<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-8198
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HOUSEHOLD INTERNATIONAL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3121988
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
2700 Sanders Road, Prospect Heights, Illinois 60070
- -------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 564-5000
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
At April 30, 1997, there were 97,385,195 shares of registrant's
common stock outstanding.
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<PAGE> 2
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
Table of Contents
PART I. Financial Information Page
----
Item 1. Financial Statements
Condensed Consolidated Statements of Income
(Unaudited) - Three Months
Ended March 31, 1997 and 1996 2
Condensed Consolidated Balance Sheets -
March 31, 1997 (Unaudited) and December 31, 1996 3
Condensed Consolidated Statements of Cash Flows
(Unaudited) - Three Months Ended
March 31, 1997 and 1996 4
Financial Highlights 5
Notes to Interim Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
<PAGE>
<PAGE> 3
Part 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------
<TABLE>
<CAPTION>
All dollar amounts, except per share data, are stated in millions.
- -------------------------------------------------------------------------------------------
Three months ended March 31 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Finance income $751.6 $679.5
Interest income from noninsurance investment
securities 8.3 20.3
Interest expense 365.1 353.4
------ ------
Net interest margin 394.8 346.4
Provision for credit losses on owned receivables 293.4 191.3
------ ------
Net interest margin after provision for credit losses 101.4 155.1
------ ------
Securitization income 330.7 279.4
Insurance revenues 65.4 63.9
Investment income 33.2 56.9
Fee income 77.4 49.9
Other income 69.1 25.3
------ ------
Total other revenues 575.8 475.4
------ ------
Salaries and fringe benefits 147.6 136.7
Occupancy and equipment expense 53.9 52.4
Other marketing expenses 118.7 100.4
Other servicing and administrative expenses 109.4 105.8
Policyholders' benefits 47.0 73.2
------ ------
Total costs and expenses 476.6 468.5
------ ------
Income before income taxes 200.6 162.0
Income taxes 69.1 51.5
------ ------
Net income $131.5 $110.5
====== ======
Earnings per common share:
Net income $131.5 $110.5
Preferred dividends (3.2) (4.1)
------ ------
Net income available to common shareholders $128.3 $106.4
====== ======
Average common and common equivalent shares 98.6 98.5
------ ------
Net income per common share $ 1.30 $ 1.08
------ ------
Dividends declared per common share .39 .34
====== ======
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE>
<PAGE> 4
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------
<TABLE>
<CAPTION>
In millions, except share data.
- -------------------------------------------------------------------------------------------------------
March 31, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
- ------
<S> <C> <C>
Cash $ 294.1 $ 239.2
Investment securities 2,333.7 2,282.0
Receivables, net 22,649.0 24,244.8
Acquired intangibles, net 930.7 969.4
Properties and equipment, net 339.9 353.1
Real estate owned 152.6 136.6
Other assets 1,346.8 1,369.4
--------- ---------
Total assets $28,046.8 $29,594.5
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Debt:
Deposits $ 2,173.1 $ 2,365.1
Commercial paper, bank and other borrowings 5,507.7 6,428.1
Senior and senior subordinated debt (with
original maturities over one year) 14,216.1 14,802.0
--------- ---------
Total debt 21,896.9 23,595.2
Insurance policy and claim reserves 1,246.0 1,205.3
Other liabilities 1,547.8 1,472.8
--------- ---------
Total liabilities 24,690.7 26,273.3
--------- ---------
Company obligated mandatorily redeemable
preferred securities of subsidiary trusts* 175.0 175.0
--------- ---------
Preferred stock 150.0 205.0
--------- ---------
Common shareholders' equity:
Common stock, $1.00 par value, 150,000,000
shares authorized, 115,231,175 shares
issued at March 31, 1997 and
December 31, 1996 115.2 115.2
Additional paid-in capital 402.6 397.3
Retained earnings 3,167.2 3,076.8
Foreign currency translation adjustments (114.3) (126.7)
Unrealized loss on investments, net (37.8) (12.9)
Less common stock in treasury, 17,922,628 and
18,165,921 shares at March 31, 1997 and
December 31, 1996, respectively, at cost (501.8) (508.5)
--------- ---------
Total common shareholders' equity 3,031.1 2,941.2
--------- ---------
Total liabilities and shareholders' equity $28,046.8 $29,594.5
========= =========
</TABLE>
* As described in note 7 to the financial statements, the sole asset of the two
trusts are Junior Subordinated Deferrable Interest Notes issued by Household
International, Inc. in June 1996 and June 1995, bearing interest at 8.70 and
8.25 percent, respectively, with principal balances of $103.1 and $77.3
million, respectively, and due June 30, 2036 and June 30, 2025, respectively.
See notes to interim condensed consolidated financial statements.
<PAGE>
<PAGE> 5
Household International, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------
<TABLE>
<CAPTION>
In millions.
- ----------------------------------------------------------------------------------------------
Three months ended March 31 1997 1996
- ----------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS
<S> <C> <C>
Net income $ 131.5 $ 110.5
Adjustments to reconcile net income to cash
provided by operations:
Provision for credit losses on owned receivables 293.4 191.3
Insurance policy and claim reserves 21.6 7.8
Depreciation and amortization 62.4 53.2
Net realized (gains) losses from sales of assets (55.0) (3.4)
Other, net 61.8 177.8
--------- ---------
Cash provided by operations 515.7 537.2
--------- ---------
INVESTMENTS IN OPERATIONS
Investment securities:
Purchased (407.8) (1,044.3)
Matured 94.3 146.2
Sold 210.6 1,372.6
Short-term investment securities, net change (19.6) 153.9
Receivables:
Originations, net (5,765.5) (6,000.9)
Purchased (234.2) (165.9)
Sold 7,305.1 6,465.2
Acquisition of portfolios, net - (12.7)
Properties and equipment purchased (15.5) (14.7)
Properties and equipment sold 4.9 1.9
--------- ---------
Cash increase from investments in operations 1,172.3 901.3
--------- ---------
FINANCING AND CAPITAL TRANSACTIONS
Short-term debt and demand deposits,
net change (938.6) (2,051.6)
Time certificates, net change (111.5) 55.1
Senior and senior subordinated debt issued 772.3 887.3
Senior and senior subordinated debt retired (1,328.4) (495.6)
Policyholders' benefits paid (38.4) (11.8)
Cash received from policyholders 69.9 173.1
Shareholders' dividends (41.1) (37.2)
Redemption of preferred stock (55.0) -
Issuance of common stock 9.2 1.6
--------- ---------
Cash decrease from financing and capital
transactions (1,661.6) (1,479.1)
--------- ---------
Effect of exchange rate changes on cash 28.5 44.4
--------- ---------
Increase in cash 54.9 3.8
Cash at January 1 239.2 270.4
--------- ---------
Cash at March 31 $ 294.1 $ 274.2
========= =========
Supplemental cash flow information:
Interest paid $ 335.8 $ 349.2
--------- ---------
Income taxes paid (received) 10.6 (91.2)
--------- ---------
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE>
<PAGE> 6
Household International, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
- --------------------
<TABLE>
<CAPTION>
All dollar amounts are stated in millions.
- --------------------------------------------------------------------------
Three months ended March 31 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Net income $ 131.5 $ 110.5
--------- ---------
Revenues 1,335.7 1,175.2
--------- ---------
Return on average common shareholders'
equity <F1> 17.1% 15.7%
--------- ---------
Return on average owned assets <F1> 1.77 1.53
--------- ---------
Managed basis efficiency ratio, normalized <F2> 38.3 41.3
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
All dollar amounts are stated in millions.
- --------------------------------------------------------------------------
March 31, December 31,
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Total assets:
Owned $28,046.8 $29,594.5
Managed 47,271.5 48,120.9
--------- ---------
Receivables:
Owned $22,401.1 $24,067.0
Serviced with limited recourse 19,224.7 18,526.4
--------- ---------
Managed $41,625.8 $42,593.4
========= =========
Total shareholders' equity as a percent of
owned assets <F3> 11.97% 11.22%
--------- ---------
Total shareholders' equity as a percent of
managed assets <F3> 7.10 6.90
--------- ---------
<FN>
<F1> Annualized.
<F2> Ratio of normalized operating expenses to managed net interest margin
and other revenues less policyholders' benefits.
<F3> Total shareholders' equity at March 31, 1997 and December 31, 1996
includes common shareholders' equity, preferred stock and company
obligated mandatorily redeemable preferred securities of subsidiary
trusts.
</FN>
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE>
<PAGE> 7
Household International, Inc. and Subsidiaries
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
- -------------------------
The accompanying unaudited condensed consolidated financial statements of
Household International, Inc. and its subsidiaries (the "company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. Certain prior period amounts have been reclassified to
conform with the current period's presentation. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the company's annual report on Form 10-K for the year ended December 31, 1996.
2. INVESTMENT SECURITIES
- --------------------------
Investment securities consisted of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
In millions. March 31, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE INVESTMENTS
<S> <C> <C> <C> <C>
Marketable equity securities $ 178.9 $ 179.3 $ 212.7 $ 213.1
Corporate debt securities 1,122.0 1,080.3 1,081.4 1,070.5
U.S. government and federal
agency debt securities 404.3 389.9 287.0 277.7
Other 655.2 655.0 690.5 690.5
-------- -------- -------- --------
Subtotal 2,360.4 2,304.5 2,271.6 2,251.8
Accrued investment income 29.2 29.2 30.2 30.2
-------- -------- -------- --------
Total investment securities $2,389.6 $2,333.7 $2,301.8 $2,282.0
======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE> 8
3. RECEIVABLES
- ----------------
Receivables consisted of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage $ 701.9 $ 725.6
Home equity 3,941.3 3,647.9
Visa/MasterCard 7,018.7 8,587.7
Private label 5,253.6 5,070.0
Other unsecured 4,573.9 5,098.0
Commercial 911.7 937.8
--------- ---------
Total owned receivables 22,401.1 24,067.0
Accrued finance charges 383.3 397.6
Credit loss reserve for
owned receivables (943.9) (900.2)
Unearned credit insurance premiums
and claims reserves (184.2) (184.6)
Amounts due and deferred from
receivables sales 1,746.0 1,561.0
Reserve for receivables serviced with
limited recourse (753.3) (696.0)
--------- ---------
Total owned receivables, net 22,649.0 24,244.8
Receivables serviced with limited
recourse 19,224.7 18,526.4
--------- ---------
Total managed receivables, net $41,873.7 $42,771.2
========= =========
</TABLE>
The outstanding balance of receivables serviced with limited recourse
consisted of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Home equity $ 4,016.6 $ 4,337.5
Visa/MasterCard 10,602.5 10,149.7
Private label 434.4 517.0
Other unsecured 4,171.2 3,522.2
--------- ---------
Total $19,224.7 $18,526.4
========= =========
</TABLE>
The combination of receivables owned and receivables serviced with limited
recourse, which the company considers its managed portfolio, is shown below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
March 31, December 31,
In millions. 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
First mortgage $ 701.9 $ 725.6
Home equity 7,957.9 7,985.4
Visa/MasterCard 17,621.2 18,737.4
Private label 5,688.0 5,587.0
Other unsecured 8,745.1 8,620.2
Commercial 911.7 937.8
--------- ---------
Total $41,625.8 $42,593.4
========= =========
</TABLE>
<PAGE>
<PAGE> 9
At March 31, 1997 and December 31, 1996, the amounts due and
deferred from receivables sales of $1,746.0 and $1,561.0 million,
respectively, included the unamortized securitization assets and
funds established pursuant to the recourse provisions for certain
sales totaling $1,127.0 and $1,033.1 million, respectively. The
amounts due and deferred also included customer payments not yet
remitted by the securitization trustee to the company of $595.8 and
$512.6 million at March 31, 1997 and December 31, 1996,
respectively. In addition, the company has subordinated interests
in certain transactions, which were recorded as receivables, of
$619.6 and $485.0 million at March 31, 1997 and December 31, 1996,
respectively. The company has agreements with a "AAA"-rated third
party who will indemnify the company for up to $21.2 million in
losses relating to certain securitization transactions. The company
maintains credit loss reserves pursuant to the recourse provisions
for receivables serviced with limited recourse which are based on
estimated probable losses under such provisions. These reserves
totaled $753.3 and $696.0 million at March 31, 1997 and December
31, 1996, respectively, and represent the company's best estimate
of possible losses on receivables serviced with limited recourse.
4. CREDIT LOSS RESERVES
- -------------------------
An analysis of credit loss reserves for the three months ended March 31 was
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
In millions. 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Credit loss reserves for owned receivables
at January 1 $ 900.2 $ 720.4
Provision for credit losses 293.4 191.3
Chargeoffs (263.2) (189.3)
Recoveries 27.4 32.4
Portfolio acquisitions, net (13.9) 3.3
-------- --------
TOTAL CREDIT LOSS RESERVES FOR OWNED RECEIVABLES
AT MARCH 31 943.9 758.1
-------- --------
Credit loss reserves for receivables serviced with
limited recourse at January 1 696.0 457.0
Provision for credit losses 249.1 209.1
Chargeoffs (204.3) (137.5)
Recoveries 9.9 5.8
Other, net 2.6 (1.7)
-------- --------
TOTAL CREDIT LOSS RESERVES FOR RECEIVABLES SERVICED
WITH LIMITED RECOURSE AT MARCH 31 753.3 532.7
-------- --------
TOTAL CREDIT LOSS RESERVES FOR MANAGED RECEIVABLES
AT MARCH 31 $1,697.2 $1,290.8
======== ========
</TABLE>
5. INCOME TAXES
- ----------------
Effective tax rates for the three months ended March 31, 1997 and 1996 of
34.4 and 31.8 percent, respectively, differ from the statutory federal income
tax rate for the respective periods primarily because of the effects of (a)
domestic and foreign loss carryforwards, (b) amortization and write-offs of
intangible assets, (c) state and local income taxes, (d) reduction of
noncurrent tax requirements and (e) leveraged lease tax benefits.
<PAGE>
<PAGE> 10
6. NET INCOME PER COMMON SHARE
- -------------------------------
Computations of net income per common share for the three months ended
March 31 were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1997 1996
----------------- -----------------
Fully Fully
In millions, except per share data. Primary Diluted Primary Diluted
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Earnings:
Net income $131.5 $131.5 $110.5 $110.5
Preferred dividends (3.2) (3.2) (4.1) (4.1)
------ ------ ------ ------
Net income available to common
shareholders $128.3 $128.3 $106.4 $106.4
====== ====== ====== ======
Average shares:
Common 97.2 97.2 97.3 97.3
Common equivalents 1.4 1.4 1.1 1.2
------ ------ ------ ------
Total 98.6 98.6 98.4 98.5
====== ====== ====== ======
Net income per common share $ 1.30 $ 1.30 $ 1.08 $ 1.08
====== ====== ====== ======
</TABLE>
7. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUSTS
- ------------------------------------------------------------------
In June 1996 Household Capital Trust II ("HCT II"), a wholly-owned
subsidiary of the company, issued 4 million 8.70 percent Trust
Preferred Securities ("preferred securities") at $25 per preferred
security. The sole asset of HCT II is $103.1 million of 8.70
percent Junior Subordinated Deferrable Interest Notes issued by the
company. The junior subordinated notes held by HCT II mature on
June 30, 2036 and are redeemable by the company in whole or in part
beginning on June 30, 2001, at which time the HCT II preferred
securities are callable at par value of $25 per preferred security
plus accrued and unpaid dividends. Net proceeds from the issuance
of preferred securities were used for general corporate purposes.
In 1995 Household Capital Trust I ("HCT I"), a wholly-owned
subsidiary of the company, issued 3 million 8.25 percent preferred
securities at $25 per preferred security. The sole asset of HCT I
is $77.3 million of 8.25 percent Junior Subordinated Deferrable
Interest Notes issued by the company. The junior subordinated notes
held by HCT I mature on June 30, 2025 and are redeemable by the
company in whole or in part beginning June 30, 2000, at which time
the HCT I preferred securities are callable at par value of $25 per
preferred security plus accrued and unpaid dividends. HCT I may
elect to extend the maturity of its preferred securities to June
30, 2044.
The obligations of the company with respect to the junior
subordinated notes, when considered together with certain
undertakings of the company with respect to HCT I and HCT II,
constitute full and unconditional guarantees by the company of HCT
I's and HCT II's obligations under the respective preferred
securities. The preferred securities are classified in the
company's balance sheets as company obligated mandatorily
redeemable preferred securities of subsidiary trusts (representing
the minority interest in the trusts) at their face and redemption
amount of $175 million at March 31, 1997. The preferred securities
have a liquidation value of $25 per preferred security. Dividends
on the preferred securities are cumulative, payable quarterly in
arrears, and are deferrable at the company's option for up to five
years from date of issuance. The company cannot pay dividends on
its preferred and common stocks during such deferments.
<PAGE>
<PAGE> 11
8. RECENT ACCOUNTING DEVELOPMENTS
- -----------------------------------
Effective January 1, 1997, the company adopted Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities" ("FAS No. 125"). FAS No. 125 provides accounting and
reporting standards for transfers and servicing of financial assets
and extinguishment of liabilities based on an approach that focuses
on control of the assets and extinguishment of the liabilities. The
statement is effective for securitization transactions occurring
subsequent to December 31, 1996. The adoption of FAS No. 125 did
not have a material impact on the company's consolidated financial
statements.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("FAS No. 128"), which establishes standards for computing
and presenting earnings per share ("EPS"). FAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS. Basic
EPS excludes dilution and is computed by dividing income available
to common shareholders by the weighted-average number of common
shares outstanding for the period. FAS No. 128 also requires
presentation of diluted EPS which is computed similarly to fully
diluted EPS currently presented. The statement is effective for
financial statements issued for periods ending after December 15,
1997, including interim periods. On adoption, it will require the
restatement of all prior period earnings per share data. The
company will adopt FAS No. 128 in the fourth quarter of 1997. At
such time, all prior period earnings per share data will be restated.
The company believes the adoption of FAS No. 128 will not have a
material impact on its earnings per share.
<PAGE>
<PAGE> 12
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATIONS SUMMARY
- ------------------
Net income for the first quarter of 1997 was $131.5 million, up 19
percent from $110.5 million in 1996. Net income per share was $1.30
in the first quarter of 1997, up 20 percent from $1.08 per share in
1996. The company's annualized return on average common shareholders'
equity for the first quarter of 1997 was 17.1 percent compared to 15.7
percent in the year-ago period. The annualized return on average owned
assets improved to 1.77 percent in the 1997 first quarter from 1.53
percent a year ago.
- - The following is a summary of the operating results of the
company's key businesses for the first quarter of 1997 compared
to the prior year period:
The domestic consumer finance business experienced higher
margins and improved efficiency compared to the prior year
quarter which were partially offset by higher credit
losses primarily due to increased bankruptcies.
Results for the Visa*/MasterCard* business improved from the
prior year period due to receivable growth and higher net
interest margin and fee income. These improvements were
partially offset by higher credit losses resulting primarily
from increased personal bankruptcy filings. Results for this
business continued to benefit from the company's co-branding
strategy, in particular the association with the General Motors
credit card ("GM Card") program and the Union Privilege
Visa/MasterCard portfolio acquired in June 1996.
The private-label credit card business reported higher earnings
in the first quarter of 1997 compared to the year-ago period due
to portfolio growth and improved operating efficiency.
Net income increased in the United Kingdom operation primarily
due to improved efficiency, as well as higher net interest
margin and insurance premiums, due to receivables growth.
- - During the first quarter of 1997, the company sold certain non-
strategic assets for a pretax gain of approximately $50 million.
This non-recurring gain was recorded in other income in the
statement of income.
- - The company's normalized managed basis efficiency ratio improved
to 38.3 percent for the first quarter of 1997 compared to 41.3
percent a year ago. The improvement in the managed ratio in 1997
resulted from a 22 percent growth in net revenues over the prior
year, compared to a 9 percent increase in operating expenses.
- - The company also increased its credit loss reserves during the
first three months of 1997 by providing reserves in excess of
chargeoffs for owned receivables of $58 million. The company
increased credit loss reserves due to continued growth and
seasoning of unsecured loan products, and uncertainty over the
economy and consumer payment patterns.
* VISA and MasterCard are registered trademarks of VISA USA, Inc.
and MasterCard International, Incorporated, respectively.
<PAGE>
<PAGE> 13
BALANCE SHEET REVIEW
- --------------------
- - Managed consumer receivables (owned and serviced with limited
recourse) grew 15 percent over the prior year. Core products, which
exclude first mortgages and commercial receivables, increased 20
percent from a year ago. Visa/MasterCard, private label and other
unsecured product lines all grew in excess of 25 percent. Year-over-
year comparisons for the home equity portfolio were impacted by
the fourth quarter 1996 sale of approximately $720 million of home
equity loans, primarily from the discontinued retail branch banking
business, and the de-emphasis of the company's wholesale business.
Home equity loan production in the retail branch network was up 7
percent year over year.
- - Compared to the fourth quarter of 1996, core receivables were
down slightly due to normal, seasonal runoff in the Visa/MasterCard
portfolio. Loan originations in the retail branch network also
experienced a typical seasonal slowdown.
- - Owned consumer receivables were $21.5 billion at March 31,
1997, compared to $23.1 billion at December 31, 1996 and $19.9
billion at March 31, 1996. Changes in owned receivables from period
to period may vary depending on the timing and significance of
securitization transactions.
- - The company's managed credit loss reserves were $1,697.2
million at March 31, 1997, up from $1,596.2 million at December 31,
1996 and $1,290.8 million at March 31, 1996. Credit loss reserves
as a percent of managed receivables were 4.08 percent, up from 3.75
percent at December 31, 1996 and 3.53 percent at March 31, 1996.
Reserves as a percent of nonperforming managed receivables were
118.6 percent compared to 119.1 percent at December 31, 1996 and
125.4 percent at March 31, 1996. Consumer two-months-and-over
contractual delinquency ("delinquency") as a percent of managed
consumer receivables was 4.45 percent, up from 4.15 percent at
December 31, 1996 and 3.60 percent at March 31, 1996. The
annualized total consumer managed chargeoff ratio in the first
quarter of 1997 was 4.15 percent, compared to 3.59 percent in the
prior quarter and 3.24 percent in the year-ago quarter.
- - The ratio of total shareholders' equity (including trust
originated securities) to total owned assets was 11.97 percent, up
from 11.22 percent at December 31, 1996. The ratio of total
shareholders' equity to managed assets was 7.10 percent, compared
to 6.90 percent at December 31, 1996.
<PAGE>
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The major use of cash by the company's subsidiaries is the
origination or purchase of receivables or investment securities.
The main sources of cash are the collection and sales of receivable
balances; maturities or sales of investment securities; proceeds
from the issuance of debt and deposits; and cash provided by
operations.
The following describes major changes in the company's funding base
from December 31, 1996 to March 31, 1997:
- - On January 23, 1997, the company redeemed, at par, all
outstanding shares of its 9.50% Preferred Stock, Series 1991-A, for
$10 per depositary share plus accrued and unpaid dividends.
- - Commercial paper, bank and other borrowings decreased 14
percent from $6.4 billion to $5.5 billion, and senior and senior
subordinated debt (with original maturities over one year)
decreased 4 percent from $14.8 billion to $14.2 billion. The
decline in debt levels from year end is primarily attributable to
the decrease in owned receivables.
- - The company had securitized home equity, Visa/MasterCard,
private label and other unsecured receivables outstanding of $19.2
and $18.5 billion at March 31, 1997 and December 31, 1996,
respectively. In the first quarter of 1997, the company
securitized, excluding replenishments of certificate holder
interests, $2.0 billion of Visa/MasterCard and other unsecured
receivables, compared to $1.4 billion of such receivables a year
ago.
The composition of these securitizations by type is as follows (in billions):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
March 31, March 31,
Three months ended 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Visa/MasterCard $ 1.2 $ .6
Other unsecured .8 .8
------ ------
Total $ 2.0 $ 1.4
====== ======
</TABLE>
The market for securities backed by receivables is a reliable,
efficient and cost-effective source of funds, which the company
plans to continue to utilize in the future.
PRO FORMA MANAGED STATEMENTS OF INCOME
- ---------------------------------------
Securitizations of consumer receivables have been, and will
continue to be, an important source of liquidity for the company.
The company continues to service the securitized receivables after
such receivables have been sold and retains a limited recourse
obligation. Securitizations impact the classification of revenues
and expenses in the statements of income. Amounts related to
receivables serviced, including net interest margin, fee and other
income, and provision for credit losses on receivables serviced
with limited recourse are reported as a net amount in
securitization income in the company's statements of income.
<PAGE>
<PAGE> 15
Management monitors the company's operations on a managed basis as
well as on the historical owned basis reflected in its statements
of income. The managed basis assumes that the receivables
securitized are held in the portfolio. Pro forma statements of
income on a managed basis for the three months ended March 31, 1997
and 1996 are presented below. For purposes of this analysis, the
results do not reflect the differences between the company's
accounting policies for owned receivables and receivables serviced
with limited recourse. Accordingly, net income on a pro forma
managed basis equals net income on an owned basis.
Pro Forma Managed Statements of Income
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
All dollar amounts are stated in millions.
Three months ended March 31 1997 * 1996 *
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Finance income $ 1,414.7 13.52% $ 1,211.0 13.21%
Interest income from noninsurance
investment securities 8.3 5.76 20.3 6.21
Interest expense 638.1 5.97 575.7 6.06
--------- ----- --------- -----
Net interest margin 784.9 7.35 655.6 6.91
Provision for credit losses 542.5 400.4
--------- ---------
Net interest margin after provision
for credit losses 242.4 255.2
--------- ---------
Insurance revenues 65.4 63.9
Investment income 33.2 56.9
Fee income 267.1 229.2
Other income 69.1 25.3
--------- ---------
Total other revenues 434.8 375.3
--------- ---------
Salaries and fringe benefits 147.6 136.7
Occupancy and equipment expense 53.9 52.4
Other marketing expenses 118.7 100.4
Other servicing and administrative
expenses 109.4 105.8
Policyholders' benefits 47.0 73.2
--------- ---------
Total costs and expenses 476.6 468.5
--------- ---------
Income before taxes 200.6 162.0
Income taxes 69.1 51.5
--------- ---------
Net income $ 131.5 $ 110.5
========= =========
Average managed receivables $42,154.5 $36,665.6
Average noninsurance investments 576.8 1,307.3
--------- ---------
Average managed interest-earning
assets $42,731.3 $37,972.9
========= ==========
</TABLE>
* As a percent, annualized, of appropriate earning assets.
Unless noted, the following discussion on revenues and provision for credit
losses includes comparisons to amounts reported on the company's historical
statements of income ("Owned Basis") as well as on the above pro forma
statements of income ("Managed Basis").
<PAGE>
<PAGE> 16
Net interest margin
- -------------------
Net interest margin on an Owned Basis was $394.8 million for the first
quarter of 1997, up from $346.4 million in the prior year primarily due
to growth in average owned Visa/MasterCard and private label receivables.
Net interest margin on a Managed Basis was $784.9 million for the first
quarter of 1997, up 20 percent compared to the year-ago period, primarily
due to managed receivable growth and higher spreads. Net interest margin
as a percent of average managed interest-earning assets, annualized, was
7.35 percent compared to 6.91 percent in the year-ago quarter. The
improvement was primarily due to the continuing change in product mix
to higher-yielding unsecured products, improved pricing and lower
funding costs.
Provision for credit losses
- ---------------------------
The provision for credit losses for receivables on an Owned Basis for the
first quarter of 1997 totaled $293.4 million, up 53 percent from $191.3
million in the prior year period. The provision as a percent of average
owned receivables, annualized, was 5.07 percent in the first quarter of
1997 compared to 3.69 percent in the first quarter of 1996. In view of
uncertainty regarding consumer payment patterns, the continued high levels
of personal bankruptcies and growth of unsecured loan products, the company
continued to increase its credit loss reserves in excess of current period
chargeoffs. Provision in excess of chargeoffs related to owned receivables
was $58 and $34 million for the three months ended March 31, 1997 and 1996,
respectively. The provision for credit losses on an Owned Basis may vary
from quarter to quarter, depending on the amount of securitizations in a
particular period.
The provision for credit losses for receivables on a Managed Basis totaled
$542.5 million in the first quarter of 1997, up 35 percent from $400.4
million in the comparable period of 1996. As a percent of average managed
receivables, annualized, the provision increased to 5.15 percent from 4.37
percent in the first quarter of 1996. As noted above, the company increased
credit loss reserves during the quarter due to continued growth and seasoning
of unsecured loan products, and uncertainty over the economy and consumer
payment patterns. In addition, the Managed Basis provision includes the
over-the-life reserve requirement on securitized receivables. These
provisions are impacted by the type and amount of receivables securitized
in a given period and substantially offset the income recorded on the
securitization transactions, as discussed below. In the first quarter of
1997, the company securitized approximately $2.0 billion of Visa/MasterCard
and other unsecured receivables, compared to approximately $1.4 billion of
such receivables a year ago. See the credit quality section for further
discussion of factors affecting the provision for credit losses.
Other revenues
- --------------
Securitization income on an Owned Basis of $330.7 and $279.4 million for the
three months ended March 31, 1997 and 1996, respectively, consists of income
associated with the securitization and sale of receivables with limited
recourse, including net interest income, fee and other income and provision
for credit losses related to those receivables. The 18 percent increase in
securitization income compared to the first quarter of 1996 was primarily
due to the 23 percent increase in average securitized receivables. The
components of securitization income are reclassified to the appropriate
lines in the statements of income on a Managed Basis.
Fee income on an Owned Basis includes revenues from fee-based products such
as credit cards and, in 1996, fees related to consumer banking deposits.
Fee income was $77.4 million in the first quarter of 1997, up from $49.9
million in the comparable period of the prior year, primarily due to higher
interchange and other fees as a result of the increase in the amount of
average owned credit card receivables compared to the prior year.
<PAGE>
<PAGE> 17
Fee income on a Managed Basis, which in addition to the items discussed
above includes fees and other income related to receivables serviced with
limited recourse, increased from $229.2 million in the first quarter of
1996 to $267.1 million in 1997. The increase was attributable to higher
late fees and interchange income from the company's Visa/MasterCard
business. Fee income also included higher income associated with the
securitization and sale of a larger amount of receivables during the
quarter compared to a year ago. Income recorded on these securitization
transactions was substantially offset by the over-the-life reserve for
estimated credit losses on the securitized receivables, as previously
discussed.
Other income increased from $25.3 million in the first quarter of 1996 to
$69.1 million in 1997 as a result of gains totaling approximately $50
million on the sales of assets, as previously discussed.
Expenses
- --------
Operating expenses for the first quarter of 1997 were $429.6 million, up
9 percent from $395.3 million in the comparable prior year period.
Salaries and fringe benefits were $147.6 million compared to $136.7 million
in the first quarter of 1996. The higher expense was primarily due to an
increase in sales force in the domestic consumer finance business, as well
as the addition of collectors in all the company's businesses, as compared
to the prior year.
Other marketing expenses increased to $118.7 million compared to the prior
year amount of $100.4 million as a result of increased spending for the
domestic and United Kingdom credit card programs.
CREDIT LOSS RESERVES
- --------------------
The company's consumer credit management policies focus on product type
and specific portfolio risk factors. The consumer credit portfolio is
diversified by product and geographic location. See Note 3, "Receivables"
in the accompanying financial statements for receivables by product type.
Total managed credit loss reserves, which include reserves for recourse
obligations for receivables sold, were as follows (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
March 31, December 31, March 31,
1997 1996 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Owned $ 943.9 $ 900.2 $ 758.1
Serviced with limited recourse 753.3 696.0 532.7
-------- -------- --------
Total $1,697.2 $1,596.2 $1,290.8
======== ======== ========
</TABLE>
Credit loss reserves have increased due to growth and seasoning of
unsecured products, coupled with uncertainty over the strength of the
economy and increased personal bankruptcies. Managed credit loss
reserves as a percent of nonperforming managed receivables were 118.6
percent, compared to 119.1 percent at December 31, 1996 and 125.4
percent at March 31, 1996.
<PAGE>
<PAGE> 18
Total owned and managed credit loss reserves as a percent of receivables
were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
March 31, December 31, March 31,
1997 1996 1996
- ---------------------------------------------------------------
<S> <C> <C> <C>
Owned 4.21% 3.74% 3.60%
Managed 4.08 3.75 3.53
---- ---- ----
</TABLE>
The level of reserves for consumer credit losses is based on delinquency
and chargeoff experience by product and judgmental factors. Management
also evaluates the potential impact of existing and anticipated national
and regional economic conditions on the managed receivable portfolio when
establishing credit loss reserves. While management allocates reserves
among the company's various products, all reserves are considered to be
available to cover total loan losses. See Note 4, "Credit Loss Reserves"
in the accompanying financial statements for analyses of reserves.
CREDIT QUALITY
- --------------
Delinquency and chargeoff levels in the consumer portfolio were higher
compared to the prior and year-ago quarters. Delinquency and chargeoff
levels are monitored on a managed basis since all of the receivables are
originated using comparable underwriting standards, are managed by operating
personnel without regard to portfolio ownership and result in a similar
credit loss exposure.
Delinquency
- -----------
Two-Months-and-Over Contractual Delinquency (as a percent of managed
consumer receivables):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
3/31/97 12/31/96 9/30/96 6/30/96 3/31/96
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First mortgage 8.19% 9.49% 3.82% 3.64% 3.28%
Home equity 3.85 3.96 3.55 3.35 3.20
Visa/MasterCard 3.13 2.71 2.54 2.05 2.42
Private label 5.52 5.50 5.43 5.04 4.74
Other unsecured 6.68 6.13 5.79 5.95 5.71
---- ---- ---- ---- ----
Total 4.45% 4.15% 3.83% 3.49% 3.60%
==== ==== ==== ==== ====
</TABLE>
Delinquency as a percent of managed consumer receivables increased from the
prior quarter and the prior year. The increase in delinquency was primarily
due to seasoning of the portfolios, the company's continued shift in
portfolio mix away from secured real estate mortgages and toward unsecured
products, and a slower consumer payment pattern.
<PAGE>
<PAGE> 19
Net Chargeoffs of Consumer Receivables
- --------------------------------------
Net Chargeoffs of Consumer Receivables (as a percent, annualized, of average
managed consumer receivables):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
1997 1996 1996 1996 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First mortgage .94% .30% .50% .46% .51%
Home equity 1.38 1.18 .98 .89 .89
Visa/MasterCard 4.90 4.66 4.71 4.86 4.44
Private label 4.85 3.70 3.54 3.82 4.51
Other unsecured 4.97 4.18 4.35 3.58 3.91
---- ---- ---- ---- ----
Total 4.15% 3.59% 3.52% 3.33% 3.24%
==== ==== ==== ==== ====
</TABLE>
Net chargeoffs as a percent of average managed consumer receivables for the
first quarter of 1997 increased compared to both the prior and year-ago
periods. Approximately two-thirds of the year-over-year increase in the
total chargeoff ratio was due to increased bankruptcy filings in the
Visa/MasterCard portfolio. The remaining increase was primarily attributable
to the continued seasoning of the private label and other unsecured
portfolios. The private label ratio was also affected by a portion of
promotional business reaching chargeoff. The increase in net chargeoffs is
in line with the company's expectations and industry trends.
Nonperforming Assets
- --------------------
Nonperforming assets consisted of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
In millions. 3/31/97 12/31/96 9/30/96 6/30/96 3/31/96
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual managed
receivables $ 820.1 $ 778.5 $ 741.1 $ 713.9 $ 740.1
Accruing managed consumer
receivables 90 or more days
delinquent 598.5 549.0 446.1 353.6 269.2
Renegotiated commercial
loans 12.9 12.9 19.9 19.9 20.4
-------- -------- -------- -------- --------
Total nonperforming managed
receivables 1,431.5 1,340.4 1,207.1 1,087.4 1,029.7
Real estate owned 152.6 136.6 137.6 131.9 123.1
-------- -------- -------- -------- --------
Total nonperforming assets $1,584.1 $1,477.0 $1,344.7 $1,219.3 $1,152.8
======== ======== ======== ======== ========
Managed credit loss reserves as
a percent of nonperforming
managed receivables 118.6% 119.1% 126.6% 133.4% 125.4%
-------- -------- -------- -------- --------
</TABLE>
<PAGE>
<PAGE> 20
Part II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Restated Certificate of Incorporation of
Household International, as amended.
10.5 Household International 1996 Long-Term
Executive Incentive Compensation Plan, as amended.
10.8 Household International Deferred Phantom Stock
Plan for Directors.
10.10 Executive Employment Agreement between the Company and
R. F. Elliott.
10.11 Executive Employment Agreement between the Company and
J. W. Saunders.
10.14 Household International Non-Qualified
Deferred Compensation Plan.
12 Statement of Computation of Ratio of Earnings
to Fixed Charges and to Combined Fixed Charges and
Preferred Stock Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
99.1 Debt and Preferred Stock Securities Ratings.
(b) Reports on Form 8-K
During the first quarter of 1997, the Registrant filed
a Current Report on Form 8-K dated January 23, 1997 with
respect to the financial results of Household
International, Inc., for the quarter and year ended
December 31, 1996, and a Current Report on Form 8-K dated
February 10, 1997 containing selected consolidated
financial information with respect to the operations of
Household International, Inc., as of and for the years
ended December 31, 1996 and 1995.
<PAGE>
<PAGE> 21
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HOUSEHOLD INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date: May 14, 1997 By: /s/ David A. Schoenholz
------------- -----------------------------
David A. Schoenholz
Executive Vice President -
Chief Financial Officer
and on behalf of
Household International, Inc.
<PAGE>
<PAGE> 22
Exhibit Index
--------------
3(i) Restated Certificate of Incorporation of
Household International, as amended.
10.5 Household International 1996 Long-Term
Executive Incentive Compensation Plan, as amended.
10.8 Household International Deferred Phantom Stock
Plan for Directors.
10.10 Executive Employment Agreement between the Company and
R. F. Elliott.
10.11 Executive Employment Agreement between the Company and
J. W. Saunders.
10.14 Household International Non-Qualified Deferred Compensation Plan.
12 Statement of Computation of Ratio of Earnings to Fixed Charges
and to Combined Fixed Charges and Preferred Stock Dividends.
21 List of Household International subsidiaries.
27 Financial Data Schedule.
99.1 Debt and Preferred Stock Securities Ratings.
HOUSEHOLD INTERNATIONAL, INC.
RESTATED CERTIFICATE OF INCORPORATION INDEX
DATE DESCRIPTION
- ------ -----------
9/4/81 Restated Certificate of Incorporation
7/25/84 Certificate of Change of Address of
Registered Office and of Registered Agent
5/13/87 Certificate of Amendment (Article VII)
8/5/91 Certificate of Elimination, Designation,
Preferences and Rights of 9-1/2% Cumulative
Preferred Stock, Series 1991-A
10/14/92 Certificate of Designation, Preferences and
Rights of 8-1/4% Cumulative Preferred Stock,
Series 1992-A
5/12/93 Certificate of Amendment (Article IV)
9/1/93 Certificate of Designation, Preferences and
Rights of 7.35% Cumulative Preferred Stock,
Series 1993-A
7/9/96 Certificate of Designations of Series A
Junior Participating Preferred Stock
5/14/97 Certificate of Amendment (Article IV)
RESTATED
CERTIFICATE OF INCORPORATION
OF
HOUSEHOLD INTERNATIONAL, INC.
This Restated Certificate of Incorporation was duly adopted
by the Board of Directors of Household International, Inc. in
accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware. This Restated
Certificate of Incorporation only restates and integrates and
does not further amend the provisions of the Corporation's
certificate of incorporation as heretofore amended or
supplemented, and there is no discrepancy between those
provisions and the provisions of this Restated Certificate of
Incorporation. The original Certificate of Incorporation was
filed with the Secretary of State of Delaware on February 20,
1981.
ARTICLE I
The name of the corporation is Household International, Inc.
ARTICLE II
The address of the Corporation's registered office in the
State of Delaware is 100 West Tenth Street, Wilmington, Delaware
19899. The name of its registered agent at such address is The
Corporation Trust Company, in the county of New Castle.
ARTICLE III
The Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
The total number of shares that may be issued by the
Corporation is 75,655,004 of which 8,155,004 shares shall be
Preferred Stock without par value and 67,500,000 shares shall be
Common Stock of the par value of $1 per share.
The 8,155,004 shares of Preferred Stock may be issued from
time to time in one or more series, which may have such
designations, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated in the resolution or
resolutions (authorizing resolutions) providing for the issue of
such shares adopted by the Board of Directors. Without otherwise
limiting the generality of the foregoing provision, the Board of
Directors is expressly authorized to provide, with respect to
each such series, that:
(a) the shares of such series shall be subject to redemption
(including redemption through a sinking fund or analogous fund)
at such time or times and at such price or prices as shall be
stated in the authorizing resolutions;
(b) the holders of the shares of such series shall be
entitled to receive dividends at such rates, on such conditions
and at such times, payable in preference, or in such relation, to
the dividends payable on any other class or classes or of any
other series of stock of the Corporation, and cumulative or non-
cumulative, all as shall be stated in the authorizing
resolutions;
(c) the holders of the shares of such series shall be
entitled to such rights upon the dissolution, or upon any
distribution of the assets, of the Corporation as shall be stated
in the authorizing resolutions;
(d) the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock,
or of any series thereof, of the Corporation at such price or
prices or at such rate or rates and with such adjustments, all as
shall be stated in the authorizing resolutions;
(e) the shares of such series shall have such voting powers,
full or limited, or no voting powers, as shall be stated in the
authorizing resolutions.
The following is a statement of the powers, preferences, and
rights, and the qualifications, limitations or restrictions
thereof, in respect of the Preferred Stock, except such thereof
as the Board of Directors is herein authorized to provide for,
and in respect of the Common Stock:
(1) Except as otherwise provided in authorizing resolutions
creating series of Preferred Stock, each share of Preferred Stock
shall rank on a parity with each other share of Preferred Stock,
regardless of series, in preference to the Common Stock, with
respect to the payment of dividends at the respectively
designated rates. No dividend shall be declared or paid on the
shares of any particular series of Preferred Stock unless at the
same time a dividend in like proportion to the respectively
designated dividend rates shall be declared or paid on the shares
of each other series of Preferred Stock then issued and
outstanding ranking prior to or on a parity with such particular
series with respect to the payment of dividends. Except as
otherwise provided in the authorizing resolutions creating
additional series of Preferred Stock, each share of Preferred
Stock shall rank on a parity with each other share of Preferred
Stock, regardless of series, in preference to the Common Stock,
with respect to the distribution of assets according to the
amounts to which the shares of the respective series are
thereupon entitled.
(2) The holders of shares of the Preferred Stock shall be
entitled to receive, when and as declared by the Board of
Directors, out of any funds legally available for that purpose,
dividends in cash at such respective rates, payable on such dates
in each year and in respect of such dividend periods, all as
stated in the authorizing resolutions, before any dividends shall
be declared or paid or set apart for payment upon the Common
Stock. Dividends on the shares of each series of the Preferred
Stock shall be cumulative or non-cumulative and, if cumulative,
shall be cumulative from such date, all as stated in the
authorizing resolutions.
At any time after all dividends shall have been paid, as
above provided, on the Preferred Stock of all series then
outstanding and after, or concurrently with, the declaration and
setting aside of a sum for the payment of full dividends on the
Preferred Stock of each series then outstanding for the then
current dividend period established for such series, then, but
not prior thereto, such dividends (payable either in cash, stock,
or otherwise) as may be determined by the Board of Directors may
be declared and paid on the Common Stock out of any remaining
assets legally available for the declaration of dividends and the
Preferred Stock shall not be entitled to participate in any such
dividends whether payable in cash, stock, or otherwise. No
Preferred Stock or Common Stock may be purchased by the
Corporation if any Preferred Stock dividends are in arrears, and
no Preferred Stock may be redeemed in such case unless all issued
and outstanding shares of Preferred Stock are redeemed.
(3) The whole or any part of the Preferred Stock, of any one
or more series, redeemable pursuant to provisions stated in the
respective authorizing resolutions, at the time outstanding, may,
at the option of the Board of Directors, be redeemed, in
accordance with such authorizing resolutions, at any time or from
time to time, by the payment or by making provision for payment
of such price or prices per share in the case of every such
redemption as shall be stated in such authorizing resolutions,
and, in every case, a sum equal to accrued and unpaid dividends,
if any, with respect to each such share to be so redeemed, at the
rate of the dividends fixed therefor, to the date fixed for
redemption.
In case of redemption of a part only of any series of the
Preferred Stock at the time outstanding, such redemption shall be
made by lot or pro rata in such manner as may be prescribed by
resolution of the Board of Directors. The Board of Directors
shall have full power and authority, subject to the limitations
and provisions herein contained and stated in the respective
authorizing resolutions, to prescribe the manner in which and the
terms and conditions upon which Preferred Stock shall be redeemed
from time to time.
Notice of the Corporation's intention to redeem Preferred
Stock, specifying the date of redemption, shall be published in
newspapers of general circulation in New York, New York, and
Chicago, Illinois, and shall be mailed not less than forty-five
nor more than ninety days before the redemption date to the
holders of record of such stock to be redeemed at their
respective addresses as the same shall appear on the books of the
Corporation, and, if less than all the shares owned by any such
stockholder are then to be redeemed, the notice shall specify the
number of shares thereof which are to be redeemed.
If notice shall be given as aforesaid and the funds
necessary to redeem such stock shall have been set aside by the
Corporation (other than by the trust deposit hereinafter provided
for) separate and apart from its other funds for the benefit of
the holders of the shares called for redemption, such stock shall
be redeemed upon such date of redemption and shall cease to be
outstanding; the right to receive dividends thereon shall cease
to accrue from and after such date of redemption and all rights
of holders of the Preferred Stock so called for redemption shall
forthwith on such redemption date cease and terminate except only
the right of the holders thereof, upon presentation and surrender
of their respective certificates representing said shares, to
receive the redemption price therefor but without interest, and
the right of conversion, if any.
Anything herein contained to the contrary notwithstanding,
if notice shall be given as aforesaid and before the redemption
date an amount sufficient to redeem the shares so called for
redemption shall be deposited in trust to be applied to such
redemption with a bank or with bankers authorized to conduct
banking business or with a trust company, in the Borough of
Manhattan, City of New York, or in the City of Chicago, having a
combined capital and surplus of at least $5,000,000, then, from
and after the date of such deposit, such shares shall be deemed
to be redeemed and to cease to be outstanding, and all rights of
the holders of the shares called for redemption, as stockholders
of the Corporation, shall cease except (i) the right, upon
presentation and surrender of their respective certificates
representing said shares, to receive from such bank or bankers or
trust company on or after such redemption date the moneys so
deposited in trust, but without interest, and (ii) the right of
conversion, if any. The Corporation shall be entitled to any
interest payable on the funds so deposited. Any redemption funds
unclaimed at the end of six years shall be repaid to the
Corporation, after which holders of the redeemed shares shall
look only to the Corporation for payment of the redemption price,
but without interest thereon.
(4) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the
holders of the Preferred Stock shall be entitled to be paid or to
have set apart for payment such sum or sums per share as shall be
stated in the respective authorizing resolutions, together in
each case with a sum equal to accrued and unpaid dividends, if
any, at the rate of the dividends fixed therefor, to the date
fixed for payment of such price or prices, before any
distribution or payment shall be made to the holders of the
Common Stock. No consolidation or merger of the Corporation with
another corporation or corporations and no sale by the
Corporation of its assets as an entirety or substantially as an
entirety shall be deemed to be a liquidation, dissolution, or
winding up of the Corporation within the meaning of this
subdivision (4).
(5) The Corporation shall not, without the consent
(expressed either in writing or by affirmative vote at a meeting
called for that purpose) of the holders of two-thirds of the then
outstanding Preferred Stock of all series, other than series in
respect of which the authorizing resolutions expressly provide
that such consent shall not be required:
(i) consolidate or merge with another corporation or
corporations or sell its assets as an entirety or
substantially as an entirety, provided, however, that the
purchase for cash, stock, or otherwise by the Corporation of
all or any part of the assets, stock or other securities of
another corporation or corporations shall not be deemed to
be a consolidation or merger;
(ii) issue Preferred Stock of any series if there shall
be cumulative dividends in arrears on outstanding Preferred
Stock, irrespective of series;
(iii) increase the authorized amount of the Preferred
Stock, or create or issue any class of stock ranking prior
to or on a parity with the Preferred Stock, or any series
thereof, as to the payment of dividends or the distribution
of assets;
(iv) adopt any amendment to the Certificate of
Incorporation of the Corporation which adversely alters any
preference, power, or special right of the Preferred Stock,
or of the holders thereof; provided, however, that if any
such amendment would adversely alter any preference, power,
or special right of one or more but not all of the series of
the Preferred Stock or of the holders thereof, then the
consent (expressed as above provided) only of the holders of
two-thirds of the then outstanding shares of all series so
affected, voting as a class, other than series in respect of
which the authorizing resolutions expressly provide that
such consent shall not be required, shall be required for
the adoption of such amendment.
(6) In the event that any four quarterly cumulative
dividends, whether consecutive or not, upon the Preferred Stock,
or any series thereof, shall be in arrears, the holders of
Preferred Stock of all series, other than series in respect of
which the right is expressly withheld by the authorizing
resolutions, shall have the right, at the next meeting of
stockholders called for the election of directors, to elect one-
third of the members of the Board of Directors out of the number
fixed by the by-laws, and the holders of such Preferred Stock
shall continue to have such right until all unpaid dividends upon
the Preferred Stock shall have been paid in full. In the event
that any eight quarterly cumulative dividends, whether
consecutive or not, upon the Preferred Stock, or any series
thereof, shall be in arrears, the holders of Preferred Stock of
all series, other than series in respect of which the right is
expressly withheld by the authorizing resolutions, shall have the
right, at the next meeting of stockholders called for the
election of directors, to elect a majority of the members of the
Board of Directors out of the numbers fixed by the by-laws, and
the holders of such Preferred Stock shall continue to have such
right until all unpaid dividends upon the Preferred Stock shall
have been paid in full.
(7) The holders of the Common Stock shall be entitled to
vote at all meetings of the stockholders and, subject to the
rights of holders of Preferred Stock to elect directors in
accordance with the provisions of the foregoing subdivision (6),
shall be entitled to one vote for each share of Common Stock
held.
ARTICLE V
There is hereby created a series of Preferred Stock of the
Corporation, such series to be within the class of Preferred
Stock authorized by Article IV hereof; to be designated $6.25
Cumulative Convertible Voting Preferred Stock (the "$6.25
Preferred Stock"); to consist of 3,454,635 shares; to have the
powers, preferences and rights and the qualifications,
limitations and restrictions set forth in, and to be subject to
all of the terms and provisions of, Article IV hereof (except to
the extent that the same may be inconsistent with this Article
V); and to have the following additional powers, preferences,
rights, qualifications, limitations, restrictions, terms and
provisions:
(a) $6.25 per share is fixed as the amount per annum at
which the holders of $6.25 Preferred Stock shall be entitled to
receive dividends when and as declared by the Board of Directors,
such dividends to be paid only from retained earnings of the
Corporation; and such dividends shall be cumulative and shall
accrue, whether or not earned or declared, from the Issue Date
(as hereinafter defined), and shall be payable quarterly on the
fifteenth day of January, April, July and October in each year to
holders of record on the respective business days next preceding
the first days of those months (and the quarterly dividend
periods shall commence on the first days of those months);
provided, however, that as to any shares of $6.25 Preferred Stock
issued less than 60 days prior to a dividend payment date, the
dividend that would otherwise be payable on such dividend payment
date will be payable on the next succeeding dividend payment
date; and provided, further, that no dividend shall be declared
or paid if (i) the Corporation is insolvent or would be rendered
insolvent by payment of such dividend or (ii) the payment of such
dividend would impair the Corporation's capital (i.e., the fair
market value of the remaining assets of the Corporation would be
less than the sum of its liabilities and the liquidation value of
any classes and series of its Preferred Stock ranking prior to or
on a parity with the $6.25 Preferred Stock). The "Issue Date"
shall mean the day on which occurs the merger of Wallace-Murray
Corporation, a Delaware corporation, into Household Acquisition
Corporation Second, a Delaware corporation, or other subsidiary
of the Corporation. An "Anniversary Date" shall mean any
anniversary date of the Issue Date.
(b) The shares of $6.25 Preferred Stock shall be subject to
redemption at the option of the Corporation at any time, and from
time to time, in whole or in part, at the redemption price of $50
per share plus the amount of accrued and unpaid dividends, if
any, thereon to the date fixed for redemption; provided, however,
that no such optional redemption shall be made unless (i) the
date fixed for redemption is on or after the fifth Anniversary
Date, and (ii) at all times during the twelve-month period
terminating on the date on which notice of such redemption is
first given, the annualized rate of dividends in respect of the
outstanding shares of Common Stock of the Corporation shall have
equalled or exceeded the quotient obtained by dividing $6.25 by
the conversion rate specified in paragraph (d) hereof (as said
conversion rate may have been adjusted pursuant to the provisions
of said paragraph). As used herein, the term "annualized rate of
dividends" shall mean, as of any particular time, the aggregate
per share amount of regular cash dividends (excluding special and
extraordinary dividends) paid on shares of the Common Stock of
the Corporation generally, in respect of the most recently
completed twelve-month period.
(c) The amount to which shares of $6.25 Preferred Stock
shall be entitled upon liquidation, dissolution, or winding up of
the Corporation, whether voluntary or involuntary, shall be $50
per share, plus the amount of accrued and unpaid dividends, if
any, thereon to the date fixed for payment, and no more.
(d) The shares of $6.25 Preferred Stock shall be convertible
at any time after issue at the option of the record holder
thereof, in the manner hereinafter provided, into fully paid and
nonassessable shares of Common Stock of the Corporation at the
rate of 1.923 shares (adjusted to 2.327 shares as of close of
business on April 7, 1989 and 4.654 shares as of close of
business on October 15, 1993) of Common Stock for each share of
$6.25 Preferred Stock; provided, however, that as to any shares
of $6.25 Preferred Stock which shall have been called for
redemption, the right of conversion shall terminate at the close
of business on the fifth full business day prior to the date
fixed for redemption. No payment or adjustment shall be made for
dividends accrued on any shares of $6.25 Preferred Stock that
shall be converted or for dividends on any shares of Common Stock
that shall be issuable upon such conversion, but all dividends
accrued and unpaid on such shares of $6.25 Preferred Stock up to
the dividend payment date immediately preceding the date of
conversion shall be payable to the converting shareholder, and no
dividend shall be paid upon the shares of Common Stock until the
same shall be paid or sufficient funds set apart for the payment
thereof.
The conversion rate provided for above shall be subject to
the following adjustments:
(i) In case the Corporation shall declare and pay to
the holders of the shares of Common Stock a dividend in
shares of Common Stock, the conversion rate in effect
immediately prior to the time fixed for the determination of
shareholders entitled to such dividend shall be
proportionately increased (adjusted to the nearest, or if
there shall be no nearest then to the next lower, one-
thousandth of a share of Common Stock), such adjustment to
become effective immediately after the time fixed for such
determination.
(ii) In case the Corporation shall subdivide the
outstanding shares of Common Stock into a greater number of
shares of Common Stock or combine the outstanding shares of
Common Stock into a smaller number of shares of Common
Stock, the conversion rate in effective immediately prior to
such subdivision or combination, as the case may be, shall
be proportionately increased or decreased (adjusted to the
nearest, or if there shall be no nearest then to the next
lower, one-thousandth of a share of Common Stock), as the
case may require, such increase or decrease, as the case may
be, to become effective when such subdivision or combination
becomes effective.
(iii) In case of any reclassification or change of
outstanding shares of Common Stock of the class issuable
upon conversion of the shares of $6.25 Preferred Stock, or
in case of any consolidation or merger of the Corporation
with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially
all of the property of the Corporation, the holder of each
share of $6.25 Preferred Stock then outstanding shall have
the right thereafter, so long as his conversion right
hereunder shall exist, to convert such share into the kind
and amount of shares of stock and other securities and
property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock of the Corporation into
which such shares of $6.25 Preferred Stock might have been
converted immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance, and shall
have no other conversion rights under these provisions;
provided, however, that effective provision shall be made,
in the Articles or Certificate of Incorporation of the
resulting, surviving, or successor corporation or otherwise,
so that the provisions set forth herein for the protection
of the conversion rights of the shares of $6.25 Preferred
Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and
other securities and property deliverable upon conversion of
the shares of $6.25 Preferred Stock remaining outstanding or
other convertible preferred shares received by the holders
in place thereof; and provided, further, that any such
resulting, surviving, or successor corporation shall
expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares,
securities, or property as the holders of the shares of
$6.25 Preferred Stock remaining outstanding, or other
convertible preferred shares received by the holders in
place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provision for the protection
of the conversion right as above provided. In case
securities or property other than shares of Common Stock
shall be issuable or deliverable upon conversion as
aforesaid, then all references in this paragraph shall be
deemed to apply, so far as appropriate and as nearly as may
be, to such other securities or property. The subdivision
or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of
Common Stock (whether with or without par value) shall not
be deemed to be a reclassification of the Common Stock of
the Corporation for the purposes of this subparagraph (iii).
(iv) Unless the holders of shares of the $6.25
Preferred Stock shall be issued subscription rights or
warrants on a reasonably equivalent basis, in case the
Corporation shall issue to the holders of shares of any
class of its capital stock subscription rights or warrants
entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Average Market
Price (as hereinafter defined) at the time fixed for
determination of shareholders entitled to such subscription
rights or warrants, the conversion rate in effect
immediately prior to the time of said determination shall be
increased (adjusted to the nearest, or if there shall be no
nearest then to the next lower, one-thousandth of a share of
Common Stock) by multiplying said rate by a fraction of
which the numerator shall be the sum of the number of shares
of Common Stock outstanding at the time of such
determination and the number of additional shares of Common
Stock so offered for subscription or purchase, and of which
the denominator shall be the sum of the number of shares of
Common Stock outstanding at the time of such determination
and the number of shares of Common Stock which the aggregate
subscription price of the total number of shares so offered
would purchase at the Average Market Price, such adjustment
to become effective immediately after the time fixed for
such determination; provided, however, that if such
subscription rights or warrants shall have a term not
exceeding 45 days and if any such subscription rights or
warrants expire unexercised, then the conversion rate will
be readjusted, effective immediately after the expiration of
such term, to the conversion rate which would have obtained
if such unexercised subscription rights or warrants had not
been issued.
For the purposes of any computation under this
subparagraph (iv) or subparagraph (v), the "Average Market
Price" per share of Common Stock for any time shall be the
average of the daily closing prices for the 30 consecutive
business days commencing 45 business days before the time in
question. The closing price for each day shall be the last
sales price regular way or, in case no such sale takes place
on such day, the average of the closing bid and asked prices
regular way, in either case as recorded on the New York
Stock Exchange (or, if the Common Stock is not regularly
traded on the New York Stock Exchange, on the principal
market or system on which trades in the Common Stock are
recorded).
(v) Unless the holders of shares of the $6.25 Preferred
Stock shall be distributed evidences of indebtedness or
other assets on a reasonably equivalent basis, in case the
Corporation shall distribute to the holders of the shares of
Common Stock evidences of indebtedness of the Corporation or
other assets of the Corporation (other than cash dividends
to the extent paid from retained earnings, dividends in
shares of Common Stock or subscription rights or warrants
entitling them to subscribe for or purchase shares of Common
Stock, but including securities convertible into capital
stock of the Corporation), the conversion rate in effect
immediately prior to the time fixed for determination of
shareholders entitled to such distribution shall be
increased (adjusted to the nearest, or if there shall be no
nearest then to the next lower, one-thousandth of a share of
Common Stock) by multiplying said rate by a fraction of
which the numerator shall be the number of shares of Common
Stock outstanding at the time of such determination, and of
which the denominator shall be the difference between the
number of shares of Common Stock outstanding at the time of
such determination and a number of shares of Common Stock
having an aggregate Average Market Price at the time of such
determination equal to the fair value (as determined by the
Board of Directors of the Corporation in good faith) of the
evidences of indebtedness or other assets so distributed,
such adjustment to become effective immediately after the
time fixed for such determination.
Except as provided in the foregoing subparagraphs (i)
through (v), there shall be no adjustments to the conversion rate
set forth above.
In order to convert shares of $6.25 Preferred Stock into
shares of Common Stock, the holder thereof shall surrender the
certificate or certificates for shares of $6.25 Preferred Stock,
duly endorsed to the Corporation or in blank, at the office of
any Transfer Agent for the shares of $6.25 Preferred Stock (or
such other place as may be designated by the Corporation), and
shall give written notice to the Corporation at said office that
he elects to convert the same and shall state in writing therein
the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, deliver at
said office to such holder of shares of $6.25 Preferred Stock or
to his nominee or nominees, a certificate or certificates for the
number of full shares of Common Stock to which he shall be
entitled as aforesaid and shall make appropriate payment in cash
for any fractional shares. Shares of $6.25 Preferred Stock shall
be deemed to have been converted as of the date of the surrender
of such shares for conversion as provided above, and the person
or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on
such date.
No fractions of shares of Common Stock shall be issued upon
conversion, but in lieu thereof the Corporation shall adjust such
fractional interest by payment to the holders of an amount in
cash equal (computed to the nearest cent) to the same fraction of
the closing price (as defined in subparagraph (iv) above) on the
business day immediately preceding such conversion.
A number of authorized shares of Common Stock sufficient to
provide for the conversion of the shares of $6.25 Preferred Stock
outstanding upon the bases hereinbefore provided shall at all
times be reserved for such conversion.
(e) There shall be a sinking fund (the "Sinking Fund") for
the benefit of the shares of $6.25 Preferred Stock. For the
purposes of the Sinking Fund, out of any net assets of the
Corporation legally available therefor (but only from retained
earnings and subject to the provisions of the last sentence of
paragraph (2) of Article IV of the Certificate of Incorporation),
before any dividends, in cash or property, shall be paid or
declared, or any distribution ordered or made on the Common Stock
of the Corporation, and before any shares of Common Stock of the
Corporation shall be purchased, redeemed, or otherwise acquired
for value by the Corporation or any subsidiary, the Corporation
shall have paid or set aside in cash annually on the day prior to
each Anniversary Date commencing with the tenth Anniversary Date,
so long as there shall be outstanding any shares of $6.25
Preferred Stock, an amount sufficient to redeem, on the day prior
to each such Anniversary Date prior to the thirtieth, 4% of the
number of shares of $6.25 Preferred Stock issued on the Issue
Date (or such lesser number as remains outstanding) and, on the
day prior to the thirtieth Anniversary Date, all such shares of
$6.25 Preferred Stock as remain outstanding, at a price of $50
per share plus the amount of accrued and unpaid dividends, if
any, thereon to the date so fixed for redemption; provided,
however, that there shall be allowed to the Corporation as a
credit thereagainst any shares of $6.25 Preferred Stock which the
Corporation may have acquired (as a result of the conversion of
such shares or otherwise, which it may have redeemed pursuant to
paragraph (b) hereof, or which it may have redeemed pursuant to
this paragraph (e) (otherwise than through the operation of the
Sinking Fund), which have not theretofore been used for the
purpose of any such credit or any credit against a redemption of
$6.25 Preferred Stock at the Corporation's election as
hereinafter in this paragraph (e) provided for and which shares
shall have been set aside by the Corporation for the purpose of
the Sinking Fund; and provided, further, that no monies shall be
paid or set aside for the Sinking Fund if at the day prior to any
such Anniversary Date the Corporation is in arrears in respect of
a sinking fund obligation under any other series of Preferred
Stock ranking prior to or on a parity with the $6.25 Preferred
Stock except to the extent that, in the case of any series
ranking on a parity with the $6.25 Preferred Stock, provision is
made for the payment or setting aside of monies for the Sinking
Fund and for the sinking funds of such other series in proportion
to the respective aggregate amounts then required to be paid or
set aside therefor; and provided, further, that no monies shall
be paid or set aside for the Sinking Fund if (i) the Corporation
is insolvent or would be rendered insolvent by the payment or
setting aside of such monies or (ii) the payment or setting aside
of such monies would impair the Corporation's capital (i.e., the
fair market value of the remaining assets of the Corporation
would be less than the sum of its liabilities and the liquidation
value of classes and series of its Preferred Stock ranking prior
to or on a parity with the $6.25 Preferred Stock). The Sinking
Fund shall be cumulative so that if on the day prior to any such
Anniversary Date, the net assets of the Corporation legally
available therefor or the retained earnings of the Corporation
shall be insufficient to permit any such amount be paid or set
aside in full, or if for any other reason such amount shall not
have been paid or set aside in full, the amount of the deficiency
shall be paid or set aside, but without interest, before any
dividend, in cash or property, shall be paid or declared, or any
other distribution ordered or made, on the Common Stock of the
Corporation, and before any shares of Common Stock of the
Corporation shall be purchased, redeemed or otherwise acquired
for value by the Corporation or by any subsidiary of the
Corporation. The Corporation may elect to redeem, on any Sinking
Fund redemption date, up to an additional 4% of the number of
shares of $6.25 Preferred Stock issued on the Issue Date, at a
price of $50 per share plus the amount of accrued and unpaid
dividends, if any, thereon to the date fixed for redemption;
provided, however, that there shall be allowed to the Corporation
as a credit thereagainst any shares of $6.25 Preferred Stock
which the Corporation may have acquired or redeemed otherwise
than pursuant to paragraph (b) above and this paragraph (e) which
have not theretofore been used for the purpose of any such credit
or for the purpose of any credit against a redemption of $6.25
Preferred Stock pursuant to the Sinking Fund. Such optional
right shall not be cumulative and, if unexercised in a particular
year, may not be carried forward to subsequent years.
(f) The holders of $6.25 Preferred Stock shall be entitled
to vote at all meetings of the stockholders, and at each such
meeting shall be entitled to one vote for each share held.
(g) To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, in respect
of additional series of Preferred Stock, none of the preferences
or rights of any such additional series as fixed by the Board of
Directors shall be prior or superior in any respect to those of
the $6.25 Preferred Stock. Without limiting the rights conferred
by paragraph (5) of Article IV of the Certificate of
Incorporation of the Corporation, the Corporation shall not,
without the consent of the holders of two-thirds of the then
outstanding shares of $6.25 Preferred Stock, adopt any amendment
to the Certificate of Incorporation of the Corporation or take
other action, whether by the Board of Directors or stockholders,
which adversely alters the preferences, powers and special rights
conferred by the provisions of paragraphs (b), d(iv), d(v) or (e)
hereof.
ARTICLE VI
In furtherance, and not in limitation, of the powers
conferred by statute, the Board of Directors of the Corporation
is expressly authorized:
(1) To make, alter, amend and rescind the by-laws of
the Corporation.
(2) To determine from time to time, whether and to what
extent, and at what times and places, and under what
conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them
shall be open to inspection of the stockholders; and no
stockholder shall have any right to inspect any account,
book or document of the Corporation, except as conferred by
statute, unless authorized by a resolution of the
stockholders then entitled to vote thereon or the Board of
Directors.
IN WITNESS WHEREOF, said Household International, Inc. has
caused its corporate seal to be hereunto affixed and this
certificate to be signed by D. C. Clark, its President, and
attested by J. D. Pinkerton, its Secretary, this 4th day of
September, 1981.
Household International, Inc.
By: /s/ D. C. Clark
---------------
President
[SEAL]
Attest:
By: /s/ J. D. Pinkerton
-------------------
Secretary
A:\WP51\IC9481.WP
<PAGE>
CERTIFICATE OF CHANGE OF ADDRESS OF
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
To: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Federal Street
Dover, Delaware 19903
Pursuant to the provisions of Section 134 of Title 8 of the
Delaware Code, the undersigned Agent for service of process, in
order to change the address of the registered office of the
corporations for which it is registered agent, hereby certifies
that:
1. The name of the agent is: The Corporate Trust Company
2. The address of the old registered office was:
100 West Tenth Street
Wilmington, Delaware 19801
3. The address to which the registered office is to be
changed is:
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
The new address will be effective on July 30, 1984.
4. The names of the corporation represented by said agent
are set forth on the list annexed to this certificate
and made a part hereof by reference.
IN WITNESS WHEREOF, said agent has caused this certificate
to be signed on its behalf by its Vice-President and Assistant
Secretary this 25th day of July, 1984.
THE CORPORATION TRUST COMPANY
(Name of Registered Agent)
By: Virginia Colwell
----------------
(Vice-President)
Attest:
Mick Nurman
- ---------------------
(Assistant Secretary) <PAGE>
PAGE 796
STATE OF DELAWARE - DIVISION OF CORPORATIONS
CHANGE OF ADDRESS FILING FOR
CORPORATION TRUST AS OF JULY 27, 1984
DOMESTIC
0908612 HOUSEHOLD INTERNATIONAL, INC. 02/21/1981 D DE
A:\WP51\IC72584.WP<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Household International, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Restated Certificate of Incorporation, as
heretofore amended, of said Corporation has been further amended
by inserting the following as Article VII:
ARTICLE VII
(1) Elimination of Certain Liability of Directors. A
director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or
successor provision, or (iv) for any transaction from which
the director derived an improper personal benefit. Any
repeal or amendment to this Section shall not adversely
affect any right or protection of a director of the
Corporation for any act or occurrence taking place prior to
such repeal or amendment.
(2) Indemnification and Insurance.
(a) Each person who was or is made a party or is
threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or
was a director, officer, or employee of the Corporation or
is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation
or of a partnership, joint venture, trust, or other
enterprise, including service with respect to employee
benefit plans, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law
permitted the Corporation to provide prior to such
amendment), against all expense, liability, and loss
(including attorneys' fees, judgments, fines, ERISA excise
taxes, or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person
in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit
of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (b) hereof,
the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors
of the Corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include
the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its
final disposition upon delivery to the Corporation of an
undertaking to repay all amounts so advanced if it shall
ultimately be determined that such person is not entitled to
be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors,
provide indemnification to agents of the Corporation with
the same scope and effect as the foregoing indemnification
of directors, officers, and employees.
(b) If a claim under paragraph (a) of this
Section is not paid in full by the Corporation, the claimant
may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final
disposition where the required undertaking has been tendered
to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the
Delaware General Corporation Law and paragraph (a) of this
Section for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the
circumstances because he or she has met the applicable
standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of
its final disposition conferred in this Section shall not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this
Certificate of Incorporation, bylaw, agreement, contract,
vote of stockholders or disinterested directors, or
otherwise.
(d) The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of
this Section, the Delaware General Corporation Law, or
otherwise.
SECOND: That the aforesaid amendment of the Restated
Certificate of Incorporation of said Corporation, set forth in
Paragraph FIRST hereinabove, has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by
D. C. Clark, its Chairman of the Board and Chief Executive
Officer, and J. D. Pinkerton, its Senior Vice President -
Administration and Secretary, this 13th day of May, 1987.
HOUSEHOLD INTERNATIONAL, INC.
[SEAL]
By: /s/ D. C. Clark
-------------------------
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ J. D. Pinkerton
- ----------------------------
Senior Vice President -
Administration and Secretary
A:\WP51\IC51387.WP<PAGE>
CERTIFICATE OF HOUSEHOLD INTERNATIONAL, INC.
UNDER SECTION 151(g) OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
Household International, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), does hereby
certify that:
1) the Corporation's 9-1/2% Cumulative Preferred Stock,
Series 1991-A (the "Preferred Stock") has been redeemed in its
entirety and that no shares of the Preferred Stock are
outstanding as of the date hereof.
2) the following resolution has been duly adopted by the
Corporation's Board of Directors:
"RESOLVED, that the officers of the Corporation are
duly authorized to file a certificate with the Secretary of
State of Delaware eliminating from the Corporation's
Certificate of Incorporation all matters set forth in each
Certificate of Designation, Preferences and Rights for the
Preferred Stock and as permitted by the Certificate of
Designation, Preferences and Rights for the Preferred Stock,
such shares of Preferred Stock redeemed shall resume the
status of authorized and unissued shares of the
Corporation's preferred stock."
Upon the effective date of the filing of this Certificate,
it shall eliminate from the Corporation's Certificate of
Incorporation all matters set forth in the Certificate of
Designation, Preferences and Rights with respect to the
Corporation's 9-1/2% Cumulative Preferred Stock, Series 1991-A,
and all of such shares of 9-1/2% Cumulative Preferred Stock,
Series 1991-A, shall resume the status of authorized and unissued
shares of the Corporation's class of Preferred Stock.
IN WITNESS WHEREOF, said Household International, Inc., has
caused its corporate seal to be hereunto affixed and this
Certificate to be signed by Paul R. Shay, its Secretary, and
attested by Susan E. Casey, its Assistant Secretary, this 14th
day of March, 1997.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ P. R. Shay
------------------------
Secretary
Attest:
By: /s/ S. E. Casey
-------------------
Assistant Secretary
<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
9-1/2% Cumulative Preferred Stock, Series 1991-A
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), HEREBY CERTIFIES that the following resolutions
were duly adopted by the Board of Directors of the Corporation
and by the Preferred Stock Committee of the Board of Directors,
pursuant to authority conferred upon the Board of Directors by
the provisions of the Restated Certificate of Incorporation, as
amended, of the Corporation, and pursuant to authority conferred
upon the Preferred Stock Committee by the resolutions of the
Board of Directors set forth herein and in accordance with
Section 141(c) of the General Corporation Law of the State of
Delaware.
1. The Board of Directors has adopted the following
resolutions designating a Preferred Stock Committee of the Board
of Directors and authorizing the Preferred Stock Committee to act
on behalf of the Board of Directors (within certain limitations)
in connection with the designation, issuance and sale of shares
in one or more series of Preferred Stock of the Corporation:
"RESOLVED, that a Preferred Stock Committee of the
Board of Directors is hereby designated which shall have and
may exercise, to the fullest extent permitted by law, the
full power and authority of the Board of Directors with
respect to the issuance and sale of one or more new series
of the Corporation's Preferred Stock without par value (each
such series herein referred to as the "New Preferred
Stock"), including, without limitation, establishing the
purchase price therefor, and fixing the designations and any
of the preferences, powers, rights (other than voting powers
or voting rights which shall be fixed by the Board of
Directors) and relative, participating, optional or other
special rights and qualifications, limitations or
restrictions thereof, of such shares of each series of New
Preferred Stock, and fixing the number of shares of each
series of New Preferred Stock.
"FURTHER RESOLVED, that the Committee is authorized to
take such additional actions and adopt such additional
resolutions as it deems necessary or appropriate for the
purpose of authorizing and implementing the issuance, offer,
and sale for cash of New Preferred Stock, including, without
limiting the generality of the foregoing, the authorization
and execution of agreements (including underwriting
agreements) relating to the offer and sale of New Preferred
Stock, authorization and approval of listing applications
(including amendments or supplements thereto) for the
listing of such New Preferred Stock on a stock exchange,
approval of forms of stock certificates and authorization of
issuance of New Preferred Stock in uncertificated form, any
actions which may be necessary to qualify the offering and
sale of New Preferred Stock under Blue Sky Laws of the
various states, any necessary filings with the Secretary of
State of Delaware and other jurisdictions, and the
appointment of a transfer agent.
"FURTHER RESOLVED, that notwithstanding the foregoing
resolutions, the Preferred Stock Committee may not authorize
the sale of New Preferred Stock for more than $250 million
cash consideration in the aggregate, and the power and
authority of the Preferred Stock Committee set forth in the
preceding resolutions shall expire on September 12, 1991.
"FURTHER RESOLVED, that the members of the Preferred
Stock Committee shall be D. C. Clark, E. P. Hoffman, and
G. P. Osler. In the absence of Mr. Osler, A. E. Rasmussen
is designated as an alternate member of the Preferred Stock
Committee to serve in his place."
2. The Board of Directors has adopted the following
resolution pertaining to the voting rights for series of
Preferred Stock authorized for issuance by the Preferred Stock
Committee of the Board of Directors:
"RESOLVED, that notwithstanding the resolution of the
Board of Directors adopted on October 17, 1989, the holders
of the Corporation's Flexible Rate Auction Preferred Stock,
Series A, and Flexible Rate Auction Preferred Stock, Series
B, and any other series of Preferred Stock which on or after
July 10, 1990, is authorized by the Preferred Stock
Committee of the Board of Directors to be issued and sold
pursuant to authority granted to the Preferred Stock
Committee by the Board of Directors (each such series herein
referred to as the "New Preferred Stock") shall have no
voting rights, and their consent shall not be required for
taking any corporate action, except as otherwise set forth
herein, except as otherwise required by law, and except as
otherwise provided by the Board of Directors with respect to
any particular series of New Preferred Stock.
The consent of the holders of the New Preferred Stock
with respect to the matters set forth in sub-sections (i)
and (iii) of paragraph (5) of Article IV of the
Corporation's Restated Certificate of Incorporation
("Paragraph (5)") shall not be required, except with respect
to the creation or issuance of any class of stock ranking
prior to or on a parity with the Preferred Stock, or any
series thereof, as to the payment of dividends or the
distribution of assets; but the other provisions of
Paragraph (5) shall be applicable to the New Preferred
Stock. The holders of the New Preferred Stock shall have no
right to elect directors pursuant to paragraph (6) of
Article IV of the Corporation's Restated Certificate of
Incorporation ("Paragraph (6)"), such right hereby being
expressly withheld.
In the event that any six quarterly cumulative
dividends (which shall be deemed to include dividends in
respect of a number of non-quarterly dividend periods
containing not less than 540 days), whether consecutive or
not, upon the New Preferred Stock shall be in arrears, the
holders of the New Preferred Stock shall have the right,
voting separately as a class with holders of shares of any
one or more other series of Preferred Stock ranking on a
parity with the New Preferred Stock either as to payment of
dividends or the distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and upon which like voting rights have been
conferred (which shall include the Corporation's 9-1/2%
Cumulative Preferred Stock, Series 1989-A) and are then
exercisable, at the next meeting of stockholders called for
the election of directors, to elect two members of the Board
of Directors. The right of such holders of such shares of
the New Preferred Stock, voting separately as a class, to
elect (together with the holders of shares of any one or
more other series of Preferred Stock ranking on such a
parity) members of the Board of Directors of the Corporation
as aforesaid shall continue until such time as all dividends
accumulated on such shares of the New Preferred Stock shall
have been paid in full, at which time such right shall
terminate, except as herein or by law expressly provided,
subject to revesting in the event of each and every
subsequent failure to pay dividends of the character above
mentioned.
Upon any termination of the right of the holders of the
New Preferred Stock as a class to elect directors as herein
provided, the term of office of all directors so elected
shall terminate immediately. If the office of any director
elected by such holders voting as a class becomes vacant by
reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the remaining director
elected by such holders voting as a class may choose a
successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Whenever the term
of office of the directors elected by such holders voting as
a class shall end and the special voting powers vested in
such holders as provided in this resolution shall have
expired, the number of directors shall thereupon be such
number as may be provided for in the Corporation's Bylaws
irrespective of any increase made pursuant to the provisions
of this resolution.
Until all unpaid dividends on the New Preferred Stock
shall have been paid in full, and in order to permit the
holders of the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, and any other series of Preferred
Stock issued by the Corporation having the voting rights set
forth in Paragraph (6) to exercise fully the right to elect
directors as granted by and provided in paragraph (6), the
number of directors constituting the whole Board of
Directors of the Corporation shall not be less than seven.
If, upon any such arrearage in dividends, the number of
directors constituting the whole Board of Directors shall be
less than seven, the size of the Board of Directors shall,
immediately prior to the next meeting of stockholders called
for the election of directors, automatically be increased by
such number as shall be necessary to cause the number of
directors constituting the whole Board of Directors to be no
less than seven.
To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof in
respect of additional series of Preferred Stock, none of the
preferences or rights of any such additional series as fixed
by the Board of Directors shall rank prior to the New
Preferred Stock as to payment of dividends or the
distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary, without the
consent of the holders of two-thirds of the outstanding
shares of such series of New Preferred Stock voting as a
class.
The foregoing voting provisions shall not apply to any
series of New Preferred Stock if, at or prior to the time
when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of
such series of New Preferred Stock shall have been redeemed
or sufficient funds shall have been deposited in trust to
effect such redemption.
On any item in which the holders of New Preferred Stock
are entitled to vote, such holders shall be entitled to one
vote for each share held."
3. The Preferred Stock Committee of the Board of Directors
has adopted the following resolution pursuant to authority
conferred upon the Preferred Stock Committee of the Board of
Directors by the resolution of the Board of Directors set forth
in paragraph 1 above of this Certificate of Designation,
Preferences and Rights:
"RESOLVED, that the issue of a series of Preferred
Stock without par value of the Corporation is hereby
authorized and the designation, preferences and privileges,
relative, participating, optional and other special rights,
and qualifications, limitations and restrictions thereof, in
addition to those set forth in the Restated Certificate of
Incorporation, as amended, of the Corporation, are hereby
fixed as follows:
9-1/2% Cumulative Preferred Stock, Series 1991-A
(1) Number of Shares and Designation. 550,000 shares
of Preferred Stock without par value of the Corporation are
hereby constituted as a series of Preferred Stock without
par value and designated as 9-1/2% Cumulative Preferred
Stock, Series 1991-A (hereinafter called the "9-1/2%
Preferred Stock").
(2) Dividends. The holders of shares of the 9-1/2%
Preferred Stock shall be entitled to receive cash dividends,
when and as declared by the Board of Directors of the
Corporation, out of assets legally available for such
purpose, at the rate determined as provided below. Such
dividends shall be cumulative from the date of original
issue of such shares and shall be payable quarterly in
arrears, when and as declared by the Board of Directors of
the Corporation, on the fifteenth day of January, April,
July and October in each year to holders of record on the
respective business days next preceding the first days of
those months (and the quarterly dividend periods shall
commence on the first days of those months).
Dividends on the 9-1/2% Preferred Stock for quarterly
dividend periods will be payable at the rate of 9-1/2% per
annum from the date of original issue applied to the amount
of $100 per share of 9-1/2% Preferred Stock. The amount of
dividends payable on each share of 9-1/2% Preferred Stock
for each full quarterly dividend period shall be computed by
dividing the dividend rate by four and applying the dividend
rate to the amount of $100 per share. The amount of
dividends payable for any dividend period shorter or longer
than a full quarterly dividend period shall be computed on
the basis of 30-day months, a 360-day year and the actual
number of days elapsed in the period.
(3) Liquidation Preference. The amount to which shares
of 9-1/2% Preferred Stock shall be entitled upon
liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, shall be $100 per share,
plus an amount equal to all accrued and unpaid dividends, if
any, thereon to the date fixed for payment, and no more.
(4) Redemption. The shares of 9-1/2% Preferred Stock
shall be subject to redemption in whole or in part at the
option of the Corporation on or after August 13, 1996, at
$100 per share, plus an amount equal to all accrued and
unpaid dividends, if any, thereon to the date fixed for
redemption, and no more.
(5) Shares to be Retired. All shares of 9-1/2%
Preferred Stock purchased or redeemed by the Corporation
shall be retired and cancelled and shall be restored to the
status of authorized but unissued shares of the class of
Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of
9-1/2% Preferred Stock.
(6) Conversion or Exchange. The holders of shares of
9-1/2% Preferred Stock shall not have any rights herein to
convert such shares into or exchange such shares for shares
of any other series of any class or classes of capital stock
(or any other security) of the Corporation.
(7) Ranking. The 9-1/2% Preferred Stock shall rank on
a parity with the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, 9-1/2% Cumulative Preferred Stock,
Series 1989-A, Flexible Rate Auction Preferred Stock, Series
A, Flexible Rate Auction Preferred Stock, Series B, and 11-
1/4% Enhanced Rate Cumulative Preferred Stock as to payment
of dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred
Stock as to payment of dividends and distribution of assets
upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, and prior to any other series of
stock authorized to be issued by the Corporation which ranks
junior to the $6.25 Cumulative Convertible Voting Preferred
Stock, 9-1/2% Cumulative Preferred Stock, Series 1989-A,
Flexible Rate Auction Preferred Stock, Series A, Flexible
Rate Auction Preferred Stock, Series B and 11-1/4% Enhanced
Rate Cumulative Preferred Stock as to payment of dividends
and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be signed
by David D. Wesselink, Vice President and Treasurer of the
Corporation, and attested by Susan Casey, Assistant Secretary,
this 5th day of August, 1991.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ D. D. Wesselink
----------------------------
Vice President and Treasurer
Attest:
/s/ S. E. Casey
- -------------------
Assistant Secretary
A:\WP51\IC8591.WP<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
8-1/4% Cumulative Preferred Stock, Series 1992-A
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), HEREBY CERTIFIES that the following resolutions
were duly adopted by the Board of Directors of the Corporation
and by the Preferred Stock Committee of the Board of Directors,
pursuant to authority conferred upon the Board of Directors by
the provisions of the Restated Certificate of Incorporation, as
amended, of the Corporation, and pursuant to authority conferred
upon the Preferred Stock Committee by the resolutions of the
Board of Directors set forth herein and in accordance with
Section 141(c) of the General Corporation Law of the State of
Delaware.
1. The Board of Directors has adopted the following
resolutions designating a Preferred Stock Committee of the Board
of Directors and authorizing the Preferred Stock Committee to act
on behalf of the Board of Directors (within certain limitations)
in connection with the designation, issuance and sale of shares
in one or more series of Preferred Stock of the Corporation:
"RESOLVED, that a Preferred Stock Committee of the
Board of Directors is hereby designated which shall have and
may exercise, to the fullest extent permitted by law, the
full power and authority of the Board of Directors with
respect to the issuance and sale of one or more new series
of the Corporation's Preferred Stock without par value (each
such series herein referred to as the "New Preferred
Stock"), including, without limitation, establishing the
purchase price therefor, and fixing the designations and any
of the preferences, powers, rights (other than voting powers
or voting rights which shall be fixed by the Board of
Directors) and relative, participating, optional or other
special rights and qualifications, limitations or
restrictions thereof, of such shares of each series of New
Preferred Stock, and fixing the number of shares of each
series of New Preferred Stock.
"FURTHER RESOLVED, that the Preferred Stock Committee
is authorized to take such additional actions and adopt such
additional resolutions as it deems necessary or appropriate
for the purpose of authorizing and implementing the
issuance, offer, and sale for cash of New Preferred Stock,
including, without limiting the generality of the foregoing,
the authorization and execution of agreements (including
underwriting agreements) relating to the offer and sale of
New Preferred Stock, authorization and approval of listing
applications (including amendments or supplements thereto)
for the listing of such New Preferred Stock on a stock
exchange, approval of forms of stock certificates and
authorization of issuance of New Preferred Stock in
uncertificated form, any actions which may be necessary to
qualify the offering and sale of New Preferred Stock under
Blue Sky Laws of the various states, any necessary filings
with the Secretary of State of Delaware and other
jurisdictions, and the appointment of a transfer agent.
"FURTHER RESOLVED, that notwithstanding the foregoing
resolutions, the Preferred Stock Committee may not authorize
the sale of New Preferred Stock for more than $150 million
cash consideration in the aggregate, and the power and
authority of the Preferred Stock Committee set forth in the
preceding resolutions shall expire on December 31, 1994,
unless extended by further action of the Board of Directors
of the Corporation.
"FURTHER RESOLVED, that the members of the Preferred
Stock Committee shall be D. C. Clark, E. P. Hoffman, and
G. P. Osler. In the absence of Mr. Osler, A. E. Rasmussen
is designated as an alternate member of the Preferred Stock
Committee to serve in his place."
2. The Board of Directors has adopted the following
resolution pertaining to the voting rights for series of
Preferred Stock authorized for issuance by the Preferred Stock
Committee of the Board of Directors:
"RESOLVED, that holders of each series of the
Corporation's New Preferred Stock which is authorized by the
Preferred Stock Committee of the Board of Directors shall
have no voting rights, and their consent shall not be
required for taking any corporate action, except as
otherwise set forth herein, or as otherwise required by law,
and except as otherwise provided by the Board of Directors
with respect to any particular series of New Preferred
Stock.
The consent of the holders of the New Preferred Stock
with respect to the matters set forth in sub-sections (i)
and (iii) of paragraph (5) of Article IV of the
Corporation's Restated Certificate of Incorporation
("Paragraph (5)") shall not be required, except with respect
to the creation or issuance of any class of stock ranking
prior to or on a parity with the New Preferred Stock, or
any series thereof, as to the payment of dividends or the
distribution of assets; but the other provisions of
Paragraph (5) shall be applicable to the New Preferred
Stock. The holders of the New Preferred Stock shall have no
right to elect directors pursuant to paragraph (6) of
Article IV of the Corporation's Restated Certificate of
Incorporation ("Paragraph (6)"), such right hereby being
expressly withheld.
In the event that any six quarterly cumulative
dividends, whether consecutive or not, upon the New
Preferred Stock shall be in arrears, the holders of the New
Preferred Stock shall have the right, voting separately as a
class with holders of shares of any one or more other series
of Preferred Stock of the Corporation ranking on a parity
with the New Preferred Stock either as to payment of
dividends or the distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and upon which like voting rights have been
conferred and are then exercisable, at the next meeting of
stockholders called for the election of directors, to elect
two members of the Board of Directors. The right of such
holders of such shares of the New Preferred Stock, voting
separately as a class, to elect (together with the holders
of shares of any one or more other series of Preferred Stock
of the Corporation ranking on such a parity) members of the
Board of Directors of the Corporation as aforesaid shall
continue until such time as all dividends accumulated on
such shares of the New Preferred Stock shall have been paid
in full, at which time such right shall terminate, except as
herein or by law expressly provided, subject to revesting in
the event of each and every subsequent failure to pay
dividends of the character above mentioned.
Upon any termination of the right of the holders of the
New Preferred Stock as a class to elect directors as herein
provided, the term of office of all directors so elected
shall terminate immediately. If the office of any director
elected by such holders voting as a class becomes vacant by
reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the remaining director
elected by such holders voting as a class may choose a
successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Whenever the term
of office of the directors elected by such holders voting as
a class shall end and the special voting powers vested in
such holders as provided in this resolution shall have
expired, the number of directors shall thereupon be such
number as may be provided for in the Corporation's Bylaws
irrespective of any increase made pursuant to the provisions
of this resolution.
Until all unpaid dividends on the New Preferred Stock
shall have been paid in full, and in order to permit the
holders of the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, and any other series of Preferred
Stock issued by the Corporation having the voting rights set
forth in Paragraph (6) to exercise fully the right to elect
directors as granted by and provided in Paragraph (6), the
number of directors constituting the whole Board of
Directors of the Corporation shall not be less than seven.
If, upon any such arrearage in dividends, the number of
directors constituting the whole Board of Directors shall be
less than seven, the size of the Board of Directors shall,
immediately prior to the next meeting of stockholders called
for the election of directors, automatically be increased by
such number as shall be necessary to cause the number of
directors constituting the whole Board of Directors to be no
less than seven.
To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof in
respect of additional series of Preferred Stock, none of the
preferences or rights of any such additional series as fixed
by the Board of Directors shall rank prior to the New
Preferred Stock as to payment of dividends or the
distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary, without the
consent of the holders of two-thirds of the outstanding
shares of such series of New Preferred Stock voting as a
class.
The foregoing voting provisions shall not apply to any
series of New Preferred Stock if, at or prior to the time
when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of
such series of New Preferred Stock shall have been redeemed
or sufficient funds shall have been deposited in trust to
effect such redemption.
On any item in which the holders of New Preferred Stock
are entitled to vote, such holders shall be entitled to one
vote for each share held."
3. The Preferred Stock Committee of the Board of Directors
has adopted the following resolution pursuant to authority
conferred upon the Preferred Stock Committee of the Board of
Directors by the resolution of the Board of Directors set forth
in paragraph 1 above of this Certificate of Designation,
Preferences and Rights:
"RESOLVED, that the issue of a series of Preferred
Stock without par value of the Corporation is hereby
authorized and the designation, preferences and privileges,
relative, participating, optional and other special rights,
and qualifications, limitations and restrictions thereof, in
addition to those set forth in the Restated Certificate of
Incorporation, as amended, of the Corporation, are hereby
fixed as follows:
8-1/4% Cumulative Preferred Stock, Series 1992-A
(1) Number of Shares and Designation. 50,000 shares of
Preferred Stock without par value of the Corporation are
hereby constituted as a series of Preferred Stock without
par value and designated as 8-1/4% Cumulative Preferred
Stock, Series 1992-A (hereinafter called the "8-1/4%
Preferred Stock").
(2) Dividends. The holders of shares of the 8-1/4%
Preferred Stock shall be entitled to receive cash dividends,
when and as declared by the Board of Directors of the
Corporation, out of assets legally available for such
purpose, at the rate determined as provided below. Such
dividends shall be cumulative from the date of original
issue of such shares and shall be payable quarterly in
arrears, when and as declared by the Board of Directors of
the Corporation, on the fifteenth day of January, April,
July and October in each year to holders of record on the
respective business days next preceding the first days of
those months (and the quarterly dividend periods shall
commence on the first days of those months).
Dividends on the 8-1/4% Preferred Stock for quarterly
dividend periods will be payable at the rate of 8-1/4% per
annum from the date of original issue applied to the amount
of $1,000 per share of 8-1/4% Preferred Stock. The amount
of dividends payable on each share of 8-1/4% Preferred Stock
for each full quarterly dividend period shall be computed by
dividing the dividend rate by four and applying the dividend
rate to the amount of $1,000 per share. The amount of
dividends payable for any dividend period shorter or longer
than a full quarterly dividend period shall be computed on
the basis of 30-day months, a 360-day year and the actual
number of days elapsed in the period.
(3) Liquidation Preference. The amount to which shares
of 8-1/4% Preferred Stock shall be entitled upon
liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, shall be $1,000 per share,
plus an amount equal to all accrued and unpaid dividends, if
any, thereon to the date fixed for payment, and no more.
(4) Redemption. The shares of 8-1/4% Preferred Stock
shall be subject to redemption in whole or in part at the
option of the Corporation on or after October 15, 2002, at
$1,000 per share, plus an amount equal to all accrued and
unpaid dividends, if any, thereon to the date fixed for
redemption, and no more.
(5) Shares to be Retired. All shares of 8-1/4%
Preferred Stock purchased or redeemed by the Corporation
shall be retired and cancelled and shall be restored to the
status of authorized but unissued shares of the class of
Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of
8-1/4% Preferred Stock.
(6) Conversion or Exchange. The holders of shares of
8-1/4% Preferred Stock shall not have any rights herein to
convert such shares into or exchange such shares for shares
of any other series of any class or classes of capital stock
(or any other security) of the Corporation.
(7) Ranking. The 8-1/4% Preferred Stock shall rank on
a parity with the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, 9-1/2% Cumulative Preferred Stock,
Series 1989-A, Flexible Rate Auction Preferred Stock, Series
A, Flexible Rate Auction Preferred Stock, Series B, 11-1/4%
Enhanced Rate Cumulative Preferred Stock and 9-1/2%
Cumulative Preferred Stock, Series 1991-A as to payment of
dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred
Stock as to payment of dividends and distribution of assets
upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, and prior to any other series of
stock authorized to be issued by the Corporation which ranks
junior to the $6.25 Cumulative Convertible Voting Preferred
Stock, 9-1/2% Cumulative Preferred Stock, Series 1989-A,
Flexible Rate Auction Preferred Stock, Series A, Flexible
Rate Auction Preferred Stock, Series B, 11-1/4% Enhanced
Rate Cumulative Preferred Stock and 9-1/2% Cumulative
Preferred Stock, Series 1991-A as to payment of dividends
and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be signed
by J. Richard Hull, Senior Vice President-Secretary of the
Corporation, and attested by John W. Blenke, Assistant Secretary,
this 14th day of October, 1992.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ J. Richard Hull
----------------------
Senior Vice President-
Secretary
Attest:
/s/ John W. Blenke
- -------------------
Assistant Secretary
A:\WP51\IC101492.WP<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Household International, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Restated Certificate of Incorporation, as
heretofore amended, of said Corporation has been further amended
by deleting, in its entirety, the first paragraph of Article IV
thereof and inserting the following as the new first paragraph of
Article IV:
The total number of shares that may be issued by
the Corporation is 158,155,004 of which 8,155,004
shares shall be Preferred Stock without par value and
150,000,000 shares shall be Common Stock of the par
value of $1 per share.
SECOND: That the aforesaid amendment of the Restated
Certificate of Incorporation of said Corporation, set forth in
Paragraph FIRST hereinabove, has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by
D. C. Clark, its Chairman of the Board and Chief Executive
Officer and J. W. Blenke, Assistant General Counsel and Assistant
Secretary, this 12th day of May, 1993.
HOUSEHOLD INTERNATIONAL, INC.
[SEAL]
By: /s/ D. C. Clark
-------------------------
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ J. W. Blenke
- -----------------------------
Assistant General Counsel and
Assistant Secretary
A:\WP51\IC51293.WP
<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
7.35% Cumulative Preferred Stock, Series 1993-A
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), HEREBY CERTIFIES that the following resolutions
were duly adopted by the Board of Directors of the Corporation
and by the Offering Committee of the Board of Directors, pursuant
to authority conferred upon the Board of Directors by the
provisions of the Restated Certificate of Incorporation, as
amended, of the Corporation, and pursuant to authority conferred
upon the Offering Committee by the resolutions of the Board of
Directors set forth herein and in accordance with Section 141(c)
of the General Corporation Law of the State of Delaware.
1. The Board of Directors on May 12, 1993 has adopted the
following resolutions designating an Offering Committee of the
Board of Directors and authorizing the Offering Committee to act
on behalf of the Board of Directors (within certain limitations)
in connection with the designation, issuance and sale of shares
in one or more series of Preferred Stock, without par value, of
the Corporation:
"FURTHER RESOLVED, that an Offering Committee of the
Board of Directors is hereby designated which shall have and
may exercise, to the fullest extent permitted by law, the
full power and authority of the Board of Directors with
respect to the issuance and sale of (i) the Common Stock,
(ii) the Debt Securities or (iii) one or more new series of
the Corporation's Preferred Stock, including, without
limitation, establishing the purchase price therefore, and
fixing the designations and any of the preferences, powers,
rights (other than voting powers or voting rights which
shall be fixed by the Board of Directors) and relative,
participating, optional or other special rights and
qualifications, limitations or restrictions thereof, of such
shares of each series of Preferred Stock; and
"FURTHER RESOLVED, that notwithstanding the foregoing
resolutions, the power and authority of the Offering
Committee set forth in the preceding resolution shall expire
on June 30, 1995, unless extended by further action of the
Board of Directors of the Corporation; and
"FURTHER RESOLVED, that the members of the Offering
Committee shall be D. C. Clark, A. E. Rasmussen and G. P.
Osler. In the absence of any of the named directors, any
current director of the Corporation is designated as an
alternate member of the Offering Committee to serve in such
named director's place; and
"FURTHER RESOLVED, that the Offering Committee is
authorized to take such additional actions and adopt such
additional resolutions as it deems necessary or appropriate
for the purpose of authorizing and implementing the
issuance, offer, and sale for cash of Preferred Stock,
including, without limiting the generality of the foregoing,
the authorization and execution of agreements (including
underwriting agreements) relating to the offer and sale of
Preferred Stock, approval of forms of stock certificates and
authorization of issuance of Preferred Stock in
uncertificated form, any actions which may be necessary to
qualify the offering and sale of Preferred Stock under Blue
Sky Laws of the various states, any necessary filings with
the Secretary of State of Delaware and other jurisdictions,
and the appointment of a transfer agent; and
"FURTHER RESOLVED, that the Offering Committee is
hereby empowered, in connection with the issuance and sale
of any new series of the Corporation's Preferred Stock, to
authorize the issuance and sale of depositary shares and
depositary receipts for such depositary shares with respect
to any such series of Preferred Stock, and to authorize the
appointment of a depositary, registrar, and transfer agent
for such depositary shares and depositary receipts, the
execution of a depositary agreement, and any additional
agreements or actions in connection therewith as the
Offering Committee deems necessary or appropriate."
2. The Board of Directors, on May 12, 1993, has adopted
the following resolution pertaining to the voting rights for
series of Preferred Stock, without par value, authorized for
issuance by the Offering Committee of the Board of Directors:
"FURTHER RESOLVED, that holders of each series of the
Corporation's Preferred Stock which is authorized by the
Offering Committee of the Board of Directors shall have no
voting rights, and their consent shall not be required for
taking any corporate action, except as otherwise set forth
herein or as otherwise required by law, and except as
otherwise provided by the Board of Directors with respect to
any particular series of Preferred Stock:
The consent of the holders of the Preferred Stock with
respect to the matters set forth in sub-sections (i) and
(iii) of paragraph (5) of Article IV of the Corporation's
Restated Certificate of Incorporation ("Paragraph (5)")
shall not be required, except with respect to the creation
or issuance of any class of stock ranking prior to or on a
parity with the Preferred Stock, or any series thereof, as
to the payment of dividends or the distribution of assets;
but the other provisions of Paragraph (5) shall be
applicable to the Preferred Stock. The holders of the
Preferred Stock shall have no right to elect directors
pursuant to paragraph (6) of Article IV of the Corporation's
Restated Certificate of Incorporation ("Paragraph (6)"),
such right hereby being expressly withheld.
In the event that any six quarterly cumulative
dividends, whether consecutive or not, upon the Preferred
Stock shall be in arrears, the holders of the Preferred
Stock shall have the right, voting separately as a class
with holders of shares of any one or more other series of
preferred stock of the Corporation ranking on a parity with
the Preferred Stock either as to payment of dividends or the
distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary, and upon which
like voting rights have been conferred and are then
exercisable, at the next meeting of stockholders called for
the election of directors, to elect two members of the Board
of Directors. The right of such holders of such shares of
the Preferred Stock, voting separately as a class, to elect
(together with the holders of shares of any one or more
other series of preferred stock of the Corporation ranking
on such a parity) members of the Board of Directors of the
Corporation as aforesaid shall continue until such time as
all dividends accumulated on such shares of the Preferred
Stock shall have been paid in full, at which time such right
shall terminate, except as herein or by law expressly
provided, subject to revesting in the event of each and
every subsequent failure to pay dividends of the character
above mentioned.
Upon any termination of the right of the holders of the
Preferred Stock as a class to elect directors as herein
provided, the term of office of all directors so elected
shall terminate immediately. If the office of any director
elected by such holders voting as a class becomes vacant by
reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the remaining director
elected by such holders voting as a class may choose a
successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Whenever the term
of office of the directors elected by such holders voting as
a class shall end and the special voting powers vested in
such holders as provided in this resolution shall have
expired, the number of directors shall thereupon be such
number as may be provided for in the Corporation's Bylaws
irrespective of any increase made pursuant to the provisions
of this resolution.
Until all unpaid dividends on the Preferred Stock shall
have been paid in full, and in order to permit the holders
of the Corporation's $6.25 Cumulative Convertible Voting
Preferred Stock, and any other series of preferred stock
issued by the Corporation having the voting rights set forth
in Paragraph (6) to exercise fully the right to elect
directors as granted by and provided in Paragraph (6), the
number of directors constituting the whole Board of
Directors of the Corporation shall not be less than seven.
If, upon any such arrearage in dividends the number of
directors constituting the whole Board of Directors shall be
less than seven, the size of the Board of Directors shall,
immediately prior to the next meeting of stockholders called
for the election of directors, automatically be increased by
such number as shall be necessary to cause the number of
directors constituting the whole Board of Directors to be no
less than seven.
To the extent that the Board of Directors is authorized
to fix the designations, powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof in
respect of additional series of preferred stock, none of the
preferences or rights of any such additional series as fixed
by the Board of Directors shall rank prior to the Preferred
Stock as to payment of dividends or the distribution of
assets upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, without the consent of the holders
of two-thirds of the outstanding shares of such series of
Preferred Stock voting as a class.
The foregoing voting provisions shall not apply to any
series of Preferred Stock, if at or prior to the time when
the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of such
series of Preferred Stock shall have been redeemed or
sufficient funds shall have been deposited in trust to
effect such redemption.
On any item in which the holders of Preferred Stock are
entitled to vote, such holders shall be entitled to one vote
for each share held."
3. The Offering Committee of the Board of Directors has on
August 30, 1993 adopted the following resolution pursuant to
authority conferred upon the Offering Committee of the Board of
Directors by the resolutions of the Board of Directors set forth
in paragraph 1 above of this Certificate of Designation,
Preferences and Rights:
"RESOLVED, that the issue of a series of Preferred
Stock without par value of the Corporation is hereby
authorized and the designation, preferences and privileges,
relative, participating, optional and other special rights,
and qualifications, limitations and restrictions thereof, in
addition to those set forth in the Restated Certificate of
Incorporation, as amended, of the Corporation, are hereby
fixed as follows:
7.35% Cumulative Preferred Stock, Series 1993-A
(1) Number of Shares and Designation. 100,000 shares
of Preferred Stock without par value of the Corporation are
hereby constituted as a series of Preferred Stock without
par value and designated as 7.35% Cumulative Preferred
Stock, Series 1993-A (hereinafter called the "7.35%
Preferred Stock").
(2) Dividends. The holders of shares of the 7.35%
Preferred Stock shall be entitled to receive cash dividends,
when and as declared by the Board of Directors of the
Corporation, out of assets legally available for such
purpose, at the rate determined as provided below. Such
dividends shall be cumulative from the date of original
issue of such shares and shall be payable quarterly in
arrears, when and as declared by the Board of Directors of
the Corporation, on the fifteenth day of January, April,
July and October in each year to holders of record on the
respective business days next preceding the first days of
those months (and the quarterly dividend periods shall
commence on the first days of those months).
Dividends on the 7.35% Preferred Stock for quarterly
dividend periods will be payable at the rate of 7.35% per
annum from the date of original issue applied to the amount
of $1,000 per share of 7.35% Preferred Stock. The amount of
dividends payable on each share of 7.35% Preferred Stock for
each full quarterly dividend period shall be computed by
dividing the dividend rate by four and applying the dividend
rate to the amount of $1,000 per share. The amount of
dividends payable for any dividend period shorter or longer
than a full quarterly dividend period shall be computed on
the basis of 30-day months, a 360-day year and the actual
number of days elapsed in the period.
(3) Liquidation Preference. The amount to which shares
of 7.35% Preferred Stock shall be entitled upon liquidation,
dissolution, or winding up of the Corporation, whether
voluntary or involuntary, shall be $1,000 per share, plus an
amount equal to all accrued and unpaid dividends, if any,
thereon to the date fixed for payment, and no more.
(4) Redemption. The shares of 7.35% Preferred Stock
shall be subject to redemption in whole or in part at the
option of the Corporation on or after October 15, 1998 at
$1,000 per share, plus an amount equal to all accrued and
unpaid dividends, if any, thereon to the date fixed for
redemption, and no more.
(5) Shares to be Retired. All shares of 7.35%
Preferred Stock purchased or redeemed by the Corporation
shall be retired and cancelled and shall be restored to the
status of authorized but unissued shares of the class of
Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of
7.35% Preferred Stock.
(6) Conversion or Exchange. The holders of shares of
7.35% Preferred Stock shall not have any rights herein to
convert such shares into or exchange such shares for shares
of any other series of any class or classes of capital stock
(or any other security) of the Corporation.
(7) Ranking. The 7.35% Preferred Stock shall rank on a
parity with the Corporation's $6.25 Cumulative Convertible
Voting Preferred Stock, 9-1/2% Cumulative Preferred Stock,
Series 1989-A, Flexible Rate Auction Preferred Stock, Series
B, 11-1/4% Enhanced Rate Cumulative Preferred Stock, 9-1/2%
Cumulative Preferred Stock, Series 1991-A and 8-1/4%
Cumulative Preferred Stock, Series 1992-A as to payment of
dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or
involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred
Stock as to payment of dividends and distribution of assets
upon liquidation, dissolution, or winding up, whether
voluntary or involuntary, and prior to any other series of
stock authorized to be issued by the Corporation which ranks
junior to the $6.25 Cumulative Convertible Voting Preferred
Stock, 9-1/2% Cumulative Preferred Stock, Series 1989-A,
Flexible Rate Auction Preferred Stock, Series B, 11-1/4%
Enhanced Rate Cumulative Preferred Stock, 9-1/2% Cumulative
Preferred Stock, Series 1991-A and 8-1/4% Cumulative
Preferred Stock, Series 1992-A as to payment of dividends
and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation, Preferences and Rights to be signed
by J. Richard Hull, Senior Vice President-Secretary and General
Counsel of the Corporation, and attested by John W. Blenke,
Assistant General Counsel and Assistant Secretary, this 1st day
of September, 1993.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ J. Richard Hull
----------------------
Senior Vice President-
Secretary and General
Counsel
Attest:
/s/ John W. Blenke
- -----------------------------
Assistant General Counsel and
Assistant Secretary
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
HOUSEHOLD INTERNATIONAL, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Household International, Inc., a corporation organized
and existing under the General Corporation Law of the State of
Delaware (hereinafter called the "Corporation"), hereby certifies
that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on
July 9, 1996:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (hereinafter
called the "Board of Directors" or the "Board") in accordance
with the provisions of the Restated Certificate of Incorporation,
the Board hereby creates a series of Preferred Stock, without par
value (the "Preferred Stock"), of the Corporation and hereby
states the designation and number of shares, and fixes the
relative rights, preferences, and limitations thereof as follows:
FURTHER RESOLVED, that pursuant to the authority
granted to and vested in the Board in accordance with the
provisions of the Restated Certificate of Incorporation, the
consent of the holders of Series A Preferred Stock with respect
to the matters set forth in sub-sections (i) and (iii) of para-
graph (5) of Article IV of the Corporation's Restated Certificate
of Incorporation ("Paragraph (5)") shall not be required; but the
other provisions of Paragraph (5) shall be applicable to the
Series A Preferred Stock. The holders of the Series A Preferred
Stock shall have no right to elect directors per paragraph (6) of
Article IV of the Corporation's Restated Certificate of
Incorporation, such right hereby being expressly withheld:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock") and the number
of shares constituting the Series A Preferred Stock shall be
150,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided that no decrease
shall reduce the number of shares of Series A Preferred Stock to
a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible
into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock)
ranking prior and superior to the Series A Preferred Stock
with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common
Stock, par value $1.00 per share (the "Common Stock"), of
the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the fifteenth day
January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of
(a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issu-
ance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share
on the Series A Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of
Series A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment here-
inafter set forth, each share of Series A Preferred Stock
shall entitle the holder thereof to 1,000 votes on all
matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred
Stock or any similar stock, or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of
the Corporation.
(C) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking
any corporate action.
(D) The consent of the holders of Series A Preferred
Stock with respect to the matters set forth in sub-sections
(i) and (iii) of paragraph (5) of Article IV of the
Corporation's Restated Certificate of Incorporation
("Paragraph 5") shall not be required, ; but the other
provisions of Paragraph (5) shall be applicable to the
Series A Preferred Stock. The holders of the Series A
Preferred Stock shall have no right to elect directors
pursuant to paragraph (6) of Article IV of the Corporation's
Restated Certificate of Incorporation, such right hereby
being expressly withheld.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation, dis-
solution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding
up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the
Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend
rates and other relative rights and preferences of the
respective series and classes, shall determine in good
faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless
the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time
and in such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
Upon any liquidation, dissolution or winding up of the Corpo-
ration, no distribution shall be made (1) to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1,000 per share, plus an
amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount to be distributed per
share to holders of shares of Common Stock, or (2) to the holders
of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series
A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately
prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the de-
nominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject
to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by mul-
tiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A
Preferred Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall
rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class
of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incor-
poration of the Corporation shall not be amended in any manner
which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Chief Executive
Officer or Chief Financial Officer and attested by its Secretary
this 9th day of July, 1996.
/s/ William F. Aldinger
--------------------------
Chief Executive Officer or
Chief Financial Officer
Attest:
/s/ Paul R. Shay
- ----------------
Secretary
U:\LAW\EDGAR\IC7996.WP<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Household International, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the Restated Certificate of Incorporation, as
heretofore amended, of said Corporation has been further amended
by deleting, in its entirety, the first paragraph of Article IV
thereof and inserting the following as the new first paragraph of
Article IV:
The total number of shares that may be issued by
the Corporation is 258,155,004 of which 8,155,004
shares shall be Preferred Stock without par value and
250,000,000 shares shall be Common Stock of the par
value of $1 per share.
SECOND: That the aforesaid amendment of the Restated
Certificate of Incorporation of said Corporation, set forth in
Paragraph FIRST hereinabove, has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by
W. F. Aldinger, its Chairman and Chief Executive Officer and
P. R. Shay, Assistant General Counsel and Secretary, this 14th
day of May, 1997.
HOUSEHOLD INTERNATIONAL, INC.
[SEAL]
By: /s/ W. F. Aldinger
-------------------------
Chairman and Chief
Executive Officer
Attest:
/s/ P. R. Shay
- -----------------------------
Assistant General Counsel and
Secretary
U:\WP\EMP819\EDGAR\IC51497.WP
HOUSEHOLD INTERNATIONAL
1996 LONG-TERM EXECUTIVE INCENTIVE COMPENSATION PLAN
(as amended January 14, 1997)
1. Purpose
The purpose of the Household International 1996 Long-Term
Executive Incentive Compensation Plan (the "Plan") is to further
the long-term growth of Household International, Inc. and its
subsidiaries ("Household") by strengthening the ability of
Household to attract and retain employees of outstanding ability,
to provide an effective means for employees to acquire and
maintain ownership of Household Common Stock, to motivate such
employees to achieve long-range performance goals and objectives,
and to provide incentive compensation opportunities competitive
with those of other major corporations. Household senior
executives, in particular, are charged with enhancing shareholder
value and except under extraordinary circumstances, will only
receive options under this Plan. The options, if granted, to
Household senior executives will comprise a significant portion
of their total annual compensation. In addition, the Plan
provides for the issuance of options to purchase Household Common
Stock to non-employee Directors of Household in order to
facilitate ownership of Household Common Stock by Directors and
to more fully align the interests of Household's Directors with
that of its Common stockholders.
2. Administration
The Plan shall be administered by the Compensation Committee
of Household's Board of Directors (the "Committee"), a committee
of the Board appointed from time to time by the Board consisting
solely of two or more non-employee directors, each of whom shall
be an "outside director" as defined in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") and the
regulations thereunder and a "disinterested person" as defined in
Rule 16b-3 under Section 16(b) of the Securities Exchange Act of
1934 (the "Exchange Act"). The Committee shall have such powers
to administer the Plan as are delegated to it by the Plan and the
Board of Directors, including, to the extent permissible under
the terms of the Plan, the power to interpret the Plan and any
agreements executed thereunder, to prescribe rules and
regulations relating to the Plan, to determine the terms,
restrictions, and provisions of any agreement relating to awards
granted pursuant to the Plan, and to make all other
determinations necessary or advisable for administering the Plan.
Except as required by Rule 16b-3 (or any successor Rule thereto)
with respect to grants of awards to individuals who are subject
to Section 16 of the Exchange Act or as otherwise required for
compliance with Rule 16b-3 or other applicable law, the Committee
may delegate all or any part of its authority under the Plan to
any officer of Household. All decisions made by the Committee,
or (unless the Committee has specified an appeal process to the
contrary) any other person to whom the Committee has delegated
authority pursuant to the provisions hereof, shall be final and
binding on all persons.
3. Grant of Awards; Shares Subject to Plan
(a) The Committee may grant any type of award permitted
under the terms of the Plan to employees (all such awards in the
aggregate being hereinafter referred to as "Awards"). Employees
of Household and its subsidiaries may be selected by the
Committee for Awards under the Plan. In addition, non-employee
Directors of Household will receive options pursuant to the
provisions of Section 6.
(b) The number of shares of Common Stock of Household that
may be issued under the Plan is equal to the sum of the number of
shares remaining available under the Household International
Long-Term Executive Incentive Compensation Plan (the "1984 Plan")
plus 4,000,000, all of which shares may be made subject to
options. The shares issued pursuant to an Award may consist of
authorized and unissued shares of Household's Common Stock,
Common Stock held in Household's treasury or Common Stock
purchased on the open market. If any Award granted under the
Plan or the 1984 Plan shall terminate or lapse for any reason,
any shares of Common Stock subject to such Award shall again be
available for grant under the Plan. The maximum number of shares
or share equivalents that may be granted through an Award to any
one participant in one year is 400,000 shares.
(c) In the event of corporate changes affecting Household's
Common Stock, this Plan or Awards granted to employees and
options granted to non-employee Directors hereunder (including,
without limiting the generality of the foregoing, stock
dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, or other relevant changes in
capitalization), appropriate adjustments in price, number and
kind of shares of Common Stock or other consideration subject to
such Awards or in the terms of such Awards, shall be made so as
to prevent dilution or enlargement of rights under the Awards.
In addition, the aggregate number or remaining number or kind of
shares which may be issued under the Plan will be adjusted to
equitably reflect any such corporate changes.
(d) The Committee may, in its discretion and subject to
such rules as it may adopt, permit an employee to satisfy, in
whole or in part, withholding tax obligations incurred in
connection with Awards: (i) by electing to have Household
withhold shares of Household Common Stock (otherwise deliverable
to the employee in connection with an Award) in payment for such
withholding tax obligation or (ii) by delivering shares of
Household Common Stock owned by such employee in payment for such
withholding tax obligation. Any shares of Common Stock
surrendered by an employee in full or partial payment of
withholding tax obligations must have been held by such employee
at least six months prior to the date such shares are surrendered
in payment.
(e) The Committee may provide that any Award to employees
under the Plan earn dividend equivalents. Such dividend
equivalents may be paid currently or may be credited to a
participant's account, including during any deferral period. Any
crediting of dividend equivalents may be subject to such
restrictions and conditions as the Committee may establish,
including reinvestment in additional shares or share equivalents.
However, the payment of dividend equivalents will not be
conditioned upon the employee exercising an option.
(f) Except as may be provided in the agreement for any
specific employee Award or otherwise limited in this Plan, the
Committee may, in its sole discretion, in whole or in part, waive
any restrictions or conditions applicable to, or accelerate the
vesting of, any Award to an employee.
(g) To the extent the Committee deems it necessary,
appropriate or desirable to comply with foreign law or practice
and to further the purpose of this Plan, the Committee may,
without amending this Plan, (i) establish special rules
applicable to Awards granted to employees who are foreign
nationals, are employed outside the United States, or both,
including rules that differ from those set forth in this Plan and
(ii) grant Awards to such employees in accordance with those
rules.
4. Employee Options
(a) The Committee may grant to employees any type of
statutory or non-statutory option to purchase shares of Household
Common Stock as is permitted by law at the time the option is
granted. The term of the initial grant of each option shall not
be more than ten years and one day from the date of grant and may
be exercised at the rate set by the Committee or as stated
herein; provided, however, that no option shall be exercised less
than one year from the date of grant, except as provided herein.
The Committee may, in its discretion, extend the expiration date
of certain outstanding employee options, provided no expiration
date of any option may exceed fifteen years from the date of the
grant of that option.
(b) The per share purchase price of Household Common Stock
which may be acquired pursuant to an employee option shall be at
least 100% of the fair market value of one share of Common Stock
of Household on the date on which the option is granted. Within
this limitation, such price shall be determined by the Committee.
(c) Payment for shares purchased upon the exercise of an
employee option shall be made in cash or, in the discretion of
the Committee, in shares of Common Stock of Household valued at
the then fair market value of such shares or by a combination of
cash and shares of Common Stock. Any shares of Common Stock
surrendered by an employee in full or partial payment of the
exercise price of an option must have been held by such employee
at least six months prior to the date such shares are surrendered
in payment.
(d) The Committee may, in its discretion and subject to
such rules as it may adopt, authorize an extension of credit from
Household to an employee holding an option granted under this
Plan (including an employee who is an officer or director of
Household) to assist the employee in exercising the option.
Household may extend or guarantee loans under this provision.
Loans extended under the Plan will bear interest at a variable
rate that is adjusted annually to equal the greater of the
average annual rate for three-year U.S. Treasury notes for the
calendar year immediately preceding the year in which the
adjustment is to be made and the applicable rate in effect under
Section 1274(d) of the Internal Revenue Code on the day the loan
is made. Payment terms will be established by the Committee and
may or may not require periodic payments of interest and/or
principal. The term of loans will be established by the
Committee, as well as provisions governing the acceleration of
maturity upon termination of employment or default. Loans
financed or guaranteed by Household will be secured by retention
of the issued stock certificates by Household and execution of an
agreement with respect to such shares. To the extent necessary
to satisfy the provisions of Regulation G or another similar
regulatory restriction, other security may be required by the
Committee.
5. Transfer of Employee Options; Exercise of Employee Options
Following Termination of Employment
(a) Options may be exercised only by the employee and shall
not be transferable other than by will or the laws of descent and
distribution. These restrictions on transferability shall not
apply to the extent (i) such restrictions are not at the time
required for the Plan to continue to meet the requirements of
Rule 16b-3 of the Exchange Act, or any successor Rule, (ii) the
Committee has established rules concerning the transferability of
employee options and (iii) the agreement relating to an Award so
specifies or the holder has received notice from the Office of
the Secretary of Household that such restrictions are no longer
applicable. If the holder of an option shall cease to be an
employee of Household or a subsidiary, and unless otherwise
provided by the Committee, all rights under such option shall
immediately terminate, except:
(i) in the event of termination of employment of a
holder to which Section 11(b) hereof applies, or of a holder
who is retirement-eligible under the terms of a pension plan
of Household or a subsidiary, the option may be exercised
within five years of the date of termination of employment
or as otherwise provided in the agreement for the Award;
(ii) in the event of termination of employment due to
permanent and total disability, and the holder is not
retirement-eligible under the terms of a pension plan of
Household or a subsidiary, the option may be exercised
within twelve months following the date of such termination
of employment or as otherwise provided in the agreement for
the Award;
(iii) in the event of death during employment, the
option may be exercised by the executor, administrator, or
other personal representative of the holder within five
years succeeding death if such holder was
retirement-eligible under the terms of a pension plan of
Household or a subsidiary, or twelve months if such holder
was not retirement-eligible under the terms of a pension
plan of Household or a subsidiary or as otherwise provided
in the agreement for the Award;
(iv) except in the event an employee is terminated for
cause, following termination of employment other than as set
forth in subsections (i), (ii) or (iii) above, the option
may be exercised within three months following the date of
termination, or prior to the expiration of the option,
whichever period is shorter; or
(v) in the event of death of a holder of an option
following termination of employment, the option may be
exercised by the executor, administrator, or other personal
representative of the holder, notwithstanding the time
period specified in (i), (ii), (iii) or (iv) above, within
a) twelve months following death or b) the remainder of the
period in which the holder was entitled to exercise the
option, whichever period is longer.
If the Committee determines that the termination is for
cause, the option will not under any circumstances be exercisable
following termination of employment.
(b) An option may not be exercised pursuant to this Section
after the expiration of the term of such option and may be
exercised only to the extent that the holder was entitled to
exercise such option on the date of termination of employment.
6. Non-Employee Director Options
(a) Each non-employee Director of Household will be granted
an option for 2,500 shares of Household Common Stock on the date
of each Annual Meeting of Stockholders at which such Director is
elected to the Board of Directors, beginning with the 1997 Annual
Meeting of Stockholders. The Committee will have no discretion
to select which non-employee Directors will be granted options or
to determine the number of option shares, price, vesting schedule
or any other term of the options granted to non-employee
Directors. All options granted to non-employee Directors will be
non-qualified stock options.
(b) The per share purchase price of Common Stock which may
be acquired pursuant to a non-employee Director option shall
be 100% of the fair market value of one share of Common Stock on
the date the option is granted. For purposes of establishing the
fair market value of Household's Common Stock on any day under
Section 6 of this Plan, such value shall be the average of the
highest and lowest sales prices per share of the Common Stock as
reported in the NYSE-Composite Transactions in The Wall Street
Journal for such date. However, if the NYSE is not open for
trading on a given day, the fair market value will be the average
of the highest and lowest sales prices per share on the next
succeeding business day.
(c) Subject to Section 11 of this Plan, each option granted
to a non-employee Director vests and shall be fully exercisable
beginning six months from the date the option was granted. Each
such option expires ten years and one day from the date of the
grant. However, if a non-employee Director ceases to be a
Director of Household, outstanding vested options are exercisable
as follows:
(i) in the event service on the Board of Directors
terminates due to permanent and total disability,
outstanding options may be exercised within twelve months
following the date such service terminates or prior to the
expiration of the outstanding options, whichever period is
shorter;
(ii) in the event of death of a non-employee Director
whether during service as a Director of Household or after
ceasing such service, outstanding options may be exercised
by the executor, administrator, or other personal
representative of such Director within twelve months after
the death of the Director or prior to the expiration of the
outstanding options, whichever period is longer;
(iii) in the event a non-employee Director's service
on the Board of Directors terminates because such Director
has reached the mandatory retirement age of 70 (or age 72 if
a Director was serving on the Board as of January 1, 1989)
or if a non-employee Director retires from the Board prior
to reaching the mandatory retirement age but after having
served on the Board of Directors continuously for at least
fifteen years, outstanding options may be exercised at any
time prior to the expiration of the outstanding options; and
(iv) in the event service on the Board of Directors
terminates other than as set forth in subsections (i),
(ii) or (iii) above, outstanding options may be exercised
within three months following the date such service
terminates or prior to the expiration of the outstanding
options, whichever period is shorter.
(d) Payment for shares purchased upon exercise of a
non-employee Director option shall be made in cash, in shares of
Household Common Stock valued at the then fair market value of
such shares or by a combination of cash and shares of Common
Stock. Any shares of Common Stock surrendered in full or partial
payment of the exercise price of an option must have been held by
such Director at least six months prior to the date such shares
are surrendered in payment.
A non-employee Director may also satisfy, in whole or in
part, income tax obligations incurred in connection with the
exercise of an option by (i) electing to have Household withhold
shares of Common Stock (otherwise deliverable to the Director in
connection with the exercise of an option) in payment for such
income tax obligation or (ii) by delivering shares of Household
Common Stock owned by such Director in payment for such income
tax obligation. Any shares of Common Stock surrendered in full
or partial payment of income tax obligations must have been held
by such Director at least six months prior to the date such
shares are surrendered.
(e) Non-employee Director options are not transferable
other than by will and the laws of descent and distribution.
7. Restricted Stock Rights
(a) Upon such terms as it deems appropriate, the Committee
from time to time may grant Restricted Stock Rights ("RSRs") to
any employee selected by the Committee, which entitle such
employee to receive a stated number of shares of Common Stock of
Household. The RSRs are subject to forfeiture if the employee
fails to remain continuously employed by Household or any
subsidiary for the period(s) stipulated by the Committee (each, a
"Restricted Period").
(b) RSRs shall be subject to the following restrictions and
limitations: (i) the RSRs may not be transferred except by will
or the laws of descent and distribution; and (ii) except as
otherwise provided in Paragraphs (d) and (e) of this Section 7,
an RSR and the shares subject to an RSR shall be forfeited and
all rights of a holder of an RSR shall terminate without any
payment of consideration by Household if such employee fails to
remain continuously employed by Household or any subsidiary for
the Restricted Period. A holder of an RSR shall remain
continuously employed if such holder leaves the employ of
Household or any subsidiary for immediate reemployment with
Household or any subsidiary.
(c) Other than as may be specified pursuant to
Section 3(e), the holder of an RSR shall not be entitled to any
of the rights of a holder of the Common Stock with respect to the
shares subject to such RSR prior to the issuance of such shares
pursuant to the Plan.
(d) The Committee in its sole discretion may accelerate the
payment of Household Common Stock under an RSR prior to the
termination of the Restricted Period if the holder of an RSR has
achieved certain performance levels established by the Committee
at the time an RSR is granted. The Committee in its sole
judgment may revise such performance levels as it deems
appropriate to reflect significant, unforeseen events or changes.
(e) In the event that the employment of a holder of an RSR
terminates by reason of death or permanent and total disability
or as a result of Section 11(b) hereof, such holder shall be
entitled to receive the number of shares subject to the RSR
multiplied by a fraction (x) the numerator of which shall be the
number of full months between the date of grant of each such RSR
and the date of such termination of employment, and (y) the
denominator of which shall be the number of full months in the
respective Restricted Period; provided, however, no fractional
share shall be awarded. A holder of an RSR whose employment
terminates for reasons other than those listed in this paragraph
will forfeit all rights under any outstanding RSR. This
automatic forfeiture may be waived in whole or in part by the
Committee in its sole discretion.
(f) When a holder shall be entitled to receive shares
pursuant to an RSR, Household shall issue the appropriate number
of shares registered in the name of the holder.
8. Other Stock-Based Awards
The Committee may make awards of unrestricted shares of
Household Common Stock to eligible employees in recognition of
outstanding achievements.
9. Forfeiture
If it is determined that an employee or former employee,
while employed by Household or any subsidiary or otherwise
associated with Household or any subsidiary as a consultant,
advisor or in another similar capacity, engaged at any time in
any activity in competition with any activity of Household or any
subsidiary or inimical, contrary or harmful to the interests of
Household or any subsidiary including, but not limited to:
(i) conduct related to the participant's position for which
either criminal or civil penalties against the participant may be
sought, (ii) violation of Household policies, notwithstanding
Household's decision or inability to, or not to, terminate the
participant for such violation, (iii) accepting employment with
or serving as a consultant, advisor or in any other capacity to
an employer that is in competition with or acting against the
interests of Household or any subsidiary, including employing or
recruiting any present employee of Household or any subsidiary
for such competitor, (iv) disclosing or misusing any confidential
information or material concerning Household or any subsidiary,
or (v) participating in a hostile takeover attempt of Household,
then the Committee, in its sole discretion, may cancel any
unexpired or unpaid Award at any time.
10. Amendment and Termination of the Plan
This Plan will expire on May 8, 2006. However, the Board of
Directors may terminate the Plan at any time except as provided
in Section 11(d), but such termination shall not affect Awards
previously granted under the Plan. During the Plan term, the
Committee may amend the Plan or any Award granted to an employee
under the Plan at any time, except (i) the Plan may not be
amended or terminated in the circumstances set forth in
Section 11(d), (ii) the Committee may not, without shareholder
approval, and except as permitted by Section 3(c), increase the
number of shares of Common Stock of Household which may be issued
pursuant to the Plan, change the purchase price of an Option, and
(iii) the Committee may not make any other amendment to the Plan
which is required by law to be approved by the shareholders of
Household.
Notwithstanding the preceding paragraph, the provisions of
Section 6 of the Plan relating to non-employee Directors may not
be amended more than once every six months, except to comply with
changes to the Code or the rules and regulations thereunder.
11. Change in Control
(a) In order to protect participants in the Plan who have
outstanding Awards in the event there is a "Change in Control"
(as defined below), (i) all outstanding Options will immediately
vest and will become fully exercisable and (ii) as to any other
Awards to employees, the Committee, in its sole discretion
(notwithstanding any contrary provision in Section 3(f)), may:
(i) accelerate the time periods for exercising or
realizing any Awards, notwithstanding any minimum holding or
restricted periods set forth in the Plan or established by
the Committee at the time of the grant of the Award;
(ii) provide for the purchase by Household of any
Awards in cash equal to the amount that could have been
received upon the exercise or realization of such Awards had
the Awards been currently exercisable or payable on the day
before said cash payment is made;
(iii) make such adjustments, including the granting of
additional Awards, to any outstanding Award as the Committee
deems appropriate to reflect the Change in Control; and
(iv) cause outstanding Awards to be assumed, or new
rights of equal value to be substituted therefor, by any
corporation that is the successor to Household.
(b) Any employee whose position with Household or any of
its subsidiaries is "Materially Changed" (as defined below)
within twenty-four (24) months after a Change in Control shall be
deemed to be involuntary terminated without "cause" (as defined
below) from Household and be entitled to exercise or receive the
payment of Awards previously granted to the employee that were
outstanding immediately prior to the event causing such
termination or were awarded subsequent to the event causing such
termination, in each case, in accordance with Sections 5(a)(i) or
7(e) of the Plan, without any action by the Committee or Board of
Directors.
(c) For purposes of this Section and to determine the
rights of any participant who has an outstanding Award, the term:
(i) "Change in Control" means:
(1) any individual, firm, corporation or other
entity (including any successor of such
entity) other than: (x) a trustee or other
fiduciary of securities held under an
employee benefit plan of Household, or
(y) Household or any subsidiary thereof
becomes a beneficial owner, directly or
indirectly, of common stock of Household
representing ten percent (10%) or more of
the total voting power of Household's then
outstanding Common Stock and Household
acquires actual knowledge thereof;
(2) a tender offer is made for thirty percent
(30%) or more of the common stock of
Household, which tender offer has not been
approved by the Board of Directors of
Household; or
(3) a solicitation subject to Rule 14a-11 under
the Exchange Act (or any successor Rule)
relating to the election or removal of 50%
or more of the Board of Directors is made by
any person other than Household or less than
50% of the members of the Household Board of
Directors are "Continuing Directors" (as
defined below).
Notwithstanding subsection (c)(i)(1) above,
if the Board of Directors of Household
determines in good faith that a person who
has met the foregoing definition has done so
inadvertently, and such person divests as
promptly as practicable a sufficient number
of shares to be below the noted threshold,
then such person, in regard to that event,
shall not trigger a "Change in Control" for
purposes of the Plan.
(ii) "Materially Changed" means the occurrence of one
or more of the following events:
(1) the termination of the employee, without
cause, and other than by reason of death,
permanent and total disability or retirement
under the terms of a pension plan of
Household or any subsidiary;
(2) the employee was assigned to a position of
lesser rank or status;
(3) the employee's annual target bonus or
targeted performance unit awards were
reduced and compensation equivalent in
aggregate value was not substituted;
(4) the employee's annual salary was reduced;
(5) the employee's benefits under the Household
Retirement Income Plan or any successor tax
qualified defined benefit plan were reduced
for reasons other than to maintain its tax
qualified status and such reductions were
not supplemented in the Household
Supplemental Retirement Income Plan
("HSRIP"); or the employee's benefits under
HSRIP, if applicable, were reduced;
(6) the employee's other benefits or perquisites
were reduced and such reductions were not
uniformally applied with respect to all
similarly situated employees; or
(7) the employee was reassigned to a
geographical area outside of the
metropolitan area in which the employee was
assigned at the time of the Change in
Control.
(iii) "cause" means willful and deliberate misconduct,
which is detrimental in a significant way to the interests
of Household or any subsidiary thereof;
(iv) "Continuing Director" means a director of
Household who either (i) was a Director of Household on
May 8, 1996, or (ii) is an individual whose election, or
nomination for election, as a Director of Household was
approved by a vote of at least two-thirds of the Directors
then still in office who were Continuing Directors other
than an individual whose initial assumption of office is in
connection with an active or threatened election contest
relating to the election of Directors of Household which
would be subject to Rule 14a-11 under the Exchange Act (or
any successor Rule).
(d) Notwithstanding anything set forth in Section 11
hereof, with the occurrence of a Change in Control the Plan may
not be amended or terminated by the Committee, the Board of
Directors or the stockholders of Household.
12. Miscellaneous
(a) The Plan is intended to constitute an "unfunded" plan
for incentive compensation. With respect to any payments or
deliveries of shares of Household Common Stock not yet made to a
participant by Household, nothing contained herein shall give any
rights to a participant that are greater than those of a general
creditor of Household. The Committee may authorize the creation
of trusts or other arrangements to meet the obligations created
under the Plan to deliver shares of Household Common Stock or
payments hereunder consistent with the foregoing.
(b) With respect to participants subject to Section 16 of
the Exchange Act, transactions under this Plan are intended to
comply with all applicable provisions of Rule 16b-3 or its
successor under the Exchange Act. To the extent any provision of
the Plan or action by the Committee or its designee fails to so
comply, it shall be deemed null and void.
(c) This Plan and each agreement with respect to an Award
shall be construed and administered in accordance with the laws
of the State of Delaware without giving effect to principles
relating to conflict of laws.
(d) Neither the adoption of the Plan nor any Award granted
hereunder shall confer upon any participant any right to
continued employment or service with Household or any subsidiary
thereof, nor shall the Plan or any Award interfere in any way
with the right of Household or a subsidiary to terminate the
employment or relationship of any of the participants at any
time.
U:\LAW\EDGAR\IEX105.AS1 (effective 1/14/97)
HOUSEHOLD INTERNATIONAL
DEFERRED PHANTOM STOCK PLAN FOR DIRECTORS
Section 1. Purpose. The purpose of the Household
International Deferred Phantom Stock Plan for Directors (the
"Plan") is to provide non-management directors (the "Directors")
of Household International, Inc. (the "Company") with the
opportunity to defer receipt of phantom Company Common Stock
units paid by the Company to Directors. The Plan is designed to
aid the Company in attracting and retaining as members of its
Board of Directors persons whose abilities, experience and
judgment can contribute to the well-being of the Company.
Section 2. Effective Date. The effective date of this
Plan is July 11, 1995. The Plan was subsequently amended on
January 9, 1996, July 9, 1996 and January 14, 1997.
Section 3. Eligibility. Any Director of the Company
serving on the Board as of January 14, 1997, who is not deemed to
be an employee of the Company or any subsidiary thereof will
participate in the Plan.
Section 4. Deferred Compensation Account. An unfunded
deferred compensation account (the "Account") has been
established for each Director.
Section 5. Time of Election of Deferral. Except as set
forth herein, a Designation of Beneficiary and Account
Distribution Form (the "Forms"), must be filed with the Secretary
of the Company.
Section 6. Hypothetical Investment. During the deferred
period, the phantom Company Common Stock units will be credited
on each dividend payment date for the Company's Common Stock with
additional phantom Company Common Stock units determined by
dividing the aggregate cash dividend which would have been paid
if the existing phantom Common Stock units were actual shares of
the Company's Common Stock by the fair market value of the
Company's Common Stock as of the dividend payment date, computed
to four decimal places. For purposes of the Plan, the "fair
market value" of one share or unit of the Company's Common Stock
shall be the average of the high and low sale prices for a share
of such Common Stock as published in The Wall Street Journal for
the respective determination date.
Section 7. Value of Deferred Compensation Accounts. The
value of each participant's Account shall include deferred
phantom Company Common Stock units and dividends credited
thereon, pursuant to Section 6 of the Plan. All deferred amounts
to be paid to a participant pursuant to the Plan are to be paid
in cash, with the value of the phantom Company Common Stock units
being the fair market value of an equal number of shares of the
Company's Common Stock on the date of payment.
Section 8. Payment of Deferred Compensation. All such
payments accumulated under this Plan will be made as soon as
practicable following the date on which a Director leaves the
Board of Directors. A participant may elect to receive the value
of his or her deferred compensation at a later date, but such
date may not be prior to the date on which a Director leaves the
Board of Directors. Deferred phantom Company Common Stock units
and dividends (including appreciation or loss) thereon will be
payable in cash either in a lump sum or in such number of
quarterly or annual installments as the participant chooses up to
a maximum ten-year period, subject to the participant's right to
change such method of distribution no later than twelve months
prior to the first date deferred phantom Company Common Stock
units are to be paid. If a participant elects to receive payment
from his or her Account in installments, the participant's
Account will continue to accrue dividends (and appreciation or
loss) during the installment period. Dividends credited to a
participant's Account during the installment period will be paid
on the next installment payment date.
Section 9. Change in Control. A "Change in Control"
means a change in the beneficial ownership of the Company's
Common Stock or a change in the composition of the Company's
Board of Directors as a result of any of the following
occurrences:
(1) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934)
other than
(x) a trustee or other fiduciary of securities held
under an employee benefit plan of the Company, or
(y) an employee or any person acting in concert with
an employee
becomes a beneficial owner, directly or indirectly, of
the Company's Common Stock representing twenty percent
(20%) or more of the total voting power of the
Company's then outstanding Common Stock; or
(2) a tender offer is made for thirty percent (30%) or more
of the Company's Common Stock, which tender offer has
not been approved by the Board of Directors of the
Company.
Notwithstanding any other provision of the Plan, if a Change
of Control occurs, then the Company shall create a trust or take
such other actions as are appropriate to protect each
participant's Account.
Section 10. Designation of Beneficiary. A participant
may designate a beneficiary or beneficiaries which shall be
effective upon filing written notice with the Secretary of the
Company on the form provided for that purpose. If no beneficiary
is designated, the beneficiary will be the participant's estate.
If more than one beneficiary statement has been filed, the
beneficiary or beneficiaries designated in the statement bearing
the most recent date will be deemed the valid beneficiary or
beneficiaries.
Section 11. Death of Participant or Beneficiary. In the
event of a participant's death before he or she has received the
full value of his or her Account, the then current value of the
participant's Account shall be determined as of the day
immediately following death and such amount shall be paid to the
beneficiary or beneficiaries of the deceased participant as soon
as practicable thereafter in cash in a lump sum. If no
designated beneficiary has been named or survives the
participant, the beneficiary will be the participant's estate.
Section 12. Participant's Rights Unsecured. The right of
any participant or beneficiary to receive payment under the
provisions of the Plan shall be an unsecured claim against the
general assets of the Company, and no provisions contained in the
Plan shall be construed to give any participant or beneficiary at
any time a security interest in the Account or any other assets
of the Company.
Section 13. Statement of Account. Statements will be
sent to participants quarterly as to the value of their Accounts
as of the 15th day of January, April, July and October for each
year in which their is Account activity.
Section 14. Assignability. No right to receive payments
hereunder shall be transferable or assignable by a participant or
a beneficiary, except by will or by the laws of descent and
distribution.
Section 15. Administration of the Plan. The Plan shall
be administered by the Compensation Committee of the Board of
Directors of the Company. The Committee shall conclusively
interpret the provisions of the Plan and shall make all
determinations under the Plan. The Committee shall act by vote
or written consent of a majority of its members.
Section 16. Amendment or Termination of Plan. This Plan
may at anytime or from time to time be amended, modified or
terminated by the Board of Directors of the Company. No
amendment, modification or termination shall, without the consent
of a participant, adversely affect such participant's accruals.
Section 17. Governing Law. This Plan shall be governed
by and construed in accordance with the laws of the State of
Illinois.
U:\WP\HFSC98\BOARD\97DEFER.PS (1/14/97)
February 4, 1997
Mr. Robert F. Elliott
2700 Sanders Road
Prospect Heights, IL 60070
Dear Bob:
SUBJECT: Amendment and Restatement of Employment Agreement
Dated July 11, 1994
- -----------------------------------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction arising
out of uncertain personal circumstances in a change in control
environment. We recognize that in the event of a Change in
Control of Household (as such term is defined herein) it is
likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Group
Executive. In that capacity you are entitled to the
following:
a. A minimum annual salary of $450,000;
b. An annual bonus having a targeted value equal to
90% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if
any, will depend on the achievement of the corporate
goals and your individual goals established for that
year and the terms of the Household International
Corporate Executive Bonus Plan, and any successor or
substitute plan or plans (the "Bonus Plan"). Your
bonus will be prorated based on the number of
elapsed months in the performance period in the case
of death, permanent and total disability, or
retirement under the Household Retirement Income
Plan or any successor tax qualified defined benefit
plan;
c. An annual grant of stock options under the Household
International 1996 Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. Stock options will be valued
at their economic value at the date of grant; and
d. A one-time grant on February 4, 1997, of 15,000
Restricted Stock Rights ("RSR's") which are intended
to replace the unvested portion of the Special
Performance Share Awards previously granted on
February 1, 1994. The remaining unvested Special
Performance Share Awards are rescinded and replaced
by the RSR's described in this paragraph. 5,000 of
the RSR's shall vest on February 1, 1998 provided
that the 1997 EPS of Household equals or exceeds
$5.30, and you remain continuously employed by
Household from the date of grant until the
February 1, 1998 vesting date. The remaining 10,000
RSR's shall vest on February 1, 1999 provided that
the 1998 EPS of Household equals or exceeds an
amount to be established in writing by the
Compensation Committee no later than March 30, 1998,
and you remain continuously employed from January 1,
1998 until the February 1, 1999 vesting date. In
the event that your employment is terminated
pursuant to the provisions of paragraph 4a or if you
resign pursuant to the provisions of paragraph
4b(i), 4b(vi), 4b(vii) or 5c, you will receive 100%
of the unvested RSR's on your last day of employment
regardless of whether you have completed the vesting
period or the performance condition has been met;
and
e. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to termination as provided herein, the term of
this Agreement shall be for 18 whole calendar months,
shall commence on the date hereof, and shall be
"evergreen"; that is shall continue monthly as an 18
month term, unless the Corporation gives to you not less
than 17 whole calendar months notice that the term as
monthly continued shall not be so continued; provided
further, that in no event shall the term be continued
beyond your sixty-fifth birthday.
3. During your employment with Household you will devote
your reasonably full time and energies to the faithful
and diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it
is mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because
within 6 whole calendar months of your resignation
one or more of the following events occurred to you:
i. your annual salary was reduced;
ii. your annual target bonus or the targeted
value of stock options calculated as provided
in paragraph 1c was reduced and compensation
equivalent in aggregate value was not
substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified
status and such reductions were not
supplemented in the Household Supplemental
Retirement Income Plan ("HSRIP"); or your
benefits under HSRIP were reduced;
iv. your other benefits or perquisites were
reduced and such reductions were not
uniformally applied with respect to all
similarly situated employees;
v. you were reassigned to a geographical area
outside of the Chicago, Illinois metropolitan
area;
vi. any successor to the Corporation by
acquisition of stock or substantially all of
the assets, by merger or otherwise, failed to
expressly adopt or otherwise repudiated this
Employment Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount
equal to 200% of your then annual salary (prior to any
of the aforesaid reductions) plus 200% of the average of
the last two years' bonuses; provided, however, if the
term of this Agreement is less than 18 months because
you are within 18 months of becoming age 65, the amount
shall be multiplied by a fraction the numerator of which
is the number of months left in the term, and the
denominator of which is 18. This payment shall be in
addition to all other compensation and benefits accrued
to the date of termination of employment.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including
the lump sum payment) described in paragraph 4
regardless of whether you are otherwise entitled to them
under paragraph 4. In addition, Household or its
successor shall promptly make a lump sum cash payment to
you in an amount equal to 200% of your then annual
salary (prior to any reduction) plus 200% of the average
of the last two years' bonuses; provided, however, if
the term of this Agreement is less than 18 months
because you are within 18 months of becoming age 65, the
amount shall be multiplied by a fraction the numerator
of which is the number of months left in the term, and
the denominator of which is 18.
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not
receive at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of stock options under the Long-Term Plan
for years in which awards were payable under the
Long-Term Plan as it existed prior to the Change in
Control,
both at corporate and individual target levels as those
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign,
payments shall be made to you as outlined earlier in
this paragraph 5.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d)
and Section 14(d)(2) of the Securities Exchange Act
of 1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the
Board of Directors of Household or its successor by
merger, consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you
as the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. This Agreement was entered into prior to March 29, 1995,
which was the date that regulations were proposed by the
Federal Deposit Insurance Corporation (the "FDIC")
limiting golden parachute and indemnification payments
by insured depository institutions and their holding
companies. At that March date the Agreement provided
for a lump sum payment equal to 879% of your annual
salary. In view of the foregoing, if the lump sum
payments under paragraphs 4 and 5 are otherwise limited
by the FDIC regulations, any limits on "golden
parachute" payments resulting from regulations issued by
the FDIC should not reduce the lump sum payments under
this Agreement below the lesser of 879% of your then
annual salary (prior to any reduction) or the lump sum
amounts calculated under paragraphs 4 and 5.
8. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event
that any excise tax is assessed against you pursuant to
the provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or
its successor shall assume that you are taxed at the
highest individual federal and state income tax rates
(without regard to Section 1(g) of the Code or successor
provisions thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning
of section 280G(b)(2)(A) of the Code, and a reduction of
the amount by 10% or less would totally avoid the
imposition of any excise tax, such amounts shall be
reduced so that the aggregate present value of the
amounts constituting such parachute payments will be
equal to 299% of your "annualized includible
compensation for the base period," as such term is
defined in section 280G(d)(1) of the Code. For the
purpose of this subparagraph, present value shall be
determined in accordance with section 280G(d)(4) of the
Code.
9. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so
has expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of
such a judgment, all reasonable legal and other
professional fees and expenses incurred by you in
contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing
your claim will be promptly paid by Household or its
successor with interest thereon at the highest statutory
rate of your state of domicile for interest on judgments
against private parties from the date of payment thereof
by you to the date of reimbursement to you by Household
or its successor.
10. You agree that you will not, without prior written
consent of the Chief Executive Officer or the General
Counsel of Household, during the term of or after the
termination of your employment under this Agreement,
directly or indirectly, disclose to any individual,
corporation, or other entity (other than Household, or
any subsidiary or affiliate thereof, or its officers,
directors, or employees entitled to such information, or
any other person or entity to whom such information is
regularly disclosed in the normal course of Household's
business), or use for your own benefit or for the
benefit of such individual, corporation or other entity,
any information whether or not reduced to written or
other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall
cease to be subject to the restrictions of this
paragraph.
11. The provisions of this Agreement shall be construed, to
the extent possible, so as to guarantee their
enforceability. In case any one or more of the
provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of
this Agreement, and this Agreement shall be construed as
if such invalid, illegal, or unenforceable provision had
never been contained in it.
12. This Agreement is an Amendment and Restatement of the
Employment Agreement dated July 11, 1994 and restated
July 9, 1996, between you and Household and supersedes
said Agreement. This Agreement also supersedes the
Employment Agreement dated April 22, 1994, the
Employment Agreement dated May 28, 1993, the Employment
Agreement dated May 1, 1991, and the Employment
Agreement dated August 16, 1990, between you and
Household, all in furtherance of the objectives
authorized and deemed by the Board of Directors of
Household to serve the best interests of the
Corporation.
13. Any successor to the Corporation, by acquisition of
stock or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
14. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require
the segregation of any funds or property.
Notwithstanding the foregoing, in the discretion of the
Corporation, the Corporation may establish a grantor
trust or other vehicle to assist it in meeting its
obligations hereunder, but any such trust or other
vehicle shall not create a funded account or security
interest for you.
15. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
-----------------------
William F. Aldinger
Chief Executive Officer
/s/ Robert F. Elliott
---------------------
Robert F. Elliott
U:\WP\EMP819\EMP\RFE.97A
February 4, 1997
Mr. Joseph W. Saunders
Household Credit Services, Inc.
1441 Schilling Place
Salinas, CA 93901
Dear Joe:
SUBJECT: Amendment and Restatement of Employment Agreement
Dated July 11, 1994
- -----------------------------------------------------------
We wish you to remain in the employ of Household International,
Inc. ("Household" or the "Corporation") and to provide you with
fair and equitable treatment along with a competitive
compensation package. Also, we wish to assure your continued
attention to your duties without any possible distraction arising
out of uncertain personal circumstances in a change in control
environment. We recognize that in the event of a Change in
Control of Household (as such term is defined herein) it is
likely that your duties and responsibilities would be
substantially altered.
1. At present you are employed by Household as Group
Executive. In that capacity you are entitled to the
following:
a. A minimum annual salary of $500,000;
b. An annual bonus having a targeted value equal to
90% of your annualized salary as of the end of the
period in which the bonus is earned. The amount of
bonus for any year that you actually receive, if
any, will depend on the achievement of the corporate
goals and your individual goals established for that
year and the terms of the Household International
Corporate Executive Bonus Plan, and any successor or
substitute plan or plans (the "Bonus Plan"). Your
bonus will be prorated based on the number of
elapsed months in the performance period in the case
of death, permanent and total disability, or
retirement under the Household Retirement Income
Plan or any successor tax qualified defined benefit
plan;
c. An annual grant of stock options under the Household
International 1996 Long-Term Executive Incentive
Compensation Plan, and any successor or substitute
plan or plans (the "Long-Term Plan"), having a
targeted value of 25% of your then annual salary at
the time of the grant. Stock options will be valued
at their economic value at the date of grant; and
d. A one-time grant on February 4, 1997, of 15,000
Restricted Stock Rights ("RSR's") which are intended
to replace the unvested portion of the Special
Performance Share Awards previously granted on
February 1, 1994. The remaining unvested Special
Performance Share Awards are rescinded and replaced
by the RSR's described in this paragraph. 5,000 of
the RSR's shall vest on February 1, 1998 provided
that the 1997 EPS of Household equals or exceeds
$5.30, and you remain continuously employed by
Household from the date of grant until the
February 1, 1998 vesting date. The remaining 10,000
RSR's shall vest on February 1, 1999 provided that
the 1998 EPS of Household equals or exceeds an
amount to be established in writing by the
Compensation Committee no later than March 30, 1998,
and you remain continuously employed from January 1,
1998 until the February 1, 1999 vesting date. In
the event that your employment is terminated
pursuant to the provisions of paragraph 4a or if you
resign pursuant to the provisions of paragraph
4b(i), 4b(vi), 4b(vii) or 5c, you will receive 100%
of the unvested RSR's on your last day of employment
regardless of whether you have completed the vesting
period or the performance condition has been met;
and
e. Other compensation, benefits and perquisites as
described in, and in accordance with, Household's
compensation, benefit and perquisite plans (the
"Plans").
2. Subject to termination as provided herein, the term of
this Agreement shall be for 18 whole calendar months,
shall commence on the date hereof, and shall be
"evergreen"; that is shall continue monthly as an 18
month term, unless the Corporation gives to you not less
than 17 whole calendar months notice that the term as
monthly continued shall not be so continued; provided
further, that in no event shall the term be continued
beyond your sixty-fifth birthday.
3. During your employment with Household you will devote
your reasonably full time and energies to the faithful
and diligent performance of the duties inherent in, and
implied by, your executive position.
4. In consideration of your employment with Household, it
is mutually agreed that:
a. In the event your employment with Household is
terminated during the term of this Agreement by
Household for any reason other than:
i. willful and deliberate misconduct which is
detrimental in a significant way to the
interests of the Corporation;
ii. death;
iii. inability, for reasons of disability,
reasonably to perform your duties for 6
consecutive calendar months; or,
b. In the event that during the term of this Agreement
you resign your position with Household because
within 6 whole calendar months of your resignation
one or more of the following events occurred to you:
i. your annual salary was reduced;
ii. your annual target bonus or the targeted
value of stock options calculated as provided
in paragraph 1c was reduced and compensation
equivalent in aggregate value was not
substituted;
iii. your benefits under the Household Retirement
Income Plan or any successor tax qualified
defined benefit plan were reduced for reasons
other than to maintain its tax qualified
status and such reductions were not
supplemented in the Household Supplemental
Retirement Income Plan ("HSRIP"); or your
benefits under HSRIP were reduced;
iv. your other benefits or perquisites were
reduced and such reductions were not
uniformally applied with respect to all
similarly situated employees;
v. you were reassigned to a geographical area
outside of the Salinas, California area;
vi. any successor to the Corporation by
acquisition of stock or substantially all of
the assets, by merger or otherwise, failed to
expressly adopt or otherwise repudiated this
Employment Agreement; or
vii. you received written notice that your
employment contract was not renewed;
Household shall be required, and hereby agrees, to make
promptly a lump sum cash payment to you in an amount
equal to 200% of your then annual salary (prior to any
of the aforesaid reductions) plus 200% of the average of
the last two years' bonuses; provided, however, if the
term of this Agreement is less than 18 months because
you are within 18 months of becoming age 65, the amount
shall be multiplied by a fraction the numerator of which
is the number of months left in the term, and the
denominator of which is 18. This payment shall be in
addition to all other compensation and benefits accrued
to the date of termination of employment.
5. It is further mutually agreed that:
a. should your employment be terminated pursuant to the
provisions of paragraph 4a, or
b. should you resign your position pursuant to the
provisions of paragraph 4b, or
c. should you resign your position because you are
assigned to a position of lesser rank or status than
you had immediately prior to the Change in Control
at any time within sixty (60) whole calendar months
following a Change in Control of Household, Household or
its successor shall pay to you the amounts (including
the lump sum payment) described in paragraph 4
regardless of whether you are otherwise entitled to them
under paragraph 4. In addition, Household or its
successor shall promptly make a lump sum cash payment to
you in an amount equal to 200% of your then annual
salary (prior to any reduction) plus 200% of the average
of the last two years' bonuses; provided, however, if
the term of this Agreement is less than 18 months
because you are within 18 months of becoming age 65, the
amount shall be multiplied by a fraction the numerator
of which is the number of months left in the term, and
the denominator of which is 18.
Because of the performance history of Household and your
performance with us, we hereby agree to an irrebuttable
presumption that a reduction in compensation shall be
deemed to have occurred in any year (within five years
following a Change in Control) in which you do not
receive at least:
i. a bonus payment under the Bonus Plan, and
ii. an award of stock options under the Long-Term Plan
for years in which awards were payable under the
Long-Term Plan as it existed prior to the Change in
Control,
both at corporate and individual target levels as those
plans existed prior to the Change in Control (or
compensation, benefits and perquisites equivalent in
aggregate value) and should you choose to resign,
payments shall be made to you as outlined earlier in
this paragraph 5.
For purposes of this Agreement, a Change in Control of
Household shall be deemed to occur when and if:
A. any "person" (as the term is used in Section 13(d)
and Section 14(d)(2) of the Securities Exchange Act
of 1934) other than a trustee or other fiduciary of
securities held under an employee benefit plan of
Household becomes the beneficial owner, directly or
indirectly, of securities of Household representing
20% or more of the combined voting power of
Household's then outstanding securities; or
B. persons who were directors of Household as of the
effective date hereof, or successor directors
nominated by those directors or by such successor
directors cease to constitute a majority of the
Board of Directors of Household or its successor by
merger, consolidation or sale of assets.
6. You are not required to mitigate the amount of any
payments to be made by Household pursuant to this
Agreement by seeking other employment, or otherwise, nor
shall the amount of any payments provided for in this
Agreement be reduced by any compensation earned by you
as the result of self-employment or your employment by
another employer after the date of termination of your
employment with Household.
7. This Agreement was entered into prior to March 29, 1995,
which was the date that regulations were proposed by the
Federal Deposit Insurance Corporation (the "FDIC")
limiting golden parachute and indemnification payments
by insured depository institutions and their holding
companies. At that March date the Agreement provided
for a lump sum payment equal to 582% of your annual
salary. In view of the foregoing, if the lump sum
payments under paragraphs 4 and 5 are otherwise limited
by the FDIC regulations, any limits on "golden
parachute" payments resulting from regulations issued by
the FDIC should not reduce the lump sum payments under
this Agreement below the lesser of 582% of your then
annual salary (prior to any reduction) or the lump sum
amounts calculated under paragraphs 4 and 5.
8. Except as provided below, it is the intent and desire of
Household that the salary, bonuses and other benefits
provided for herein shall be paid to you without any
diminution by reason of the assessment of any "golden
parachute" excise tax pursuant to the Internal Revenue
Code of 1986, as from time to time amended, (hereinafter
the "Code"), or state law. Accordingly, in the event
that any excise tax is assessed against you pursuant to
the provisions of sections 280G and 4999 of the Code (or
successor provisions) or comparable provisions of state
law, whether with respect to any payments made to you
pursuant to the provisions of this Agreement or payments
otherwise arising out of your employment relationship,
Household or any successor, upon notification of such
assessment, shall promptly pay to you such amount as is
necessary to provide you with the same after-tax benefit
that you would have received had there been no "golden
parachute" excise tax. For this purpose, Household or
its successor shall assume that you are taxed at the
highest individual federal and state income tax rates
(without regard to Section 1(g) of the Code or successor
provisions thereto).
However, if any part or all of the amounts to be paid to
you constitute "parachute payments" within the meaning
of section 280G(b)(2)(A) of the Code, and a reduction of
the amount by 10% or less would totally avoid the
imposition of any excise tax, such amounts shall be
reduced so that the aggregate present value of the
amounts constituting such parachute payments will be
equal to 299% of your "annualized includible
compensation for the base period," as such term is
defined in section 280G(d)(1) of the Code. For the
purpose of this subparagraph, present value shall be
determined in accordance with section 280G(d)(4) of the
Code.
9. If a dispute arises regarding the termination of your
employment or the interpretation or enforcement of this
Agreement and you obtain a final judgment in your favor
from a court of competent jurisdiction from which no
appeal may be taken, whether because the time to do so
has expired or otherwise, or your claim is settled by
Household or its successor prior to the rendering of
such a judgment, all reasonable legal and other
professional fees and expenses incurred by you in
contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit
provided for in this Agreement or in otherwise pursuing
your claim will be promptly paid by Household or its
successor with interest thereon at the highest statutory
rate of your state of domicile for interest on judgments
against private parties from the date of payment thereof
by you to the date of reimbursement to you by Household
or its successor.
10. You agree that you will not, without prior written
consent of the Chief Executive Officer or the General
Counsel of Household, during the term of or after the
termination of your employment under this Agreement,
directly or indirectly, disclose to any individual,
corporation, or other entity (other than Household, or
any subsidiary or affiliate thereof, or its officers,
directors, or employees entitled to such information, or
any other person or entity to whom such information is
regularly disclosed in the normal course of Household's
business), or use for your own benefit or for the
benefit of such individual, corporation or other entity,
any information whether or not reduced to written or
other tangible form, which:
a. is not generally known to the public or in the
industry;
b. has been treated by Household as confidential or
proprietary; and
c. is of competitive advantage to Household and in the
confidentiality of which Household has a legally
protectible interest,
(such information being referred to herein as
"Confidential Information"). Confidential Information
which becomes generally known to the public or in the
industry, or in the confidentiality of which Household
ceases to have a legally protectible interest, shall
cease to be subject to the restrictions of this
paragraph.
11. The provisions of this Agreement shall be construed, to
the extent possible, so as to guarantee their
enforceability. In case any one or more of the
provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of
this Agreement, and this Agreement shall be construed as
if such invalid, illegal, or unenforceable provision had
never been contained in it.
12. This Agreement is an Amendment and Restatement of the
Employment Agreement dated July 11, 1994 and restated
July 9, 1996, between you and Household and supersedes
said Agreement. This Agreement also supersedes the
Employment Agreement dated April 22, 1994, the
Employment Agreement dated May 28, 1993, the Employment
Agreement dated May 1, 1991, and the Employment
Agreement dated August 16, 1990, between you and
Household, all in furtherance of the objectives
authorized and deemed by the Board of Directors of
Household to serve the best interests of the
Corporation.
13. Any successor to the Corporation, by acquisition of
stock or substantially all of the assets, by merger or
otherwise, shall be required to adopt and abide by the
terms of this Agreement. This Agreement, and any rights
to receive payments hereunder, may not be transferred,
assigned or alienated by you.
14. All benefits under this Agreement shall be general
obligations of the Corporation which shall not require
the segregation of any funds or property.
Notwithstanding the foregoing, in the discretion of the
Corporation, the Corporation may establish a grantor
trust or other vehicle to assist it in meeting its
obligations hereunder, but any such trust or other
vehicle shall not create a funded account or security
interest for you.
15. This Agreement may only be amended or terminated by
written agreement, signed by both of the parties.
Our signatures below indicate our mutual agreement and
acceptance of the foregoing terms and provisions, all as of the
date first above set forth.
Sincerely,
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
-----------------------
William F. Aldinger
Chief Executive Officer
/s/ Joseph W. Saunders
----------------------
Joseph W. Saunders
U:\WP\EMP819\EMP\JWS.97A
<PAGE> 1
HOUSEHOLD INTERNATIONAL
NON-QUALIFIED DEFERRED COMPENSATION PLAN
Section 1. Purpose. The purpose of this Plan is to provide certain
executives of Household International, Inc. (the "Company") and certain of
its direct and indirect subsidiaries (the Company and such subsidiaries
being referred to as the "Employers") the opportunity to defer receipt of
compensation and provide for future savings of compensation earned. The
provision of such an opportunity is designed to aid the Company in
attracting and retaining as executives persons whose abilities, experience
and judgment can contribute to the well-being of the Company.
Section 2. Name, Effective Date. The effective date of this plan
known as the Household International Non-Qualified Deferred Compensation
Plan (the "Plan") is December 1, 1996.
Section 3. Eligibility. Any executive of the Employers who is on
the United States payroll and whose base salary is at least $160,000 as of
the November 1 preceding the year for which an election is made is
eligible to participate in this Plan.
Section 4. Deferred Compensation Account. An unfunded deferred
compensation account shall be established for each person who elects to
participate in the Plan.
Section 5. Amount of Deferral. For calendar year 1997 and for
each calendar year thereafter, a participant may elect to defer receipt
of a specified portion of the unearned salary that would otherwise be
paid in that year and/or all or a specified portion of the cash bonus
which will be earned for that year which generally becomes payable to
the participant in the following year. An amount equal to the
compensation deferred will be credited to the participant's deferred
compensation account on the date such compensation would otherwise be
initially payable. In no event may a participant make a deferral
election with respect to his or her salary that would cause his projected
salary expected to be actually paid in that year to be reduced below
$160,000. A participant may, however, elect to defer all or any part
of his cash bonus earned for a particular year whether it is payable in
that year or payable in the next year. The $160,000 amount referred to in
this Section 5 and Section 3 shall be automatically adjusted to reflect
changes in the limits outlined under Section 401(a)(17) of the Internal
Revenue Code (the "Code").
<PAGE> 2
Section 6. Election of Deferral. An election to defer salary
and/or bonus for each year shall be made on forms provided by the
Compensation Committee of the Board of Directors of the Company (the
"Committee") for that purpose and shall be effective on the date
indicated, but not before the date filed with the Committee. With
respect to salary, the election shall be made prior to the year for which
it is applicable and shall be effective with respect to any salary to be
earned which would otherwise be payable in that year. With respect to
bonus, due to its uncertain nature, the election shall be made by July 1
regarding the potential bonus to be earned and awarded for that year
notwithstanding the fact that bonus income is generally distributed in
the following calendar year.
If a participant has failed to select a deferred distribution date
for a deferral or if he terminates employment before such deferred
distribution date, then distribution of such deferred compensation will
be made in the calendar year following the date of the participant's
termination of employment. For any compensation earned for a particular
year, the earliest deferred distribution date specified by the
participant must be at least two years after the year for which the
compensation was earned. Subject to Section 19, with respect to each
such calendar year to which it applies, the election shall be irrevocable
upon receipt by the Committee.
Section 7. Hypothetical Investment. Each deferred compensation
account will be credited with earnings from the date on which deferred
compensation would initially have been payable until the date of
payment. The participant can elect to have the amount credited to his
account invested hypothetically in various funds. The funds against
which increases or decreases in the participant's deferred compensation
account will be measured are:
Fund A - Household International, Inc. Common Stock Fund.
Fund B - Treasury Fund. This Fund shall be credited with interest
at a rate equal to the United States five-year treasury
rate plus HFC's borrowing spread over that rate on the
first day of each calendar quarter with interest
compounded quarterly.
<PAGE> 3
The participant can change his or her investment election as to the
amount already credited or to be credited to his account on a quarterly
basis by filing an appropriate election form with the Committee prior to
the first day of the quarter in which the election is to be effective.
There is no guarantee a participant's deferred compensation account
invested in Fund A will increase; amounts may decrease based on the
performance of Fund A.
Section 8. Value of Deferred Compensation Accounts. The value of
each participant's deferred compensation account shall include compensation
deferred, adjusted for any increase or decrease thereon, pursuant to
Section 7 of the Plan.
Section 9. Payment of Deferral. Subject to Section 19, no
distribution may be made from the participant's deferred compensation
account prior to the first day of the calendar year following the date of
the termination of the participant's employment, unless an earlier date is
specified by the participant in his election to defer compensation. If a
participant elected to defer any year's compensation to a specific date
other than his or her termination of employment, such year's deferred
compensation and earnings or losses thereon will be payable in cash in a
lump sum on the date specified unless it is paid earlier due to termination
of employment. The value of a participant's deferred compensation account
will be payable in cash in a lump sum as soon as practicable following the
end of the year in which a participant terminates employment.
In the event that the participant becomes totally disabled, the
Committee, in its absolute discretion, may distribute all or a portion of
the participant's deferred compensation account according to a revised
payment schedule.
Section 10. Withholding. There shall be deducted from all deferrals
and payments under this Plan the amount of any taxes required to be
withheld by any federal, state or local government. The participants and
their beneficiaries, distributees, and personal representatives will bear
any and all federal, foreign, state, local or other income or other taxes
imposed on amounts deferred or paid under this Plan.
Section 11. Designation of Beneficiary. A participant may designate
a beneficiary or beneficiaries which shall be effective upon filing written
notice with the Committee on the form provided by the Committee for that
purpose. If no beneficiary is designated, the beneficiary will be the
participant's estate. If more than one beneficiary statement has been
filed, the beneficiary or beneficiaries designated in the statement bearing
the most recent date will be deemed the valid beneficiary or beneficiaries.
<PAGE> 4
Section 12. Death of Participant or Beneficiary. In the event of a
participant's death before he has received the full value of his deferred
compensation account, the then current value of the participant's
deferred compensation account shall be determined and such amount shall
be paid to the beneficiary or beneficiaries of the deceased participant
as soon as practicable thereafter in cash in a lump sum. If no
designated beneficiary has been named or survives the participant, the
beneficiary will be the participant's estate.
Section 13. Participant's Rights Unsecured. The right of any
participant or beneficiary to receive payment under the provisions of
the Plan shall be an unsecured claim against the general assets of the
Company, and any successor company in the event of a merger,
consolidation, reorganization or any other event which causes the
Company's assets or business to be acquired by another company. No
provisions contained in the Plan shall be construed to give any
participant or beneficiary at any time a security interest in the
deferred compensation account or any other assets of the Company.
Section 14. Statement of Account. Statements will be sent to
participants following the end of each year as to the value of their
deferred compensation accounts as of December 31st of such year.
Section 15. Assignability. No right to receive payments hereunder
shall be transferable or assignable by a participant or a beneficiary.
Section 16. Administration of the Plan. The Plan shall be
administered by the Committee. The Committee shall conclusively
interpret the provisions of the Plan, decide all claims, and shall
make all determinations under the Plan. The Committee shall act by vote
or written consent of a majority of its members. The Committee may
authorize the appointment of an agent to perform recordkeeping and other
administrative duties with respect to the Plan.
Section 17. Amendment or Termination of Plan. This Plan may at any
time or from time to time be amended, modified or terminated by the
Committee. No amendment, modification or termination shall, without the
consent of a participant, adversely affect such participant's accruals
on his prior elections. Rights accrued prior to termination of the Plan
will not be canceled by termination of the Plan.
<PAGE> 5
Section 18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
Section 19. Withdrawals. Notwithstanding anything in this Plan to
the contrary, a participant may request withdrawal of all or a portion
of the balance of his deferred compensation account by filing a written
request with the Committee in a form acceptable to the Committee for
that purpose. A minimum of $25,000 (Twenty Five Thousand Dollars) or
the balance of the account, if less, must be requested. The withdrawal
will be deemed to be made from the deferrals for the year or years whose
deferred distribution date is closest to the date of the withdrawal and
the Committee, in its sole discretion, shall determine which of the
phantom investment accounts of the participant will be charged for the
withdrawal. This request may be granted, solely in the absolute discretion
of the Committee, provided, however, if the Committee grants a withdrawal
request, all pending deferral elections for future compensation under the
Plan which the participant has filed with the Committee will be canceled.
The participant will be suspended from participation in this Plan with
respect to future compensation until the participant files a deferral
election with respect to salary and/or bonus earned for the calendar year
following the year in which the withdrawal occurs or some later year. The
Committee will impose a forfeiture equal to the amount of the withdrawal
multiplied by 10 percent. Such amount will be forfeited to the Company.
In the event a participant is a Section 16 officer of the Company, a
distribution made by the Committee pursuant to this Section 19 shall occur on
a date that is at least six (6) months from the date the Committee approves
the withdrawal request if the withdrawal comes from the participant's account
hypothetically invested in Fund A.
Section 20. Payment of Certain Costs of the Participant. If a
dispute arises regarding the interpretation or enforcement of this Plan and
the participant (or, in the event of his death, his beneficiary) obtains a
final judgment in his favor from a court of competent jurisdiction from
which no appeal may be taken, whether because the time to do so has expired
or otherwise, or his claim is settled by the Company prior to the rendering
of such a judgment, all reasonable legal and other professional fees and
expenses incurred by the participant in contesting or disputing any such
claim or in seeking to obtain or enforce any right or benefit provided for
in this Plan or in otherwise pursuing his claim will be promptly paid by
the Company with interest thereon at the highest Illinois statutory rate
for interest on judgments against private parties from the date of payment
thereof by the participant to the date of reimbursement to him by the
Company.
<PAGE> 6
Section 21. Securities Law. With respect to participants subject to
section 16 of the Exchange Act, transactions under this plan are intended
to comply with all applicable provisions of Rule 16b-3 or its successor
under the Securities Exchange Act of 1934. To the extent any provision of
the Plan or action by the Committee or its designee fails to so comply, it
shall be deemed null and void.
Section 22. Change in Control. A "Change in Control" means a change
in the beneficial ownership of the Company's then outstanding securities
or a change in the composition of the Company's Board of Directors as a
result of any of the following occurrences:
1. any "person" (as the term is used in Section 13(d) and Section
14(d)(2) of the Securities Exchange Act of 1934) other than: (a) a
trustee or other fiduciary of securities held under an employee
benefit plan of the Company, or (b) the Company or any subsidiary
thereof becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities; or
2. persons who were directors of the Company as of the effective date
hereof, or successor directors nominated by those directors or by such
successor directors, cease to constitute a majority of the Board of
Directors of the Company or its successor by merger, consolidation or
sale of assets.
Notwithstanding any other provision of the Plan, if a Change of Control
occurs, then the Company shall create a trust or take such other actions
as are appropriate to protect each participant's deferred compensation
account.
h:\wp\hi0122\plans\defcomp
EXHIBIT 12
-----------
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
All dollar amounts are stated in millions.
Three months ended March 31 1997 1996
- ---------------------------------------------------------------
<S> <C> <C>
Net income $131.5 $110.5
Income taxes 69.1 51.5
------ ------
Income before income taxes 200.6 162.0
------ ------
Fixed charges:
Interest expense <F1> 365.9 356.5
Interest portion of rentals <F2> 7.0 7.5
------ ------
Total fixed charges 372.9 364.0
------- -------
Total earnings as defined $573.5 $526.0
====== ======
Ratio of earnings to fixed charges 1.54 1.45
====== ======
Preferred stock dividends <F3> $ 4.9 $ 6.0
====== ======
Ratio of earnings to combined fixed charges
and preferred stock dividends 1.52 1.42
====== ======
<FN>
<F1> For financial statement purposes, interest expense includes
income earned on temporary investment of excess funds,
generally resulting from over-subscriptions of commercial
paper.
<F2> Represents one-third of rentals, which approximates the
portion representing interest.
<F3> Preferred stock dividends are grossed up to their pretax
equivalent based upon an effective tax rate of 34.4 and 31.8
percent for the three months ended March 31, 1997 and 1996,
respectively.
</FN>
</TABLE>
Exhibit 21
SUBSIDIARIES OF HOUSEHOLD INTERNATIONAL, INC.
- ---------------------------------------------
As of March 31, 1997, the following subsidiaries were directly or
indirectly owned by the Registrant. Certain subsidiaries which
in the aggregate do not constitute significant subsidiaries may
be omitted.
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Hamilton Investments, Inc. Delaware 100%
Craig-Hallum Corporation Delaware 100%
Household Bank, f.s.b U.S. 100%
HHTS, Inc. Illinois 100%
Household Home Title Services, Inc. II Maryland 100%
Household Bank (SB), N.A. U.S. 100%
Household Affinity Funding Corporation Delaware 100%
Household Service Corporation
of Illinois, Inc. Illinois 100%
Household Insurance Services, Inc. Illinois 100%
Housekey Financial Corporation Illinois 100%
Associations Service Corporation Indiana 100%
Household Mortgage Services, Inc. Delaware 100%
Security Investment Corporation Maryland 100%
Household Capital Corporation Delaware 100%
Household Commercial Canada Inc. Canada 100%
Household Finance Corporation Delaware 100%
HFC Auto Credit Corp. Delaware 100%
HFC Funding Corporation Delaware 100%
HFC Revolving Corporation Delaware 100%
HFS Funding Corporation Delaware 100%
Household Bank (Nevada), N.A. U.S. 100%
Household Card Funding Corporation Delaware 100%
Household Receivables Funding Corporation Nevada 100%
Household Receivables Funding Delaware 100%
Corporation II
Household Receivables Funding, Inc. Delaware 100%
Household Capital Markets, Inc. Delaware 100%
Household Card Services, Inc. Nevada 100%
Household Bank (Illinois), N.A. U.S. 100%
Household Consumer Loan Corporation Nevada 100%
Household Corporation Delaware 100%
Household Credit Services, Inc. Delaware 100%
Household Credit Services of Mexico, Inc. Delaware 100%
<PAGE>
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Household Finance Receivables Corporation IIDelaware 100%
Household Financial Services, Inc. Delaware 100%
Household Group, Inc. Delaware 100%
AHLIC Investment Holdings Corporation Delaware 100%
Household Insurance Agency, Inc. Michigan 100%
Household Insurance Company Michigan 100%
Household Life Insurance Co. of Arizona Arizona 100%
Household Life Insurance Company Michigan 100%
Cal-Pacific Services, Inc. California 100%
Household Business Services, Inc. Delaware 100%
Household Commercial Financial Delaware 100%
Services, Inc.
Business Realty Inc. Delaware 100%
Business Lakeview, Inc. Delaware 100%
Capital Graphics, Inc. Delaware 100%
Color Prelude Inc. Delaware 100%
HCFS Business Equipment Corporation Delaware 100%
HFC Commercial Realty, Inc. Delaware 100%
G.C. Center, Inc. Delaware 100%
Com Realty, Inc. Delaware 100%
Lighthouse Property Corporation Delaware 100%
Household OPEB I, Inc. Illinois 100%
Land of Lincoln Builders, Inc. Illinois 100%
PPSG Corporation Delaware 100%
Steward's Glenn Corporation Delaware 100%
HFC Leasing, Inc. Delaware 100%
First HFC Leasing Corporation Delaware 100%
Second HFC Leasing Corporation Delaware 100%
Valley Properties Corporation Tennessee 100%
Fifth HFC Leasing Corporation Delaware 100%
Sixth HFC Leasing Corporation Delaware 100%
Seventh HFC Leasing Corporation Delaware 100%
Eighth HFC Leasing Corporation Delaware 100%
Tenth HFC Leasing Corporation Delaware 100%
Eleventh HFC Leasing Corporation Delaware 100%
Thirteenth HFC Leasing Corporation Delaware 100%
Fourteenth HFC Leasing Corporation Delaware 100%
Seventeenth HFC Leasing Corporation Delaware 100%
Nineteenth HFC Leasing Corporation Delaware 100%
Twenty-second HFC Leasing Corporation Delaware 100%
Twenty-sixth HFC Leasing Corporation Delaware 100%
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Beaver Valley, Inc. Delaware 100%
Hull 752 Corporation Delaware 100%
Hull 753 Corporation Delaware 100%
Third HFC Leasing Corporation Delaware 100%
Macray Corporation California 100%
Fourth HFC Leasing Corporation Delaware 100%
Pargen Corporation California 100%
Fifteenth HFC Leasing Corporation Delaware 100%
Hull Fifty Corporation Delaware 100%
Household Capital Investment Corporation Delaware 100%
B&K Corporation Michigan 94%
Household Commercial of California, Inc. California 100%
OLC, Inc. Rhode Island 100%
OPI, Inc. Virginia 100%
Household Finance Consumer Discount CompanyPennsylvania 100%
Overseas Leasing Two FSC, Ltd. Bermuda 99%
Household Finance Corporation II Delaware 100%
Household Finance Corporation of Alabama Alabama 100%
Household Finance Corporation of CaliforniaDelaware 100%
Household Finance Corporation of Nevada Delaware 100%
Household Finance Realty Corporation of Delaware 100%
New York
Household Finance Industrial Loan Company Washington 100%
Household Finance Industrial Loan Company Iowa 100%
of Iowa
Household Finance Realty Corporation of Delaware 100%
Nevada
Household Finance Corporation III Delaware 100%
Amstelveen FSC, Ltd. Bermuda 99%
HFC Agency of Connecticut, Inc. Connecticut 100%
HFC Agency of Michigan, Inc. Michigan 100%
HFC Agency of Missouri, Inc. Missouri 100%
Night Watch FSC, Ltd. Bermuda 99%
Household Realty Corporation Delaware 100%
Overseas Leasing One FSC, Ltd. Bermuda 100%
Overseas Leasing Four FSC, Ltd. Bermuda 99%
Overseas Leasing Five FSC, Ltd. Bermuda 99%
Household Retail Services, Inc. Delaware 100%
HRSI Funding, Inc. Nevada 100%
Household Financial Center Inc. Tennessee 100%
Household Industrial Finance Company Minnesota 100%
Household Industrial Loan Co. of Kentucky Kentucky 100%
Household Insurance Agency, Inc. Nevada 100%
Household Recovery Services Corporation Delaware 100%
%
Voting
Stock
Organized Owned
Under By
Names of Subsidiaries Laws of: Parent
- --------------------- --------- ------
Household Relocation Management, Inc. Illinois 100%
Mortgage One Corporation Delaware 100%
Mortgage Two Corporation Delaware 100%
Sixty-First HFC Leasing Corporation Delaware 100%
Household Pooling Corporation Nevada 100%
Household Receivables Acquisition Company Delaware 100%
Household Financial Group, Ltd. Delaware 100%
Household Global Funding, Inc. Delaware 100%
Household International (U.K.) Limited England 100%
D.L.R.S. Limited Cheshire 100%
HFC Bank plc England 100%
Hamilton Financial Planning Services
Limited England 100%
Hamilton Insurance Company Limited England 100%
Hamilton Life Assurance Co. Limited England 100%
HFC Pension Plan Limited England 100%
Household Funding Limited England 100%
Household Investments Limited England/Wales 100%
Household Leasing Limited England 100%
Household Management Corporation Limited England/Wales 100%
Household Overseas Limited England 100%
Household International Netherlands, B.V. Netherlands 100%
Household Financial Corporation Limited Ontario 100%
Household Finance Corporation of Canada Canada 100%
Household Realty Corporation Limited Ontario 100%
Household Trust Company Canada 100%
Merchant Retail Services Limited Ontario 100%
Household Reinsurance Ltd. Bermuda 100%
U:\LAW\EDGAR\IEX21.WP (5/1/97)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SUMMARY FINANCIAL INFORMATION OF THE COMPANY AND ITS
SUBSIDIARIES IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION
AND FINANCIAL STATEMENTS PREVIOUSLY FILED WITH THE SECURITIES &
EXCHANGE COMMISSION.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 294,100
<SECURITIES> 2,333,700
<RECEIVABLES> 22,401,100
<ALLOWANCES> 1,697,200
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 703,800
<DEPRECIATION> 363,900
<TOTAL-ASSETS> 28,046,800
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 14,216,100
0
150,000
<COMMON> 115,200
<OTHER-SE> 3,090,900
<TOTAL-LIABILITY-AND-EQUITY> 28,046,800
<SALES> 0
<TOTAL-REVENUES> 1,335,700
<CGS> 0
<TOTAL-COSTS> 476,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 293,400
<INTEREST-EXPENSE> 365,100
<INCOME-PRETAX> 200,600
<INCOME-TAX> 69,100
<INCOME-CONTINUING> 131,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,500
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
<FN>
<F1>FINANCIAL STATEMENTS OF THE COMPANY WERE PREPARED IN ACCORDANCE
WITH
FINANCIAL INSTITUTION INDUSTRY STANDARDS. ACCORDINGLY, THE
COMPANY'S
BALANCE SHEETS WERE NON-CLASSIFIED.
</FN>
</TABLE>
EXHIBIT 99.1
-------------
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
DEBT AND PREFERRED STOCK SECURITIES RATINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Standard Moody's Fitch Duff & Phelps
& Poor's Investors Investors Credit Thomson
Corporation Service Services Rating Co. BankWatch
- ------------------------------------------------------------------------------------------------------
At March 31, 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Household International, Inc.
Senior A A3 A A A
Commercial paper A-1 P-2 F-1 Duff 1 TBW-1
Preferred stock A- baa1 A- A- BBB+
----------- --------- --------- ------------- ---------
Household Finance Corporation
Senior A A2 A+ A+ A+
Senior subordinated A- A3 A A A
Commercial paper A-1 P-1 F-1 Duff 1+ TBW-1
Preferred stock A- a3 A A- A-
----------- --------- --------- ------------- ---------
Household Bank, f.s.b.
Senior A A2 A A NR
Subordinated A- A3 A- A- A
Certificates of deposit
(long/short-term) A/A-1 A2/P-1 A/F-1 A/Duff 1 TBW-1
Thrift notes A-1 P-1 F-1 Duff 1 TBW-1
- ------------------------------------------------------------------------------------------------------
</TABLE>
