February 4, 1997
Xx. Xxxxxx X. Xxxxxxxx
Household Credit Services, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Dear Xxx:
SUBJECT: Amendment and Restatement of Employment Agreement
Dated July 11, 1994
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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Performance Share Awards are rescinded and replaced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 xxxxxxxxx
0x(x), 0x(xx), 0x(xxx) 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/ Xxxxxxx X. Xxxxxxxx
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Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
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