-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MfVdaEMUVjr2pDICWQV8Gk+jPb04vsbzGuRKMtK0qbRdbISZ5Xs6RWh8mEBCTQ+/ Vu9Kf7QZyVPQiFC6/PqV2A== 0000354964-97-000008.txt : 19970515 0000354964-97-000008.hdr.sgml : 19970515 ACCESSION NUMBER: 0000354964-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: CSX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOUSEHOLD INTERNATIONAL INC CENTRAL INDEX KEY: 0000354964 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 363121988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08198 FILM NUMBER: 97605684 BUSINESS ADDRESS: STREET 1: 2700 SANDERS RD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 BUSINESS PHONE: 8475645000 MAIL ADDRESS: STREET 1: 2700 SANDERS ROAD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 10-Q 1 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 -------------- OR [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- -------------- Commission file number 1-8198 ------ HOUSEHOLD INTERNATIONAL, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 36-3121988 - ------------------------ ------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 2700 Sanders Road, Prospect Heights, Illinois 60070 - ------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 564-5000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] At April 30, 1997, there were 97,385,195 shares of registrant's common stock outstanding. 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 3 Part 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Household International, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - -------------------------------------------------------
All dollar amounts, except per share data, are stated in millions. - ------------------------------------------------------------------------------------------- Three months ended March 31 1997 1996 - ------------------------------------------------------------------------------------------- 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 ====== ======
See notes to interim condensed consolidated financial statements. 4 Household International, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS - -------------------------------------
In millions, except share data. - ------------------------------------------------------------------------------------------------------- March 31, December 31, 1997 1996 - ------------------------------------------------------------------------------------------------------- ASSETS (Unaudited) - ------ 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 ========= =========
* 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. 5 Household International, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - -----------------------------------------------------------
In millions. - ---------------------------------------------------------------------------------------------- Three months ended March 31 1997 1996 - ---------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATIONS 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) --------- ---------
See notes to interim condensed consolidated financial statements. 6 Household International, Inc. and Subsidiaries FINANCIAL HIGHLIGHTS - --------------------
All dollar amounts are stated in millions. - -------------------------------------------------------------------------- Three months ended March 31 1997 1996 - -------------------------------------------------------------------------- Net income $ 131.5 $ 110.5 --------- --------- Revenues 1,335.7 1,175.2 --------- --------- Return on average common shareholders' equity 17.1% 15.7% --------- --------- Return on average owned assets 1.77 1.53 --------- --------- Managed basis efficiency ratio, normalized 38.3 41.3 --------- ---------
All dollar amounts are stated in millions. - -------------------------------------------------------------------------- March 31, December 31, 1997 1996 - -------------------------------------------------------------------------- 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 11.97% 11.22% --------- --------- Total shareholders' equity as a percent of managed assets 7.10 6.90 --------- --------- Annualized. Ratio of normalized operating expenses to managed net interest margin and other revenues less policyholders' benefits. 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.
See notes to interim condensed consolidated financial statements. 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:
- ----------------------------------------------------------------------------------------------------- In millions. March 31, 1997 December 31, 1996 - ----------------------------------------------------------------------------------------------------- Amortized Fair Amortized Fair Cost Value Cost Value - ----------------------------------------------------------------------------------------------------- AVAILABLE-FOR-SALE INVESTMENTS 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 ======== ======== ======== ========
8 3. RECEIVABLES - ---------------- Receivables consisted of the following:
- --------------------------------------------------------------------------------------- March 31, December 31, In millions. 1997 1996 - --------------------------------------------------------------------------------------- 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 ========= =========
The outstanding balance of receivables serviced with limited recourse consisted of the following:
- ------------------------------------------------------------------------------------- March 31, December 31, In millions. 1997 1996 - ------------------------------------------------------------------------------------- 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 ========= =========
The combination of receivables owned and receivables serviced with limited recourse, which the company considers its managed portfolio, is shown below:
- ------------------------------------------------------------------------------------- March 31, December 31, In millions. 1997 1996 - ------------------------------------------------------------------------------------- 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 ========= =========
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:
- -------------------------------------------------------------------------------- In millions. 1997 1996 - -------------------------------------------------------------------------------- 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 ======== ========
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. 10 6. NET INCOME PER COMMON SHARE - ------------------------------- Computations of net income per common share for the three months ended March 31 were as follows:
- ---------------------------------------------------------------------------------------- 1997 1996 ----------------- ----------------- Fully Fully In millions, except per share data. Primary Diluted Primary Diluted - ------------------------------------ ------- ------- ------- ------- 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 ====== ====== ====== ======
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. 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. 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. 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. 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):
- ----------------------------------------------------------------------------- March 31, March 31, Three months ended 1997 1996 - ----------------------------------------------------------------------------- Visa/MasterCard $ 1.2 $ .6 Other unsecured .8 .8 ------ ------ Total $ 2.0 $ 1.4 ====== ======
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. 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
- --------------------------------------------------------------------------------------------- All dollar amounts are stated in millions. Three months ended March 31 1997 * 1996 * - --------------------------------------------------------------------------------------------- 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 ========= ==========
* 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"). 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. 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):
- --------------------------------------------------------------------------- March 31, December 31, March 31, 1997 1996 1996 - --------------------------------------------------------------------------- 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 ======== ======== ========
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. 18 Total owned and managed credit loss reserves as a percent of receivables were as follows:
- --------------------------------------------------------------- March 31, December 31, March 31, 1997 1996 1996 - --------------------------------------------------------------- Owned 4.21% 3.74% 3.60% Managed 4.08 3.75 3.53 ---- ---- ----
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):
- --------------------------------------------------------------------------- 3/31/97 12/31/96 9/30/96 6/30/96 3/31/96 - --------------------------------------------------------------------------- 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% ==== ==== ==== ==== ====
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. 19 Net Chargeoffs of Consumer Receivables - -------------------------------------- Net Chargeoffs of Consumer Receivables (as a percent, annualized, of average managed consumer receivables):
- ----------------------------------------------------------------------------- First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter 1997 1996 1996 1996 1996 - ----------------------------------------------------------------------------- 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% ==== ==== ==== ==== ====
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:
- ----------------------------------------------------------------------------------------- In millions. 3/31/97 12/31/96 9/30/96 6/30/96 3/31/96 - ----------------------------------------------------------------------------------------- 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% -------- -------- -------- -------- --------
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. 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. 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. EX-3.1 2 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 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 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 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 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 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 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 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 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 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 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 EX-10.5 3 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) EX-10.8 4 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) EX-10.10 5 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 EX-10.11 6 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 EX-10.14 7 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"). 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. 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. 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. 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. 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 EX-12 8 EXHIBIT 12 ----------- HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
- --------------------------------------------------------------- All dollar amounts are stated in millions. Three months ended March 31 1997 1996 - --------------------------------------------------------------- Net income $131.5 $110.5 Income taxes 69.1 51.5 ------ ------ Income before income taxes 200.6 162.0 ------ ------ Fixed charges: Interest expense 365.9 356.5 Interest portion of rentals 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 $ 4.9 $ 6.0 ====== ====== Ratio of earnings to combined fixed charges and preferred stock dividends 1.52 1.42 ====== ====== For financial statement purposes, interest expense includes income earned on temporary investment of excess funds, generally resulting from over-subscriptions of commercial paper. Represents one-third of rentals, which approximates the portion representing interest. 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.
EX-21 9 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% % 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) EX-27 10
5 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. 1,000 3-MOS DEC-31-1997 MAR-31-1997 294,100 2,333,700 22,401,100 1,697,200 0 0 703,800 363,900 28,046,800 0 14,216,100 0 150,000 115,200 3,090,900 28,046,800 0 1,335,700 0 476,600 0 293,400 365,100 200,600 69,100 131,500 0 0 0 131,500 1.30 1.30 FINANCIAL STATEMENTS OF THE COMPANY WERE PREPARED IN ACCORDANCE WITH FINANCIAL INSTITUTION INDUSTRY STANDARDS. ACCORDINGLY, THE COMPANY'S BALANCE SHEETS WERE NON-CLASSIFIED.
EX-99.1 11 EXHIBIT 99.1 ------------- HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES DEBT AND PREFERRED STOCK SECURITIES RATINGS
- ------------------------------------------------------------------------------------------------------ Standard Moody's Fitch Duff & Phelps & Poor's Investors Investors Credit Thomson Corporation Service Services Rating Co. BankWatch - ------------------------------------------------------------------------------------------------------ At March 31, 1997 - ------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------
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