amount required to relieve the financial need or to the extent such need may
be satisfied from other resources that are reasonably available to the
Participant. In order to demonstrate that the withdrawal is necessary to satisfy
an immediate and heavy financial need, a
13
<PAGE> 15
Participant will be required to execute a written representation that the need
cannot be met through one or more of the following means: reimbursement or
compensation by insurance or otherwise; reasonable liquidation of the
Participant's assets, to the extent such liquidation would not itself cause an
immediate and heavy financial need; cessation of Tax Reduction Contributions or
Investment Plan Contributions to the Plan; borrowing from commercial sources on
reasonable commercial terms; or other withdrawals or nontaxable (at the time of
the loan) loans available from the Plan, all of which have been exhausted
pursuant to the terms of the Plan.
For purposes hereof, a Participant's assets shall be deemed to include
those assets of the Participant's spouse and minor children that are reasonably
available to the Participant.
Participants who make hardship withdrawals will not be able to make Tax
Reduction Contributions or Investment Plan Contributions for a period of twelve
months following the request for a hardship withdrawal. Also, the amount of Tax
Reduction Contributions for the Plan year following the year in which a
Participant makes a hardship withdrawal shall be limited to an amount (as of the
date of this Prospectus $9,500, subject to annual adjustment by the Secretary of
the Treasury for changes in the cost of living), reduced by the amount of the
Participant's Tax Reduction Contributions for the prior year. In addition, a
Participant will be required to stop his/her contributions to the Household
International Employee Stock Purchase Plan for the period beginning with the
payroll period next following the date he/she makes the withdrawal request. Even
if otherwise eligible, a Participant will not be permitted to elect to make
contributions under the Household International Employee Stock Purchase Plan
until the next offering period which begins at least 12 months after the date
the Participant receives the withdrawal.
Reference is made to "Federal Income Tax Effects to Participants --
Withdrawals While Employed" for tax consequences of hardship withdrawals.
DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT
Participants who terminate employment are entitled to receive the entire
balance of their account under the Plan as soon as administratively practicable
following receipt by Household of a request for distribution of the
Participant's account. Subject to the immediately succeeding sentence, if a
Participant does not request a distribution and if the value of his/her account
following termination exceeds $3,500, the distribution will be deferred until a
later date but not later than the first business day following the date the
Participant reaches age 65. Participants who are retirement eligible under a
pension plan of Household or a subsidiary may elect to defer the distribution of
their account regardless of amount, provided that such distribution is made no
later than April 1 of the year following the year in which the Participant
attains age 70 1/2. A direct rollover to an individual retirement account or a
qualified retirement plan is available. Until distributions are initiated, a
deferred account fee of $30 will be charged each year to any Participant who
defers distribution from the Plan beyond June 30 of the year following the
calendar year in which employment is terminated. All amounts will generally be
distributed in a lump sum distribution; however, Participants in the Plan prior
to July 1, 1989, and who do not have outstanding loans may choose to receive
their distribution in the form of an annuity. Lump sum payments will be made in
cash, except that distributions from the Household Common Stock Fund may be made
in cash, shares, or a combination of cash and shares at the Participant's
option, subject to the Committee's discretion to determine the minimum number of
shares which the Plan may distribute to a Participant in lieu of cash. A
Participant's account will also be distributed upon death or total disability.
A Participant may designate a beneficiary or beneficiaries to receive the
vested and undistributed amount of the Participant's account (less the amount of
any outstanding loan) in the event of the Participant's death. Subject to the
consent of the Participant's spouse, if any, a Participant may designate a
beneficiary other than his or her spouse to receive the Participant's account
balance, in the event of the Participant's death.
Amounts distributed to Participants will be valued as of the date of
distribution.
Any non-vested portion of a terminating Participant's account will be
applied to reduce Employer Matching Contributions otherwise payable by Household
or the Participant's Employer, as applicable, to the accounts of other
Participants.
14
<PAGE> 16
Refer to "Federal Income Tax Effects to Participants" for tax consequences
resulting from distributions upon termination of employment.
LOANS TO PARTICIPANTS
Loans are available under the Plan to Participants. Requests for loans must
be approved by the Committee or the Committee's designee. A $40 loan fee will be
deducted from the amount borrowed when the loan is made. Participants must
obtain the consent of their spouse in order to borrow money from their account.
Each loan must be for an amount not less than $500 ($2,000 for residential
loans) or the eligible balance of the Participant's account, whichever is less.
No more than two non-residential loans and one loan for the construction or
acquisition of a principal residence may be outstanding at any time. Outstanding
loans to a Participant under the Plan and all other tax-qualified plans of
Household and its subsidiaries may not exceed $50,000 at any point in time. In
the case of a new loan this dollar limitation is reduced by the highest
outstanding loan balance during the prior twelve months. A Participant may not
borrow more than 50% of the value of the Participant's non-forfeitable account
(i.e. Tax Reduction Contributions, Investment Plan Contributions, Rollover
Contributions, Trustee-to-Trustee Transfer Contributions, any earnings or
appreciation on any such contributions and the vested portion of any Employer
Matching Contributions and any earnings or appreciation thereon). Loans will be
secured by the Participant's account balance. The Committee will determine the
interest rate to be charged on each loan. Loans must be repaid within five years
except that, at the Committee's discretion, loans for the construction or
acquisition of a Participant's principal residence may be made for a term of up
to 25 years. However, all loans become due upon severance of the Participant's
employment. Loan installment payments will be made through payroll deductions.
Prepayment of a loan in full is allowed at any time without penalty. Interest on
loans made after January 1, 1987, secured by the portion of a Participant's
account attributable to Tax Reduction Contributions is not deductible for
federal income tax purposes. Loan repayments will be credited to a Participant's
Plan account and invested in accordance with the Participant's current
investment election for future Tax Reduction Contributions and/or Investment
Plan Contributions, except that repayment of loans borrowed from funds
attributable to Employer Matching Contributions will be invested in the
Household Common Stock Fund.
FEDERAL INCOME TAX EFFECTS TO PARTICIPANTS
General. The Plan is operated as a qualified plan under Sections 401(a) and
401(k) of the Code. Qualification of the Plan means that a Participant will not
be subject to federal income taxes on Tax Reduction Contributions and Employer
Matching Contributions, or on earnings or appreciation on all account balances
held in the Plan, until such amounts either are withdrawn by or distributed to
the Participant or are distributed to the Participant's beneficiary in the event
of the Participant's death.
Contributions to Employee Accounts. No deduction for federal income tax
purposes is allowed to Participants for Investment Plan Contributions. Tax
Reduction Contributions of a Participant, however, reduce the gross income of
the Participant for federal income tax purposes (but not for social security
taxes) to the extent of such contributions.
Withdrawals While Employed. The withdrawal of amounts attributable to Tax
Reduction Contributions, Employer Matching Contributions, Rollover
Contributions, and all accumulated earnings thereon, and the withdrawal of
earnings on Investment Plan Contributions, will be subject to federal income
tax. Withdrawals of amounts attributable to Trustee-to-Trustee Transfer
Contributions, including earnings thereon, will also be subject to federal
income tax except for the amount (if any) of the Participant's own contributions
into PAYSOP. An additional 10% excise tax will also be imposed on withdrawals of
taxable amounts (including hardship withdrawals) unless: (i) the Participant is
age 59 1/2 or over; (ii) the Participant terminated employment after age 55 when
eligible to retire under a corporation sponsored retirement plan; (iii) the
withdrawal is made to pay medical expenses, except that the additional 10%
excise tax will be imposed on the amount of medical expenses that the
Participant cannot deduct on a tax return; or (iv) the payment is made to an
alternate payee pursuant to a qualified domestic relations order.
15
<PAGE> 17
If a Participant exercises the right to withdraw amounts attributable to
Investment Plan Contributions (excluding earnings thereon) while continuing as
an employee, such withdrawal, being a return of the Participant's after-tax
contributions, will not be subject to federal income tax provided they were
contributed to the Plan prior to January 1, 1987. After any pre-1987 Investment
Plan Contributions have been withdrawn, further withdrawals are considered to be
made on a pro-rata basis from nontaxable employee contributions and taxable
earnings on contributions. Thus, a withdrawal of Investment Plan Contributions
is considered to be part nontaxable (the return of Investment Plan Contributions
made after January 1, 1987) and part taxable (the payment of earnings on the
Investment Plan Contributions, including earnings on Investment Plan
Contributions made prior to 1987). In similar fashion, if withdrawal of the
portion of a Participant's Trustee-to-Trustee Transfer Contribution attributable
to such Participant's employee contributions into PAYSOP is made, such
withdrawal will be considered in part nontaxable (the return of the
Participant's employee contributions into PAYSOP) and part taxable (the earnings
on such Participant's employee contributions into PAYSOP).
Withdrawals of Dividends. If a Participant elects to have distributed to
him/her the dividends on Household common stock which is credited to the
Participant's account, he/she will be subject to federal income tax on such
distribution. However, the additional 10% excise tax which is usually imposed on
distributions prior to the time a Participant attains age 59 1/2 will not be
imposed.
Distribution Upon Termination of Employment. Amounts subject to federal
income taxation that are distributed after termination of employment will
generally become taxable in the year of distribution.
If distribution of a Participant's account is made in a lump sum, the
amount of the distribution equal to a Participant's Investment Plan
Contributions and the portion of the Participant's Trustee-to-Trustee Transfer
Contribution equal to the employee's contributions into PAYSOP is returned
tax-free for federal income tax purposes. The remainder of such distribution,
including all accumulated earnings, is subject to federal income tax at ordinary
income rates, subject to the rules described in the next paragraph.
The Tax Reform Act of 1986 repealed ten-year forward averaging and phased
out over a five-year period pre-1974 capital gains treatment for lump sum
distributions. Individuals over age 59 1/2 are entitled to make one election of
five-year forward averaging for a lump sum distribution. However, a transitional
rule allows individuals who were age 50 before January 1, 1986, and who are
otherwise eligible, to make one election, without regard to the age 59 1/2
requirement, to use five-year forward averaging (using current rates) or ten-
year averaging (using the 1986 tax rates) with respect to a lump sum
distribution. This transitional rule also allows such an individual to elect
capital gains treatment (at a 20% rate) with respect to lump-sum distributions
without regard to the phaseout of capital gains. An individual who elects to use
the transitional rule with respect to a distribution received before age 59 1/2
will lose the opportunity to make another such election for distributions after
age 59 1/2.
With respect to Participants who choose to have their distributions paid in
the form of an annuity, federal taxation of the annuity payments will be
determined pursuant to rules established under the Code. Generally, that part of
annuity income attributable to Investment Plan Contributions and the portion of
Trustee-to-Trustee Transfer Contributions equal to employee contributions into
PAYSOP is returned tax-free for federal income tax purposes, but the remaining
part is subject to federal income tax at ordinary income rates.
If a lump sum distribution of stock from the Household Common Stock Fund is
distributed upon termination of employment, the excess, if any, of the fair
market value of such stock over the cost of the stock when acquired by the
Trustee is not subject to federal income tax at the time of distribution to a
Participant but generally will be subject to federal income tax when such stock
is subsequently sold by the Participant. To the extent provided in regulations
issued pursuant to the Tax Reform Act of 1986, a taxpayer may elect not to defer
the tax on net unrealized appreciation until the year of disposition of the
stock, thus subjecting the distribution to federal income tax at the time of
distribution.
An additional 10% excise tax is imposed on the taxable portion of a
distribution received by a Participant prior to age 59 1/2 unless such
distribution is: (i) made to a beneficiary after the Participant's death; (ii)
made on account of the Participant's disability, defined as the inability to
engage in any substantial gainful activity
16
<PAGE> 18
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or to be of long continued or indefinite
duration; (iii) part of a scheduled series of substantially equal annual (or
more frequent) payments over life or life expectancy (or joint lives or life
expectancies) but only if payments begin after termination of employment; (iv)
made after termination of employment on account of early retirement under a
corporation sponsored retirement plan after attainment of age 55; (v) made to a
Participant for payment of medical expenses that could be deducted on the
Participant's tax return; or (vi) a distribution to an alternate payee pursuant
to a qualified domestic relations order.
Excess Tax Reduction Contributions. If a Participant makes tax-deferred
contributions during the year to certain other tax-qualified plans or
tax-sheltered annuities, such tax-deferred contributions must be combined with
the Participant's Tax Reduction Contributions to the Plan in determining whether
the $9,500 limit on Tax Reduction Contributions has been exceeded during the
year. If a Participant has made more than $9,500 in tax-deferred contributions
under more than one plan during a taxable year, the Participant may notify the
Committee of the Plan's allocable share of the excess contribution prior to the
March 1 following the end of such taxable year. On or before April 15 of such
year, the Committee will distribute to the Participant any excess Tax Reduction
Contributions and earnings thereon. The excess Tax Reduction Contributions are
included in the Participant's income for the year in which such excess Tax
Reduction Contributions were made. The earnings on the excess Tax Reduction
Contributions will be treated as earned and received in the tax year in which
the income is distributed. If the excess Tax Reduction Contributions and
earnings thereon are returned after April 15, such excess is taxable to the
Participant in both the year in which the excess Tax Reduction Contributions
were made and in the year in which such excess Tax Reduction Contributions are
distributed from the Plan to the Participant. In addition, if such excess Tax
Reduction Contributions are not distributed by April 15 of such year, such
excesses cannot generally be distributed from the Plan until employment has
terminated.
Excise Tax On Excess Distributions. The Code imposes a 15% excise tax on
certain distributions from tax-qualified plans. In general, the payments in any
calendar year from the Plan and any other tax-qualified defined benefit or
defined contribution plan, tax-sheltered annuity, or individual retirement
account will be compared to a dollar limitation, currently $150,000. The excess
of the amount distributed over the dollar limitation will be subject to the 15%
excise tax in addition to any applicable income tax, but reduced by the 10%
excise tax paid for an early distribution as described under "Federal Income Tax
Effects to Participants -- Distribution upon Termination of Employment" above.
For lump sum distributions for which a Participant elects the Code's
averaging provisions, the penalty will be applied to the extent the lump sum
exceeds five times the otherwise applicable limit for the year. All lump sum
distributions from qualified retirement plans made within the same year will be
aggregated for this purpose. Lump sum distributions are not aggregated with
annuity payments. Benefits that accrued before August 1, 1986, will be subject
to special rules if an election was made on the Participant's 1987 or 1988
income tax return and accrued benefits exceeded $562,500.
The excise tax does not apply to excess distributions (i) of Investment
Plan Contributions, (ii) on account of death, (iii) to alternate payees under
qualified domestic relations orders, or (iv) rolled over into another qualified
plan or individual retirement account.
Rollover of a Distribution. If a distribution is made in a lump sum, a
Participant may, under certain conditions, roll over to an individual retirement
account or other tax-qualified plan all amounts distributed from the Plan
account, except for amounts equal to Investment Plan Contributions and the
portion of any Trustee-to-Trustee Transfer Contribution equal to his or her
employee contributions into PAYSOP, and thereby postpone the payment of federal
income tax on the distribution. A subsequent distribution to the employee from
the individual retirement account or tax-qualified plan will be subject to
federal income tax at ordinary income rates and will not qualify for special
five-year averaging described above.
Internal Revenue Service Approval. The tax consequences explained above are
based on the Internal Revenue Service's determination that the Plan is a
qualified plan under Sections 401(a) and 401(k) of the Code.
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The foregoing is not intended to cover all tax aspects of Plan
participation and is based upon current understanding of federal tax laws and
regulations as in effect as of the date of this Prospectus. Each Participant or
beneficiary should consult with tax counsel concerning specific tax
consequences, including the application of state tax laws which may differ from
the federal tax treatment.
SPECIAL TAX NOTICE REGARDING PLAN PAYMENTS
This notice contains important information Participants should consider
before they decide how to receive their benefits from the Plan.
SUMMARY
A payment from the Plan that is eligible for "rollover" can be taken in two
ways. Participants may have ALL OR ANY PORTION of their payments either 1) PAID
IN A "DIRECT ROLLOVER" or 2) PAID DIRECTLY TO THEMSELVES. A rollover is a
payment of Plan benefits to an individual retirement arrangement (IRA) or to
another qualified employer plan. This choice will affect the tax owed.
If a Participant chooses a DIRECT ROLLOVER:
- The payment will not be taxed in the current year and no income tax will
be withheld.
- The payment will be made directly to a designated IRA or, if the
Participant chooses, to another employer plan that will accept the
rollover.
- The payment will be taxed later when it is taken out of the IRA or the
employer plan.
If Participants choose to have Plan benefits PAID TO THEMSELVES:
- A Participant will receive only 80% of the payment, because the Plan is
required to withhold 20% of the payment and send it to the IRS as income
tax withholding to be credited against taxes.
- The payment will be taxed in the current year unless it is rolled over
within 60 days of its receipt. Special tax rules are available that could
reduce the tax owed. However, if the payment is received before age
59 1/2, an additional 10% tax may be owed.
- A Participant can roll over the payment by paying it to an IRA or to
another employer plan that accepts rollovers within 60 days of receiving
the payment. The amount rolled over will not be taxed until taken out of
the IRA or employer plan.
- If a Participant wants to roll over 100% of the payment to an IRA or an
employer plan, OTHER MONEY MUST BE FOUND TO REPLACE THE 20% THAT WAS
WITHHELD. If a Participant rolls over only the 80% that was received, tax
will be imposed on the 20% that was withheld and that is not rolled over.
PAYMENTS ELIGIBLE TO BE ROLLED OVER
Payments from the Plan may be "eligible rollover distributions." This means
that they can be rolled over to an IRA or to another employer plan that accepts
rollovers. Vanguard and other Plan administrators should be able to tell a
Participant what portion of a payment is an eligible rollover distribution. The
following types of payments cannot be rolled over:
Non-Taxable Payments. In general, only the "taxable portion" of a payment
is an eligible rollover distribution. If a Participant has made Investment Plan
Contributions to the Plan, these contributions will be non-taxable when they are
paid to the Participant, and they cannot be rolled over. (Investment Plan
Contributions are contributions made to the Plan that were already taxed.)
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Payments Spread Over Long Periods. A payment cannot be rolled over if it is
part of a series of equal (or almost equal) payments that are made at least once
a year and that will last for:
- the Participant's lifetime (or the Participant's life expectancy), or
- the Participant's lifetime and the Participant's beneficiary's lifetime
(or life expectancies), or
- a period of ten years or more.
Required Minimum Payments. Beginning in the year a Participant reaches age
70 1/2, a certain portion of a payment cannot be rolled over because it is a
"required minimum payment" that must be paid to the Participant.
DIRECT ROLLOVER
Participants can choose a direct rollover of all or any portion of a
payment that is an "eligible rollover distribution," as described above. In a
direct rollover, the eligible rollover distribution is paid directly from the
Plan to an IRA or another employer plan that accepts rollovers. Participants
that choose a direct rollover, are not taxed on a payment until they take it out
of the IRA or the employer plan.
Direct Rollover to an IRA. Participants can open an IRA to receive the
direct rollover. (The term "IRA", as used in this notice, includes individual
retirement accounts and individual retirement annuities.) Participants who
choose to have payment made directly to an IRA, should contact an IRA sponsor to
find out how to have payment made in a direct rollover to an IRA at that
institution. An IRA can be established to receive a payment and temporarily hold
the account balance until a decision is made on how to invest the funds.
However, in choosing an IRA, a Participant may wish to consider whether the IRA
chosen will allow all or a part of the payment to another IRA at a later date,
without penalties or other limitations. See IRS Publication 590, Individual
Retirement Arrangements, for more information on IRAs (including limits on how
often IRAs may be rolled over between IRAs).
Direct Rollover to a Plan. If a Participant is employed by a new employer
that has a qualified plan, and would like to have a direct rollover made to that
plan, the administrator of that plan should be asked whether it will accept the
rollover. An employer plan is not legally required to accept a rollover. If the
new employer's plan does not accept a rollover, a Participant can make a direct
rollover to an IRA.
Direct Rollover of a Series of Payments. If a Participant receives eligible
rollover distributions that are paid in a series for less than ten years, the
choice on whether a direct rollover will be made will apply to all later
payments in the series until a change is made to the payment election. A
Participant is free to change the election for any later payment in the series.
PAYMENT PAID TO A PARTICIPANT
A payment made directly to a Participant is subject to a 20% income tax
withholding. The payment is taxed in the year it is received unless, within 60
days, it is rolled over to an IRA or another plan that accepts rollovers. If it
is not rolled over, special tax rules may apply.
Mandatory Withholding. If any portion of a payment made directly to a
Participant is an eligible rollover distribution, the Plan is required by law to
withhold 20% of that amount. This amount is sent to the IRS as income tax
withholding. For example, if an eligible rollover distribution is $10,000, only
$8,000 will be paid to the Participant because the Plan must withhold $2,000 as
income tax. However, when the Participant prepares an income tax return for the
year, the full $10,000 will be reported as a payment from the Plan. The $2,000
will be reported as tax withheld, and it will be credited against any income tax
owed for the year.
Voluntary Withholding. If any portion of a payment is not an eligible
rollover distribution but is taxable, the mandatory withholding rules described
above do not apply. In this case, an election may be made to not have
withholding apply to that portion. To elect out of withholding, ask Vanguard for
the election form and related information.
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Sixty-Day Rollover Option. If an eligible rollover distribution is paid to
a Participant, the Participant may still decide to roll over all or part of it
to an IRA or another employer plan that accepts rollovers. If the Participant
decides to roll over, THE ROLLOVER MUST BE MADE WITHIN 60 DAYS AFTER THE PAYMENT
IS RECEIVED. The portion of the payment that is rolled over will not be taxed
until it is taken out of the IRA or the employer plan.
Up to 100% of the eligible rollover distribution, including an amount equal
to the 20% that was withheld, may be rolled over. If 100% is rolled over, other
money must be contributed to the IRA or the employer plan within the 60-day
period to replace the 20% that was withheld. On the other hand, if only the 80%
received is rolled over, the 20% that was withheld will be taxed.
EXAMPLE: An eligible rollover distribution is $10,000, and the
Participant chooses to receive payment directly. The Participant will
receive $8,000 and $2,000 will be sent to the IRS as income tax
withholding. Within 60 days after receiving the $8,000, the Participant may
roll over the entire $10,000 to an IRA or employer plan. To do this, the
Participant must roll over the $8,000 received from the Plan, and an
additional $2,000 from other sources (savings, a loan, etc.). In this case,
the entire $10,000 is not taxed until it is taken out of the IRA or
employer plan. If the entire $10,000 is rolled over, when the Participant
files a federal income tax return, the $2,000 withheld may be refunded.
If, on the other hand, only $8,000 is rolled over, the $2,000 not
rolled over is taxed in the year it was withheld. When the Participant
files an income tax return, a refund of part of the $2,000 withheld may be
payable. (However, any refund is likely to be larger if the entire $10,000
is rolled over.)
Additional 10% Tax if a Participant is Not Age 59 1/2. If a Participant
receives a payment before reaching age 59 1/2 and it is not rolled over, then,
in addition to the regular income tax, an additional tax equal to 10% of the
taxable portion of the payment may be payable. The additional 10% tax does not
apply to the payment if it is (1) paid because employment is terminated with the
employer during or after the year the Participant reaches age 55, (2) paid
because retirement is due to disability, (3) paid as equal (or almost equal)
payments over the Participant's life or life expectancy (or the Participant's
and the Participant's beneficiary's lives or life expectancies), or (4) used to
pay certain medical expenses. See IRS Form 5329 for more information on the
additional 10% tax.
Special Tax Treatment. If an eligible rollover distribution is not rolled
over, it will be taxed in the year it is received. However, if it qualifies as a
"lump sum distribution", it may be eligible for special tax treatment. A lump
sum distribution is a payment of a Participant's entire balance under the Plan
(and certain other similar plans of the employer) that is paid to the
Participant within one year because the Participant has reached age 59 1/2 or
has terminated employment with the employer (or, in the case of a self-employed
individual, because the Participant has reached age 59 1/2 or has become
disabled). For a payment to qualify as a lump sum distribution, the Participant
must have been a participant in the Plan for at least 5 years. The special tax
treatment for lump sum distributions is described below.
Five-Year Averaging. If a lump sum distribution is received after a
Participant is age 59 1/2, the Participant may be able to make a one-time
election to figure the tax on the payment by using "five-year averaging".
Five-year averaging often reduces the tax owed because it treats the
payment much as if it were paid over five years.
Ten-Year Averaging If A Participant Was Born Before January 1,
1936. If a lump sum distribution is received and the Participant was born
before January 1, 1936, the Participant can make a one-time election to
figure the tax on the payment by using "ten-year averaging" (using 1986 tax
rates) instead of five-year averaging (using current tax rates). Like the
five-year averaging rules, ten-year averaging often reduces the tax owed.
Capital Gain Treatment If A Participant Was Born Before January 1,
1936. In addition, if a lump sum distribution is received and the
Participant was born before January 1, 1936, the Participant may elect to
have the part of the payment that is attributable to pre-1974 participation
in the Plan (if any) taxed as long-term capital gain at a rate of 20%.
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There are other limits on the special tax treatment for lump sum
distributions. For example, Participants can generally elect this special tax
treatment only once in their lifetime, and the election applies to all lump sum
distributions that are received in that same year. If a Participant previously
rolled over a payment from the Plan (or certain other similar plans of the
employer), the Participant cannot use this special tax treatment for later
payments from the Plan. If a Participant rolls over a payment to an IRA, this
special tax treatment for later payments from the IRA will not be available.
Also, if a Participant rolls over only a portion of a payment to an IRA, this
special tax treatment is not available for the rest of the payment. Additional
restrictions are described in IRS Form 4972, which has more information on lump
sum distributions and how to elect the special tax treatment.
Employer Stock or Securities. There is a special rule that may be
applicable for a payment from the Plan that includes employer stock (or other
employer securities). To use this special rule, 1) the payment must qualify as a
lump sum distribution, as described above (or would qualify except that the
Participant does not yet have 5 years of participation in the Plan), or 2) the
employer stock included in the payment must be attributable to "after-tax"
employee contributions, if any. Under this special rule, a Participant may have
the option of not paying tax on the "net unrealized appreciation" of the stock
until the stock is sold. Net unrealized appreciation generally is the increase
in the value of the employer stock after it was acquired by the Plan. For
example, if employer stock was contributed to a Plan account when the stock was
worth $1,000 but the stock was worth $1,200 when it is received, tax would not
be paid on the $200 increase in value until the stock is later sold.
A Participant may instead elect not to have the special rule apply to the
net unrealized appreciation. In this case, net unrealized appreciation will be
taxed in the year the stock is received, unless the stock is rolled over. The
stock (including any net unrealized appreciation) can be rolled over to an IRA
or another employer plan either in a direct rollover or a rollover that is made
by the Participant.
If any employer stock is received in a payment that qualifies as a lump sum
distribution, the special tax treatment for lump sum distributions described
above (such as five-year averaging) also may apply. See IRS Form 4972 for
additional information on these rules.
SURVIVING SPOUSES, ALTERNATE PAYEES AND OTHER BENEFICIARIES
In general, the rules summarized above that apply to payments to employees
also apply to payments to surviving spouses of employees and to spouses or
former spouses who are "alternate payees". An alternate payee is an individual
whose interest in the Plan results from a "qualified domestic relations order",
which is an order issued by a court, usually in connection with a divorce or
legal separation. Some of the rules summarized above also apply to a deceased
employee's beneficiary who is not a spouse. However, there are some exceptions
for payments to surviving spouses, alternate payees, and other beneficiaries
that should be mentioned.
A surviving spouse may choose to have an eligible rollover distribution
paid in a direct rollover to an IRA or receive payment directly. If a surviving
spouse receives the payment directly, it may be kept or rolled over to an IRA
but it cannot be rolled over to an employer plan. An alternate payee has the
same choices as the employee. Thus, an alternate payee can have the payment paid
as a direct rollover or receive payment directly. If an alternate payee receives
payment directly, it may be kept or rolled over to an IRA or to another employer
plan that accepts rollovers. A beneficiary other than a surviving spouse CANNOT
choose a direct rollover, and CANNOT roll over the payment.
Payments to a surviving spouse, an alternate payee, or another beneficiary
are not subject to the additional 10% tax described in "Special Tax Notice
Regarding Plan Payments -- Payment Paid to a Participant" above, even if they
are younger than age 59 1/2.
A surviving spouse, an alternate payee, or another beneficiary may be able
to use the special tax treatment for lump sum distributions and the special rule
for payments that include employer stock, as described in "Special Tax Notice
Regarding Plan Payments -- Payment Paid to a Participant" above. If a payment is
received because of a Participant's death, the beneficiary may be able to treat
the payment as a lump sum
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distribution if the employee met the appropriate age requirements, whether or
not the employee had 5 years of participation in the Plan.
HOW TO OBTAIN ADDITIONAL INFORMATION
This Prospectus summarizes only the federal (not state or local) tax rules
that might apply to payments. The rules described above are complex and contain
many conditions and exceptions that are not included in this notice. Therefore,
Participants may wish to consult with a professional tax advisor BEFORE they
take a payment of benefits from the Plan. Also, more specific information on the
tax treatment of payments from qualified retirement plans can be found in IRS
Publication 575, Pension and Annuity Income, and IRS Publication 590, Individual
Retirement Arrangements. These publications are available from local IRS offices
or by calling (800) TAX-FORMS.
OTHER IMPORTANT INFORMATION
Restrictions on Resale of Household Common Stock. There are generally no
restrictions on resale of Household's common stock acquired pursuant to the Plan
except for employees who are deemed to be "affiliates" of the Corporation, and
directors or officers of the Corporation who are subject to Section 16 of the
Securities Exchange Act of 1934. An affiliate may resell common stock of
Household acquired under the Plan either pursuant to a registration statement or
pursuant to Rule 144 or another applicable exemption under the Securities Act of
1933. For purposes of reselling, an affiliate is basically defined as a control
person or one who, directly or indirectly, has the power to direct or cause the
direction of the management and policies of Household. Under Section 16 of the
Securities Exchange Act of 1934, any profit realized by a director or officer of
Household through the purchase and sale or any sale and purchase of any equity
security of Household within a period of six months might be recoverable by
Household. If an employee thinks that he or she might be an affiliate of the
Corporation, or subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, an attorney should be consulted to determine what steps
should be taken to accomplish any such resale under securities laws.
Amendment or Termination. The Plan has no specified duration. Household
reserves the right to amend, suspend, or terminate the Plan at any time, and to
discontinue or modify its contributions at any time. Rights or benefits
previously acquired by or allocated for Participants will not be adversely
affected by any such action unless the general officers of Household, on advice
of legal counsel, determine such action to be necessary or advisable to conform
the Plan to the requirements of Sections 401 and 501 of the Code or other
federal law.
Reports to Participants. Participants in the Plan will receive an account
statement showing their current account balance as of the end of each quarter.
Non-assignability and Security Interests. Except for security interests in
a Participant's account resulting from loans by the Plan to a Participant, and
unless otherwise required by law, e.g. a qualified domestic relations order, a
Participant may not assign, transfer, pledge, or otherwise encumber the
Participant's interest in the Plan.
Burden of Risk. Household does not guarantee the value of the benefits
payable under the Plan, and payments which are specified to be made thereunder
shall be made exclusively from the assets of the Trust. A Participant assumes
all risk connected with any decline in market value of Household common stock or
other securities and investments credited to the Participant's account.
Miscellaneous. The foregoing statements are summaries of important
provisions of the Plan and are not complete. Each employee may obtain a complete
copy of the Plan from the Corporation. In case of any conflict between
information provided in this Prospectus and the provisions of the Plan, the
provisions of the Plan control.
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AVAILABLE INFORMATION AND
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Household is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements, and other information can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Commission's Regional Offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
at prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, reports, proxy
statements, and other material concerning Household can be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005, and the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605.
The following documents filed with the Commission are incorporated herein
by reference:
(a) The Corporation's and the Plan's latest annual reports filed
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
or, in the case of the Corporation, the latest prospectus filed pursuant to
Rule 424(b) under the Securities Act of 1933, which contains, either
directly or by incorporation by reference, certified financial statements
for the Corporation's latest fiscal year for which such statements have
been filed.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 since the end of the fiscal year covered by
the annual reports or the prospectus incorporated pursuant to (a) above.
(c) The description of any class of securities to be offered herein
which is contained in any registration statements filed under Section 12 of
the Securities Exchange Act of 1934, including any amendments or reports
filed for the purpose of updating such description.
All documents subsequently filed by Household pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities remaining
unsold, shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents.
Household will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits to such documents). Requests should be directed to: Household
International, Inc., 2700 Sanders Road, Prospect Heights, IL 60070, Attention:
Office of the Secretary (Telephone: (847) 564-5000).
LEGAL OPINIONS
The legality of the securities being registered will be passed upon for
Household International, Inc. by John W. Blenke, Assistant General Counsel and
Secretary for Household International, Inc. Mr. Blenke is a full-time employee
and an officer of Household International, Inc. and owns, and holds options to
purchase, shares of Common Stock of Household International, Inc.
EXPERTS
The financial statements and schedules of Household International, Inc. and
its subsidiaries incorporated by reference in this Prospectus, to the extent and
for the periods indicated in its reports, have been audited by Arthur Andersen
LLP, independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
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PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The information set forth under "Available Information and Incorporation of
Certain Documents by Reference" in the Prospectus included as a part of this
Registration Statement is hereby incorporated herein by reference.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The information set forth under "Legal Opinions" and "Experts" in the
Prospectus included as a part of this Registration Statement is hereby
incorporated herein by reference.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of Delaware (Section 102) allows a corporation
to eliminate the personal liability of directors of a corporation to the
corporation or to any of its stockholders for monetary damage for a breach of
his/her fiduciary duty as a director, except in the case where the director
breached his/her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law
or obtained an improper personal benefit. The Restated Certificate of
Incorporation, as amended, of Household International, Inc. ("Household"),
contains a provision which eliminates directors' personal liability as set forth
above.
The General Corporation Law of Delaware (Section 145) gives Delaware
corporations such as Household broad powers to indemnify their present and
former directors and officers and those of affiliated corporations against
expenses incurred in the defense of any lawsuit to which they are made parties
by reason of being or having been such directors or officers, subject to
specified conditions and exclusions; gives a director or officer who
successfully defends an action the right to be so indemnified; and authorizes
Delaware corporations to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other right to which those indemnified
may be entitled under any bylaw, agreement, vote of stockholders or otherwise.
Household's Restated Certificate of Incorporation, as amended, provides for
indemnification to the fullest extent as expressly authorized by Section 145 of
the General Corporation Law of Delaware for directors, officers and employees of
Household and also to persons who are serving at the request of Household as
directors, officers or employees of other corporations (including subsidiaries).
This right of indemnification is not exclusive of any other right which any
person may acquire under any statute, bylaw, agreement, contract, vote of
stockholders or otherwise.
Household has purchased liability policies which indemnify its officers and
directors against loss arising from claims by reason of their legal liability
for acts as officers and directors, subject to limitations and conditions as set
forth in the policies.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS
4) Amended and Restated Household International Tax Reduction Investment
Plan, together with Amendments One through Seven thereof.
5A) Opinion of Mr. John W. Blenke, Assistant General Counsel and Secretary
of Household, as to the legality of the securities being registered.
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<PAGE> 26
5B) Internal Revenue Service Determination letter as to qualification under
Section 401 of the Internal Revenue Code.
5C) Undertaking to file amended provisions of the plan with the Internal
Revenue Service.
23A) Consent of Arthur Andersen LLP, Certified Public Accountants.
23B) Consent of Mr. Blenke is contained in his opinion.
24) Power of Attorney (included on Page II-3 hereof).
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10 (a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that the undertakings set forth in paragraphs
(a)(1)(i) and (a)(1)(ii) above do not apply if the information required
to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceedings) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Prospect Heights, and State of Illinois, on the 24th
day of January, 1996.
HOUSEHOLD INTERNATIONAL, INC.
By W. F. ALDINGER
--------------------------------------
W. F. Aldinger
President and Chief Executive Officer
Each person whose signature appears below constitutes and appoints J. W.
Blenke, M. M. Carlson, L. S. Mattenson, J. M. Powell and P. D. Schwartz and each
or any one of them (with full power to act alone), as his/her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him/her in his/her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Form S-8 and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto each such attorneys-in-fact and agents full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he/she might or could do in person,
hereby ratifying and confirming all that such attorneys-in-fact and agents or
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 24th day of January, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ------------------------------------
<C> <S>
W. F. ALDINGER President, Chief Executive Officer
- --------------------------------------------- and Director
(W. F. Aldinger)
D. C. CLARK Chairman of the Board and Director
- ---------------------------------------------
(D. C. Clark)
R. J. DARNALL Director
- ---------------------------------------------
(R. J. Darnall)
G. G. DILLON Director
- ---------------------------------------------
(G. G. Dillon)
J. A. EDWARDSON Director
- ---------------------------------------------
(J. A. Edwardson)
Director
- ---------------------------------------------
(M. J. Evans)
D. FISHBURN Director
- ---------------------------------------------
(D. Fishburn, M.P.)
C. F. FREIDHEIM, JR. Director
- ---------------------------------------------
(C. F. Freidheim, Jr.)
</TABLE>
II-3
<PAGE> 28
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ------------------------------------
<C> <S>
L. E. LEVY Director
- ---------------------------------------------
(L. E. Levy)
G. A. LORCH Director
- ---------------------------------------------
(G. A. Lorch)
J. D. NICHOLS Director
- ---------------------------------------------
(J. D. Nichols)
J. B. PITBLADO Director
- ---------------------------------------------
(J. B. Pitblado)
S. J. STEWART Director
- ---------------------------------------------
(S. J. Stewart)
L. W. SULLIVAN, M.D. Director
- ---------------------------------------------
(L. W. Sullivan, M.D.)
R. C. TOWER Director
- ---------------------------------------------
(R. C. Tower)
D. A. SCHOENHOLZ Senior Vice President -- Chief
- --------------------------------------------- Financial Officer (also a
(D. A. Schoenholz) Principal Accounting Officer)
</TABLE>
II-4
<PAGE> 29
SIGNATURE FOR THE PLAN
Pursuant to the requirements of the Securities Act of 1933, the Household
International Tax Reduction Investment Plan has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Prospect Heights, and State of Illinois on the 24th
day of January, 1996.
HOUSEHOLD INTERNATIONAL TAX
REDUCTION INVESTMENT PLAN
By: MARY E. BILBREY
--------------------------------------
(Mary E. Bilbrey)
Member of the Administrative and
Investment
Committee of the Household
International Tax
Reduction Investment Plan
II-5
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- -------- ------------------------------------------------------------------------------------
<C> <S>
4) Amended and Restated Household International Tax Reduction Investment Plan, together
with Amendments One through Seven thereof.
5A) Opinion of John W. Blenke, Assistant General Counsel and Secretary of Household, as
to the legality of the securities being registered.
5B) Internal Revenue Service Determination letter as to qualification under Section 401
of the Internal Revenue Code.
5C) Undertaking to file amended provisions of the plan with the Internal Revenue
Service.
23A) Consent of Arthur Andersen LLP, Certified Public Accountants.
23B) Consent of Mr. Blenke is contained in his opinion.
24) Power of Attorney (included on Page II-3 hereof).
</TABLE>
II-6
<PAGE> 1
EXHIBIT 4
HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
January 1, 1992
<PAGE> 2
AMENDMENT AND RESTATEMENT OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, the Corporation by resolution of its Board of Directors on
September 11, 1990 authorized the undersigned to amend the Household
International Tax Reduction Investment Plan,
NOW, THEREFORE, Household International, Inc., hereby amends and
restates the plan as set forth in the attached 74 pages effective as of January
1, 1992 subject to any contrary effective date as set forth in the Plan for a
particular article or provision.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed and its corporate seal to be hereunto affixed and attested by its
proper officers thereunto authorized all on this 6th day of December, 1991.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Colin P. Kelly
-----------------------------
Colin P. Kelly,
Vice President Human Resources
ATTEST:
/s/ Susan E. Casey
- -----------------------------
Assistant Secretary
(Corporate Seal)
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 PARTICIPATION AND YEARS OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Eligibility to Participate . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Commencement of Participation . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Waiver of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Employment by Foreign Subsidiary . . . . . . . . . . . . . . . . . . . . . 7
3.5 Transfers from Eligible Employment . . . . . . . . . . . . . . . . . . . . 8
3.6 Hour of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.8 Participation and Service Upon Reemployment . . . . . . . . . . . . . . . . 10
3.9 Predecessor Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Tax Reduction Contributions . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Tax Reduction Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Investment Plan Contributions . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Investment Plan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Matching Company Contributions . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5 LIMITATION ON TAX REDUCTION CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 15
5.1 Dollar Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Maximum Deferral Percentage . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Family Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Prospective Reduction of Tax Reduction Contributions . . . . . . . . . . . . 17
ARTICLE 6 LIMITATION ON INVESTMENT PLAN AND
MATCHING COMPANY CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . 19
6.1 Maximum Contribution Percentage . . . . . . . . . . . . . . . . . . . . . . 19
6.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Prospective Reduction of Investment Plan
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.4 Testing of Tax Reduction Contributions
Under Maximum Contribution Percentage Test . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 7 AGGREGATE LIMIT ON DEFERRAL AND CONTRIBUTION
PERCENTAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 General Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.2 Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.3 Prospective Reduction of Contributions . . . . . . . . . . . . . . . . . . 22
ARTICLE 8 CORRECTION OF TAX REDUCTION CONTRIBUTIONS
IN EXCESS OF DOLLAR LIMITATION . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Designation as Excess Deferral . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Coordination with Excess Tax Reduction
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 9 CORRECTION OF EXCESS CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 Maximum Deferral Percentage Test --
Excess Tax Reduction Contributions . . . . . . . . . . . . . . . . . . . . . 24
9.3 Recharacterization of Excess Tax Reduction
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.4 Distribution of Excess Tax Reduction
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 Maximum Contribution Percentage Test --
Excess Aggregate Contributions . . . . . . . . . . . . . . . . . . . . . 26
9.6 Distribution of Excess Aggregate
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.7 Forfeiture of Matching Company Contributions . . . . . . . . . . . . . . . . 27
9.8 Allocable Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.9 Timing of Corrections . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.10 Special Rule for Recharacterized Amounts . . . . . . . . . . . . . . . . . 27
9.11 Corrective Measures with Respect to
Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.12 Additional Company Contributions . . . . . . . . . . . . . . . . . . . . . 28
9.13 Highly Compensated Individual Elections . . . . . . . . . . . . . . . . . . 28
9.14 Other Permissible Methods of Testing and
Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 10 LIMITATIONS ON ANNUAL ADDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1 Basic Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Limitation on Combination of Plans . . . . . . . . . . . . . . . . . . . . . 30
10.4 Prospective Adjustment to Contributions . . . . . . . . . . . . . . . . . . . 30
10.5 Disposal of Excess Annual Additions . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 11 GENERAL PROVISIONS REGARDING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 32
11.1 Manner of Making Contributions . . . . . . . . . . . . . . . . . . . . . . . 32
11.2 Limitation to Amount Deductible . . . . . . . . . . . . . . . . . . . . . . 32
11.3 Return of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.4 Certain Aggregation Rules. . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 12 ROLLOVERS AND TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.1 Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12.2 Transfers from Other Plan . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.3 Section 401(k) Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.4 Transfers to Other Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 13 ACCOUNTS AND ALLOCATION OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.1 Receipt of Contributions by Trustee . . . . . . . . . . . . . . . . . . . . 36
13.2 Trust Fund Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.3 Allocation of Contributions to
Participants' Separate Accounts . . . . . . . . . . . . . . . . . . . . 36
13.4 Adjustments to Participants' Accounts . . . . . . . . . . . . . . . . . . . 36
13.5 Participant-Directed Investments For
Future Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.6 Investment of Matching Company
Contributions; Forfeitures . . . . . . . . . . . . . . . . . . . . . . . 38
13.7 Investment Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
13.8 No Rights Created by Allocation . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 14 VESTING; FORFEITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.1 Vesting of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.2 Forfeiture of Non-Vested Interest . . . . . . . . . . . . . . . . . . . . . 40
14.3 Restoration of Non-Vested Interest . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 15 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
15.1 Timing of Distributions; Applicable
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
15.2 Method of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 42
15.3 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . 43
15.4 Code Section 401(a)(9) . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 16 WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.1 Withdrawal Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
16.2 Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
16.3 Manner of Making Withdrawals . . . . . . . . . . . . . . . . . . . . . . . 49
16.4 Withdrawals Upon Attainment of Age 59-1/2 . . . . . . . . . . . . . . . . . 49
16.5 Consequences of Withdrawals of Matched
After-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . 50
16.6 Qualified Domestic Relations Order
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 17 LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.2 Amount of Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.3 Security for Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.4 Interest Rate Charged . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.5 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.6 Default on Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
17.7 Manner of Making Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 54
17.8 Accounting for Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 18 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.1 Allocation of Responsibilities Among
Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.2 Powers and Responsibilities of the
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.3 Conclusiveness of Records . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.5 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 19 AMENDMENT, TERMINATION AND MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
19.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
19.2 Plan Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
19.3 Distributions upon Certain Sales . . . . . . . . . . . . . . . . . . . . . 59
19.4 Successor Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
19.5 Merger, Consolidation or Transfer . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 20 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
20.1 Exclusive Benefit of Participants a
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
20.2 Non-Guarantee of Employment . . . . . . . . . . . . . . . . . . . . . . . . 61
20.3 Rights to Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 61
20.4 Non-Alienation of the Right to Receive
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
20.5 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
20.6 Plan Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
20.7 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
20.8 Effect of Mistake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 21 TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
21.1 Top-Heavy Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
21.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
21.3 Minimum Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
21.4 Nonforfeitability of Minimum Allocation . . . . . . . . . . . . . . . . . . 67
21.5 Compensation Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . 67
21.6 Minimum Vesting Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 67
21.7 Collective Bargaining Rules . . . . . . . . . . . . . . . . . . . . . . . . 67
21.8 Temporary Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 22 FORMER EMPLOYEES OF FREEDOM FEDERAL SAVINGS
BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
22.1 Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
22.2 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
22.3 Service Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
22.4 Rights with respect to Transferred
Account Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE 23 HOUSEHOLD MANUFACTURING, INC. DIVESTITURE . . . . . . . . . . . . . . . . . . . . . . . 69
23.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
23.2 Discontinuance of Participation by
Spinoff Company Employees . . . . . . . . . . . . . . . . . . . . . . . 69
23.3 Continued Participation by Sale Company
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
23.4 Eljer, Schwitzer and Scotsman Stock Funds . . . . . . . . . . . . . . . . . 70
</TABLE>
v
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 24 SPECIAL PLAN PROVISIONS FOR TRANSITION PERIOD . . . . . . . . . . . . . . . . . . . . . 72
24.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
24.2 Investment of Fund C . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
24.3 Suspension of Activity in the Plan . . . . . . . . . . . . . . . . . . . . 72
24.4 Special Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
24.5 Plan Limitations on events . . . . . . . . . . . . . . . . . . . . . . . . 72
24.6 Matching Company Contributions . . . . . . . . . . . . . . . . . . . . . . . 72
</TABLE>
vi
<PAGE> 9
ARTICLE 1
INTRODUCTION
1.1 Introduction.
This plan has been established by Household International, Inc.,
as a profit sharing plan for the benefit of its eligible employees and eligible
employees of subsidiaries thereof in order to encourage their personal savings.
It is to be maintained according to the terms and conditions of this
instrument. The assets of the Plan are held, administered and managed in
accordance with the terms and conditions of the Trust Agreement, which is
considered to be an integral part of the Plan. The Plan is intended to be a
qualified profit sharing plan under Section 401(a) of the Internal Revenue Code
with a cash or deferred arrangement that is qualified under Section 401(k) of
the Code.
The Plan is amended from time to time. Except as otherwise
provided in the Plan or amendments, any amendment shall apply solely to
employees whose employment is terminated on or after the effective date of the
amendments. The rights of an employee whose employment is terminated prior to
the effective date shall be determined solely by the provisions of the Plan as
in effect on the date of his termination of employment.
The Plan was amended and restated on July 26, 1989 and further
amended on June 21, 1991 to make a number of changes to comply with the Tax
Reform Act of 1986 and other applicable law. Except as otherwise required or
permitted by law, or set forth in the provisions of the Plan, the
above-referenced amendments shall be effective January 1, 1987 to the extent
required by law.
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ARTICLE 2
DEFINITIONS
2.1 Definitions.
Whenever used in the Plan the following terms shall have the
respective meanings set forth below unless otherwise expressly provided in the
Plan:
"Affiliate" means any company that is included as a member with a
Company in a controlled group of corporations, as described in Section 414(b)
of the Code, any trade or business (whether or not incorporated) that is under
common control with a Company as described in Section 414(c) of the Code, any
trade or business that, with a Company, is a member of an affiliated service
group as described in Section 414(m) of the Code, and any other trade or
business required to be aggregated with a Company pursuant to Section 414(o) of
the Code. Service, compensation or their credit under the Plan shall be given
for periods of employment with an Affiliate only if such periods occur at a
time when there was an Affiliate relationship with the Company as described
herein.
"Board of Directors" means the Board of Directors of Household
International, Inc., or any committee of the Board authorized to act on its
behalf.
"Code" means the Internal Revenue Code of 1986, as amended, and
any successor legislation thereto, and includes any regulations promulgated
thereunder.
"Collective Bargaining Unit Employee" means any employee who is a
member of a unit of employees covered by a collective bargaining agreement
between employee representatives and the Company if retirement benefits were
the subject of good faith bargaining between the Company and such
representatives.
"Committee" means the Administrative and Investment Committee
which is a committee of at least three employees of the Company appointed by
the Chief Executive Officer of Household International, Inc., and serving at
the pleasure of Household International, Inc.
"Company" means Household International, Inc., and any direct or
indirect U.S. subsidiary named as an employer, any of whose employees are
covered by this Plan pursuant to the Company election document that is filed
with the Committee and made a part of this Plan. The Committee shall have the
exclusive right to determine whether any subsidiary shall be a Company that
participates in this Plan and the employees of such subsidiary covered hereby.
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"Company Stock" means common stock par value $1.00 per share of
Household International, Inc.
"Compensation" means the total base wages or salary paid by the
Company in cash to an Employee, including bonuses, severance pay, pay in lieu
of vacation, commissions and overtime payments, prior to any reduction for
contributions that are made to the Trust on behalf of the Employee in
accordance with his tax reduction agreement under Article 4.2 and prior to any
reduction for contributions to any cafeteria plan covered by Section 125 of the
Code maintained by the Company; provided, however, that compensation received
from the Household International Long-Term Executive Incentive Compensation
Plan shall be excluded from the definition of compensation.
In the event that an Employee receives Company Stock as a bonus
from a bonus plan other than the Long-Term Executive Incentive Compensation
Plan, the stock shall be valued at the high/low average of the New York Stock
Exchange Composite as reported in the Wall Street Journal on the date of the
award and this amount shall be considered Compensation.
Effective January 1, 1989, the maximum amount of Compensation
taken into account under the Plan in any Plan Year for purposes of determining
the amount of a Participant's Tax Reduction Contributions, Investment Plan
Contributions and Matching Company Contributions shall be $209,200, adjusted
pursuant to the Code. At the discretion of the Company, any Matching Company
Contributions that cannot be allocated under this Plan due to this dollar
limitation on Compensation may be allocated and paid to the affected
Participant under a non-qualified plan.
"Disability" means the physical or mental disability of an
Employee whereby such Employee is disabled by bodily injury or disease and will
be prevented thereby from engaging in any employment for the Company.
"Effective Date" means January 1, 1984, the original effective
date of the Plan.
"Employee" means any individual employed by a Company to whom the
Plan is extended as set forth in the Company election document. An individual
shall be considered to be an Employee if such individual is a leased employee
of a Company within the meaning of Section 414(n) of the Code; provided,
however, that a leased employee shall not be eligible to participate in the
Plan.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and includes any regulations promulgated thereunder.
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"Fiscal Year" means the taxable year of the Company ending on
December 31st.
"Hourly Employee" means any employee who is compensated by the
Company on an hourly-rate basis.
"Hour of Service" has the meaning set forth in Article 3.6.
"Investment Fund" means any of the following funds of the Trust
Fund established from time to time by the Committee:
Fund A - Household International, Inc. Common Stock Fund. This
fund shall primarily be composed of investments in Company Stock.
Fund B - Fixed Income Securities Fund. This Fund shall primarily
be invested in a guaranteed interest contract or contracts, bonds, notes and/or
other evidences of indebtedness, or mutual funds investing in such securities.
Effective January 1, 1992 new Fund B money and money in Fund B not invested in
existing insurance contracts will be invested in the Vanguard Variable Rate GIC
Trust.
Fund C - Vanguard Windsor II. This Fund shall primarily be
invested in common stock and other equity securities, or mutual funds investing
in such securities such as the Vanguard Windsor II Fund.
Fund D - Eljer Stock Fund. This Fund shall primarily be composed
of investments in Eljer Common Stock and such cash in the Vanguard Money Market
Prime Portfolio as the Committee deems appropriate.
Fund E - Schwitzer Stock Fund. This Fund shall primarily be
composed of investments in Schwitzer Common Stock and such cash in the Vanguard
Money Market Prime Portfolio as the Committee deems appropriate.
Fund F - Scotsman Stock Fund. This Fund shall primarily be
composed of investments in Scotsman Common Stock and such cash in the Vanguard
Money Market Prime Portfolio as the Committee deems appropriate.
Fund G - Wellington Fund. A Vanguard Mutual Fund primarily
invested in a combination of stocks and bonds.
Fund H - Quantitative Portfolio Fund. A Vanguard Mutual Fund
primarily invested in equity securities.
Fund I - Vanguard Extended Market Portfolio of Index Trust. A
Vanguard Mutual Fund primarily invested in equity securities.
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Fund J - Vanguard Money Market Reserves - Federal Portfolio. A
Vanguard Mutual Fund investing in short-term securities issued by the U.S.
Treasury and agencies of the U.S. government and repurchase agreements
collateralized by such securities.
Loan Fund - has the meaning set forth in Article 17.8.
Any other investment fund may be established by the Committee
from time to time.
"Investment Plan Contribution" means a contribution made to the
Plan pursuant to Article 4.3.
"Limitation Year" means the Plan Year.
"Matching Company Contribution" means a contribution made to the
Plan pursuant to Article 4.5.
"Participant" means any Employee who is participating in the Plan
in accordance with the provisions of Article 3.
"PAYSOP" means the Household International Tax Credit Stock
Ownership Plan.
"Plan" means the Household International Tax Reduction Investment
Plan as amended from time to time.
"Plan Year" means the twelve-month period commencing on January
1st and ending on December 31st.
"Quarterly Valuation Date" means the last day of each calendar
quarter.
"Rollover Contribution" means a contribution made to the Plan
pursuant to Article 12.1.
"Salaried Exempt Employee" means any Employee who is compensated
by the Company in fixed amounts at regular intervals without regard to the
number of hours worked and who is exempt from the overtime wage provisions of
the federal wage-hour law (as said law may be amended from time to time).
"Salaried Non-exempt Employee" means any Employee who is
compensated by the Company in fixed amounts at regular intervals and who is not
exempt from the overtime wage provisions of the federal wage-hour law (as said
law may be amended from time to time).
"Tax Reduction Contribution" means a contribution made to the
Plan pursuant to Article 4.1.
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"Trust" means the fund maintained by the Trustee for the
investment of Plan assets in accordance with the terms and conditions of the
Trust Agreement.
"Trust Agreement" means the agreement between the Company and the
Trustee under which the assets of the Plan are held, administered and managed
by the Trustee. The provisions of the Trust Agreement shall be considered an
integral part of this Plan as if set forth fully herein.
"Trust Fund" means the assets or any part thereof of every kind
and description under the Trust.
"Trustee" means any corporation or persons acting as trustee
under the Trust at any time.
"Valuation Date" means the last day of each month and such other
dates as may be declared by the Committee. Effective January 1, 1991
"Valuation Date" means the last day of each Plan Year, or the last day of the
Plan Year and more frequent dates during each Plan Year as determined by the
Committee or Trustee. To the extent that Plan assets are invested in the
Vanguard Funds or stock Funds A, D, E, and F, and such investments are
specifically credited or earmarked to Participants' separate accounts under the
Plan in accordance with the directed investment provisions of the Plan, the
term "Valuation Date" shall mean the close of each day that the New York Stock
Exchange is open for business.
"Year of Service" has the meaning set forth in Article 3.7.
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<PAGE> 15
ARTICLE 3
PARTICIPATION AND YEARS OF SERVICE
3.1 Eligibility to Participate.
An Employee shall be eligible to participate in the Plan on the
first day of the calendar quarter (any period of three consecutive months
beginning with January 1, April 1, July 1 or October 1) next following or
coinciding with the earlier of the following dates:
(a) the date he completed three Years of Service; or
(b) the date he attained the age of 21 years and
completed one Year of Service.
3.2 Commencement of Participation.
Any Employee eligible to participate in the Plan may elect to
become a Participant by executing either a tax reduction agreement as described
in Article 4.2 or an investment plan agreement as described in Article 4.4, or
both. Participation in the Plan shall commence on the effective date of his
agreement under Article 4.2(B) or Article 4.4(B), whichever date is earlier,
and shall continue in effect until amended or terminated. By signing such an
agreement, the Employee agrees to be bound by all terms and conditions of the
Plan as then in effect or as thereafter amended.
3.3 Waiver of Participation.
Any Employee eligible to participate in the Plan who chooses not
to participate in the Plan during the first quarter in which he becomes
eligible to participate shall waive his right to participate until the first
day of any subsequent calendar quarter.
3.4 Employment by Foreign Subsidiary.
For purposes of the Plan, an individual who is a citizen of the
United States and an employee of a foreign subsidiary (as defined in Section
3121(1)(8) of the Code) of the Company shall be treated as an Employee if:
(a) the Company has entered into an agreement under
Section 3121(1) of the Code which applies to such foreign
subsidiary; and
(b) contributions under a funded plan of deferred
compensation (whether or not a plan described in Section 401(a)
or 405(a) of the Code) are not provided by any
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<PAGE> 16
other person with respect to the remuneration paid to such
individual by the foreign subsidiary. It is intended by this
Article 3.4 that such individual be entitled to benefits under
this Plan to the same extent as if he were employed by the
Company for the period he in fact is employed by such foreign
subsidiary.
3.5 Transfers from Eligible Employment.
If a Participant is transferred to a class of employment not
eligible for participation in this Plan but continues to be employed by a
Company or an Affiliate, no further contributions to the Trust shall be made by
or on behalf of the Participant under the Plan with respect to periods on and
after the transfer unless the Participant is subsequently transferred back to
eligible employment and a new tax reduction agreement is executed in accordance
with Article 4.2 or a new investment plan agreement is executed in accordance
with Article 4.4. During the period of his employment in such transferred
position:
(a) vesting shall continue in Matching Company
Contributions; and
(b) he may make withdrawals, transfer funds, and
change beneficiaries in accordance with the provisions of the
Plan.
3.6 Hour of Service.
(A) An Hour of Service means:
(a) Performance of Duties - Each actual hour for which
an individual is paid or entitled to be paid for the performance
of duties for the Company or an Affiliate;
(b) Nonworking Paid Time - Each hour for which an
individual is paid or entitled to be paid by the Company or an
Affiliate on account of a period of time during which no duties
are performed (irrespective of whether the employment
relationship has terminated) incapacity, disability, layoff, jury
duty, military duty or leave of absence; provided, however, that
no credit shall be given for payments made or due under a plan
maintained solely for the purpose of complying with applicable
worker's or unemployment compensation or disability insurance
laws or for payments which solely reimburse an individual for
medical or medically related expenses incurred by the individual;
and
(c) Back Pay - Each hour for which back pay,
irrespective of mitigation or damages, is either awarded or
agreed to by the Company or an Affiliate.
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Notwithstanding any other provision of this Plan to the contrary,
an individual shall not be credited with Hours of Service more
than once with respect to the same period of time.
(B) Equivalencies. In lieu of determining Hours of Service on
the basis of each actual hour for which an individual is paid or entitled to be
paid under (a) through (c) above, if a Company so elects on the Company
election document, an Employee shall be credited with --
(a) 10 Hours of Service for each day;
(b) 45 Hours of Service for each week;
(c) 95 Hours of Service for each semi-monthly payroll
period; or
(d) 190 Hours of Service for each calendar month - for
which he would otherwise be credited with an Hour of Service in
accordance with the foregoing provisions of this Article 3.6.
In the event that a week or semi-monthly payroll period for which
Hours of Service are credited in accordance with subparagraph (b)
or (c) next above overlaps two Plan Years, all such Hours of
Service shall be credited to the first such Plan Year.
(C) Periods When Duties Not Performed. The Committee shall
adopt methods of determining Hours of Service when payments are made for other
than the performance of duties and of crediting such Hours of Service to Plan
Years in accordance with Regulations Sec. 2530.200b-2(b) and (c) promulgated
by the Department of Labor which are incorporated by reference into the Plan.
In no event shall an Employee be credited with more than 501 Hours of Service
during any single continuous period during which he performs no duties for the
Company or an Affiliate.
3.7 Year of Service.
An Employee shall be credited with a Year of Service on the last
day of an eligibility computation period if he is credited with 1,000 Hours of
Service with respect to such eligibility computation period. An eligibility
computation period shall be the 12 consecutive month period beginning on the
first date on which an Employee is employed and completes an Hour of Service
(or the first day of the month in which an Employee is employed and completes
an Hour of Service, if the Employee's employment commences on the first
regularly scheduled work day of a month) or any Plan Year, beginning with the
first Plan Year commencing after the Employee's first date of employment.
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3.8 Participation and Service Upon Reemployment.
If an individual's employment with a Company or Affiliate is
terminated but he is reemployed as an Employee, the following rules shall apply
in determining his eligibility to participate in the Plan and his Years of
Service:
(a) If the reemployed Employee was a Participant in
the Plan or had satisfied the service and age requirements of
Article 3.1 during his prior period of employment, he shall be
entitled upon reemployment to become a Participant in the Plan.
In order to make contributions, he shall be required to execute a
new tax reduction agreement in accordance with Article 4.2 or a
new investment plan agreement in accordance with Article 4.4.
(b) If the reemployed Employee was not a Participant
in the Plan or had not satisfied the service and age requirements
of Article 3.1 during his prior period of employment, such
service and age requirements shall be satisfied before he becomes
a Participant upon reemployment; provided, however, that any
Years of Service credited during his prior period of employment
shall be automatically reinstated as of the date of his
reemployment.
3.9 Predecessor Service.
Credit towards Hours and Years of Service (and years of
employment under Article 14.1) shall be given for periods of employment with
any corporation that is a predecessor corporation of a Company, or a
corporation merged, consolidated or liquidated into a Company or a predecessor
of the Company, or a corporation, substantially all of the assets of which have
been acquired by a Company, but only to the extent required by Section 414(a)
of the Code; provided, however, that even if not required by the Code, the
Company on a nondiscriminatory basis may grant credit for Hours and Years of
Service (and years of employment under Article 14.1) with a predecessor
corporation.
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ARTICLE 4
CONTRIBUTIONS
4.1 Tax Reduction Contributions.
Any Employee eligible to participate in the Plan may elect to
have the Company make Tax Reduction Contributions to the Trust on his behalf by
executing a tax reduction agreement as described in Article 4.2. The amount of
Tax Reduction Contributions made on behalf of a Participant for any payday
shall equal that whole percentage of his Compensation per payday selected by
the Participant, not to exceed 15% when combined with the percentage elected
under Article 4.3 by such Participant.
4.2 Tax Reduction Agreement.
(A) Nature of Agreement. The tax reduction agreement referred
to in Article 4.1 shall be a legally binding agreement (on a form prescribed by
the Committee) whereby the Participant agrees that, as of the effective date of
the agreement, the Compensation otherwise payable to him thereafter shall be
reduced by a whole percentage (as selected by the Participant) not to exceed
the maximum percentage permitted under Article 4.1 and whereby the Company
agrees to contribute the total amount of such reduction in Compensation to the
Trust on behalf of the Participant as a Tax Reduction Contribution under
Article 4.1. Such contributions may be made by the Company to the Trust on a
monthly basis, provided that in no event shall the Company's aggregate
contribution on behalf of the Participant under Article 4.1 for any Plan Year
be made to the Trust later than 90 days after the close of the Plan Year or
such later date prescribed under Department of Labor regulations.
(B) Effective Date of Agreement. The effective date of a
Participant's tax reduction agreement shall be no earlier than the first day of
the calendar quarter commencing at least 30 days after the agreement is
received in executed form by the Committee (provided such effective date is no
earlier than the date the Participant first becomes eligible to participate in
the Plan).
(C) Amendment of Agreement. A Participant may amend his tax
reduction agreement at any time with respect to Compensation not yet paid to
change the whole percentage (within the limits of Article 4.1) to be used to
determine his Tax Reduction Contribution. The amended tax reduction agreement
shall be effective no earlier than the first day of the calendar quarter
commencing at least 30 days after the amended agreement is received in executed
form by the Committee.
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(D) Termination of Agreement. A Participant may terminate his
tax reduction agreement at any time with respect to Compensation not yet paid.
The effective date of termination shall be as soon as reasonably possible after
the notice of termination is received in executed form by the Committee. Any
Participant who terminates his tax reduction agreement shall be permitted to
execute a new tax reduction agreement and resume having contributions made to
the Trust on his behalf under Article 4.1, provided that the effective date of
the new tax reduction agreement shall be no earlier than the first day of a
calendar quarter commencing at least 30 days after the new tax reduction
agreement is received in executed form by the Committee.
(E) Transfer to Ineligible Employment or Termination of
Employment. A Participant's tax reduction agreement shall automatically
terminate if the Participant transfers to a class of employment not eligible
for participation in this Plan or if he terminates his employment with the
Company. Upon return of the Participant to eligible employment, the
Participant shall be permitted to execute a new tax reduction agreement and
resume having contributions made to the Trust on his behalf under Article 4.1,
provided that the effective date of the new tax reduction agreement shall be
effective on the first day of the calendar quarter commencing at least 30 days
after the agreement is received in executed form by the Committee, and in no
event earlier than the date the Participant resumes eligible employment.
Transfers to a different payroll system shall be administered by procedures
established by the Committee.
4.3 Investment Plan Contributions.
Any Employee eligible to participate in the Plan may elect to
make Investment Plan Contributions to the Trust by executing an investment plan
agreement as described in Article 4.4. The amount of Investment Plan
Contributions made by a Participant for any payday shall equal that whole
percentage of his Compensation per payday selected by the Participant, not to
exceed 15% when combined with the percentage elected under Article 4.1 by such
Participant.
4.4 Investment Plan Agreement.
(A) Nature of Agreement. The investment plan agreement
referred to in Article 4.3 shall be a legally binding agreement (on a form
prescribed by the Committee) whereby the Participant agrees that, as of the
effective date of the agreement, the Compensation otherwise payable to him
thereafter shall be adjusted by a whole percentage (as selected by the
Participant) not to exceed the maximum percentage permitted under Article 4.3,
and whereby the Participant agrees to contribute the total amount of said
adjustment in Compensation upon any payday to the Trust as an Investment Plan
Contribution under Article 4.3. Each Participant's Investment Plan
Contributions shall be paid over to the Trustee for
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deposit in the Trust Fund at such time or times as may be convenient to the
Company but not later than the end of the month next following the month in
which the deduction is made or such later date prescribed under Department of
Labor regulations.
(B) Effective Date of Agreement. The effective date of a
Participant's investment plan agreement shall be no earlier than the first day
of the calendar quarter commencing at least 30 days after the agreement is
received in executed form by the Committee (provided such effective date is no
earlier than the date the Participant first becomes eligible to participate in
the Plan).
(C) Amendment of Agreement. A Participant may amend his
investment plan agreement at any time with respect to Compensation not yet paid
to change the whole percentage (within the limits of Article 4.3) to be used to
determine his Investment Plan Contribution. The amended investment plan
agreement shall be effective no earlier than the first day of the calendar
quarter commencing at least 30 days after the amended agreement is received in
executed form by the Committee.
(D) Termination of Agreement. A Participant may terminate his
investment plan agreement at any time with respect to Compensation not yet
paid. The effective date of termination shall be as soon as reasonably
possible after notice of termination is received in executed form by the
Committee. Any Participant who terminates his investment plan agreement shall
be permitted to execute a new investment plan agreement and resume making
contributions to the Trust under Article 4.3, provided that the effective date
of the new investment plan agreement shall be no earlier than the first day of
a calendar quarter commencing at least 30 days after the new investment plan
agreement is received in executed form by the Committee.
(E) Transfer to Ineligible Employment or Termination of
Employment. A Participant's investment plan agreement shall automatically
terminate if the Participant transfers to a class of employment not eligible
for participation in this Plan or if he terminates his employment with the
Company. Upon return of the Participant to eligible employment, the
Participant shall be permitted to execute a new investment plan agreement and
resume making contributions to the Trust under Article 4.3, provided that the
effective date of the new investment plan agreement shall be no earlier than
the first day of the calendar quarter commencing at least 30 days after the
agreement is received in executed form by the Committee, and in no event
earlier than the date the Participant resumes eligible employment. Transfers
to a different payroll system shall be administered by procedures established
by the Committee.
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4.5 Matching Company Contributions.
(A) Contributions. The Company shall make Matching Company
Contributions to the Trust on behalf of each Participant for each calendar
month in the amount set forth in the Company election document, which amount
shall be not more than one dollar for each dollar contributed under Articles
4.1 and 4.3; provided, however, that no Matching Company Contributions will be
made with respect to Tax Reduction Contributions or Investment Plan
Contributions that in total exceed 6% of a Participant's Compensation.
(B) Timing of Contributions. The Matching Company
Contributions made to the Trust under Article 4.5(A) for any Plan Year
generally shall be made monthly and in no event later than the date prescribed
by law for filing the Company's federal income tax return, including
extensions, for the Fiscal Year coincident with the Plan Year with respect to
which the Matching Company Contributions are made.
(C) Order of Matching Contributions. On a monthly basis,
Matching Company Contributions shall be made first to match a Participant's Tax
Reduction Contributions and then to match a Participant's Investment Plan
Contributions.
(D) Waiver of Matching Contributions. In accordance with
rules prescribed by the Committee, a Participant may waive in advance of any
Plan Year or other prescribed period the allocation to his account of the
Matching Company Contributions that otherwise would be made thereto.
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ARTICLE 5
LIMITATION ON TAX REDUCTION CONTRIBUTIONS
5.1 Dollar Limitation.
In no event may the Tax Reduction Contributions made on behalf of
any Participant exceed $7,000 in the 1987 Plan Year, adjusted in subsequent
Plan Years in accordance with the Code. The Committee shall establish rules
necessary for such limitation to be met with respect to any Participant
including, but not limited to, rules that require a reduction in contributions
in order to meet the limitation and rules applicable to satisfy the appropriate
limitations should a Participant participate within the same Plan Year in this
Plan and another plan (including that of another employer) subject to a similar
dollar limitation.
5.2 Maximum Deferral Percentage.
The Tax Reduction Contributions made on behalf of all eligible
Participants who are highly compensated individuals with respect to any Plan
Year shall not result in a deferral percentage for such group of Participants
for any Plan Year that exceeds the greater of (a) or (b) below, where:
(a) is an amount equal to 125% of the deferral
percentage for all eligible Participants other than eligible
Participants who are highly compensated individuals; and
(b) is an amount equal to the sum of the deferral
percentage for all eligible Participants other than highly
compensated individuals and 2%, provided that such amount does
not exceed 200% of the deferral percentage for all eligible
Participants other than highly compensated individuals.
5.3 Definitions.
For purposes of this Article 5, the following terms shall have
the following meanings:
(A) "Eligible Participant" shall mean an Employee who is
eligible to make Tax Reduction Contributions to the Plan, even if he elects not
to make such contributions, he is suspended from making such contributions for
a period of time due to such events as a loan or a withdrawal, or he is
suspended from further contributions during the Plan Year due to the
limitations of Section 415 of the Code.
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(B) "Highly compensated individual" shall mean an individual
who during the current Plan Year or the preceding Plan Year:
(a) was at any time a 5% owner of a Company or an
Affiliate;
(b) receives compensation from one or more Companies
or Affiliates in excess of $75,000 in 1987, adjusted in
subsequent Plan Years in accordance with the Code; or
(c) received compensation from one or more Companies
or Affiliates in excess of $50,000 in 1987, adjusted in
subsequent Plan Years in accordance with the Code, and was in the
top 20% of all Employees, when ranked on the basis of the
compensation paid to all employees of all Companies or
Affiliates; or
(d) was at any time an officer of a Company or an
Affiliate and received compensation from one or more Companies or
Affiliates greater than 50% of the amount in effect under Section
415(b)(1)(A) of the Code; provided, however, that no more than 50
individuals shall be taken into account under this (d).
An individual not described in (b), (c) or (d) for the
preceding Plan Year shall not be considered a highly compensated
individual for the current Plan Year unless, for the current Plan
Year, he is among the 100 employees of all Companies and
Affiliates paid the greatest compensation.
The term "compensation" for purposes of determining who is
a highly compensated individual shall have the meaning prescribed
in Section 415(c)(3) of the Code, but prior to reduction on
account of a Participant's Tax Reduction Contributions to this
Plan and any other contributions not treated as taxable income by
reason of Sections 125, 402(a)(8) or 402(h)(1)(B) of the Code.
(C) "Deferral percentage" with respect to any group of
eligible Participants for a Plan Year shall mean the average of the deferral
ratios (calculated separately for each eligible Participant in the group and
rounded to the nearest one one-hundredth of one percent) of:
(a) the amount of Tax Reduction Contributions
allocated to the account of each eligible Participant for such
year, to
(b) the eligible Participant's compensation for such
year.
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The term "compensation" for purposes of this (C) has the meaning
set forth in Section 415(c)(3) of the Code but, as determined by the Committee,
prior to or after reduction on account of a Participant's Tax Reduction
Contributions to this Plan or any other contributions not treated as taxable
income by reason of Sections 125, 402(a)(8) or 402(h)(1)(B) of the Code. The
dollar limitation on "compensation" set forth in the definition of
"Compensation" in Article 2.1 of the Plan applies for this purpose.
Compensation received by a Participant for the entire Plan Year shall be taken
into account for purposes of this (C), even if the Participant begins, resumes
or ceases to be eligible to make Tax Reduction Contributions during the Plan
Year, provided such compensation is received from a Company or an Affiliate;
provided, however, that the Committee, in its discretion, may limit the
compensation taken into account for this purpose to only that received with
respect to periods during which an Employee is eligible to participate in the
Plan pursuant to Article 3, provided such limitations apply on a uniform basis
to all Participants.
5.4 Family Members.
For purposes of determining who is a highly compensated
individual and for purposes of the maximum deferral percentage prescribed in
Article 5.2 hereof and the maximum contribution percentage prescribed in
Article 6.1 hereof, a family member of a 5% owner or of one of the highest 10
paid individuals employed by all Companies and Affiliates shall not be
considered a separate individual and, further, any earnings paid to him or
contributions made by or on his behalf shall be attributed to the highly
compensated individual described above. The term "family" for purposes hereof
includes an individual's spouse, lineal ascendants or descendants, and the
spouses of such lineal ascendants or descendants.
5.5 Prospective Reduction of Tax Reduction Contributions.
In the event that it is determined by the Committee at any time
prior to or within a Plan Year that the maximum deferral percentage prescribed
in Article 5.2 could be exceeded with respect to such Plan Year, then the
amount of Tax Reduction Contributions allowed to be made on behalf of eligible
Participants who are highly compensated individuals with respect to the
remainder of the Plan Year may be reduced by the Committee. The highly
compensated individuals with respect to whom such reduction shall be made and
the amount of such reduction shall be determined in a manner comparable to the
manner of determining Excess Tax Reduction Contributions under Article 9.2;
provided, however, that for purposes of this Article 5.5 (but not for purposes
of Article 9.2), the Committee may round off or estimate the prospective
reductions hereunder. Once a reduction has been made hereunder, it shall
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remain in effect unless the Committee determines that it is no longer necessary
in order for the maximum deferral percentage to be met.
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ARTICLE 6
LIMITATION ON INVESTMENT PLAN AND
MATCHING COMPANY CONTRIBUTIONS
6.1 Maximum Contribution Percentage.
The sum of the Investment Plan Contributions made by all eligible
Participants who are highly compensated individuals and the Matching Company
Contributions made on such Participants' behalf shall not result in a
contribution percentage for such group of Participants for any Plan Year that
exceeds the greater of (a) or (b) below, where:
(a) is an amount equal to 125% of the contribution
percentage for all eligible Participants other than highly
compensated individuals; and
(b) is an amount equal to the sum of the contribution
percentage for all eligible Participants other than highly
compensated individuals and 2%, provided that such amount does
not exceed 200% of the contribution percentage for all eligible
Participants other than highly compensated individuals.
6.2 Definitions.
For purposes of this Article 6, the following terms shall have
the following meanings:
(A) The terms "eligible Participant" and "highly compensated
individual" shall have the meanings prescribed in Article 5.
(B)"Contribution percentage" with respect to any group of
eligible Participants for a Plan Year shall mean the average of the ratios
(calculated separately for each eligible Participant in the group and rounded
to the nearest one one-hundredth of one percent) of:
(a) the sum of the Investment Plan Contributions and
Matching Company Contributions allocated to the account of each
eligible Participant for such year, to
(b) the eligible Participant's compensation (as
defined in Article 5.3(C)) for such year.
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6.3 Prospective Reduction of Investment Plan Contributions.
In the event that it is determined by the Committee at any time
prior to or within a Plan Year that the maximum contribution percentage
described in Article 6.1 could be exceeded with respect to such Plan Year, then
the amount of Investment Plan Contributions allowed to be made by eligible
Participants who are highly compensated individuals may be reduced by the
Committee. The highly compensated individuals with respect to whom such
reduction shall be made and the amount of such reduction shall be determined by
(i) reducing the maximum allowable Investment Plan Contributions under Article
4.3 to such percentage which will, when applied to all eligible Participants
who are highly compensated individuals (and taking into account any reduction
in Matching Company Contributions as a consequence of a reduction in Tax
Reduction Contributions under Article 5.5 and a reduction in Investment Plan
Contributions hereunder) result in the maximum contribution percentage set
forth in Article 6.1 not being exceeded, and (ii) reducing accordingly the
Investment Plan Contributions that may be made in the remainder of the Plan
Year in the case of each highly compensated individual with respect to whom
such reduced maximum percentage is exceeded. Notwithstanding the foregoing,
the Committee may round off or estimate the prospective reductions hereunder.
Once a reduction has been made hereunder, it shall remain in effect unless the
Committee determines that it is no longer necessary in order for the maximum
contribution percentage to be met.
6.4 Testing of Tax Reduction Contributions Under Maximum
Contribution Percentage Test.
Notwithstanding the foregoing provisions of this Article 6 or of
Article 5, all or a portion of the Tax Reduction Contributions made on behalf
of eligible Participants who are not highly compensated individuals may be
treated as Matching Company Contributions made on behalf of such eligible
Participants for the purpose of meeting the maximum contribution percentage
test set forth in Article 6.1, provided that the maximum deferral percentage
test of Article 5.2 can be met, both when the Tax Reduction Contributions
treated as Matching Company Contributions hereunder are included in performing
such maximum deferral percentage test and when such Tax Reduction Contributions
are excluded in performing such maximum deferral percentage test. Except for
purposes of meeting the maximum contribution test of Article 6.1 to the extent
described hereunder, any such Tax Reduction Contributions shall continue to be
treated as Tax Reduction Contributions for all other purposes of the Plan.
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ARTICLE 7
AGGREGATE LIMIT ON DEFERRAL AND CONTRIBUTION PERCENTAGES
7.1 General Rules.
In addition to satisfaction of the maximum deferral percentage
test described in Article 5.2 and the maximum contribution percentage test
described in Article 6.1, effective January 1, 1989, the Tax Reduction
Contributions, Investment Plan Contributions and Matching Company Contributions
made to the Plan with respect to any Plan Year on behalf of eligible
Participants who are highly compensated individuals shall not cause the sum of
the deferral percentage and the contribution percentage with respect to such
eligible Participants (after application of Article 6.4, and after assuming
that corrections have been made to satisfy such maximum deferral percentage and
maximum contribution percentage tests pursuant to Article 9) to exceed the
aggregate limit prescribed in Article 7.2; provided, however, that such
aggregate limit only shall apply if the maximum deferral percentage test
described in Article 5.2(a) is not satisfied and the maximum contribution
percentage test in Article 6.1(a) is not satisfied.
7.2 Aggregate Limit.
The aggregate limit is equal to the greater of (a) and (b) below,
where:
(a) equals the sum of (i) an amount equal to 125% of
the greater of the deferral percentage or contribution percentage
for all eligible Participants other than highly compensated
individuals; and (ii) is an amount equal to the lesser of the
deferral percentage or contribution percentage for all eligible
Participants other than highly compensated individuals and 2%;
provided that such amount does not exceed 200% of the lesser of
the deferral percentage or contribution percentage for all
eligible Participants other than highly compensated individuals;
and
(b) equals the sum of (i) an amount equal to 125% of
the lesser of the deferral percentage or contribution percentage
for all eligible Participants other than highly compensated
individuals, and (ii) an amount equal to the greater of the
deferral percentage or contribution percentage for all eligible
Participants other than highly compensated individuals and 2%;
provided that such amount does not exceed 200% of the greater of
the deferral percentage or contribution percentage for all
eligible Participants other than highly compensated individuals.
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7.3 Prospective Reduction of Contributions.
In the event that it is determined by the Committee at any time
prior to or within a Plan Year that the aggregate limit prescribed in Articles
7.1 and 7.2 could be exceeded with respect to such Plan Year, then the amount
of Tax Reduction Contributions, Investment Plan Contributions or both (as
determined by the Committee) made on behalf of or by eligible Participants who
are highly compensated individuals may be reduced in a manner similar to that
described in Articles 5.5 and 6.3.
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ARTICLE 8
CORRECTION OF TAX REDUCTION CONTRIBUTIONS
IN EXCESS OF DOLLAR LIMITATION
8.1 General Rule.
In the event that, notwithstanding Article 5.1, the dollar
limitation on Tax Reduction Contributions prescribed therein is exceeded, the
excess shall be considered an "Excess Deferral" and the procedures set forth in
this Article 8 shall be followed.
8.2 Designation as Excess Deferral.
A Participant may designate to the Committee the amount of any
Excess Deferral that is allocable to the Plan and request that such amount be
distributed to the Participant. Such a designation must be made on or before
March 1 of the year following the Plan Year in which the Excess Deferral was
made.
8.3 Distribution.
The Committee may grant a Participant's request for a
distribution pursuant to Article 8.2. Any such distribution shall be made at
such date as the Committee determines but in no event later than the April 15
following the Plan Year in which the Excess Deferral was made. Any such
distribution shall include a distribution of income allocable to the Excess
Deferral, determined by applying methodology comparable to that described in
Article 9.4(b) and (c).
8.4 Coordination with Excess Tax Reduction Contributions.
The amount of Excess Deferrals that may be distributed under this
Article 8 with respect to a Participant for a Plan Year shall be reduced by any
Excess Tax Reduction Contributions previously recharacterized or distributed
with respect to such Participant for such Plan Year. Conversely, the amount of
Excess Tax Reduction Contributions to be recharacterized or distributed under
Article 9 with respect to a Participant for a Plan Year shall be reduced by any
Excess Deferrals previously distributed hereunder to such Participant for such
Plan Year.
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ARTICLE 9
CORRECTION OF EXCESS CONTRIBUTIONS
9.1 General Rule.
If as of the end of a Plan Year, the maximum deferral percentage
test of Article 5.2, the maximum contribution percentage test of Article 6.1 or
the aggregate limit test of Articles 7.1 and 7.2 are not satisfied, the
Committee, after the close of such Plan Year, shall make a determination of the
Excess Tax Reduction Contributions or Excess Aggregate Contributions and then
apply one or more of the corrective measures set forth in this Article 9 (with
the applicable measures determined by the Committee, in its sole discretion) in
order that, after application of such measures, all of such tests are
satisfied.
9.2 Maximum Deferral Percentage Test -- Excess Tax Reduction
Contributions.
Excess Tax Reduction Contributions are determined on an
individual basis under a leveling method pursuant to which the Committee shall
reduce the deferral ratio (determined in accordance with Article 5.3(C)) of the
eligible Participant who is a highly compensated individual and who has the
highest deferral ratio to the extent required to (i) cause the test of Article
5.2 to be satisfied, or (ii) cause such individual deferral ratio to equal the
deferral ratio of the eligible Participant who is a highly compensated
individual and who has the next highest deferral ratio. This process shall be
repeated until Article 5.2 is satisfied. For each such individual affected,
his total Tax Reduction Contributions, minus an amount determined by
multiplying his permissible deferral ratio by his compensation used in
determining such ratio, shall be considered his Excess Tax Reduction
Contributions.
9.3 Recharacterization of Excess Tax Reduction Contributions.
Excess Tax Reduction Contributions may be recharacterized as
Investment Plan Contributions in order to meet the maximum deferral percentage
test, provided that the following conditions are met with respect thereto:
(a) The recharacterized amounts are reported to the
Internal Revenue Service and to the affected highly compensated
individual as income for the Plan Year in which the individual
would have received the recharacterized Tax Reduction
Contributions in cash, had he not elected to have such amounts
contributed to the Plan;
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(b) The recharacterized amounts are treated as Investment
Plan Contributions for purposes of Sections 72, 401(a)(4) and
6047 of the Code and for purposes of the maximum contribution
test described in Article 6.1 (in the year when taken into
account as income);
(c) The recharacterized amounts continue to be treated
for all other purposes under the Plan as Tax Reduction
Contributions; and
(d) Notice of recharacterization is given to each
affected highly compensated individual not later than the March
15 next following the Plan Year with respect to which
recharacterization occurs.
9.4 Distribution of Excess Tax Reduction Contributions.
Excess Tax Reduction Contributions (and income allocable thereto)
may be distributed in order to meet the maximum deferral percentage test,
provided that the following conditions are met with respect thereto:
(a) The distributed amounts are designated as a
distribution of Excess Tax Reduction Contributions (and income)
and are distributed to the affected highly compensated
individuals within 12 months following the close of the Plan Year
in which the maximum deferral percentage was exceeded;
(b) Allocable income for the Plan Year in which the
maximum deferral percentage was exceeded is distributed. Such
allocable income shall be determined by multiplying the income
for the Plan Year that is attributable to the affected
Participant's Tax Reduction Contributions by a fraction, the
numerator of which is the Participant's Excess Tax Reduction
Contributions for the Plan Year and the denominator of which is
the value of the Participant's entire Tax Reduction Contributions
sub-account as of the end of the Plan Year in which the maximum
deferral percentage was exceeded reduced by the gain allocable to
such sub-account for the Plan Year and increased by the loss
allocable to such sub-account for the Plan Year; and
(c) Allocable income for the period after the close of
the Plan Year in which the maximum deferral percentage was
exceeded and prior to distribution is distributed. Such
allocable income either shall be determined under the method
prescribed in (b), but based on income through the last day of
the month preceding distribution, or under a safe harbor method,
as determined by the Committee. Under the safe harbor method,
10% of the allocable income for the Plan Year in which the
maximum deferral percentage was
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exceeded (as computed under (b) hereof) is multiplied by the
number of months elapsed since the end of such Plan Year
(treating any distribution occurring on or before the 15th of a
month as made in the last preceding month), and the product is
the safe harbor allocable income.
The term "income" for all purposes under this Article 9
includes all earnings and appreciation, including such items as
interest, dividends, rent, royalties, gains from the sale of
property, appreciation in the value of stocks, bonds, annuity and
life insurance contracts and other property, without regard to
whether such appreciation has been realized.
9.5 Maximum Contribution Percentage Test -- Excess Aggregate
Contributions.
The term "Excess Aggregate Contributions" means the total dollar
amount of Investment Plan Contributions (including Tax Reduction Contributions
recharacterized as Investment Plan Contributions pursuant to Article 9.3) and
Matching Company Contributions (including Tax Reduction Contributions treated
as Matching Company Contributions pursuant to Article 6.4) allocated to the
account of any eligible Participant who is a highly compensated individual
that, in combination with a similarly-computed amount with respect to other
such individuals, causes the maximum contribution percentage limitation set
forth in Article 6.1 to be exceeded. In order to determine Excess Aggregate
Contributions with respect to any individual, the Committee shall apply the
methodology prescribed in Article 9.2 hereof but shall substitute the
contribution percentage tests prescribed in Article 6 for the deferral
percentage tests prescribed in Article 5 and shall substitute Investment Plan
Contributions and Matching Company Contributions for Tax Reduction
Contributions.
9.6 Distribution of Excess Aggregate Contributions.
Excess Aggregate Contributions (and income allocable thereto that
is earned prior to distribution) may be distributed in order to meet the
maximum contribution percentage test. If the affected highly compensated
individual has not made any Investment Plan Contributions to the Plan for the
applicable Plan Year, then the Excess Aggregate Contributions distributed shall
be deemed to consist solely of Matching Company Contributions. If the amount
of the Excess Aggregate Contributions is at least equal to the amount of the
affected highly compensated individual's Investment Plan Contributions that
were not matched by any Matching Company Contributions, then the Excess
Aggregate Contributions distributed shall be deemed to consist solely of
Investment Plan Contributions. In other cases, the Committee shall apportion
the Excess Aggregate Contributions between Investment Plan Contributions and
Matching Contributions on a nondiscriminatory basis; provided, however, that
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Matching Company Contributions always may be distributed prior to a
distribution of Investment Plan Contributions.
9.7 Forfeiture of Matching Company Contributions.
If, after applying the provisions of Article 9.6, the Committee
determines that all or a portion of the Excess Aggregate Contributions is to be
treated as Matching Company Contributions and the affected highly compensated
individual is not fully vested, the non-vested amount of the portion of the
Excess Aggregate Contributions treated as Matching Company Contributions (and
income allocable thereto that is earned prior to forfeiture) may be forfeited.
The non-vested amount of the portion of the Excess Aggregate Contributions
treated as Matching Company Contributions shall be determined by multiplying
such portion by the difference between 100% and the individual's vested
percentage under Article 14.
9.8 Allocable Income.
The income allocable to Excess Aggregate Contributions shall be
determined by applying a methodology comparable to that prescribed in Article
9.4(b) and (c).
9.9 Timing of Corrections.
Distributions or forfeitures pursuant to Article 9.6 or 9.7 shall
be made within 12 months following the close of the Plan Year in which the
maximum contribution percentage was exceeded.
9.10 Special Rule for Recharacterized Amounts.
The determination of the amount of Excess Aggregate Contributions
with respect to a Plan Year shall be made after determining the Excess Tax
Reduction Contributions, if any, to be treated as Investment Plan Contributions
due to recharacterization. The income allocable to Excess Aggregate
Contributions resulting from the recharacterization of Tax Reduction
Contributions shall be determined and distributed as if such recharacterized
Tax Reduction Contributions had been distributed pursuant to Article 9.4
instead of recharacterized pursuant to Article 9.3.
9.11 Corrective Measures with Respect to Aggregate Limit.
If the aggregate limit prescribed under Articles 7.1 and 7.2 is
exceeded, the maximum contribution percentage for eligible Participants who are
highly compensated individuals shall be reduced in order to meet such limit.
Excess Aggregate Contributions shall be determined under such reduced
percentage pursuant to Article 9.5, and corrective measures pursuant to Article
9.6 or 9.7 shall be taken in order to satisfy the aggregate limit.
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9.12 Additional Company Contributions.
Notwithstanding any other provision of the Plan, the Company may
make qualified nonelective contributions and qualified matching contributions
pursuant to Section 401(k) or (m) of the Code in order to satisfy the maximum
deferral percentage test, the maximum contribution percentage test or the
aggregate limit, provided that appropriate nondiscrimination tests under
Section 401(k) or (m) and Section 401(a)(4) of the Code are satisfied. A
Participant shall at all times be 100% vested in such contributions. For
purposes of Article 16 hereof and any other distribution provisions of the Plan
or the Code, such contributions are treated as if they were Tax Reduction
Contributions; provided, however, that they may not be withdrawn merely on
account of the hardship of a Participant.
9.13 Highly Compensated Individual Elections.
Notwithstanding Article 9.1, but solely for purposes of
satisfying the maximum deferral percentage test (and not for purposes of
satisfying the maximum contribution percentage test) the Committee, in its sole
discretion, may permit a highly compensated individual to elect whether the
appropriate method of correcting Excess Tax Reduction Contributions shall be
recharacterization, distribution or a combination of both.
9.14 Other Permissible Methods of Testing and Correction.
The provisions of Article 5 through this Article 9 are intended
to conform with Sections 401(k) and (m) and 402(g) of the Code. In the event
that the Committee determines that, in accordance with the Code, the
requirements of such Code sections may be applied in a manner different from
that prescribed in Articles 5 through 9, the Committee, in its discretion, may
make appropriate adjustments.
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ARTICLE 10
LIMITATIONS ON ANNUAL ADDITIONS
10.1 Basic Limitation.
Subject to the adjustments hereinafter set forth, the maximum
annual addition to a Participant's account in any Limitation Year under this
Plan plus the annual addition to the Participant's account under any other
qualified defined contribution plan maintained by the Company or by an
affiliate shall not exceed the lesser of:
(a) $30,000, adjusted in accordance with the Code, or
(b) 25% of the Participant's annual compensation.
10.2 Definitions.
For purposes of Article 10.1, the following terms shall have the
following meanings:
(A) Annual Addition. The term "annual addition" shall mean
the sum of:
(a) the Company's contributions (including Tax
Reduction Contributions, Matching Company Contributions and
forfeitures treated as Matching Company Contributions) allocated
to the account of the Participant under this Plan;
(b) the employer contributions and forfeitures
allocated to the account of the Participant under any other
qualified defined contribution plan maintained by the Company or
by an affiliate; and
(c) the Participant's Investment Plan Contributions to
this Plan and after-tax employee contributions to any other
qualified plan maintained by the Company or an affiliate.
(B) Compensation. The term "compensation" shall mean the
Participant's wages, salary for professional services and other amounts
received for personal services actually rendered (including, but not limited
to, commissions paid to salesmen, compensation for services on the basis of a
percentage of profits and bonuses) and such other amounts as are treated as
"compensation" under Section 415(c)(3) of the Code.
(C) Affiliate. The term "affiliate" shall mean an Affiliate
as defined in Article 2.1, but modified pursuant to Section 415(h) of the Code.
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10.3 Limitation on Combination of Plans.
Notwithstanding the foregoing, in the case of a Participant who
participates in this Plan and any qualified defined benefit plan maintained by
the Company or by an affiliate, the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any year shall not exceed 1.0.
In the event the sum of such fractions exceeds 1.0, benefits under the defined
benefit plan shall be reduced or frozen prior to making any reductions in this
Plan. For purposes of applying the limitations of this Article 10.3, the
following rules shall apply:
(a) The terms "defined benefit plan fraction" and
"defined contribution plan fraction" shall have the meanings
prescribed in Section 415(e) of the Code.
(b) The term "annual addition" shall have the meaning
set forth in Article 10.2.
10.4 Prospective Adjustment to Contributions.
The Committee shall maintain records, showing the contributions
to be allocated to the account of each Participant in any limitation year. In
the event that it is determined prior to or within any Limitation Year that the
foregoing limitations would be exceeded if the full amount of contributions
otherwise allocable would be allocated, the annual additions to this Plan for
the remainder of the Limitation Year shall be adjusted by reducing (i) first,
any unmatched Investment Plan Contributions, (ii) second, any unmatched Tax
Reduction Contributions, (iii) third, matched Investment Plan Contributions and
a corresponding share of Matching Company Contributions; and (iv) fourth,
matched Tax Reduction Contributions and a corresponding share of Matching
Company Contributions but, in each case, only to the extent necessary to
satisfy the limitations.
10.5 Disposal of Excess Annual Additions.
In the event that, notwithstanding Article 10.4 hereof, the
limitations with respect to annual additions prescribed hereunder are exceeded
with respect to any Participant and such excess arises as a consequence of
forfeitures, a reasonable error in estimating the Participant's compensation or
such other circumstance under which an adjustment hereunder is permitted under
the Code, the Participant's Investment Plan Contributions, if any, may be paid
from the Trust to him to the extent of the excess, in discretion of the
Committee. Any remaining excess shall be used to reduce future contributions
by or on behalf of the Participant for the next succeeding Limitation Year and
succeeding Limitation Years, as
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<PAGE> 39
necessary, or, if the Participant is no longer employed in such a succeeding
year, to reduce future contributions on behalf of other Participants entitled
to an allocation.
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ARTICLE 11
GENERAL PROVISIONS REGARDING CONTRIBUTIONS
11.1 Manner of Making Contributions.
All contributions to the Trust shall be paid directly to the
Trustee. Tax Reduction Contributions and Investment Plan Contributions shall
be made in cash. Matching Company Contributions shall be made in cash or
Company Stock, in the discretion of the Company. Each contribution shall be
accompanied by written instructions from the Committee that:
(a) identify each Participant on whose behalf the
contribution is being made and the amount thereof;
(b) state whether the amount contributed on behalf of
the Participant represents a Tax Reduction Contribution, an
Investment Plan Contribution or a Matching Company Contribution;
and
(c) direct the investment of the amount contributed on
behalf of the Participant.
11.2 Limitation to Amount Deductible.
Tax Reduction Contributions and Matching Company Contributions to
the Plan, when considered with the amount contributed by a Company to any other
tax-qualified plan, shall not exceed the amount deductible pursuant to Section
404 of the Code. In the event that the amount that any Company would
contribute but for the deductible limitation exceeds the deductible limitation,
contributions shall be reduced in such manner as the Committee, in its sole
discretion, shall prescribe.
11.3 Return of Contributions.
In the event that:
(a) a Matching Company Contribution or negative
contribution is made under a mistake of fact; or
(b) the deductibility of a Matching Company
Contribution is disallowed (it being understood that all Matching
Company Contributions are conditioned on the deductibility
thereof under Section 404 of the Code) such contribution may be
returned to the Company that made the contribution within one
year after the payment of the contribution or the disallowance of
the deduction (to the extent disallowed). If the share prices of
the funds that the contribution was invested in have increased,
then the Company receives back the amount of the contribution. If
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the share prices of the funds that the contribution was invested
in have decreased, then the Company receives the number of shares
originally bought with the contribution amount times the current
day share price.
11.4 Certain Aggregation Rules.
In the event that this Plan is aggregated with any other
tax-qualified plan maintained by the Company for purposes of satisfying Section
401(a)(4) or 410(b) of the Code (other than Section 410(b)(2)(A)(ii) of the
Code), the maximum deferral percentage limit of Article 5.2, the maximum
contribution percentage limit of Article 6.1 and the aggregate limit of Article
7.2 shall be applied as if the Plan and such other plan(s) were a single plan.
In addition, in the event that a Participant in this Plan who is a highly
compensated individual also participates in another tax-qualified plan
maintained by the Company, he shall be treated as participating in a single
plan for purposes of such limitations. The provisions of this Article 11.4 are
subject to Article 9.14 hereof.
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ARTICLE 12
ROLLOVERS AND TRANSFERS
12.1 Rollovers.
Rollover Contributions may be made to the Plan in accordance with
the following provisions:
(A) Amounts Eligible. Any amount eligible for a tax-free
rollover under applicable provisions of the Code may be rolled over to the
Plan.
(B) Individuals Eligible. Any Employee, including an Employee
who has not satisfied the participation requirements of Article 3 of the Plan,
may make a Rollover Contribution to the Plan. Even though an Employee has not
yet satisfied such participation requirements, the provisions of the Plan shall
be generally applicable to him and to the Rollover Contribution, unless
expressly provided otherwise.
(C) Source of Rollover. Subject to the Code, Rollover
Contributions may be made directly by the Employee or by the retirement plan,
individual retirement account or other arrangement from which the Rollover
Contribution is being made.
(D) Assets Eligible for Rollover. Rollover Contributions
shall be made in cash and not in stock or other property, unless otherwise
permitted by the Committee. A Rollover Contribution may not include any
amounts representing employee contributions, other than voluntary deductible
contributions.
(E) Timing. Any amount to be rolled over generally must be
rolled over to the Plan within 60 days of receipt by the Participant, unless
otherwise permitted by the Code and the Committee.
(F) Self-Employed Individual. A rollover to the Plan shall
not be permitted to the extent the amount proposed to be rolled over is
attributable to periods during which an Employee was a self-employed
individual, within the meaning of Section 401(c)(1) of the Code.
(G) Procedures. The Committee may adopt rollover procedures
and, before permitting a Rollover Contribution, may require an Employee to
furnish such information regarding the amount proposed to be rolled over as the
Committee determines is necessary or appropriate.
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12.2 Transfers from Other Plan.
The Committee, in its discretion, may accept a direct transfer to
the Plan from another plan qualified under Section 401(a) of the Code of all or
a portion of the amount credited under such other plan to an Employee. The
Committee may adopt rules with respect to any such transfer including, but not
limited to, rules with respect to accounting for, and the investment of,
amounts transferred.
12.3 Section 401(k) Limitations.
In the event that an amount transferred to the Plan pursuant to
Article 12.2 is attributable to a cash or deferred election that was made
pursuant to Section 401(k) of the Code, such amount shall be subject to the
same rules that apply under the Plan to Tax Reduction Contributions.
12.4 Transfers to Other Plan.
The Committee, in its discretion, may permit a direct transfer
from the Plan to another plan qualified under Section 401(a) of the Code of all
or a portion of the amount credited under this Plan to an Employee. The
Committee may adopt rules with respect to any such transfer. In the event that
an amount transferred to another plan is attributable to Tax Reduction
Contributions, it shall be required as a condition of transfer that such
contributions shall be subject to such restrictions under the transferee plan
as may be required pursuant to Section 401(k) of the Code.
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ARTICLE 13
ACCOUNTS AND ALLOCATION OF FUNDS
13.1 Receipt of Contributions by Trustee.
All contributions to the Trust that are received by the Trustee,
together with any earnings thereon, shall be held, managed and administered by
the Trustee in accordance with the terms and conditions of the Trust Agreement.
The Trustee shall at all times be subject to the proper directions of the
Committee or the Company which are made in accordance with the terms of this
Plan and the Trust Agreement and which are not, on their face, contrary to the
ERISA.
13.2 Trust Fund Valuation.
The value of each Investment Fund and of the Trust Fund shall be
determined by the Trustee as of the close of business on each Valuation Date,
or as soon thereafter as practicable, and shall be the fair market value of all
property held in the Investment Funds, plus cash and accrued income, with
equitable adjustments for pending trades less all charges, expenses, reserves
and liabilities due or accrued which are determined to be properly chargeable
to the Investment Funds.
13.3 Allocation of Contributions to Participants' Separate Accounts.
The Trustee shall maintain a separate account for each
Participant. Within such account, one or more sub-accounts may be maintained
as the Trustee and the Committee deem appropriate to accurately reflect a
Participant's interest in the Plan. In all events, there shall be a separate
sub-account for Tax Reduction Contributions.
The maintenance of separate accounts is for accounting purposes
only. Any amount distributed to a Participant or his Beneficiary or any amount
withdrawn by a Participant shall be charged to the appropriate separate
accounts of the Participant as of the date of the distribution or withdrawal.
13.4 Adjustments to Participants' Accounts.
(A) The dividends, capital gains distributions, and other
earnings received on any share or unit of a Vanguard Fund or on any other Plan
investment that is specifically credited or earmarked to a Participant's
separate account under the Plan in accordance with the directed investment
provisions of the Plan shall be allocated to such separate account and
immediately reinvested, to the extent
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practicable, in additional shares or units of such Fund or other earmarked Plan
investments.
(B) Any Plan earnings or losses attributable to the investment
of a Participant's separate account under the Plan in a loan to the Participant
under Article 17 shall be allocated to the Participant's separate account in
accordance with the procedures of Article 17.8.
(C) To the extent not otherwise provided in subsection (A) or
(B) above, the assets of the Plan shall be valued at their current fair market
value as of each Valuation Date, and the earnings or losses of the Plan since
the immediately preceding Valuation Date shall be allocated to the separate
accounts of all Participants and former Participants under the Plan in the
ratio that the fair market value of each such account as of the immediately
preceding Valuation Date, bears to the total fair market value of all separate
accounts as of the immediately preceding Valuation Date, reduced by any
distributions or withdrawals therefrom since such preceding Valuation Date.
13.5 Participant-Directed Investments For Future Contributions.
(A) General Rule. Except as provided in Article 13.6, and
Article 23.4(E) all contributions to the Trust that are allocated to the
account of a Participant shall be invested by the Trustee in the Investment
Funds as directed by the Participant. Any such investment directions by a
Participant shall be made in accordance with rules and procedures prescribed by
the Committee, and shall be timely furnished to the Trustee.
(B) Investment Plan and Tax Reduction Contributions; Loan
Repayments. For contributions made under investment plan agreements, tax
reduction agreements or for loan repayments, an investment election in the
manner prescribed by the Committee shall direct that the aggregate of such
contributions and loan repayments (without distinction) be invested in the
Investment Funds in multiples of 10%; provided, however, elections in effect
prior to 1991 for elections in multiples of 25% shall remain effective until
changed by the Participant. A Participant may change his investment directions
under this Article 13.5(B), in accordance with the rules and procedures
prescribed by the Committee and furnished to the Trustee.
(C) Rollover Contributions. An investment election in the
manner prescribed by the Committee shall be submitted with an Employee's
Rollover Contribution and shall direct that such contribution be invested in
the Investment Funds in multiples of 10%.
(D) Failure to Provide Investment Instructions. If the
Trustee receives any contribution to the Trust that is not
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accompanied by written instructions directing its investment, the Trustee may
hold or return all or a portion of such contribution uninvested without
liability for loss of income or appreciation pending receipt of proper
investment directions from the Committee.
13.6 Investment of Matching Company Contributions; Forfeitures.
Matching Company Contributions and forfeitures shall be invested
in Fund A and allocated to the account of each Participant a monthly basis.
Forfeitures arising during any month shall be held by the Trustee in the
Vanguard Money Market Prime Account portion of Fund A and used to reduce
Matching Company Contributions.
13.7 Investment Transfers.
A Participant shall be permitted to transfer contributions to the
Trust (other than Matching Company Contributions) previously invested in one
Investment Fund and earnings thereon to one or more other Investment Funds
other than Funds D, E, and F. A transfer election shall be made in 1%
increments of the Participant's total interest in an Investment Fund or in a
whole dollar amount or in a number of whole shares to another Investment Fund
in accordance with rules and procedures prescribed by the Committee. Transfer
elections may be made as often as directed by the Participant, except that
transfers to and from Fund B may be made only once per calendar quarter.
Assets exchanged out of Fund B must remain in an eligible equity
fund for a minimum of ninety calendar days prior to becoming eligible for
transfer into Fund J - the Vanguard Money Market Reserves - Federal Portfolio.
They are eligible for transfer to funds other than Fund J on a daily basis.
The following funds are eligible equity funds: Fund A - Household
International, Inc. Common Stock Fund; Fund C - Vanguard Windsor II; Fund G -
Wellington Fund; Fund H - Vanguard Quantitative Portfolio Fund; and Fund I -
Vanguard Extended Market Portfolio.
Exchanges from Fund J, the Vanguard Money Market Reserves -
Federal Portfolio, may be made directly into Fund B without a ninety day
investment in an eligible equity fund.
13.8 No Rights Created by Allocation.
Any allocation of contributions or earnings to the separate
account of a Participant under this Article 13 shall not cause the Participant
to have any right, title or interest in any assets of the Plan except at the
time and under the terms and conditions expressly provided for in the Plan.
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ARTICLE 14
VESTING; FORFEITURES
14.1 Vesting of Accounts.
(A) Years of Matching Company Account Test. If a
Participant's employment with the Company or an Affiliate is terminated for any
reason other than a reason described in (C) hereof, the Participant shall:
(a) be entitled to the entire amount in his account
attributable to his Rollover Contributions, his Investment Plan
Contributions, and his Tax Reduction Contributions, including in
each case any contributions made for the year of termination of
employment but not yet allocated; and
(b) be vested in, and entitled to, an amount equal to
a percentage of the portion of his account attributable to
Matching Company Contributions. Such percentage shall be
determined in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Matching Vested Forfeited
Company Account Percentage Percentage
----------------- ---------- ----------
<S> <C> <C>
less than 1 0% 100%
1 but less than 2 20% 80%
2 but less than 3 40% 60%
3 but less than 4 60% 40%
4 but less than 5 80% 20%
5 or more 100% 0%
</TABLE>
For purposes of this Article 14.1, "Years of Matching Company
Account" will be measured in calendar quarters beginning with the calendar
quarter with respect to which the Participant first has Matching Company
Contributions allocated to his account and ending with the calendar quarter in
which the Participant's employment is terminated.
(B) Five Years of Employment Test. Notwithstanding (A)
hereof, a Participant shall be 100% vested if his employment with the Company
or an Affiliate is terminated after 5 years of employment, determined in
accordance with the following:
(a) A "year of employment" for this purpose means a 365
day period (disregarding fractional years), beginning on the date
on which an Employee first completes an Hour of Service (or the
first day of the month in which he is employed and completes an
Hour of Service, if his employment commences on the first
regularly scheduled work day of a month) and ends on the earlier
of (i) the date
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<PAGE> 48
the Employee quits, is discharged, retires or dies or (ii) the
first anniversary of the date the Employee is absent from active
employment for any other reason including, but not limited to,
short term disability, vacation, leave of absence or layoff. The
applicable date under (i) or (ii) is the "severance from service
date".
(b) Notwithstanding the foregoing, if the Employee is
severed from service by reason of quitting, discharge or
retirement but returns to employment and performs an Hour of
Service within the 365 day period ending on the first anniversary
of his severance from service date, the interim period shall
count towards the computation of years of employment. If an
Employee is absent for a reason described in (a)(ii) and then
quits, is discharged or retires but subsequently returns to
employment and performs an Hour of Service, the interim period of
absence shall count towards the computation of years of
employment, provided that the date on which the Employee again
performs an Hour of Service occurs within the 365 day period
ending on the first anniversary of the date the Employee was
first absent from employment for a reason described in (a)(ii).
(c) In accordance with uniform rules, the Committee
may count certain periods of absence from active employment
toward the computation of years of employment, even if not
required pursuant to (a) or (b) hereof.
(d) Years of employment credited during a prior period
of employment shall be automatically reinstated as of the date of
an Employee's reemployment.
(C) Other Circumstances. A Participant shall be 100% vested
upon his attainment of age 65, his eligibility for normal or early retirement
(as defined under any tax-qualified defined benefit plan maintained by a
Company or Affiliate in which he participates), his death prior to termination
of employment with a Company or Affiliate, or his Disability (as determined by
the Committee). In addition, the Company may accelerate vesting to 100% in
special circumstances including, but not limited to, a sale of stock or assets
of an Employee's employer.
14.2 Forfeiture of Non-Vested Interest.
The portion of a Participant's account attributable to Matching
Company Contributions in which he is not vested when his employment with the
Company or an Affiliate is terminated shall be forfeited upon the earlier of
(i) the date that he receives a distribution of his entire vested interest
(including for this purpose, an annuity contract that represents his right to
such vested interest), or (ii) the fifth anniversary of the
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<PAGE> 49
Participant's severance from service date, as defined in Article 14.1(B)
hereof. A Participant who does not have any vested interest in the portion of
his account attributable to Matching Company Contributions as of his severance
from service date shall be deemed to have received a distribution for purposes
of (i) hereof as of his severance from service date.
14.3 Restoration of Non-Vested Interest.
If, following his termination of employment, a Participant
received a distribution of his entire vested interest under the Plan and then
is reemployed and performs an Hour of Service prior to the fifth anniversary of
the date on which he received a distribution, the entire amount forfeited,
unadjusted for gains and losses following the distribution, shall be restored
to his account from other forfeiture amounts by Participants and the Plan
earnings attributable thereto, or by additional Company contributions to the
Plan on behalf of the Participant.
At any time thereafter, the amount in which he is vested shall be
determined by applying his vested percentage against the sum of the
distribution and the amount restored; provided, however, that the amount
actually distributable to him upon his subsequent termination of employment
shall be offset by the amount previously distributed.
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<PAGE> 50
ARTICLE 15
DISTRIBUTIONS
15.1 Timing of Distributions; Applicable Valuation Date.
(A) General Rule. Normally, the vested interest of a
Participant (or beneficiary) shall become distributable to him as soon as
administratively practicable following the Participant's severance from service
date (or death), provided that the Committee has received written notice of the
Participant's severance from service date (or death).
(B) Consent to Immediate Distribution; Deferral if Consent Not
Obtained. If the value of a Participant's account as of the severance from
service date exceeds $3,500, no distribution shall be made thereunder unless
the Participant (or beneficiary) consents to the distribution. In accordance
with rules prescribed by the Committee, a Participant (or beneficiary) who does
not consent may defer his distribution until a date no later than the Valuation
Date first following the date he becomes age 65 (or the date he would have
attained age 65 in the case of a beneficiary).
(C) Retirement-Eligible Deferrals. If a Participant is
eligible for normal or early retirement (as defined under any tax-qualified
defined benefit plan maintained by a Company or Affiliate in which he
participates) as of his severance from service date then, regardless of the
value of his account, he may elect to defer the receipt of his vested interest
to a date, no later than his required beginning date under Article 15.4. A
beneficiary also may elect to defer distribution hereunder if, as of the date
of the Participant's death, he was eligible for normal or early retirement.
(D) Treatment of Accounts in the Case of Deferred
Distributions. If a Participant or beneficiary elects to defer distribution of
the Participant's vested interest pursuant to (B) or (C) hereof, the
Participant's account shall continue to share in the earnings and losses of the
Trust until the applicable Valuation Date. Transfers among Investment Funds
also shall be permitted until such Valuation Date.
15.2 Method of Distribution.
All amounts which a Participant or a beneficiary shall be
entitled to receive under the Plan shall be distributed as a single sum
distribution, unless the Participant elects an annuity as described below.
Payment from Fund B shall be in cash. Payments in the form of a single sum
distribution from Fund A (and from the Eljer, Schwitzer and Scotsman Stock
Funds) shall be in cash or stock or a combination of both, at the discretion of
the
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<PAGE> 51
Participant; provided, however, that partial shares will be paid in cash.
Payments in the form of a single sum distribution from Funds other than Fund A
(and from the Eljer, Schwitzer and Scotsman Stock Funds) shall be in cash.
A Participant (who does not have a loan outstanding) may elect to
receive his distribution in a single sum, as an immediate annuity purchased
under the group annuity contract or contracts, or as a combination of both, or
in any other form available through a group annuity contract issued to the Plan
by a legal reserve life insurance company authorized to do business in
Illinois. The forms of immediate annuity available under the group annuity
contract or contracts shall include the following:
(a) Qualified Joint and Survivor Annuity. An annuity
for the life of the Participant with a survivor annuity for the
life of such Participant's spouse which is not less than
one-half, or greater than, the amount of the annuity payable
during the joint lives of the participant and such Participant's
spouse.
(b) Annuity Certain and Life. An annuity to the
Participant for a specified number of monthly payments.
Thereafter, payments will continue for as long as the annuitant
lives.
If a married Participant who is eligible to elect to
receive an annuity elects payment in the form of a life annuity,
it will be provided in the form of a qualified joint and survivor
annuity, provided, that such participant (i) may elect with the
consent of his spouse not to take the joint and survivor annuity
and (ii) may revoke an election not to take a joint and survivor
annuity or choose again to take a joint and survivor annuity at
any time and any number of times prior to the commencement of
benefit payments. The consent of a married Participant's spouse
not to take the joint and survivor annuity only shall be
effective if the spouse consents to the other particular form of
life annuity elected by the Participant and to the specific
beneficiary (if any) under such form. No annuity may be
purchased unless the payments of the annuity will equal or exceed
$30 per month.
Notwithstanding the foregoing, the only form of distribution
available to an individual who becomes a Participant on or after July 1, 1989
shall be a single sum distribution.
15.3 Designation of Beneficiary.
A Participant may designate from time to time a beneficiary or
beneficiaries (who may be designated contingently or
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<PAGE> 52
successively and may be an entity other than a natural person) to be entitled
under Article 15.1 to receive any vested, undistributed amounts credited to the
Participant's account under the Plan at the time of the Participant's death
(reduced by the amount of any outstanding loan); provided, however, that if a
beneficiary other than the surviving spouse of the Participant is named, the
designation is valid only with the consent of such spouse. The consent must
acknowledge the effect of the election not to be the sole beneficiary and must
be witnessed by a notary public or a Plan representative. Spousal consent may
be dispensed with only if it is established to the satisfaction of the
Committee that: (i) such consent is not obtainable, either because there is no
spouse, or the spouse cannot be located; or (ii) because of such other
circumstances as the Secretary of the Treasury may by regulations prescribe.
Subject to the foregoing, any such beneficiary designation shall be made on a
form prescribed by the Committee, and shall be effective only when filed with
the Committee during the Participant's lifetime. A Participant may change or
revoke his beneficiary designation at any time by filing a new instrument with
the Committee. If the designated beneficiary (or each of the designated
beneficiaries) predeceases the Participant, the Participant's beneficiary
designation shall be ineffective. In determining whether any person named as a
beneficiary is living at the time of a Participant's death, if such person and
the Participant die in a common accident or disaster and there is insufficient
evidence to determine which person died first, then it shall be deemed that the
beneficiary died first. If no valid beneficiary designation is in effect at
the time of the Participant's death, the amount payable will be paid in equal
shares to those person(s) then living in the first of the following classes of
successive preference beneficiaries being the deceased Participant's:
(a) widow or widower;
(b) descendants, per stirpes (including adopted
children);
(c) parents;
(d) brothers and sisters;
(e) executors or administrators.
15.4 Code Section 401(a)(9).
All distributions under the Plan shall be subject to the
requirements of Section 401(a)(9) of the Code and applicable regulations
thereunder, including the incidental death benefit requirements thereof.
Without limitation of the foregoing, the following specific requirements of
Section 401(a)(9) shall apply:
(A) Required Beginning Date. Distributions to a Participant
shall being not later than April 1 of the Plan Year following the Plan Year in
which a Participant attains age 70-1/2, even if the Participant has not yet
severed from service as of such date.
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<PAGE> 53
(B) Payment Term and Frequency. Benefits payable in the form
of an annuity shall not extend beyond the life of the Participant, the lives of
the Participant and a designated beneficiary, the life expectancy of the
Participant or the joint life and last survivor expectancy of the Participant
and a designated beneficiary. If a Participant dies and annuity payments have
commenced before his death, any annuity payments payable thereafter will be
distributed at least as rapidly as those made during the Participant's life.
(C) Lump Sum Payable After Death. If a Participant dies prior
to payment or the commencement of payment to him of his vested interest, the
amount payable to his beneficiary pursuant to Article 15.1(A) and 15.3 shall in
all event be distributed within five (5) years after the Participant's death.
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<PAGE> 54
ARTICLE 16
WITHDRAWALS
16.1 Withdrawal Categories.
A Participant may make a withdrawal of all or part of his
account; provided, however, that a minimum of $500 or the balance of the
Participant's account must be withdrawn and only two non-hardship withdrawals
may be made in each Plan Year. Withdrawals must be made of all amounts
eligible for withdrawal in each category below (listed in descending order)
before amounts in the next lower category may be withdrawn:
Category A: Investment Plan Contributions (excluding earnings
thereon) made prior to January 1, 1987, which have
not been matched by Employer Matching Contributions.
Category B: Investment Plan Contributions (including earnings
thereon) made after January 1, 1987, which have not
been matched by Employer Matching Contributions.
Category C: Investment Plan Contributions (excluding earnings
thereon) made prior to January 1, 1987, which have
been matched by Employer Matching Contributions,
providing that the Participant has been in the Plan
for five years.
Category D: Investment Plan Contributions (including earnings
thereon) made after January 1, 1987, which have been
matched by Employer Matching Contributions, provided
that the Participant has been in the Plan for five
years.
Category E: Employer Matching Contributions, including earnings
thereon, provided that the Participant has been in
the Plan for five years.
Category F: Trustee-to-Trustee Transfer Contributions (except any
amount attributable to such contributions previously
distributed, as described above) and Rollover
Contributions, plus earnings thereon.
Category G: Investment Plan Contributions (excluding earnings
thereon) of Participants who have been in the Plan
for less than five years,
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<PAGE> 55
which have been matched by Employer Matching
Contributions; provided, however, the earnings will
be excluded only to the extent of the Participant's
pre 1987 cost basis. Thereafter the withdrawal will
be prorata to include earnings.
Category H: Tax Reduction Contributions, plus earnings thereon,
by Participants who have attained age 59-1/2, or in
order to meet immediate financial hardships as
defined by the Code and regulations thereunder.
Participants who have not attained age 59-1/2 may
withdraw account balances attributable to Tax
Reduction Contributions (excluding earnings thereon
that were earned on or after January 1, 1989) during
employment with Household or a subsidiary only to
meet immediate financial hardships.
16.2 Hardship Withdrawals.
(A) General Rule. A Participant may make a hardship withdrawal
only if the withdrawal is made on account of an immediate and heavy financial
need of the Participant and if the withdrawal is necessary to satisfy such
financial need.
(B) Immediate and Heavy Financial Need. A withdrawal will be
deemed to be made on account of an immediate and heavy financial need of the
Participant if the withdrawal is on account of one of the following:
(a) Medical expenses described in Section 213(d) of the
Code incurred by the Participant, the Participant's spouse, or any
dependent of the Participant (as defined in Section 152 of the
Code) or necessary for these persons to obtain medical care
(defined in Code Section 213(d));
(b) Purchase (excluding mortgage payments) of a principal
residence of the Participant;
(c) Payment of tuition for the next 12 months of
post-secondary education and related educational fees for the
Participant, his spouse or dependents; or
(d) The need to prevent the eviction of the Participant
from his principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(C) Withdrawal Necessary to Satisfy Financial Need. A
distribution will not be treated as necessary to satisfy an immediate and heavy
financial need to the extent the amount of the
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<PAGE> 56
withdrawal is in excess of the amount required to relieve the financial need or
to the extent such need may be satisfied from other resources that are
reasonably available to the Participant; provided, however, the amounts
necessary to pay reasonably anticipated federal, state and local income taxes
and penalties may be included. In order to demonstrate that the withdrawal is
necessary to satisfy an immediate and heavy financial need, a Participant shall
be required to execute a written representation that the need cannot be
relieved through one or more of the following means:
(a) Reimbursement or compensation by insurance or
otherwise;
(b) Reasonable liquidation of the Participant's assets,
to the extent such liquidation would not itself cause an immediate
and heavy financial need;
(c) Cessation of Tax Reduction or Investment Plan
Contribution to the Plan;
(d) Borrowing from commercial sources on reasonable
commercial terms; or
(e) Other withdrawals or nontaxable (at the time of the
loan) loans available from the Plan, all of which have been
exhausted pursuant to the terms of the Plan; provided, however,
that loans shall be considered hereunder only to the extent that
repayment of a loan would not in and of itself be unreasonably
burdensome to the Participant. For purposes hereof, a
Participant's assets shall be deemed to include those assets of his
spouse and minor children that are reasonably available to the
Participant.
(D) Consequences of Hardship Withdrawals. In the event that a
Participant makes a hardship withdrawal, his contributions shall be restricted
as follows:
(a) He shall not be eligible to make any Tax Reduction
Contributions or Investment Plan Contributions for the period
beginning with the payroll period next following the date he makes
the withdrawal request and ending with the last day of the calendar
quarter that is at least 12 months after the date he receives the
withdrawal;
(b) The amount of his Tax Reduction Contributions for the
Plan Year following the Plan Year in which he makes the withdrawal
shall be limited to the dollar amount prescribed under Article 5.1,
reduced by the amount of his Tax Reduction Contributions for the
year in which he made the withdrawal.
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<PAGE> 57
16.3 Manner of Making Withdrawals.
Any withdrawal by a Participant under this Article 16 shall be made
only after the Participant files a written request with the Committee,
specifying the category of the withdrawal and the amount requested to be
withdrawn. Upon approving the amount of any withdrawal, the Committee shall
furnish the Trustee with written instructions directing the Trustee to make a
single sum payment of the withdrawal. Payments from Funds B, C, G, H, I and J
shall be in cash. Payments from Funds A, D, E and F shall be in cash or stock
or a combination of both at the discretion of the Participant; provided,
however, that a hardship withdrawal only may be made in cash and provided,
further, that partial shares will be paid in cash.
Payment shall be made by withdrawing as of the Valuation Date a
proportionate amount credited to the interests of the Participant in the
Investment Funds under the Plan. Contributions which were received subsequent
to such Valuation Date will not be included.
16.4 Withdrawals Upon Attainment of Age 59-1/2.
Any participant who has attained age 59-1/2 may, in addition to the
withdrawal options provided in Article 16.1, elect to withdraw all or part of
his vested accounts; provided, however, that withdrawals must be made of all
amounts eligible for withdrawal in each classification below (listed in
descending order) before amounts in the next lower classification may be
withdrawn:
Category A: Investment Plan Contributions (excluding earnings
thereon) made prior to January 1, 1987, which have
not been matched by Employer Matching Contributions.
Category B: Investment Plan Contributions (including earnings
thereon) made after January 1, 1987, which have not
been matched by Employer Matching Contributions.
Category C: Investment Plan Contributions (excluding earnings
thereon) made prior to January 1, 1987, which have
been matched by Employer Matching Contributions,
providing that the Participant has been in the Plan
for five years.
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<PAGE> 58
Category D: Investment Plan Contributions (including earnings
thereon) made after January 1, 1987, which have been
matched by Employer Matching Contributions, provided
that the Participant has been in the Plan for five
years.
Category E: Employer Matching Contributions, including earnings
thereon, provided that the Participant has been in
the Plan for five years.
Category F: Trustee-to-Trustee Transfer Contributions (except any
amount attributable to such contributions previously
distributed, as described above) and Rollover
Contributions, plus earnings thereon.
Category G: Investment Plan Contributions (excluding earnings
thereon) of Participants who have been in the Plan
for less than five years, which have been matched by
Employer Matching Contributions; provided, however,
the earnings will be excluded only to the extent of
the Participant's pre 1987 cost basis. Thereafter
the withdrawal will be prorata to include earnings.
Category H: Tax Reduction Contributions, plus earnings thereon,
by Participants who have attained age 59-1/2, or in
order to meet immediate financial hardships as
defined by the Code and regulations thereunder.
Participants who have not attained age 59-1/2 may
withdraw account balances attributable to Tax
Reduction Contributions (excluding earnings thereon
that were earned on or after January 1, 1989) during
employment with Household or a subsidiary only to
meet immediate financial hardships.
16.5 Consequences of withdrawals of Matched After-Tax Contributions
In the event that a Participant with less than five years of
participation in the Plan makes a withdrawal from Category G of Article 16.1 or
Article 16.4, his contributions shall be restricted as follows: he shall not
be eligible to make any Tax Reduction Contributions or Investment Plan
Contributions for the period beginning with the payroll period next following
the date he makes the withdrawal request and ending with the payroll period
next following the later of 13 payroll periods or six months.
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16.6 Qualified Domestic Relations Order Distribution.
In the event a distribution is made pursuant to a qualified
domestic relations order, the withdrawal will be made from each relevant
category listed in Section 16.1 (regardless of restrictions otherwise imposed)
in the ratio the distribution bears to the total account of the Participant.
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<PAGE> 60
ARTICLE 17
LOANS
17.1 General Rule.
Loans are available to Participants. These loans are limited to a
minimum of $500 each (or the eligible balance of the Participant's account, if
less) and may be granted twice per year. No more than two non-residential
loans and one residential loan may be outstanding at any time.
17.2 Amount of Loan.
Upon receipt of a written request from a Participant, the Committee
may direct the Trustee to make a loan to the requesting Participant. The total
amount of any such loan shall not cause the outstanding balance of all loans to
the Participant under any qualified plan of the Company or an Affiliate to
exceed 50% of the value of the Participant's vested interest under the Plan as
of the previous Valuation Date. In no event, however, shall the amount of any
loan to a Participant either (i) exceed $50,000, reduced by the highest
outstanding loan balance applicable to the Participant during the one year
period ending on the day before the second loan to the Participant is granted;
or (ii) cause the outstanding balance of all loans to the Participant under any
qualified plan of the Company or an Affiliate to exceed $50,000.
17.3 Security for Loan.
Any loan to a Participant under this Article 17 shall be secured by
the pledge of all of the Participant's right, title and interest in the Trust,
supported by the execution of a promissory note for the amount of the loan,
including interest, payable to the order of the Trustee. The spouse, if any,
shall be required to consent to the use of the Participant's account as
security and if such consent is not obtained, no loan will be made to the
Participant.
Spousal consent shall be obtained no earlier than the beginning of
the 90-day period that ends on the date on which the loan is to be so secured.
The consent must be in writing, must acknowledge the effect of the loan, and
must be witnessed by a plan representative or notary public. Such consent
shall thereafter be binding with respect to the consenting spouse or any
subsequent spouse with respect to that loan. A new consent shall be required
if the account balance is used for renegotiation, extension, renewal, or other
revision of the loan.
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17.4 Interest Rate Charged.
The rate of interest charged on any loan to a Participant under
this Article 17 shall be determined by the Committee and shall take into
consideration interest rates being charged under generally prevailing market
conditions for similarly secured personal loans. The Committee shall not
discriminate among Participants in the matter of interest rates, but loans
granted at different times may bear different interest rates if, in the opinion
of the Committee, the difference in rates is justified by a change in general
economic conditions.
17.5 Repayment of Loans.
(A) General. Any loan to a Participant under this Article 17
shall be repaid within five years of the date on which the loan is made, except
that loans used to acquire or construct any dwelling unit which is within a
reasonable time to be used as a principal residence of the Participant may be
repaid over a longer period of time (not greater than 25 years) as determined
by the Committee; provided, however, that any loan shall be repaid on or before
the Participant's final distribution date. Loans shall be amortized on a level
basis and repaid in regular, substantially equal installments by payroll
deduction on a schedule prescribed by the Committee (with payments made at
least as often as quarterly), which installments shall be applied to reduce the
principal as well as the accrued interest of the loan.
(B) Payment to Trustee. Each loan repayment shall be paid to
the Trustee, and shall be accompanied by written instructions from the
Committee that:
(a) identify the Participant on whose behalf the
repayment is being made; and
(b) direct the investment of the loan repayment to the
Investment Fund account in the same proportion as elected by the
Participant in Article 13.5 as if the repayments were future
contributions.
(C) Security not to be Jeopardized. No distribution of benefits
under Article 15 or withdrawals under Article 16 which jeopardize the security
of the loan shall be made from amounts credited to a Participant's account
under the Plan unless and until all unpaid loans, including accrued interest
thereon, to the Participant have been satisfied.
17.6 Default on Loan.
In the event of a default by a Participant on a loan repayment, all
remaining repayments on the loan shall be immediately due and payable, and the
entire amount of the unpaid
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balance of such loan and accrued interest thereon shall be considered and
treated as having been distributed in cash under Article 15 as of the date of
default, and an appropriate adjustment of his account shall be made therefor as
if such distribution occurred on a Valuation Date. Notwithstanding the
foregoing, the Committee may use alternative means to pursue payment of a loan
in default if such alternative means are necessary to prevent a distribution
from the portion of the Participant's account that is attributable to Tax
Reduction Contributions and that would contravene Section 401(k) of the Code.
If a spousal consent has been obtained in accordance with Article
17.3, then, notwithstanding any other provision of this Plan, the portion of
the Participant's vested account balance used as a security interest held by
the Plan by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance payable
at the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested account
balance (determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first reducing
the vested account balance by the amount of the security used as repayment of
the loan, and then determining the benefit payable to the surviving spouse.
17.7 Manner of Making Loans.
All requests by a Participant for loans from the Trust shall be
made in writing to the Committee prior to the Valuation Date used for purposes
of determining the amount of the loan made. The Committee shall apply its
standards for the approval of loans in a uniform and consistent manner with
respect to all Participants and shall approve a loan if the requirements of
this Article 17 are satisfied. If a Participant's request for a loan is
approved by the Committee, the Committee shall furnish the Trustee with written
instructions directing the Trustee to make the loan in a single sum payment in
cash to the Participant. Such payment shall be made by withdrawing as of the
Valuation Date a proportionate amount from the separate Investment Funds of the
Participant under the Plan.
17.8 Accounting for Loans.
A loan to a Participant (and interest thereon) shall be considered
a Plan investment, and repayments shall be credited to an Investment Fund in
accordance with Article 13.5 as if such repayments were future contributions;
provided, however, that repayments attributable to money borrowed from the
portion of a Participant's account attributable to Matching Company
Contributions and interest thereon shall be credited to Fund A.
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ARTICLE 18
ADMINISTRATION
18.1 Allocation of Responsibilities Among Fiduciaries.
A fiduciary to the Plan shall have only those specific powers,
duties, responsibilities and obligations as are explicitly given him under the
Plan and the Trust Agreement. In general, Household International, Inc., shall
have the sole authority to establish the Plan and Trust and to amend or
terminate, in whole or in part the Plan or the Trust Agreement subject to the
provisions of Article 19. The Chief Executive Officer of Household
International, Inc. shall have the sole authority to appoint and remove three
or more members of the Committee. The Company shall have the sole
responsibility for making contributions to the Plan. The Committee shall have
the sole responsibility for the administration of the Plan as more fully
described in Article 18.2. Subject to Participants' investment directions
under Article 13, and subject to Committee directions under Article 18.2, the
Trustee shall have the sole responsibility for the administration of the Trust
and the management of the assets held thereunder, as provided in the Trust
Agreement. It is intended that each fiduciary shall be responsible only for
the proper exercise of his own powers, duties, responsibilities and obligations
under the Plan and the Trust Agreement and shall not be responsible for any act
or failure to act of another fiduciary. A fiduciary may serve in more than one
fiduciary capacity with respect to the Plan.
It is expressly provided that any fiduciary to the Plan and the
Trust may also be an Employee of the Company.
No fiduciary guarantees the Trust Fund in any manner against
investment loss or depreciation in asset value.
18.2 Powers and Responsibilities of the Committee.
The Committee as the plan administrator and named fiduciary of the
Plan shall have all powers, duties, responsibilities and obligations imposed by
law and by the provisions of the Plan and the Trust except those specifically
granted or allocated by those instruments to the Board of Directors, to
Household International, Inc., to its Chief Executive Officer, to the Trustee
or to any investment manager appointed by the Committee, and those which the
Committee has delegated or allocated to any other person. Such powers, duties,
responsibilities and obligations of the Committee shall include, but shall not
be limited to, excluding direct or indirect subsidiaries of Household
International, Inc. from participation in the Plan, approving the Company
election documents, refunding contributions, appointing and removing the
Trustee, any investment manager, and any other person appointed or
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employed to render advice with regard to the Plan, including but not limited to
such counsel, accountants and other experts as it deems necessary, determining
and instructing the Trustee and any investment managers on the funding,
investment policies, methods and objectives of the Trust, designating and
rescinding the designation of Trust assets which the Trustee and each
investment manager is to control, accepting or rejecting any tendered Rollover
Contribution, refunding Rollover Contributions, determining the form of and
providing any written documents to be used under the Plan, receiving and
maintaining such documents, authorizing or denying contributions to and
withdrawals or distributions out of the Trust and in accordance with the
provisions of the Plan, providing a full and fair review of the denial of any
claimed contribution, loan, withdrawal or distribution out of the Plan with a
written notice setting out the specific reason for the denial of his claim
written in a manner calculated to be understood by the Participant, preparing
and submitting all reports, notices, insurance premiums and applications with
respect to the Plan and the Trust required by law and for the continual
qualification of the Plan and the Trust under Sections 401 and 501 of the Code,
preparing and furnishing all reports and communications required by law or as
it deems appropriate to persons to whom benefits are being paid or may become
payable under the Plan, and taking such further actions as may be necessary for
the administration of the Plan.
Any construction, interpretation or application of the Plan by the
Committee shall be final, conclusive and binding on the Company, and all
Participants and their beneficiaries and other successors in interest.
Limitations and interpretations under the Plan shall be determined to the best
of the ability of the Committee based on such information as is reasonably
available at the time a decision is made. All actions by the Committee shall
be taken pursuant to uniform standards consistently applied to all persons
similarly situated.
18.3 Conclusiveness of Records.
In administering the Plan, the Committee may conclusively rely upon
the Company's and any Affiliate's payroll and personnel records maintained in
the ordinary course of business.
18.4 Expenses.
The expenses of administering the Plan, other than compensation of
persons on the payroll of the Company, but including fees of the Trustee,
counsel, accountants or other experts appointed under the Plan, shall be paid
out of the Trust Fund to the extent not paid by the Company.
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18.5 Claims Procedure.
(A) Filing of Claim. Any claim, including but not limited to a
claim for distribution, loan or withdrawal shall be submitted to the Committee
through the designee which it has appointed for the Company facility where the
Participant with respect to whom the payment is claimed, is, or was last
employed, or, if no such designee has been appointed, then to the
Administrative and Investment Committee, Household International, Inc., 2700
Sanders Road, Prospect Heights, Illinois 60070. Submissions shall be made in
the form and within the time period designated by the Committee. Satisfactory
proof of eligibility and information necessary to determine the amount of such
distribution, loan, or withdrawal, including, where appropriate, age, date of
death of a Participant or a prior beneficiary, appointment as executor,
administrator or guardian and such other information as is reasonably required
in the circumstances must be submitted. The Committee shall authorize or deny
requests for a loan or payment of any claimed amount within a reasonable period
of time.
(B) Notice of Denial of Claim. If a claim is denied, the
Committee shall notify the claimant in writing. Such written notice shall
contain:
(a) the specific reason or reasons for denial;
(b) a specific reference to the provisions of the Plan on
which such denial is based;
(c) a description of any additional material or
information necessary for such person to perfect such claim, with
an explanation of why such additional material or information is
necessary; and
(d) an explanation of the Plan's review procedure as set
forth in Article 18.5(C). This written notice of denial of claim
shall be written in a manner calculated to be understood by the
claimant.
(C) Right of Review. Each claimant whose claim has been denied
in whole or in part, and any authorized representative of such person, may
review all documents pertinent to such denial and, within 60 days after receipt
by such claimant of the notification provided for in Article 18.5(B), may
request, by written notice sent to the Committee, a review of such denial and
may submit to the Committee written issues and comments for consideration as
part of such review. No claimant or representative shall have any right to
appear personally, nor shall the Committee be obligated to hold any meetings
with any claimant or representative, or hold any hearings, as part of such
review. The Committee shall conduct such review as expeditiously as reasonably
possible, and shall give due consideration to all written issues and comments
submitted by or on
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behalf of the claimant. A decision on such review shall be made, if reasonably
possible, within 60 days after receipt of the request for such review, but in
any event not later than 120 days after receipt of such request. The decision
shall be in writing and shall include specific reasons for the decision,
written in a manner calculated to be understood by the claimant, and shall also
include specific references to the pertinent Plan provisions on which the
decision is based.
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ARTICLE 19
AMENDMENT, TERMINATION AND MERGER
19.1 Amendments.
Household International, Inc. hopes and intends to continue the
Plan indefinitely but reserves the right to amend, suspend, or terminate the
Plan and the Trust for itself and its direct and indirect subsidiaries and to
discontinue or modify Company contributions, at any time. Except to the extent
required or permitted by the Code and other applicable law, the accrued benefit
of any Participant, former Participant, or beneficiary shall not be adversely
affected retroactively by any such action.
19.2 Plan Termination.
In case of the termination of the Plan by Household International,
Inc., the complete discontinuance of contributions to the Plan, or a partial
termination of the Plan with respect to a group of Participants, the account
balance of each affected Participant shall become 100% vested. In any such
event, the Committee shall determine the manner and timing of distributions.
19.3 Distributions upon Certain Sales.
There may be a single sum distribution from the Plan to any
Participant affected by (i) a disposition by a Company of substantially all of
the assets used by the Company in a trade or business, but only if the
Participant continues employment with the corporation acquiring such assets, or
(ii) a disposition by a Company of its interest in a subsidiary, but only if
the Participant continues employment with such subsidiary, or (iii) a
disposition by a Company of a portion of the assets used by the Company in a
trade or business, to the extent such distribution does not contravene any
requirement of the Code or other applicable law.
19.4 Successor Employer.
In the event of the dissolution, merger, consolidation or
reorganization of Household International, Inc. or any participating
subsidiaries, provision may be made by the Committee by which the Plan and the
Trust shall be continued by the successor company, in which case such successor
company shall be substituted for its predecessor under the Plan. The
substitution of the successor company shall constitute an assumption of Plan
liabilities by the successor company, and the successor company shall have all
powers, duties and responsibilities of its predecessor under the Plan.
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19.5 Merger, Consolidation or Transfer.
There shall be no merger or consolidation of the Plan with, or
transfer of assets or liabilities of the Plan to, any other plan of deferred
compensation maintained or to be established for the benefit of all or some of
the Participants of the Plan, unless each Participant would (if either this
Plan or such other plan then terminated) receive a benefit immediately after
the merger, consolidation or transfer which is equal to or greater than the
benefit the Participant would have been entitled to receive immediately before
the merger, consolidation or transfer (if this Plan had then terminated).
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ARTICLE 20
MISCELLANEOUS
20.1 Exclusive Benefit of Participants and Beneficiaries.
All assets of the Trust shall be maintained for the exclusive
benefit of Participants, and their beneficiaries, and shall be used only to pay
benefits to such persons or to pay the fees and expenses of the Trust. The
assets of the Trust shall not revert to the benefit of the Company except as
provided in Article 11.3
20.2 Non-Guarantee of Employment.
Nothing contained in this Plan shall be construed as a contract of
employment between an Employee and the Company, or as a right of any Employee
to be continued in the employment of the Company, or as a limitation of the
right of the Company to discharge any of its Employees, with or without cause,
and no Employee or any other person shall have any right or claim to any
benefit or right under the Plan which has not arisen under the express
provisions of the Plan.
20.3 Rights to Trust Assets.
No Employee, Participant, or beneficiary shall have any right to,
or interest in, any assets of the Trust upon termination of employment or
otherwise, except as provided under the Plan. All payments of benefits under
the Plan shall be made solely out of the assets of the Trust.
20.4 Non-Alienation of the Right to Receive Payments.
Except as provided under Article 17 with respect to loans, and
except as may otherwise be required by law, benefits payable under the Plan
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, prior to actually being received by the
person entitled to the benefit under the terms of the Plan, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any right to benefits payable under the Plan shall be
void. It is expressly provided that qualified domestic relations orders in
compliance with the Retirement Equity Act of 1984 may override the distribution
provisions of this Plan, and notwithstanding any other provisions of the Plan,
a distribution may be made to an alternate payee under a qualified domestic
relations order at the time specified in the order, regardless of any
restrictions on distributions that may then apply to the participant to whom
the order applies.
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20.5 Controlling Law.
The interpretation of the Plan and other questions arising in the
administration of the Plan shall be determined by ERISA, and (to the extent
that state law is applicable) by the laws of Illinois.
20.6 Plan Controls.
The Trust Agreement is a part of the Plan. In case of any
inconsistency between their respective provisions, the Plan shall control. In
the event of any conflict between the Plan and any summary thereof, from
whatever source, the language of the Plan shall govern.
20.7 Construction.
Unless the context otherwise indicates, words of the masculine
gender include the feminine, the singular shall include the plural, and the
plural shall include the singular. Titles of articles are inserted for
convenience only and shall not affect the meaning or construction of the Plan.
20.8 Effect of Mistake.
In the event of a mistake or misstatement as to age or eligibility
of any person, or the amount or kind of contributions, withdrawals or
distributions made or to be made to a Participant, or other person, the
Committee shall, to the extent it deems possible, make such adjustment as will
in its judgment accord to such person the credits or distributions to which he
is properly entitled under the Plan.
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ARTICLE 21
TOP-HEAVY PROVISIONS
21.1 Top-Heavy Provisions.
If the Plan is or becomes top-heavy as defined below in any Plan
Year, these provisions of Article 21 will supersede any conflicting provisions
in the Plan or Company election document.
21.2 Definitions.
For purposes of this Article 21 the following terms shall have the
following meanings:
(A) "Key Employee" means any Employee (and the beneficiaries of
such Employee) under this Plan who at any time during the determination period
was:
(a) An officer of the Company if such individual's annual
compensation exceeds 150 percent of the dollar limitation under
Section 415(c)(1)(A) of the Code; provided, however, that the
number of individuals treated as Key Employees by reason of being
officers shall not exceed the lesser of fifty (50) or ten percent
(10%) of all Employees and provided, further, that if the number of
individuals treated as officers is limited to fifty (50) hereunder,
the individuals treated as Key Employees shall be those who, while
officers, received the greatest annual compensation in the Plan
Year and any of the 4 preceding Plan Years (without regard to the
limitation set forth in Section 416(d) of the Code;
(b) An individual who was one of the 10 Employees owning
or considered as owning more than a one-half percent (1/2%)
interest in value and the largest interests in value in the Company
who has annual compensation in the applicable Plan Year in excess
of the dollar limitation under Section 415(c)(1)(A) of the Code, as
increased under Section 415(d) of the Code;
(c) A five percent (5%) owner of the Company; or
(d) A one percent (1%) owner of the Company who has an
annual compensation of more than $150,000. The determination
period is the Plan Year containing the determination date and the 4
preceding Plan Years.
The determination of who is a key employee will be made in
accordance with Section 416(i)(1) of the Code and the regulations
thereunder.
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(B) "Top-heavy plan" means that for any Plan Year, any of the
following conditions exists:
(a) The top-heavy ratio for this Plan exceeds 60 percent
and this Plan is not part of any required aggregation group or
permissive aggregation group of plans.
(b) This Plan is part of a required aggregation group of
plans but not part of a permissive aggregation group and the
top-heavy ratio for the group of plans exceeds 60 percent.
(c) This Plan is a part of a required aggregation group
and part of a permissive aggregation group of plans and the top-
heavy ratio for the permissive aggregation group exceeds 60
percent.
(C) "Top-heavy ratio" means:
(a) If the Company maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan)
and the Company has not maintained any defined benefit plan which
during the 5-year period ending on the determination date(s) has or
has had accrued benefits, the top-heavy ratio for this Plan alone
or for the required or permissive aggregation group as appropriate
is a fraction, the numerator of which is the sum of the account
balances of all Key Employees as of the determination date(s)
(including any part of any account balance distributed in the
5-year period ending on the determination date(s)) and the
denominator of which is the sum of all account balances (including
any part of any account balance distributed in the 5-year period
ending on the determination date(s)), both computed in accordance
with Section 416 of the Code and the regulations thereunder. Both
the numerator and denominator of the top-heavy ratio are adjusted
to reflect any contribution not actually made as of the
determination date, but which is required to be taken into account
on that date under Section 416 of the Code and the regulations
thereunder.
(b) If the Company maintains one or more defined
contribution plans (including any Simplified Employee Pension Plan)
and the Company maintains or has maintained one or more defined
benefit plans which during the 5-year period ending on the
determination date(s) has or has had any accrued benefits, the
top-heavy ratio for any required or permissive aggregation group as
appropriate is a fraction, the numerator of which is the sum of
account balances under the aggregated defined contribution plan or
plans for all Key Employees, determined in accordance with (a)
above, and the present value of accrued benefits under
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the aggregated defined benefit plan or plans for all Key Employees
as of the determination date(s), and the denominator of which is
the sum of the account balances under the aggregated defined
contribution plan or plans for all participants, determined in
accordance with (a) above, and the present value of accrued
benefits under the defined benefit plan or plans for all
participants as of the determination date(s), all determined in
accordance with Section 416 of the Code and the regulations
thereunder. The accrued benefits under a defined benefit plan in
both the numerator and denominator of the top-heavy ratio are
adjusted for any distribution of an accrued benefit made in the
five-year period ending on the determination date.
(c) For purposes of (a) and (b) above the value of
account balances and the present value of accrued benefits will be
determined as of the most recent valuation date that falls within
or ends with the 12-month period ending on the determination date,
except as provided in Section 416 of the Code and the regulations
thereunder for the first and second Plan Years of a defined benefit
plan. The account balances and accrued benefits of a participant
(1) who is not a key employee but who was a key employee in a prior
year, or (2) who has not received any compensation from any Company
maintaining the Plan at any time during the 5-year period ending on
the determination date will be disregarded. The calculation of the
top-heavy ratio, and the extent to which distributions, rollovers,
and transfers are taken into account will be made in accordance
with Section 416 of the Code and the regulations thereunder.
Deductible employee contributions will not be taken into account
for purposes of computing the top-heavy ratio. When aggregating
plans the value of account balances and accrued benefits will be
calculated with reference to the determination dates that fall
within the same calendar year.
(D) "Permissive aggregation group" means the required
aggregation group of plans plus any other plan or plans of the Company which,
when considered as a group with the required aggregation group, would continue
to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(E) "Required aggregation group" means (1) each qualified plan
of the Company in which at least one key employee participates, and (2) any
other qualified plan of the Company which enables a plan described in (1) to
meet the requirements of Sections 401(a)(4) or 410 of the Code.
(F) "Determination Date" means for any Plan Year the last day of
the preceding Plan Year.
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(G) "Present Value" shall be based upon the interest rate and
mortality table used to determine actuarial equivalence under the provisions of
the applicable defined benefit plan or plans.
(H) "Valuation Date" means the Valuation Date on the last day of
the Plan Year as of which account balances or accrued benefits are valued for
purposes of calculating the top-heavy ratio.
21.3 Minimum Allocation.
(A) In General. Except as otherwise provided in (C) and (D)
below, the Company contributions and forfeitures allocated on behalf of any
participant who is not a key employee shall not be less than the lesser of
three percent of such participant's compensation or in the case where the
Company has no defined benefit plan which designates this plan to satisfy
Section 401 of the Code, the largest percentage of Company contributions and
forfeitures, as a percentage of the first $200,000 of the key employee's
compensation, allocated on behalf of any key employee for that year. The
minimum allocation is determined without regard to any Social Security
contribution. This minimum allocation shall be made even though, under other
Plan provisions, the participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation of the year because of
(i) the participant's failure to complete 1,000 hours of service (or any
equivalent provided in the Plan), or (ii) the participant's failure to make
mandatory Employee contributions to the Plan, or (iii) compensation less than a
stated amount.
(B) Compensation. For purposes of computing the minimum
allocation, compensation will mean earnings for the taxable year ending with or
within the Plan Year which are subject to tax under Section 3101(a) of the Code
without regard to the dollar limitation of Section 3121(a).
(C) Employees Covered. The provisions in (A) above shall not
apply to any participant who was not employed by the Company on the last day of
the Plan Year.
(D) More than one Plan. To the extent the participant is
covered under any other plan or plans of the Company the minimum allocation or
benefit requirement applicable to top-heavy plans will be met in this Plan. If
a participant is covered by no other plan maintained by the Company, the
minimum allocation will be met in this Plan. Whenever a non-key employee
participates in both a defined benefit plan and a defined contribution plan
maintained by the Company which are top-heavy, the contributions and
forfeitures of this Plan in which he participates shall equal 5% of
compensation for each year the Plan is top-heavy and no other top-heavy
contributions will be made to any other plan on his account.
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21.4 Nonforfeitability of Minimum Allocation.
The minimum allocation required (to the extent required) to be
nonforfeitable under Section 416(b) may not be forfeited under Section
411(a)(3)(B) or 411(a)(3)(D) of the Code.
21.5 Compensation Limitation.
For any Plan Year in which the Plan is top-heavy, only the first
$200,000 (or such larger amount as may be prescribed by the Secretary or his
delegate) of a participant's annual compensation shall be taken into account
for purposes of determining Company contributions under the Plan. Such amount
shall be adjusted automatically for each Plan Year to the amount prescribed by
the Secretary of the Treasury or his delegate pursuant to regulations for the
calendar year in which such Plan Year commences.
21.6 Minimum Vesting Schedules.
For any Plan Year in which this Plan is top-heavy, the
nonforfeitable interest of each Employee (who has completed an Hour of Service
during any Plan Year in which the Plan is top-heavy) in his account balance
attributable to Company contributions shall be 100% vested after three Years of
Service.
If the vesting schedule under the Plan shifts in or out of the
above schedule for any Plan Year because of the Plan's top-heavy status, such
shift is an amendment to the vesting schedule and any participant with three or
more Years of Service will be given an option to remain under the prior (i.e.
top-heavy) vesting schedule.
21.7 Collective Bargaining Rules.
The provisions of this Article do not apply with respect to any
employee included in a unit of employees covered by a collective bargaining
agreement unless the application of this Article has been agreed upon with the
collective bargaining agent.
21.8 Temporary Effect.
This Article 21 is designed to meet the requirements of Section 416
of the Code and regulations issued pursuant thereto. If there is any
discrepancy between the provisions of this Article 21 and Section 416 of the
Code, such discrepancy shall be resolved in such a way to give full effect to
the provisions of Section 416 and ERISA. However, no benefit in excess of that
required by law and regulation is intended to be conferred by the Company.
This Article 21 shall automatically become inoperative and of no effect
whenever not required by the Code or its regulations.
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ARTICLE 22
FORMER EMPLOYEES OF FREEDOM FEDERAL SAVINGS BANK
22.1 Application.
This Article 22 applies to any individual who became an Employee on
August 3, 1988 and who immediately prior thereto was an employee of Freedom
Federal Savings Bank.
22.2 Participation.
An individual described in Article 22.1 who was a participant in
the Freedom Federal Incentive Savings Plan (the "Freedom Plan") shall become a
Participant in TRIP as of October 1, 1988 if he then is an Employee.
22.3 Service Credit.
As of October 1, 1988, years of service credited under the terms of
the Freedom Plan for eligibility and vesting purposes shall be credited
hereunder for such purposes.
22.4 Rights with respect to Transferred Account Balances.
Account balances under the Freedom Plan were transferred hereto as
of December 13, 1988. The following rights shall apply thereto:
(A) 100% Vesting as of July 29, 1988. The account balance of an
individual who was a participant in the Freedom Plan as of July 29, 1988,
adjusted for gains and losses subsequent thereto, is 100% vested.
(B) Withdrawals. A Participant who was a participant in the
Freedom Plan may make a withdrawal during his employment with a Company of all
or a portion of the balance of the amount described in (A) hereof to the extent
such portion is attributable to his after-tax contributions to the Freedom
Plan.
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ARTICLE 23
HOUSEHOLD MANUFACTURING, INC. DIVESTITURE
23.1 Background.
Prior to April 1, 1989, salaried exempt and non-exempt employees of
Household Manufacturing, Inc. and certain subsidiaries and divisions thereof
were eligible for participation in the Plan. In 1989, Household International,
Inc. undertook to divest itself of its manufacturing businesses. Three new
companies, Eljer Industries, Inc., Schwitzer, Inc. and Scotsman Industries,
Inc. (the "Spinoff Companies") were formed, and common stock of such Spinoff
Companies was distributed to shareholders of Household International, Inc. in
April, 1989. Various employees formerly eligible for participation in the Plan
became employees of subsidiaries of the Spinoff Companies, effective as of the
close of business on March 31, 1989. Other employees formerly eligible for
participation in the Plan became employees of Albion Industries, Inc.,
King-Seeley, Inc., Omni Products International, Inc., The Thermos Company, G.C.
Thorsen, Inc. or WaterTest Corporation (the "Sale Companies") or subsidiaries
or divisions thereof, effective as of the close of business on March 31, 1989.
It is intended that Household International, Inc. will sell such Sale Companies
to persons not affiliated with Household International, Inc. as of various
dates following the spinoff of stock of the Spinoff Companies.
23.2 Discontinuance of Participation by Spinoff Company Employees.
Effective as of the close of business on March 31, 1989, an
individual who is an employee of a subsidiary of a Spinoff Company shall cease
to be eligible to contribute to, or to have contributions made on his behalf
to, the Plan. As soon as administratively practicable following such date,
there shall be a transfer to a plan maintained by such Spinoff Company
subsidiary of his account balance hereunder. Pending such date, his account in
the Plan shall continue to be administered hereunder in accordance with
procedures established by the Committee.
23.3 Continued Participation by Sale Company Employees.
Until such date determined by Household International, Inc., any
individual who is an Employee of a Sale Company or a subsidiary or division
thereof and who is in a classification of employment that prior to April 1,
1989 was eligible to participate in the Plan shall continue to be eligible to
participate in the Plan. The following special provisions shall apply to Sale
Company Employees:
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(A) Elapsed Time Method of Crediting Service. The Household
Manufacturing, Inc. method of determining a Years of Service for purposes of
eligibility to participate in the Plan under Article 3 on the elapsed time
basis, as in effect on March 31, 1989, shall continue to be applicable to Sale
Company employees after such date. To that end, a "Year of Service" for
purposes of Article 3 shall have the same meaning as a "year of employment" as
defined in Article 14.1(B).
(B) Matching Company Contributions. The rate of Matching
Company Contributions under Article 4.5 for each Sale Company shall be fifty
cents for each dollar contributed under Articles 4.1 and 4.3; provided,
however, that no Matching Company Contributions will be made with respect to
Tax Reduction Contributions or Investment Plan Contributions that exceed 6% of
a Sale Company Participant's Compensation.
23.4 Eljer, Schwitzer and Scotsman Stock Funds.
Spinoff Company stock received by the Plan as a consequence of the
distribution of such stock to shareholders of Household International, Inc.
will be held and managed in three separate Investment Funds, the "Eljer Stock
Fund", the "Schwitzer Stock Fund" and the "Scotsman Stock Fund". The following
provisions shall apply to such Spinoff Company stock and Investment Funds:
(A) Reinvestment in Other Investment Funds. A Participant may
elect in accordance with the rules and procedures of the Committee that all or
a portion of his interest in the Eljer Stock Fund, Schwitzer Stock Fund or
Scotsman Stock Fund shall be reinvested in another Investment Fund (excluding,
however, the Eljer, Schwitzer and Scotsman Stock Funds themselves).
Notwithstanding the foregoing, that portion of a Participant's interest in the
Eljer, Schwitzer and Scotsman Stock Funds that is derived from the portion of
the Participant's interest in Fund A attributable to Matching Company
Contributions only may be reinvested in Fund A.
(B) Dividends. Dividends attributable to Eljer, Schwitzer and
Scotsman stock shall be added to Fund A.
(C) Liquidation of Eljer, Schwitzer or Scotsman Funds. The
Committee, in its discretion, at any time may liquidate the Eljer, Schwitzer or
Scotsman Stock Fund and transfer the proceeds to one or more of the other
Investment Funds under the Plan.
(D) Treatment as Company Stock. Except as otherwise provided
herein or as determined by the Committee, in its discretion, Eljer, Schwitzer
and Scotsman stock shall be treated as Company Stock for purposes of the Plan.
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<PAGE> 79
(E) Investment. No investment of contributions into or
transfers into Funds D, E, or F shall be permitted.
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<PAGE> 80
ARTICLE 24
SPECIAL PLAN PROVISIONS FOR
TRANSITION PERIOD
24.1 Background.
Between the periods of September 1, 1990 and March 1, 1991 which
date may be extended or rescinded by the Committee, the Plan will be operated
under special transition provisions in this Article 24 which will supersede
other provisions of the Plan to the contrary.
24.2 Investment of Fund C.
Effective December 31, 1990 all assets invested in the Fidelity
Equity Income Fund will be converted to cash and invested in the Vanguard,
Windsor II Fund.
24.3 Suspension of Activity in the Plan.
During the period between November 30, 1990 until March 1, 1991
which date may be extended or rescinded the Committee, no loans, transfers,
withdrawals, or distributions will be permitted from the Plan.
24.4 Special Transfer Date.
Transfer elections received before November 1, 1990 (but not before
September 1, 1990) will be effective November 30, 1990.
24.5 Plan Limitations on events.
The limitations on the number of transfers or withdrawals which can
be made per Plan Year are hereby waived during the transition period.
24.6 Matching Company Contributions.
The Matching Company Contributions will be made as of November 30,
1990 for Tax Reduction and Investment Plan contributions made for the period of
October and November 1990. The Company Matching Contributions for December
will be made in January, 1991.
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<PAGE> 81
AMENDMENT ONE OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its Board
of Directors on September 11, 1990 authorized the undersigned to amend the
Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of January
1, 1992; and
WHEREAS, further amendment of the Plan is now considered desirable;
NOW, THEREFORE, the Household International Tax Reduction
Investment Plan is amended effective as of January 1, 1993 as follows:
1. The following paragraph is substituted for the last
paragraph of Article 1:
"The Plan was amended and restated on December 6, 1991
effective as of January 1, 1992 subject to any contrary
effective date as set forth in the Plan for a particular
article or provision or as otherwise required by law."
2. The following subparagraph is substituted for subparagraph
3.6(A)(b):
(b) Nonworking Paid Time - Each hour for which an
individual is paid or entitled to be paid by the Company or
an Affiliate on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday,
illness, incapacity, disability, layoff, jury duty, military
duty or leave of absence; provided, however, that no credit
shall be given for payments made or due under a plan
maintained solely for the purpose of complying with
applicable worker's or unemployment compensation or
disability insurance laws or for payments which solely
reimburse an individual for medical or medically related
expenses incurred by the individual; and
3. The following new Article 12.5 is added immediately after
Article 12.4:
12.5 Optional Direct Transfer of Eligible Rollover Distributions.
(A) If the distributee of any eligible rollover distribution
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<PAGE> 82
made after December 31, 1992:
(a) elects to have all or any part of such distribution
paid directly to an eligible retirement plan, and
(b) specifies the eligible retirement plan to which such
distribution is to be paid (in such form and at such time as
the Committee may prescribe),
such distribution shall not be deemed a transfer under Article 12.4 but shall
be made in the form of a direct trustee-to-trustee transfer to the eligible
retirement plan so specified. This subparagraph (A) shall apply only to the
extent that the eligible rollover distribution would be includible in gross
income if not transferred as provided in subparagraph (A) (determined without
regard to sections 402(c) and 403(a)(4) of the Code).
(B) As used in this Article 12.5 the term "eligible rollover
distribution" means any distribution to an Employee of all or any portion of
the balance to the credit of the Employee in the Plan, except that such term
shall not include:
(a) any distribution which is one of a series of
substantially equal periodic payments (not less frequently
than annually) made --
(i) for the life (or life expectancy) of the Employee
or the joint lives (or joint life expectancies) of the
Employee and the Employee's designated beneficiary, or
(ii) for a specified period of 10 years or more, and
(b) any distribution to the extent such distribution is
required under section 401(a)(9) of the Code, and
(c) the portion of a distribution which consists of
after-tax contributions.
(C) As used in this Article 12.5, the term "eligible retirement
plan" means:
(i) an individual retirement account described in
section 408(a) of the Code,
(ii) an individual retirement annuity described in
section 408(b) of the Code (other than an endowment
contract),
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<PAGE> 83
(iii) a qualified trust, and
(iv) an annuity plan described in section 403(a) of
the Code.
(D) As used in this Article 12.5, the term "qualified trust"
means an Employees' trust described in section 401(a) of the Code which is
exempt from tax under section 501(a) of the Code and which is a defined
contribution plan whose terms permit the acceptance of rollover contributions.
(E) If any distribution attributable to an Employee is paid to
the spouse of the Employee after the Employee's death, the preceding provisions
of this Article shall apply to such distribution in the same manner as if the
spouse were the Employee; except that a trust or plan described in clause (iii)
or (iv) of Article 12.5 (C) above shall not be treated as an eligible
retirement plan with respect to such distribution.
(F) If any amount is paid or distributed to an alternate payee who
is the spouse or former spouse of the Participant by reason of any qualified
domestic relations order (within the meaning of section 414(p) of the Code,
this Article 12.5 shall apply to such distribution in the same manner as if
such alternate payee were the Employee.
4. The following sentence is substituted for the first sentence
of Article 13.6:
"Matching Company Contributions and forfeitures shall be
invested in Fund A and allocated to the account of each
Participant on a monthly basis."
5. The following three additional sentences are added after the
last sentence of Article 15.1(D):
"However, in the event of such deferral, the Participant's
account will be charged an annual fee of $30 on the July 1
following the close of the Plan Year in which the
Participant terminated employment for any reason, including,
but not limited to, death or retirement, if he still has a
balance in his account at that time. This $30 fee will
continue to be imposed as of each subsequent July 1 if there
then remains a balance in such terminated Participant's
account but no fee will be charged under this Article 15.1
(D) prior to July 1, 1994. This fee is subject to increase
or decrease as determined by the Committee."
6. The following sentence is substituted for the second
sentence of Article 17.1:
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<PAGE> 84
"These loans are limited to a minimum of $500 each for
non-residential loans and $2,000 each for residential loans
(or the eligible balance of the Participant's account, if
less) and may be granted twice per year."
7. The following additional sentence is added after the last
sentence of Article 17.4:
"In addition, the Participant's account will be charged a
loan fee of $30 for each loan distributed to a Participant
after August 1, 1993."
IN WITNESS WHEREOF, Household International, Inc. has caused this
instrument to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by its officers thereunto duly authorized this 30th day of
July, 1993.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Colin P. Kelly
--------------------------------
Colin P. Kelly
Vice President - Human Resources
(Corporate Seal)
ATTEST:
/s/ Susan E. Casey
- --------------------------------
Assistant Secretary
76
<PAGE> 85
AMENDMENT TWO OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its Board
of Directors on September 11, 1990 authorized the undersigned to amend the
Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of January
1, 1992; and
WHEREAS, the restated Plan was amended on July 30, 1993 and further
amendment of the Plan is now considered desirable;
NOW, THEREFORE, the Household International Tax Reduction
Investment Plan is amended effective as of January 1, 1994 as follows:
1. The last paragraph of the definition of "Compensation" in
Article 2.1 is amended and restated to read as follows:
"Effective January 1, 1989, the maximum amount of
Compensation taken into account under the Plan in any Plan Year for
purposes of determining the amount of a Participant's Tax Reduction
Contributions, Investment Plan Contributions and Matching Company
Contributions shall be $209,200, adjusted pursuant to the Code.
Effective January 1, 1994, the maximum amount of Compensation taken
into account under the Plan in any Plan Year for purposes of
determining the amount of a Participant's Tax Reduction
Contributions, Investment Plan Contributions and Matching Company
Contributions shall be $150,000, adjusted pursuant to the Code. At
the discretion of the Company, any Matching Company Contributions
that cannot be allocated under this Plan due to this dollar
limitation on Compensation may be allocated and paid to the
affected Participant under a non-qualified plan."
2. The following two new definitions are added to Article 2.1
immediately after the definition of "Fund J":
"Fund K - Vanguard PrimeCAP Fund. This Fund shall primarily
be invested in common stock and other equity securities with an
emphasis on smaller companies.
Fund L - Vanguard International Growth Portfolio Fund. This
Fund shall primarily be invested in common stocks and other equity
securities of companies located in countries other than the United
States."
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<PAGE> 86
3. Article 13.7 is amended and restated to read as follows:
"13.7 Investment Transfers.
A Participant shall be permitted to transfer contributions
to the Trust (other than Matching Company Contributions) previously
invested in one Investment Fund and earnings thereon to one or more
other Investment Funds other than Funds D, E and F. In addition, a
Participant shall be permitted to transfer contributions to the
Trust (including Matching Company Contributions) and earnings
thereon that are invested in Funds D, E or F to one or more of the
Investment Funds other than Funds D, E and F. A transfer election
shall be made in 1% increments of the Participant's total interest
in an Investment Fund or in a whole dollar amount or in a number of
whole shares to another Investment Fund in accordance with rules
and procedures prescribed by the Committee. Transfer elections may
be made as often as directed by the Participant, except that
transfers to and from Fund B may be made only once per calendar
quarter.
Assets exchanged out of Fund B must remain in an eligible
equity fund for a minimum of ninety calendar days prior to becoming
eligible for transfer into Fund J - the Vanguard Money Market
Reserves - Federal Portfolio. They are eligible for transfer to
funds other than Fund J on a daily basis. The following funds are
eligible equity funds: Fund A - Household International, Inc.
Common Stock Fund; Fund C - Vanguard Windsor II; Fund G -
Wellington Fund; Fund H - Vanguard Quantitative Portfolio Fund;
Fund I - Vanguard Extended Market Portfolio; Fund K - Vanguard
PrimeCAP Fund; and Fund L - Vanguard International Growth Portfolio
Fund.
Exchanges from Fund J, the Vanguard Money Market Reserves
- Federal Portfolio, may be made directly into Fund B without a
ninety day investment in an eligible equity fund.
If on June 30, 1994 any amount remains credited to a
Participant's account which is invested in Fund D, E or F, then the
Trustee shall transfer all such amounts to the other Funds in the
same proportions as the Participant has directed for future
contributions in accordance with Article 13.5."
4. The following new Article is added immediately after Article
16.6:
"16.7 Withdrawal From Funds D, E and F.
Any Participant who has attained age 59 1/2 may, in
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<PAGE> 87
addition to the withdrawal options provided in Articles 16.1 and
16.4, elect to withdraw all or part of his vested accounts that are
invested in Funds D, E or F. In such event, the Participant shall
file a written request with the Committee in accordance with
Article 16.3 specifying the category of the withdrawal and the
amount requested to be withdrawn, but it will not be necessary that
all amounts eligible for withdrawal in each of the classifications
listed in Articles 16.1 and 16.4 be distributed before amounts in
the next lower classification are distributed. Any such
distributions shall be in cash or stock or a combination of both,
at the discretion of the Participant; provided, however, that
partial shares will be paid in cash. If the Participant has less
than five years of participation in the plan and makes a withdrawal
from Category G of Article 16.1 or Article 16.4, his contributions
will be restricted as outlined in Article 16.5."
IN WITNESS WHEREOF, Household International, Inc. has caused this
instrument to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by its officers thereunto duly authorized this 10th day of
December, 1993.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Colin P. Kelly
--------------------------------
Colin P. Kelly
Vice President - Human Resources
(Corporate Seal)
ATTEST:
/s/ Susan E. Casey
- ------------------------------
Assistant Secretary
79
<PAGE> 88
AMENDMENT THREE OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its Board
of Directors on September 11, 1990 authorized the undersigned to amend the
Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of January 1, 1992; and
WHEREAS, the restated Plan was amended on July 30, 1993 and
December 10, 1993 and further amendment of the Plan is now considered
desirable;
NOW, THEREFORE, the Household International Tax Reduction
Investment Plan is amended as follows:
1. The definition of Fund K in Article 2.1 of the Plan is
amended and restated to read as follows effective as of January 1, 1994:
"Fund K - Vanguard PrimeCAP Fund. This Fund shall primarily
be invested in common stock and other equity securities with an
emphasis on capital growth. Dividend income is expected to be
incidental."
2. Notwithstanding anything else in the Plan or its related
Trust to the contrary, any Participant with a Matching Company Contribution
Account as of May 1, 1994 and who was an Employee of Omni Products
International Inc. on such date shall be 100% vested in his or her Matching
Company Contribution Account (as defined in the Plan).
IN WITNESS WHEREOF, Household International, Inc. has caused this
instrument to be executed on its behalf and its corporate seal to be hereunto
affixed and attested by its officers thereunto duly authorized all on this 10th
day of June, 1994.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Colin P. Kelly
--------------------------------
Colin P. Kelly, Vice President
(Corporate Seal)
ATTEST:
/s/ Susan E. Casey
- ---------------------------------
Assistant Secretary
80
<PAGE> 89
AMENDMENT FOUR OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its Board
of Directors on September 11, 1990 authorized the undersigned to amend the
Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of January
1, 1992; and
WHEREAS, the restated Plan was amended on July 30, 1993, December
10, 1993 and June 10, 1994 and further amendment of the Plan is now considered
desirable;
NOW, THEREFORE, the Plan is amended in the following particulars:
1. The following sentence is substituted for the first sentence
of Article 16.1 of the Plan:
"A Participant may make a withdrawal of all of part of his account;
provided, however, that a minimum of $500 or the balance of the
Participant's account must be withdrawn."
2. The following new Article 16.8 is added immediately after
Article 16.7 of the Plan:
"16.8 Withdrawals by Retirees
A Participant who is a Retiree (as defined below) may make a
withdrawal of all or part of his vested account balance remaining
in the Plan; provided, however, that a minimum of $500 or the
balance of the Participant's account must be withdrawn and only two
withdrawals may be made in each Plan Year. A Retiree is a
Participant who has terminated employment with the Company or an
Affiliate after he has attained age 55 and who was also at that
time eligible for normal or early retirement under any
tax-qualified defined benefit plan maintained by the Company or an
Affiliate in which he participated. Withdrawals must be made of
all amounts eligible for withdrawal in each category below (listed
in descending order) before amounts in the next lower category may
be withdrawn:
Category A: Investment Plan Contributions (excluding earnings
thereon) made prior to January 1, 1987.
Category B: Investment Plan Contributions made after January 1,
1987 and earnings attributable to
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<PAGE> 90
both pre 1987 and post 1986 Investment Plan
Contributions.
Category C: Employer Matching Contributions, including earnings
thereon.
Category D: Trustee-to-Trustee Transfer Contributions (except any
amount attributable to such contributions previously
distributed, as described above) and Rollover
Contributions, plus earnings thereon.
Category E: Tax Reduction Contributions, plus earnings thereon."
3. The following new sentence is added after the first sentence
of Article 18.2 of the Plan:
"The Committee shall have the discretionary powers, duties,
responsibilities and obligations to construe and interpret the
provisions of the Plan and make factual determinations thereunder,
including the power to determine the rights or eligibility of
Employees or Participants and any other persons, and the amounts of
their benefits under the Plan, and to remedy ambiguities,
inconsistencies or omissions, and such determinations shall be
binding on all parties."
4. The following new sentence is added at the end of both
Article 19.1 and 19.2 of the Plan:
"Any action taken by Household International, Inc. shall be by
resolution of its Board of Directors or a committee of the Board
authorized to act on its behalf or by written direction of one or
more of its officers or agents duly authorized by resolution of the
Board as outlined in Article Nine of the Trust."
5. The following new Article is added immediately after Article
24 of the Plan:
"ARTICLE 25
FORMER EMPLOYEES OF FIRST NATIONWIDE BANK
25.1 Application.
This Article 25 applies to any individual who became an
Employee on October 7, 1994 and who immediately prior thereto was
an employee of First Nationwide Bank.
25.2 Participation.
An individual described in Article 25.1 who was a
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<PAGE> 91
participant in the First Nationwide Employees' Investment Plan (the
"FNB Plan") shall become a Participant in TRIP as of January 1,
1995 if he then is an Employee.
25.3 Service Credit.
As of October 7, 1994, service credited under the terms of
the FNB Plan for eligibility and vesting purposes shall be credited
hereunder for purposes of determining eligibility to participate
and vesting but years of participation shall only be based on
participation in TRIP.
25.4 Rights with respect to Transferred Account Balances.
Account balances under the FNB Plan of participants in the
FNB Plan who become Participants in TRIP as of January 1, 1995 are
to be transferred hereto as of January 1, 1995. The following
rights shall apply thereto:
(A) 100% Vesting. The transferred account balance of an
individual who was a participant in the FNB Plan, adjusted for
gains and losses subsequent thereto, is 100% vested.
(B) Earnings. Although the account balances of
Participants valued as of December 31, 1994 under the FNB Plan will
be transferred as of January 1, 1995 to TRIP, such amounts will not
be invested under TRIP until actually received and at such time
will be invested in accordance with the Participants' investment
directions made in accordance with the terms of the Plan.
(C) Recordkeeping. Records will be maintained as to the
portion of the amount described in (A) hereof which is attributable
to after-tax contributions (Investment Plan Contributions), pre-tax
contributions (Tax Reduction Contributions) and the portion that is
attributable to Employer Matching Contributions.
(D) Withdrawals. A Participant who was a participant in
the FNB Plan may make a withdrawal during his employment with a
Company of all or a portion of his account balance attributable to
the amount described in (A) hereof in accordance with the
withdrawal rules outlined in Article 16 except that such amount
will not be treated as a Trustee to Trustee Transfer or Rollover
Contribution under Category F of Article 16.1. or 16.4."
Particular 2 shall be effective as of January 1, 1995 and all other
particulars shall be effective as of January 1, 1994.
IN WITNESS WHEREOF, Household International, Inc. has
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<PAGE> 92
caused this instrument to be executed on its behalf and its corporate seal to
be hereunto affixed and attested by its officers thereunto duly authorized all
on this 19th day of December, 1994.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Colin P. Kelly
--------------------------------
Colin P. Kelly, Vice President
(Corporate Seal)
ATTEST:
/s/ Susan E. Casey
- ------------------------------
Assistant Secretary
84
<PAGE> 93
AMENDMENT FIVE OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its
Board of Directors on March 14, 1995 and September 12, 1995 authorized the
undersigned to amend the Household International Tax Reduction Investment Plan
(the "Plan") and make changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of
January 1, 1992; and
WHEREAS, the restated Plan was amended on July 30, 1993,
December 10, 1993, June 10, 1994 and December 19, 1994 and further amendment of
the Plan is now considered desirable;
NOW, THEREFORE, the Plan is amended in the following
particulars:
1. By substituting the following for Article 1 of the
Plan:
"1.1 History of the Plan.
This Plan was established effective as of January 1, 1984 by
Household International, Inc., as a profit sharing plan for the benefit of its
eligible employees and eligible employees of subsidiaries thereof in order to
encourage their personal savings. The Plan has been amended from time to time,
and was amended and restated on December 6, 1991 effective as of January 1,
1992, subject to any contrary effective date as set forth in the Plan for a
particular article or provision or as otherwise required by law. Effective
January 1, 1996 the Plan is further amended into an employee stock ownership
plan, as set forth herein.
1.2 Purpose of Plan; Applicable Requirements.
The Plan is maintained by the Company to enable eligible
employees of the Company to acquire Company Stock and to accumulate funds for
their future security by electing to make income deferral contributions and by
sharing in Company contributions to the Plan. The Plan is a profit sharing
plan intended to meet the applicable requirements of Section 401(a) of the Code
and contains a cash or deferred arrangement intended to qualify under Section
401(k) of the Code. The Plan also constitutes an employee stock ownership plan
that is designed to invest primarily in Company Stock and that is intended to
meet the applicable requirements of Sections 401(a), 409, and 4975(e)(7) of the
Code and Section 407(d)(6) of ERISA."
2. By substituting the following for Article 4.5(A) of
the Plan:
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<PAGE> 94
"(A) Contributions. The Company shall make Matching Company
Contributions to the Trust on behalf of each Participant for each calendar
month in the amount set forth below:
<TABLE>
<CAPTION>
If the Participant elects The Company will
to contribute to the make a Matching
Plan under Company
Articles 4.1 and Contribution
4.3 the following equal to the
percentage of his following
Compensation percentage of
his Compensation
<S> <C>
1% 3%
2% 4%
3% 5%
4% 6%
</TABLE>
No Matching Company Contributions will exceed 6% of a Participant's
Compensation and no Matching Company Contributions will be made with respect to
Tax Reduction Contributions or Investment Plan Contributions to the extent such
contributions exceed 4% of a Participant's Compensation."
3. By substituting the following for the second sentence
of Article 13.1 of the Plan:
"The Trustee shall at all times be subject to the proper
directions of the Committee, the Company, and, to the extent provided in
Articles 13.5, 13.7 and 18.6, the Participants, which are made in accordance
with the terms of this Plan and the Trust Agreement and which are not, on their
face, contrary to ERISA."
4. By substituting the following for Article 13.4(A) of
the Plan:
"(A) Except as provided in Article 13.4(D) below with
respect to Fund A, the dividends, capital gains distributions, and other
earnings received on any share or unit of a Vanguard Fund or on any other Plan
investment that is specifically credited or earmarked to a Participant's
separate account under the Plan in accordance with the directed investment
provisions of the Plan shall be allocated to such separate account and
immediately reinvested, to the extent practicable, in additional shares or
units of such Fund or other earmarked Plan investments."
5. By adding the following as Article 13.4(D) of the
Plan:
"(D) Cash dividends earned during a Plan Year on shares of
Company Stock in Fund A specifically credited or earmarked to a Participant's
separate account shall be retained in the Plan and reinvested in Fund A unless
the Participant elects otherwise as outlined below. A Participant who has
shares of Company Stock in Fund A specifically credited or earmarked to his
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<PAGE> 95
separate account shall be entitled to make an annual election to have any cash
dividends earned on such Company Stock distributed to him within 90 days of the
close of quarter of the Plan Year for which earned. Such election will
continue in effect for all subsequent Plan Years unless changed. However a
Participant may discontinue an election to receive a cash distribution of
dividends during the Plan Year if such election is timely filed before the
beginning of the quarter in which the dividend is paid. The elections pursuant
to this Article 13.4(D) shall be made in accordance with rules and procedures
prescribed by the Committee."
6. By adding the following as Article 13.9 of the Plan:
"13.9.Diversification of Investments in Fund A.
Pursuant to rules established by the Committee, Participants
may elect to diversify the portion of their separate account invested in Fund A
and attributable to Matching Company Contributions subject to the following:
(A) Each Participant who has attained age 55 years and
has at least ten years of employment or participation
in the Plan, if earlier (a "Qualified Participant")
may elect during each of the Participant's "Qualified
Election Periods" (as defined in paragraph (C) below)
to transfer to one or more of the other Investment
Funds (other than Funds D, E and F) up to twenty-five
percent (fifty percent in the case of the
Participant's last Qualified Election Period) of the
Qualified Participant's separate account which is
attributable to Matching Company Contributions and is
invested in Fund A (the "Fund A investment") and
eligible for diversification (as described in
paragraph (B) next below).
(B) The portion of a Qualified Participant's Fund A
investment subject to diversification shall equal
twenty-five percent (fifty percent in the case of the
Qualified Participant's last Qualified Election
Period) of the total number of shares of Company
Stock credited or earmarked to the Participant's
separate account attributable to Matching Company
Contributions (including shares that the Participant
previously elected to diversify pursuant to this
paragraph), less the number of such shares previously
diversified pursuant to the Qualified Participant's
election under this Article 13.9.
(C) For purposes of this Article 13.9, a Qualified
Election Period means (i) the ninety-day period
immediately following the last day of the first
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<PAGE> 96
Plan Year in which the Participant becomes a
Qualified Participant and (ii) the ninety-day period
immediately following the last day of each of the
next five Plan Years. Any election made in
accordance with the provisions of paragraph (A) next
above with respect to any Qualified Election Period
shall be given effect no later than ninety days after
the end of that Qualified Election Period.
(D) The provisions of this Article 13.9 shall not apply
to any Participant if the value of the Company Stock
credited or earmarked for the Participant's separate
account attributable to Matching Company
Contributions (determined as of the Valuation Date
immediately preceding the first day on which the
Participant would otherwise be entitled to make an
election under this Article) is $500 or less.
(E) Any amounts diversified from Company Stock to one or
more of the Investment Funds pursuant to this
subsection shall be subject to the investment
transfer elections under Article 13.7 but not be
available for distribution in the form of Company
Stock (as otherwise allowed under Article 15)."
7. By adding the following as Article 13.10 of the Plan:
"13.10 Diversification Pending Jefferson Pilot Transfer
In accordance with the Stock Purchase Agreement executed on
August 9, 1995 between the Company and Jefferson-Pilot Corporation ("J-P"), the
obligation for benefit payments under the Plan to Participants who transfer to
employment with J-P as of the Closing Date will be transferred to a J-P plan
which will be tax-qualified under Section 401(a) of the Code and contain a cash
or deferred arrangement under Section 401(k) of the Code. There will also be a
transfer of assets equal to the account balances of such Participants. This
transfer will occur no later than the last day of the 12th month following the
Closing Date. Accordingly, Participants who transfer to employment with J-P as
of the Closing Date and are expected to have their account balances transferred
to the J-P plan will have certain expanded investment election rights from the
Closing Date until the actual transfer of assets. In particular, such a
Participant may elect to have all or any portion of his separate account in
Fund A which is attributable to Matching Company Contributions invested in one
of the other Investment Funds. These elections may be made in accordance with
the investment transfer rules outlined in Article 13.7. However, once such
assets have been transferred out of Fund A they may not be reinvested in Fund
A."
88
<PAGE> 97
8. By adding the following sentence after the last
sentence of Article 14.1(C):
"Notwithstanding the foregoing, if a Participant's
employment with the Company or an Affiliate is terminated for any reason on or
after September 30, 1995 he shall be 100% vested in his account."
9. By adding the following sentence after the last
sentence of Article 15.1(A) of the Plan:
"In no event shall the Company delay a distribution beyond
one year after the close of the Plan Year (a) in which the Participant
separates from service by reason of the attainment of age 65, Disability or
death, or (b) which is the fifth Plan Year following the Plan Year in which the
Participant otherwise separates from service, unless the Participant is
reemployed before the distribution has begun or elects to defer distribution
pursuant to (B) or (C) below."
10. By adding the following sentence after the last
sentence of Article 15.2 of the Plan:
"An election by a Participant to receive his distribution in
the form of an annuity will be deemed to be an election not to receive any
portion of his distribution in the form of Company Stock."
11. By adding the following as Article 18.6 of the Plan:
"18.6 Voting and Tendering of Company Stock
The voting of Company stock held in the Trust, and if a
tender offer is made for Company Stock, the tendering of such shares, shall be
subject to the provisions of ERISA and the following provisions, to the extent
such provisions are not inconsistent with ERISA:
(A) Allocated shares. For purposes of this Article,
shares of Company Stock shall be deemed to be
allocated and credited to a Participant in an amount
to be determined based on the balance in such account
on the Valuation Date coincident with or next
preceding the record date of any vote or tender
offer.
(B) Voting of Company Stock. The Company shall furnish
to each Participant who has shares of Company Stock
credited or earmarked for the Participant's separate
account notice of the date and purpose of each
meeting of the stockholders of the Company at which
shares of Company Stock are entitled to be voted.
The Trustee shall request from each such
89
<PAGE> 98
Participant instructions as to the voting at that
meeting of shares of Company Stock credited or
earmarked to the Participant's separate account. If
the Participant furnishes such instructions to the
Trustee within the time specified in the notification
given to the Participant, the Trustee shall vote such
shares in accordance with the Participant's
instructions. All shares of Company Stock allocated
to accounts as to which the Trustee does not receive
voting instructions as specified above, and all
unallocated shares held by the Trustee, shall be
voted by the Trustee: (a) in the same manner as the
majority of shares for which voting directions are
received direct the Trustee to vote on each item
(other than the election of director) and (b) with
respect to the election of directors, the Trustee
shall vote for the nominees who receive the most
votes pursuant to such voting directions.
(C) Tendering of Company Stock. The Trustee shall
furnish to each Participant who has shares of Company
Stock credited or earmarked to the Participant's
separate account notice of any tender offer for, or a
request or invitation for tenders of, Company Stock
made to the Trustee. The Trustee shall request from
each such Participant instructions as to the
tendering of the number of whole shares of Company
Stock credited or earmarked to the Participant's
separate account as of the close of business on the
date immediately prior to the date on which the
tender offer commences. The Trustee shall tender
such shares of Company Stock as to which the Trustee
has received instructions to tender from Participants
within the time specified by the Trustee. Shares of
Company Stock credited or earmarked to Participants'
separate accounts as to which the Trustee has not
received instructions from Participants shall not be
tendered. As to all unallocated shares of Company
Stock held by the Trustee, the Trustee shall tender
such shares if the majority of shares of Company
Stock for which Participant directions are received
are tendered.
In carrying out its responsibilities under this Section, the Trustee may rely
on information furnished to it by the Committee, including the names and
current addresses of Participants, the number of shares of Company Stock
allocated to their accounts, and the number of shares of Company Stock held by
the Trustee that have not yet been allocated and otherwise follow the terms of
the Trust Agreement."
90
<PAGE> 99
Particulars 1, 2, 3, 4, 5, 6, 9, 10 and 11 shall be
effective as of January 1, 1996, Particular 7 shall be effective as of the
Closing Date of the sale to Jefferson-Pilot Corporation pursuant to the August
9, 1995 Stock Purchase Agreement and Particular 8 shall be effective as of
September 30, 1995.
IN WITNESS WHEREOF, Household International, Inc. has caused
this instrument to be executed on its behalf and its corporate seal to be
hereunto affixed and attested by its officers thereunto duly authorized all on
this 29th day of September, 1995.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ Colin P. Kelly
--------------------------------
Colin P. Kelly, Vice President
(Corporate Seal)
ATTEST:
/s/ Susan E. Casey
- --------------------------------
Assistant Secretary
91
<PAGE> 100
AMENDMENT SIX OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its
Board of Directors on September 11, 1990 authorized the undersigned to amend
the Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of
January 1, 1992; and
WHEREAS, the restated Plan was amended on July 30, 1993,
December 10, 1993, June 10, 1994, December 19, 1994 and September 29, 1995 and
further amendment of the Plan is now considered desirable;
NOW, THEREFORE, the Plan is amended effective as of January
1, 1996 in the following particulars:
1. By adding the following new sentence after the last
sentence of Article 9.8 of the Plan:
"Notwithstanding the foregoing provisions of Articles 9.4
and 9.6 it will not be necessary to distribute income allocable to Excess Tax
Reduction Contributions or Excess Aggregate Contributions from the end of the
Plan Year until the date of distribution unless otherwise required by law."
2. By adding the following sentence after the last
sentence of Article 13.10 of the Plan:
"The provisions of Article 13.4(D) and Article 13.9 shall
not apply to Participants who transferred to employment with Jefferson-Pilot as
of the Closing Date since the obligation for their benefit payments transferred
to a Jefferson-Pilot plan even though Plan assets may not yet have transferred
as of January 1, 1996."
3. By substituting the following sentence for the second
sentence of Article 15.1(B) of the Plan:
"In accordance with rules prescribed by the Committee, a
Participant (or beneficiary) who does not consent and does not meet the
requirement of (C) below may defer his distribution until a date no later than
the Valuation Date first following the date he becomes age 65 (or the date he
would have attained age 65 in the case of a beneficiary)."
4. By substituting the following Article for Article
15.4(A) of the Plan:
92
<PAGE> 101
"(A) Required Beginning Date. Distributions to a
Participant shall begin not later than April 1 of the Plan Year following the
Plan Year in which the Participant attains age 70-1/2, even if the Participant
has not yet severed from service as of such date, unless earlier distribution
is required pursuant to Article 15.1(B)."
5. By substituting the following sentence for the last
sentence of Article 17.4 of the Plan:
"In addition, the Participant's account will be charged a
loan fee of $30 for each loan distributed to a Participant after August 1, 1993
but before January 1, 1996 and a loan fee of $40, or such other amount
determined by the Committee from time to time, for each loan distributed on or
after January 1, 1996."
IN WITNESS WHEREOF, Household International, Inc. has caused
this instrument to be executed on its behalf and its corporate seal to be
hereunto affixed and attested by its officers thereunto duly authorized all on
this 14th day of December, 1995.
HOUSEHOLD INTERNATIONAL, INC.
(SEAL) By: /s/ Colin P. Kelly
------------------------------
Colin P. Kelly, Vice President
ATTEST:
/s/ Susan E. Casey
- -----------------------------
Assistant Secretary
93
<PAGE> 102
AMENDMENT SEVEN OF HOUSEHOLD INTERNATIONAL
TAX REDUCTION INVESTMENT PLAN
WHEREAS, Household International, Inc. by resolution of its
Board of Directors on September 11, 1990 authorized the undersigned to amend
the Household International Tax Reduction Investment Plan (the "Plan") and make
changes required by the law; and
WHEREAS, the Plan was amended and restated effective as of
January 1, 1992; and
WHEREAS, the restated Plan was amended on July 30, 1993,
December 10, 1993, June 10, 1994, December 19, 1994, September 29, 1995 and
December 14, 1995 and further amendment of the Plan is now considered
desirable;
NOW, THEREFORE, the Plan is amended effective as of January
1, 1996 in the following particulars:
1. By adding the following new Article 15.5 immediately
after Article 15.4 of the Plan:
"15.5 Facility of Payment.
If any Participant or his beneficiary who is entitled to receive
any amount payable under the Plan is then a minor, or is ill, or is under any
disability, due to any cause, which in the judgment of the Committee renders
him unable to apply such amount to his own best interest and advantage, the
Committee may in its discretion direct the Trustee to pay all or a part of the
amount in one or a combination of the following ways as the Committee may
determine to be for the individual's best interest:
(a) directly to him,
(b) to his legal or natural guardian or the conservator of his
estate,
(c) to any person having his care or custody, or
(d) directly for his care, support, or education."
2. By substituting a semicolon for the period at the end
of paragraph (b) of Article 16.2(D) of the Plan and adding the following new
paragraph (c) immediately after such paragraph (b).
"(c) He will be required to stop his contributions to the
Household International Employee Stock Purchase Plan for the period beginning
with the payroll period next following the date he makes the withdrawal
request. Even if otherwise eligible, he will not be permitted to elect to make
contributions under the Household International Employee Stock Purchase Plan
until the next offering period which begins at least 12 months after the date
he receives the withdrawal."
94
<PAGE> 103
IN WITNESS WHEREOF, Household International, Inc. has
caused this instrument to be executed on its behalf and its corporate seal to
be hereunto affixed and attested by its officers thereunto duly authorized all
on this 2nd day of January, 1996.
HOUSEHOLD INTERNATIONAL, INC.
(SEAL) By: /s/ Colin P. Kelly
------------------------------
Colin P. Kelly, Vice President
Human Resources
ATTEST:
/s/ Susan E. Casey
- ---------------------------
Assistant Secretary
95
<PAGE> 1
EXHIBIT 5A
Household International, Inc.
2700 Sanders Road
Prospect Heights, IL 60070
(708) 564-6150
John W. Blenke
Assistant General Counsel and
Secretary
January 24, 1996
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
RE: Household International Tax Reduction Investment Plan
Registration Statement on Form S-8
Ladies and Gentlemen:
As Assistant General Counsel and Secretary of Household International, Inc.
(the "Company"), I am generally familiar with the proceedings in connection
with the Company's Registration Statement on Form S-8 in which interests in the
Household International Tax Reduction Investment Plan (the "Plan") and shares
of the Company's Common Stock ($1.00 par value per share) offered pursuant to
the Plan are being registered under the Securities Act of 1933, as amended (the
"Act"). In accordance with the foregoing, I have examined such corporate
records, certificates, public documents and other documents, and have reviewed
such questions of law, as considered necessary or appropriate for the purpose
of this opinion.
Upon the basis of such examination, it is my opinion that:
1. The Company has been duly incorporated and is an existing corporation in
good standing under the laws of the State of Delaware.
2. The interests in the Plan and the shares of Common Stock have been duly
authorized by the Company, and when (i) the registration statement on Form
S-8 by the Company with respect to the interests in the Plan and the shares
of Common Stock (the "Registration
<PAGE> 2
Household International, Inc.
January 24, 1996
Page 2
Statement") shall have been filed with the Securities and Exchange
Commission under the Act and (ii) the interests in the Plan are issued
and sold, and the shares of the Company's Common Stock are distributed
pursuant to the Plan, such shares will be validly issued, fully paid and
non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving said consent, I do not admit that I am in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ JOHN W. BLENKE
John W. Blenke
JWB:jmh
<PAGE> 1
EXHIBIT 5B
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
1100 COMMERCE STREET
DALLAS, TX 75242
Employer Identification Number:
Date: Dec 01, 1995 36-3121988
File Folder Number:
360042664
HOUSEHOLD INTERNATIONAL, INC. Person to Contact:
2700 SANDERS ROAD TECHNICAL SCREENER
PROSPECT HEIGHTS, IL 60070 Contact Telephone Number:
(312) 435-1040
Plan Name:
HOUSEHOLD INTERNATIONAL TAX RED
INVESTMENT PLAN
Plan Number: 005
Dear Applicant:
We have made a favorable determination on your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend on
its effect in operation. (See section 1.401-1(b)(3) of the Income Tax
Regulations.) We will review the status of the plan in operation periodically.
The enclosed document explains the significance of this favorable
determination letter, points out some features that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the publication.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other federal
or local statutes.
This determination letter is applicable for the amendment(s) adopted on
December 19, 1994.
This determination letter is also applicable for the amendment(s) adopted
on June 10, 1994.
This plan has been mandatorily disaggregated, permissively aggregated, or
restructured to satisfy the nondiscrimination requirements.
This letter is issued under Rev. Proc. 93-39 and considers the amendments
required by the Tax Reform Act of 1986 except as otherwise specified in this
letter.
This plan satisfies the nondiscriminatory current availability
requirements of section 1.401(a) (4)-4(b) of the regulations with respect to
those benefits, rights, and features that are currently available to all
employees in the plan's coverage group. For this purpose, the plan's coverage
group consists of those employees treated as currently benefiting for purposes
of demonstrating that the plan satisfies the minimum coverage requirements of
section 410(b) of the Code.
<PAGE> 2
-2-
HOUSEHOLD INTERNATIONAL, INC.
This plan also satisfies the requirements of section 1.401(a)(4)-4(b) of
the regulations with respect to the specific benefits, rights, or features for
which you have provided information.
This letter may not be relied upon with respect to whether the plan
satisfies the qualification requirements as amended by the Uruguay Round
Agreements Act, Pub. L. 103-465.
The information on the enclosed addendum is an integral part of this
determination. Please be sure to read and keep it with this letter.
We have sent a copy of this letter to your representative as indicated in
the power of attorney.
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely yours,
/s/ Bobby E. Scott
Bobby E. Scott
District Director
Enclosures:
Publication 794
Addendum
<PAGE> 3
-3-
HOUSEHOLD INTERNATIONAL, INC.
This determination letter is also applicable for the amendment(s) adopted
on December 10, 1993.
This determination letter also applies to the amendments dated July 30,
1993, December 6, 1991, July 3, 1991, May 14, 1991 and December 19, 1990.
This determination letter supercedes the previous letters dated Sept. 6,
1995 and Oct 25, 1995.
<PAGE> 1
EXHIBIT 5C
UNDERTAKING TO FILE AMENDMENTS
TO TAX REDUCTION INVESTMENT PLAN
WITH THE INTERNAL REVENUE SERVICE
The Registrant hereby undertakes to file with the Internal Revenue Service
("IRS"), in a timely manner, all amendments and restatements of the Household
International Tax Reduction Investment Plan (the "Plan") which were adopted
subsequent to those mentioned in the IRS' Determination Letter dated December
1, 1995 (such letter included as Exhibit 5B to this Registration Statement.)
The Registrant further undertakes to make all changes required by the IRS in
order to qualify the Plan under Section 401 of the Internal Revenue Code.
<PAGE> 1
ARTHUR ANDERSEN LLP
EXHIBIT 23 (A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Household International, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-8 relating to the offering
of an indeterminate amount of Interests in the Household International Tax
Reduction Investment Plan and 2,000,000 shares of Household International,
Inc. Common Stock, to be filed with the Securities and Exchange Commission on
or about January 24, 1996, of our report dated February 3, 1995, included in
Household International, Inc.'s Form 10-K for the year ended December 31, 1994,
and of our report dated June 27, 1995, included in the Household International
Tax Reduction Investment Plan's Form 11-K for the year ended December 31, 1994,
and to all references to our Firm included in this registration statement.
Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 23, 1996
