PROSPECTUS SUPPLEMENT
(To Prospectus dated December 1, 1994)
$150,000,000
HOUSEHOLD INTERNATIONAL NETHERLANDS B.V.
6 1/8% Senior Notes due March 1, 2003
Interest payable March 1 and September 1
Guaranteed as to Payment of Principal and Interest by
HOUSEHOLD INTERNATIONAL, INC.
ISSUE PRICE: 99.568%
The Notes will bear interest from March 1, 1996, at the rate of 6 1/8% per
annum, payable semiannually on March 1 and September 1, commencing September
1, 1996. The Notes will not be redeemable prior to maturity except that the
Notes may be redeemed if, at any time, the Company or Household International
has been or will be required to pay additional amounts with respect to the
Notes. See "Description of the Notes."
The Notes will be represented by a global security registered in the name of a
nominee of The Depository Trust Company, as depositary. Beneficial interests
in the Notes will be shown on, and transfers thereof will be effected only
through, records maintained by The Depository Trust Company and its
participants. Except as described herein, Notes in definitive form will not be
issued. The Notes will trade in The Depository Trust Company's Same-Day Funds
Settlement System until maturity, and secondary market trading activity for
the Notes will settle, therefore, in immediately available funds. All payments
of principal and interest on global securities will be made by the Company in
immediately available funds. See "Description of the Notes--Same-Day
Settlement and Payment."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3)
- ------------------------------------------------------------------------------------------------
Per Note 99.568% .550% 99.018%
- ------------------------------------------------------------------------------------------------
Total $149,352,000 $825,000 $148,527,000
- ------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from March 1, 1996.
(2) The Company and Household International have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(3) Before deduction of expenses payable by the Company estimated at $315,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by McDermott,
Will & Emery, counsel for the Underwriters. It is expected that delivery of
the Notes will be made on or about March 1, 1996, through the facilities of
The Depository Trust Company in New York, New York, against payment therefor
in same-day funds. As March 1, 1996 is the fifth business day following the
date hereof, purchasers of the Notes should be aware that trading of the Notes
on the date hereof and the next succeeding business day may be affected by
such five-day settlement.
J.P. MORGAN & CO. MORGAN STANLEY & CO.
INCORPORATED
February 23, 1996
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR ANY OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Description of the Notes................................................... S-3
Certain Tax Matters........................................................ S-6
Ratios of Earnings to Fixed Charges........................................ S-7
Underwriters............................................................... S-7
Legal Opinions............................................................. S-7
Experts.................................................................... S-8
Available Information...................................................... S-8
PROSPECTUS
PAGE
----
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Household International.................................................... 3
Household International Netherlands B.V.................................... 3
Use of Proceeds............................................................ 3
Selected Financial Information of Household International, Inc............. 4
Ratios of Earnings to Fixed Charges........................................ 5
Description of Debt Securities and Guarantees.............................. 5
Description of Warrants.................................................... 10
Plan of Distribution....................................................... 11
Erisa Matters.............................................................. 12
S-2
DESCRIPTION OF THE NOTES
The following description of the terms of the 6 1/8% Senior Notes due March
1, 2003 (the "Notes") offered hereby (referred to in the Prospectus as the
"Offered Debt Securities") supplements, insofar as such description relates to
the Notes, the description of the Debt Securities set forth in the Prospectus
under the heading "Description of Debt Securities and Guarantees" to which
description reference is hereby made.
The Notes will be issued in fully registered form only in denominations of
$100,000 or any amount in excess thereof which is an integral multiple of
$1,000. The Notes will mature on March 1, 2003.
Interest on the Notes at the rate of 6 1/8% per annum will be payable
semiannually on March 1 and September 1, beginning September 1, 1996, to the
persons in whose names the Notes are registered at the close of business on
the fifteenth day of the preceding month, except that interest payable at
maturity shall be paid to the same persons to whom principal of the Notes is
payable.
Subject to certain exceptions and limitations, the Company will pay as
additional interest on the Notes, such additional amounts as are necessary in
order that the net payment by the Company or a paying agent of the principal
and interest on the Notes, after deduction for any present or future tax,
assessment or governmental charge of The Netherlands or a political
subdivision or taxing authority thereof or therein imposed by withholding with
respect to such payment, will not be less than the amount provided in the
Notes to then be due and payable. See "Payment of Additional Amounts."
The Notes are not redeemable at the option of the Company prior to maturity,
except that the Notes may be redeemed, as a whole but not in part, at a
redemption price equal to 100% of their principal amount, together with
interest thereon to the date of redemption, if at any time the Company or
Household International has been or will be required to pay additional amounts
with respect to the Notes. See "Optional Tax Redemption." The Notes will not
be entitled to any sinking fund.
The Notes will be unconditionally guaranteed as to payment of principal and
interest (including additional amounts) by Household International. See
"Description of Debt Securities and Guarantees--Guarantees" in the Prospectus.
The Notes and the Guarantees will be issued under an Indenture dated as of
September 9, 1993, among the Company, Household International and First Trust
of New York N.A. (successor to BankAmerica National Trust Company), as
Trustee.
PAYMENT OF ADDITIONAL AMOUNTS
If any deduction or withholding for any present or future taxes, assessments
or other governmental charges of The Netherlands or any political subdivision
or taxing authority thereof or therein shall at any time be required in
respect of any amounts to be paid by the Company or Household International
under the Notes, the Company or Household International will pay as additional
interest such additional amounts as may be necessary in order that the said
amounts paid to the Holder of any Note pursuant to the terms of such Note,
after such deduction or withholding, will be not less than the amounts
specified in such Note to be then due and payable; provided, however, that the
Company or Household International shall not be required to make any payment
of additional amounts for or on account of:
(a) any tax, assessment or other governmental charge which would not have
been imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member
or shareholder of, or possessor of a power over, such Holder, if such
Holder is an estate, trust, partnership or corporation) and The Netherlands
or any political subdivision or territory or possession of The Netherlands
or area subject to its jurisdiction, including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident or treated as a
resident thereof, being or having been present or engaged in trade or
business therein or having had a permanent establishment therein or (ii)
the presentation of a Note (where presentation is
S-3
required) for payment on a date more than 20 days after the date on which
such payment became due and payable or the date on which payment thereof
was duly provided for, whichever occurs later;
(b) Any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or other governmental charge;
(c) Any tax, assessment or other governmental charge which is payable
otherwise than by withholding from payments of (or in respect of) principal
of or interest on the Notes;
(d) any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure to comply by the Holder or the beneficial
owner with a request of the Company or Household International addressed to
the Holder to provide information concerning the nationality, residence or
identity of the Holder or beneficial owner of the Note, and to make such
declaration or other similar claim or reporting requirement, which is
required by statute, treaty or regulation of The Netherlands as a
precondition to exemption from all or part of such tax, assessment or other
governmental charge; or
(e) any combination of items (a), (b), (c) and (d) above;
nor will additional amounts be paid with respect to any payment of the
principal or interest on any Note to any such Holder who is a fiduciary or
partnership or other than the sole beneficial owner of such payment to the
extent such payment would be required by the laws of The Netherlands (or any
political subdivision or taxing authority of or in The Netherlands) to be
included in the income for tax purposes of a beneficiary or settlor with
respect to such fiduciary or member of such partnership or a beneficial owner
who would not have been entitled to such additional amounts had it been the
Holder of such Note.
OPTIONAL TAX REDEMPTION
The Notes may be redeemed, at the option of the Company or Household
International, in whole but not in part, upon not less than 30 nor more than
60 days' notice given as provided in the Indenture, at any time at a
redemption price equal to the principal amount thereof plus accrued interest
to the date fixed for redemption if, as a result of any change in or amendment
to the laws or any regulations or rulings promulgated thereunder of The
Netherlands or any political subdivision or taxing authority thereof or
therein or any change in the official application or interpretation of such
laws, regulations or rulings, or any change in the official application or
interpretation of, or any execution of or amendment to, any treaty or treaties
affecting taxation to which The Netherlands is a party, which change,
execution or amendment becomes effective on or after the original issue date
of the Notes, the Company or Household International has been or will be
required to pay additional amounts with respect to the Notes as described
above under "Payment of Additional Amounts."
The Company or Household International will also pay, or make available to
Holders on the date of redemption any additional amounts (as described above
under "Payment of Additional Amounts") resulting from the payment of such
redemption price.
BOOK-ENTRY SYSTEM
The Notes will be represented by one or more global securities (the "Global
Security"). The Global Security will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of a
nominee of the Depositary. Except under circumstances described below, the
Notes will not be issuable in definitive form.
The Depositary has advised the Company and the Underwriters as follows: the
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
S-4
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations, some of
which (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies, that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Upon the issuance of the Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of persons designated
by the Underwriters with the respective principal amounts of the Notes
represented by the Global Security. Ownership of beneficial interests in the
Global Security will be limited to persons that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. Ownership of beneficial interests in the Global Security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary or its nominee (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons other than participants). The laws of some states require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in the Global Security.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by the Global
Security for all purposes under the Indenture. Except as provided below,
owners of beneficial interests in the Global Security will not be entitled to
have Notes represented by the Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Notes in definitive
form and will not be considered the owners or holders thereof under the
Indenture.
Principal and interest payments on Notes registered in the name of the
Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any paying agent or the registrar for the Notes will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial interests in the Global Security or
for maintaining, supervising or reviewing any records relating to such
beneficial interests.
The Company expects that the Depositary for the Notes or its nominee, upon
receipt of any payment of principal or interest, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
as shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within
90 days, the Company will issue Notes in definitive form in exchange for the
entire Global Security. In addition, the Company may at any time and in its
sole discretion determine not to have the Notes represented by the Global
Security and, in such event, will issue Notes in definitive form in exchange
for the entire Global Security. In any such instance, an owner of a beneficial
interest in the Global Security will be entitled to physical delivery in
definitive form of Notes represented by the Global Security equal in principal
amount to such beneficial interest and to have such Notes registered in its
name. Notes so issued in definitive form will be issued as registered Notes in
denominations of $100,000 or any amount in excess thereof which is an integral
multiple of $1,000, unless otherwise specified by the Company.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest on Global Securities
will be made by the Company in immediately available funds.
S-5
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
will trade in the Depositary's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Notes will therefore be
required by the Depositary to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Notes.
CERTAIN TAX MATTERS
The following is a summary of the principal United States and Netherlands
income tax consequences with respect to the purchase, ownership and
disposition of a Note by a Holder that is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States, or any estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source (a "United States Holder"). This summary is based on facts as they
exist and laws, regulations, rulings and decisions in effect on the date
hereof, all of which are subject to change, and is included for general
information only and may not apply to all United States Holders. Prospective
purchasers of Notes should consult their own tax advisors in determining the
United States, Netherlands and any other tax consequences to them of the
purchase, ownership and disposition of Notes or beneficial interests therein.
UNITED STATES TAXATION
Due to the guarantee of the Notes by Household International, it is possible
that any interest paid on the Notes will be considered as U.S. source income
for United States income tax purposes (including for purposes of computing a
Holder's U.S. foreign tax credit limitation).
Upon the sale, exchange or redemption of a Note, a United States Holder will
recognize a gain or loss, if any, for United States Federal income tax
purposes equal to the difference between the amount realized on the sale,
exchange or redemption and the United States Holder's tax basis in the Note.
Such gain or loss generally will be capital gain or loss if the Note is held
as a capital asset.
A 31% backup withholding tax and an information reporting requirement is
applicable to certain non-corporate United States Holders with respect to
payments of principal and interest on, and the proceeds of the sale of, the
Notes unless such United States Holder makes certain written certifications
and provides certain identifying information in accordance with applicable
requirements or otherwise establishes an exemption. Any amounts withheld under
the backup withholding rules from a payment to a Holder would be allowed as a
refund or a credit against such United States Holder's Federal income tax
provided that the required information is furnished to the United States
Internal Revenue Service.
THE NETHERLANDS TAXATION
No income taxes will be payable under the tax laws of The Netherlands on
payments of principal or interest on a Note to, or on a disposition of a Note
by, a Holder who is not a resident, nor deemed to be a resident, of The
Netherlands, assuming the Holder does not have an enterprise nor an interest
in an enterprise which carries on business in The Netherlands through a
permanent establishment or permanent representative to which or to whom the
interest on the Note is attributable or to which or to whom the Note belongs.
No payment of principal or interest in respect of the Notes will be subject
to Netherlands withholding tax.
S-6
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for Household International for the
periods indicated below were as follows:
NINE
MONTHS
ENDED
SEPTEMBER
30, YEAR ENDED DECEMBER 31,
--------- ------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
Household International and subsidiaries..... 1.41 1.42 1.41 1.38 1.19 1.10 1.17
For purposes of calculating the ratio, earnings consist of income from
continuing operations to which has been added income taxes and fixed charges.
For Household International, fixed charges consist of interest on all
indebtedness (including capitalized interest) and one-third rental expense
(approximate portion representing interest).
UNDERWRITERS
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, severally, and each of the Underwriters has
severally agreed to purchase, the principal amount of the Notes set forth
opposite its name below:
PRINCIPAL
AMOUNT
NAME OF NOTES
---- ------------
J.P. Morgan Securities Inc................................... $ 75,000,000
Morgan Stanley & Co. Incorporated............................ 75,000,000
------------
Total...................................................... $150,000,000
============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Notes if any are
taken.
The Underwriters initially propose to offer the Notes directly to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in
excess of .35% of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of .25% of the
principal amount of the Notes to certain other dealers. After the initial
public offering, the public offering price and such concessions may be
changed.
The Company and Household International have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Underwriters that
they currently intend to make a market in the Notes. The Underwriters are not
obligated, however, to make a market in the Notes and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of, or trading markets for, the Notes.
LEGAL OPINIONS
The legality of the Notes and the Guarantees will be passed upon by John W.
Blenke, Assistant General Counsel and Secretary for Household International.
As of the date of this Prospectus Supplement, Mr. Blenke is a full-time
employee and an officer of Household International and owns, and holds options
to purchase, shares of Common Stock of Household International. Certain legal
matters will be passed upon for the Underwriters by McDermott, Will & Emery,
Chicago, Illinois.
S-7
EXPERTS
The financial statements and schedules of Household International and its
subsidiaries incorporated by reference in this Prospectus Supplement, to the
extent and for the periods indicated in its reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
AVAILABLE INFORMATION
As a wholly-owned finance subsidiary of Household International, the Company
applied for, and received from the Commission on November 9, 1995, an
exemption from the informational reporting requirements of the Exchange Act.
S-8
HOUSEHOLD INTERNATIONAL NETHERLANDS B.V.
SENIOR NOTES
AND
WARRANTS TO PURCHASE SENIOR NOTES
HOUSEHOLD INTERNATIONAL, INC.
GUARANTOR
Household International Netherlands B.V. (the "Company") from time to time
may offer one or more series of unsecured senior notes ("Debt Securities") and
warrants ("Warrants") to purchase Debt Securities (the Debt Securities and
Warrants being hereinafter collectively called the "Securities") having an
aggregate initial offering price of up to U.S. $400,000,000, or the equivalent
thereof if any of the Securities are denominated in a foreign currency or a
foreign currency unit. All Debt Securities will be unconditionally guaranteed
as to payment of principal, premium, if any, and interest by Household
International, Inc. ("Household International"). The guarantees of the Debt
Securities (the "Guarantees") will constitute unsecured obligations of
Household International and will rank on a parity with other unsecured senior
indebtedness of Household International. The Debt Securities will be offered
as separate series in amounts, at prices and on terms to be determined at the
time of sale and to be set forth in supplements to this Prospectus
("Prospectus Supplement"). The Debt Securities and Warrants may be sold for
U.S. dollars, foreign currencies or foreign currency units, and the principal
of and any interest on the Debt Securities may be payable in U.S. dollars,
foreign currencies or foreign currency units. Unless otherwise specified in
the Prospectus Supplement, the Debt Securities will be issued only in
denominations of U.S. $100,000, or the equivalent thereof, or any amount in
excess thereof which is an integral multiple of U.S. $1,000. The specific
designation, aggregate principal amount, the currency or currency unit for
which the Securities may be purchased, the currency or currency unit in which
the principal and any interest is payable, the rate (or method of calculation)
and time of payment of any interest, authorized denominations, maturity,
offering price, any redemption terms or other specific terms of the Securities
in respect of which this Prospectus is being delivered will be set forth in
the Prospectus Supplement. With regard to the Warrants, if any, in respect of
which this Prospectus is being delivered, the Prospectus Supplement sets forth
a description of the Debt Securities for which each Warrant is exercisable and
the offering price, if any, exercise price, duration, detachability and other
terms of the Warrants.
The Company may sell Securities through underwriting syndicates led by one
or more managing underwriters or through one or more underwriting firms acting
alone, to or through dealers, acting as principals for their own account or as
agents, and also may sell Securities directly to other purchasers. See "Plan
of Distribution". The names of any underwriters or agents involved in the sale
of the Securities in respect to which this Prospectus is being delivered and
their compensation will be set forth in the Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 1, 1994.
AVAILABLE INFORMATION
The Company and Household International have filed with the Securities and
Exchange Commission (the "Commission") a combined registration statement on
Form S-3 (the "Registration Statement," which term encompasses any amendments
thereof) under the Securities Act of 1933, as amended, with respect to the
Securities and the Guarantees offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto to which reference is hereby made. Statements or extracts
presented in this Prospectus from financial statements, contracts, agreements
or other documents are not necessarily complete. With respect to each such
statement or extract, reference is hereby made to the appropriate financial
statement, contract, agreement or other document for a more complete
description of the matter involved. All information concerning the Company
contained herein has been furnished by the Company and all information
concerning Household International has been furnished by Household
International.
The Company and Household International are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith each files applicable reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington
D.C. 20549, and at the Commission's Regional Offices at the Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and Seven
World Trade Center, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
reports, proxy statements and other material concerning Household
International can be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005, and the Chicago Stock
Exchange, 440 South LaSalle Street, Chicago, Illinois 60605.
The Company is not required to send an annual report to its security
holders. However, the Company will, upon request, send to any holder of the
Securities its latest Annual Reports on Form 10-K, as filed with the
Commission. In addition, although Household International is not required to
send a copy of its latest Annual Report to Shareholders to holders of the
Securities, Household International will, upon request, send to any holder of
Securities a copy of its latest Annual Report to Shareholders, as filed with
the Commission. Both the Annual Report on Form 10-K of the Company and the
Annual Report to Shareholders of Household International will contain
financial information that has been examined and reported upon, with an
opinion expressed, by independent certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company (File No. 33-50351)
and Household International (File No. 1-8198) with the Commission pursuant to
the Exchange Act and are incorporated herein by reference and made a part of
this Prospectus:
(a) The Company's and Household International's Annual Reports on Form
10-K for the fiscal year ended December 31, 1993;
(b) The Company's and Household International's Quarterly Reports on Form
10-Q for the quarters ended March 31, June 30, and September 30, 1994; and
(c) Household International's Current Reports on Form 8-K dated February
1, May 11, June 28, August 8, August 10 and October 11, 1994.
All documents filed by Household International or the Company, as the case
may be, with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY AND HOUSEHOLD INTERNATIONAL WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL DOCUMENTS INCORPORATED HEREIN BY
REFERENCE (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE). REQUESTS SHOULD BE DIRECTED TO:
HOUSEHOLD INTERNATIONAL, INC.
2700 SANDERS ROAD
PROSPECT HEIGHTS, ILLINOIS 60070
ATTENTION: OFFICE OF THE SECRETARY
TELEPHONE: 708-564-6989
2
HOUSEHOLD INTERNATIONAL
Household International was formed in 1981 as a holding company for various
subsidiaries which operated in the financial services, manufacturing,
transportation and merchandising industries. In 1985 Household International
initiated a restructuring program that has resulted in the disposition of its
merchandising, transportation and manufacturing businesses. This has enabled
Household International to focus its resources in the financial services
industry through the operation of businesses involved in finance and banking,
and insurance. Household International's principal executive office is located
at 2700 Sanders Road, Prospect Heights, Illinois 60070 (telephone 708-564-
5000).
The finance and banking business of Household International is the largest
segment of Household International's operations. Through subsidiaries, such as
Household Finance Corporation ("HFC"), Household Bank, f.s.b., Household
Credit Services, Inc., Household Retail Services, Inc., Household Bank
(Illinois), National Association, Household Financial Corporation Limited,
Household Trust Company and HFC Bank plc, Household International offers
numerous consumer finance products, including mortgages, home equity credit
lines, revolving and closed-end unsecured personal loans, private label credit
cards, and VISA* and MasterCard* credit cards. Also, in conjunction with its
consumer finance business, and where applicable laws permit, Household
International makes credit life, credit accident and health, household
contents, and term insurance available to its customers. This insurance is
generally directly written by or reinsured with Household International's
insurance subsidiary, Alexander Hamilton Life Insurance Company of America
("Alexander Hamilton").
Household International has included its ongoing commercial finance
operations in the finance and banking segment. These operations are generally
administered by Household Commercial Financial Services, Inc. ("Household
Commercial"), a subsidiary of HFC. Products offered by Household Commercial
include loan and lease financing to businesses for capital equipment,
including aircraft and other transportation equipment, and specialized secured
corporate loans. In addition, Household Commercial also invests in publicly
issued or privately placed term preferred stocks of unaffiliated entities.
Household International's individual life insurance products are offered by
Alexander Hamilton. These products include universal life, whole life and term
insurance policies, as well as annuity products, and are sold through a
network of independent agents in the United States.
HOUSEHOLD INTERNATIONAL NETHERLANDS B.V.
The Company was organized under the Dutch Civil Code on September 14, 1990.
The Company is a wholly-owned indirect subsidiary of Household International
(U.K.) Limited ("U.K. Limited"), which is an indirect subsidiary of Household
International and a holding company for all operations of Household
International in the United Kingdom. The Company was organized solely to serve
as a source of financing, directly or indirectly, for HFC Bank plc. HFC Bank
plc is also a wholly-owned subsidiary of U.K. Limited and is the principal
operating subsidiary of Household International in the United Kingdom.
The registered office of the Company is at Hoekenrode 6, 1102 BR, Amsterdam,
Netherlands. The Company's telephone number is 31-20-6298033. The Company's
principal business activity has been and will be to provide funds to HFC Bank
plc for general corporate purposes.
The enforcement by investors of civil liabilities under U.S. federal
securities laws may be affected adversely by the fact that the Company is
incorporated or organized under the laws of the Netherlands, that some or all
of its officers and directors may be residents of the Netherlands and that all
or a substantial portion of the assets of the Company and of those persons may
be located outside the United States.
USE OF PROCEEDS
The Company will loan the net proceeds from the sale of the Securities to
HFC Bank plc to be used for general corporate purposes, including to fund
extensions of credit to its subsidiaries and to consumers in the United
Kingdom; to reduce other outstanding indebtedness (which may include
indebtedness owed to its affiliates, including Household International); or to
fund acquisitions of other companies or portfolios.
- --------
*VISA and MasterCard are registered trademarks of VISA, USA, Inc. and
MasterCard International Incorporated, respectively.
3
SELECTED FINANCIAL INFORMATION
OF HOUSEHOLD INTERNATIONAL, INC.
Due to the limited nature of the Company's operations and the full and
unconditional guaranty of the Securities by Household International, the
Company and Household International have determined that the financial
statements of the Company are not material to the offerings made hereby.
The financial information which is set forth below for the three years ended
December 31, 1993 has been derived from the financial statements of Household
International which have been audited by Arthur Andersen LLP, independent
certified public accountants. All financial information of Household
International and subsidiaries presented below should be read in conjunction
with the detailed financial statements included in documents on file with the
Commission and listed under "Incorporation of Certain Documents by Reference".
The results of operations of Household International and subsidiaries for the
nine month periods ended September 30, 1994 and 1993 reflect all adjustments
of a normal recurring nature which are, in the opinion of Household
International's management, necessary for a fair statement of the results for
the interim period and such results are not necessarily indicative of the
results of operations that may be expected for the entire year. In addition,
certain prior period amounts have been reclassified to conform with the
current period's presentation. All dollar amounts stated below are in millions
of U.S. dollars.
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------
1994 1993 1993 1992 1991
-------- -------- -------- -------- --------
STATEMENT OF INCOME DATA:
Finance income.................. $1,945.6 $1,932.9 $2,561.4 $2,584.4 $3,037.5
Interest income from
noninsurance investment
securities..................... 90.7 101.8 129.3 152.8 187.4
Interest expense................ 878.6 878.2 1,149.5 1,420.2 1,886.9
-------- -------- -------- -------- --------
Interest margin................. 1,157.7 1,156.5 1,541.2 1,317.0 1,338.0
Provision for credit losses on
owned receivables.............. 502.2 561.1 735.8 671.5 843.2
-------- -------- -------- -------- --------
Interest margin after provision
for credit losses.............. 655.5 595.4 805.4 645.5 494.8
-------- -------- -------- -------- --------
Securitization and servicing fee
income......................... 520.9 301.3 460.0 376.0 398.3
Insurance premiums and contract
revenues....................... 196.1 216.0 288.3 281.2 288.4
Investment income............... 388.1 441.7 574.0 523.7 471.5
Fee income...................... 193.9 219.8 292.6 164.5 104.0
Other income.................... 68.2 98.5 148.9 98.0 106.8
-------- -------- -------- -------- --------
Other revenues.................. 1,367.2 1,277.3 1,763.8 1,443.4 1,369.0
-------- -------- -------- -------- --------
Interest margin after provision
for credit losses and other
revenues....................... 2,022.7 1,872.7 2,569.2 2,088.9 1,863.8
-------- -------- -------- -------- --------
Salaries and fringe benefits.... 497.0 450.8 615.4 535.9 489.7
Other operating expenses........ 799.7 707.6 964.0 761.1 702.1
Policyholders' benefits......... 343.9 405.4 539.1 513.9 472.2
-------- -------- -------- -------- --------
Total costs and expenses........ 1,640.6 1,563.8 2,118.5 1,810.9 1,664.0
-------- -------- -------- -------- --------
Income before income taxes...... 382.1 308.9 450.7 278.0 199.8
Income taxes.................... 125.5 103.2 152.0 87.1 50.0
-------- -------- -------- -------- --------
Net income...................... $ 256.6 $ 205.7 $ 298.7 $ 190.9 $ 149.8
======== ======== ======== ======== ========
4
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
------------- -----------------------------
1994 1993 1992 1991
------------- --------- --------- ---------
PERIOD END BALANCE SHEET DATA:
Total assets..................... $34,804.5 $32,961.5 $31,128.4 $29,982.3
Total debt....................... 23,824.8 22,272.0 22,298.0 21,906.5
Deposits......................... 7,490.9 7,516.1 8,030.3 7,969.6
Convertible preferred stock
subject to mandatory redemption. 3.7 19.3 36.0 54.4
Preferred stock.................. 320.0 320.0 300.0 250.0
Common shareholders' equity...... $ 2,122.1 $ 2,078.3 $ 1,545.6 $ 1,462.1
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for Household International for the
periods indicated below were as follows:
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ------------------------
1994 1993 1993 1992 1991 1990 1989
------ ------ ---- ---- ---- ---- ----
Household International and
subsidiaries........................... 1.42 1.34 1.38 1.19 1.10 1.17 1.19
For purposes of calculating the ratio, earnings consist of income from
continuing operations to which has been added income taxes and fixed charges.
For Household International, fixed charges consist of interest on all
indebtedness (including capitalized interest) and one-third of rental expense
(approximate portion representing interest).
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate. The particular terms of the Debt Securities offered by any
Prospectus Supplement (the "Offered Debt Securities") and the extent to which
such general terms and provisions may apply to the Offered Debt Securities
will be described in the Prospectus Supplement relating to such Offered Debt
Securities.
GENERAL
The Offered Debt Securities will constitute unsecured senior debt of the
Company, will rank on a parity with other unsecured senior debt of the Company
and will be unconditionally guaranteed as to payment of principal, interest
and premium, if any, by Household International. The Offered Debt Securities
will be issued under one of two indentures specified elsewhere herein (the
"Indentures"). Copies of the forms of the Indentures are filed as exhibits to
the Registration Statement which registers the Securities and the Guarantees
with the Commission. The following summaries do not purport to be complete
and, where particular provisions of the Indentures are referred to, such
provisions, including definitions of certain terms, are incorporated by
reference as part of such summaries, which are qualified in their entirety by
such reference.
The Indentures provide that Debt Securities may be issued thereunder from
time to time in one or more series and do not limit the aggregate principal
amount of the Debt Securities, except as may be otherwise provided with
respect to any particular series of Offered Debt Securities.
Unless otherwise indicated in the Prospectus Supplement with respect to any
particular series of Offered Debt Securities, the Debt Securities will be
issued in definitive registered form without coupons, will be
5
exchangeable for authorized denominations and will be transferable at any time
or from time to time. No charge will be made to any Holder for any exchange or
registration of transfer except for any tax or governmental charge incident
thereto.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms and other
information to the extent applicable with respect to the Offered Debt
Securities: (1) the title of the Offered Debt Securities; (2) any limit on the
aggregate principal amount of the Offered Debt Securities; (3) the price
(expressed as a percentage of the aggregate principal amount thereof) the
Company will be paid for the Offered Debt Securities and the initial offering
price, if any, at which the Offered Debt Securities will be offered to the
public; (4) the currency, currencies or currency units for which the Offered
Debt Securities may be purchased and the currency, currencies or currency
units in which the principal of and any interest on such Offered Debt
Securities may be payable; (5) the date or dates on which the Offered Debt
Securities will mature; (6) the rate or rates (which may be fixed or variable)
per annum at which the Offered Debt Securities will bear interest, if any; (7)
the date from which such interest, if any, on the Offered Debt Securities will
accrue, the dates on which such interest, if any, will be payable, the date on
which payment of such interest, if any, will commence and the Regular Record
Dates for such Interest Payment Dates, if any; (8) the dates, if any, on which
and the price or prices at which the Offered Debt Securities will, pursuant to
any mandatory sinking fund provisions, or may, pursuant to any optional
sinking fund or purchase fund provisions, be redeemed by the Company and the
other detailed terms and provisions of such sinking and/or purchase funds; (9)
the date, if any, after which and the price or prices at which the Offered
Debt Securities may, pursuant to any optional redemption provisions, be
redeemed at the option of the Company or of the Holder thereof and the other
detailed terms and provisions of such optional redemption; (10) the securities
exchange, if any, on which the Offered Debt Securities will be listed; and
(11) additional provisions, if any, with respect to the Offered Debt
Securities. With respect to Offered Debt Securities sold through dealers
acting as agents, however, the maturities and interest rates of such Offered
Debt Securities may be established by the Company from time to time and, if
not set forth in the Prospectus Supplement relating thereto, will be made
available through such dealers.
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or any interest on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other
information with respect to such issue of Debt Securities and such currencies
or currency units will be set forth in the Prospectus Supplement relating
thereto.
Debt Securities may be issued as Original Issue Discount Securities to be
offered and sold at a discount below their stated principal amount. "Original
Issue Discount Securities" means any Debt Securities that provide for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof upon the occurrence of an
Event of Default and the continuance thereof. As used in the following summary
of certain terms of the Debt Securities, the term "principal amount" means, in
the case of any Original Issue Discount Security, the amount that would then
be due and payable upon acceleration of the maturity thereof, as specified in
such Debt Securities.
GUARANTEES
Household International will unconditionally guarantee the due and punctual
payment of the principal of, premium, if any, and interest on the Debt
Securities when and as the same shall become due and payable, whether at
maturity, upon redemption or otherwise. The Guarantees are unsecured
obligations of Household International and will rank equally with all other
unsecured and unsubordinated obligations of Household International. The
Guarantees provide that in the event of a default in payment of principal,
premium, if any, or interest on a Debt Security, the Holder of the Debt
Security may institute legal proceedings directly against Household
International to enforce the Guarantee without first proceeding against the
Company. The Indentures provide that Household International may, without the
consent of any Holder, under certain circumstances assume all rights and
obligations of the Company under the Indentures with respect to a series of
Debt Securities. Upon such an assumption, the Company shall be released from
its liabilities with respect to such series of Debt Securities. (Section 2.12)
6
Household International is principally a holding company whose primary
source of funds is dividends from its subsidiaries. Dividend distributions to
Household International from its savings and loan, banking and insurance
subsidiaries may be restricted by federal and state laws and regulations.
Dividend distributions from its foreign subsidiaries, including the Company,
may also be restricted by exchange controls of the country in which the
subsidiary is located. Also, as a holding company the rights of any creditors
or stockholders of Household International to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject
to the prior claims of the subsidiary's creditors, except to the extent that
Household International may itself be a creditor with recognized claims
against the subsidiary. Nevertheless, there are no restrictions that currently
materially limit Household International's ability to make payments to its
creditors at current levels nor are there any restrictions which Household
International reasonably believes are likely to limit materially such payments
in the future.
INDENTURES
Offered Debt Securities and the related Guarantees will be issued under (i)
an Indenture dated as of September 9, 1993, among the Company, Household
International and The First National Bank of Boston, as Trustee, or (ii) an
Indenture dated as of September 9, 1993, among the Company, Household
International and BankAmerica National Trust Company, as Trustee.
Unless a different place is specified in the Prospectus Supplement with
respect to any particular series of Debt Securities, principal of and
interest, if any, on Debt Securities will be payable at the office or agency
of the respective Trustee or Paying Agent, if any, in either Canton,
Massachusetts, with respect to the Indenture with The First National Bank of
Boston, or in New York, New York, with respect to the Indenture with
BankAmerica National Trust Company, provided, however, that payment of
interest may be made at the option of the Company by check or draft mailed to
the person entitled thereto.
COVENANT OF HOUSEHOLD INTERNATIONAL AGAINST CREATION OF PLEDGES OR LIENS
Household International covenants in the Indentures that, with the
exceptions listed below, it will not issue, assume or guarantee any
indebtedness for borrowed money secured by a mortgage, security interest,
pledge or lien ("security interest") of or upon any of its property, now owned
or hereafter acquired, unless the Guarantees, by supplemental indenture, are
effectively secured by such security interest equally and ratably with all
other indebtedness secured thereby. The term "indebtedness for borrowed money"
does not include any guarantee or other recourse obligation in connection with
the sale or discount by Household International or any of its subsidiaries of
finance or accounts receivable, trade acceptances, or other paper arising in
the ordinary course of its business.
The foregoing covenant does not apply to (a) security interests to secure
the payment of the purchase price on property, shares of capital stock, or
indebtedness acquired by Household International or the cost of construction
or improvement of such property or the refinancing of all or any part of such
secured indebtedness, provided that such security interests do not apply to
any other property, shares of capital stock, or indebtedness of Household
International; (b) security interests on property, shares of capital stock, or
indebtedness existing at the time of acquisition of Household International;
(c) security interests on property of a corporation which security interests
exist at the time such corporation merges or consolidates with or into
Household International or which security interests exist at the time of the
sale or transfer of all or substantially all of the assets of such corporation
to Household International; (d) security interests of Household International
to secure any of its indebtedness to a subsidiary; (e) security interests in
property of Household International in favor of the United States of America
or any state or agency or instrumentality thereof, or in favor of any other
country or political subdivision, to secure partial, progress, advance, or
other payments pursuant to any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the
purchase price or the cost of construction of the property subject to such
security interests; (f) security interests on properties financed through tax
exempt municipal obligations, provided that such security interests are
limited to the property so financed; (g) security interests existing on
September 9, 1993; and (h) any extension, renewal, refunding, or replacement
7
(or successive extensions, renewals, refundings, or replacements), in whole or
in part, of any security interest referred to in the foregoing clauses (a)
through (g) inclusive, provided, however, that the principal amount of
indebtedness secured in such extension, renewal, refunding, or replacement
does not exceed the principal amount of indebtedness secured at the time by
such security interest, and provided further, that such extension, renewal,
refunding, or replacement of such security interest is limited to all or part
of the property subject to such security interest so extended, renewed,
refunded, or replaced.
Notwithstanding the foregoing, Household International may, without equally
and ratably securing the Guarantees, issue, assume, or guarantee indebtedness
secured by a security interest not excepted pursuant to clauses (a) through
(h) above, if the aggregate amount of such indebtedness, together with all
other indebtedness of, or guaranteed by, Household International existing at
such time and secured by security interests not so excepted, does not at the
time exceed 10% of Household International's Consolidated Net Worth. As used
herein, "Consolidated Net Worth" shall mean the difference between Household
International's consolidated assets and consolidated liabilities as shown on
Household International's most recent audited consolidated financial
statements prepared in accordance with United States generally accepted
accounting principles. In addition, an arrangement with any person providing
for the leasing by Household International of any property, which property has
been or is to be sold or transferred by Household International to such person
with the intention that such property be leased back to Household
International, shall not be deemed to create any indebtedness secured by a
security interest if the obligation with respect to such lease would not be
included as liabilities on a consolidated balance sheet of Household
International. The Holders of not less than a majority in principal amount of
the Debt Securities at the time outstanding under an Indenture, on behalf of
the Holders of all of the Debt Securities issued under such Indenture, may
waive compliance with the foregoing covenant. (Section 4.04)
SATISFACTION, DISCHARGE AND DEFEASANCE OF THE INDENTURES AND DEBT SECURITIES
If there is deposited irrevocably with the Trustee as trust funds for the
benefit of the Holders of Debt Securities of a particular series, for the
purpose hereinafter stated, an amount, in money or the equivalent in
securities of the United States or securities the principal of and interest on
which is fully guaranteed by the United States, sufficient to pay the
principal, premium, if any, and interest, if any, on such series of Debt
Securities on the dates such payments are due in accordance with the terms of
such series of Debt Securities through their maturity, and if the Company has
paid or caused to be paid all other sums payable by it under the applicable
Indenture with respect to such series, then the Company will be deemed to have
satisfied and discharged the entire indebtedness represented by such series of
Debt Securities and all the obligations of the Company and Household
International under such Indenture with respect to such series, except as
otherwise provided in such Indenture. In the event of any such defeasance,
Holders of such Debt Securities will be able to look only to such trust funds
for payment of principal, premium, if any, and interest, if any, on their Debt
Securities. (Section 7.03)
For federal income tax purposes, any such defeasance may be treated as a
taxable exchange of the related Debt Securities for an issue of obligations of
the trust or a direct interest in the cash and securities held in the trust.
In that case, Holders of such Debt Securities may recognize a gain or loss as
if the trust obligations or the cash or securities deposited, as the case may
be, had actually been received by them in exchange for their Debt Securities.
Such Holders thereafter would be required to include in income a share of the
income, gain or loss of the trust. The amount so required to be included in
income could be a different amount than would be includable in the absence of
defeasance. Prospectus investors are urged to consult their own tax advisors
as to the specific consequences to them of defeasance.
THE TRUSTEES
First National Bank of Boston and BankAmerica National Trust Company provide
lines of credit to Household International or its subsidiaries in the normal
course of business.
8
MODIFICATION OF INDENTURES
Each Indenture provides that the Holders of not less than a majority in
principal amount of each series of Debt Securities at the time outstanding
under such Indenture may enter into supplemental indentures for the purpose of
amending or modifying, in any manner, provisions of the Indenture or of any
supplemental indenture modifying the rights of Holders of such series of Debt
Securities. However, no such supplemental indenture, without the consent of
the Holder of each outstanding Debt Security affected thereby, shall, among
other things, (i) change the maturity of the principal of, or any installment
of interest on any Debt Security, or reduce the principal amount thereof or
the interest thereon or any premium payable upon the redemption thereof, or
(ii) reduce the aforesaid percentage of the Debt Securities, the consent of
the Holders of which is required for the execution of any such supplemental
indenture or for any waiver of compliance with any covenant or condition in
such Indenture. (Section 12.02)
Each Indenture may be amended or supplemented without the consent of any
Holder of Debt Securities under certain circumstances, including (i) to cure
any ambiguity, defect or inconsistency in the Indenture, any supplemental
indenture, or in the Debt Securities of any series; (ii) to evidence the
succession of another corporation to the Company or Household International
and to provide for the assumption of all the obligations of the Company or
Household International under the Indenture by such corporation; (iii) to
provide for uncertificated debt securities in addition to certificated debt
securities; (iv) to make any change that does not adversely affect the rights
of Holders of Debt Securities issued thereunder; (v) to provide for a new
series of Debt Securities; or (vi) to add to rights to Holders of Debt
Securities or add additional Events of Default. (Section 12.01)
SUCCESSOR ENTITY
Household International may not consolidate with or merge into, or transfer,
sell or lease its properties and assets as, or substantially as, an entirety
to another entity unless the successor entity is a corporation incorporated
within the United States and, after giving effect thereto, no default under
the Indenture shall have occurred and be continuing. Thereafter, except in the
case of a lease, all obligations of Household International under the
Indenture terminate. (Sections 11.01 and 11.02)
The Indentures do not contain any covenants specifically designed to protect
Holders of Debt Securities against a reduction in the creditworthiness of
Household International or the Company in the event of a highly leveraged
transaction.
EVENTS OF DEFAULT
Each Indenture defines the following as Events of Default with respect to
any series of Debt Securities: default for 30 days in the payment of any
interest upon any Debt Security of such series issued under such Indenture;
default in the payment of any principal of or premium on any such Debt
Security; default for 30 days in the deposit of any sinking fund or similar
payment for such series of Debt Securities; default for 60 days after notice
in the performance of any other covenant in the Indenture; certain defaults
for 30 days after notice in the payment of principal or interest, or in the
performance of other covenants, with respect to borrowed money under another
indenture in which the Trustee for such Debt Securities is trustee which
results in the principal amount of such indebtedness becoming due and payable,
prior to maturity, which acceleration has not been rescinded or annulled; and
certain events of bankruptcy, insolvency or reorganization. The Company and
Household International are required to file with each Trustee annually an
Officers' Certificate as to the absence of certain defaults under the
Indenture. (Sections 8.01, 3.06 and 4.05)
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, either the Trustee or the Holders
of not less than 25% in principal amount of the outstanding Debt Securities of
such series by notice as provided in the Indenture may declare the principal
amount of all the Debt Securities of any such series to be due and payable
immediately. At any time after a declaration of acceleration
9
with respect to Debt Securities of any series has been made, but before a
judgment or decree for payment of money has been obtained by the Trustee, the
Holders of not less than a majority in principal amount of outstanding Debt
Securities of such series may, under certain circumstances, rescind or annul
such declaration of acceleration. (Section 8.02)
The Holders of not less than a majority in principal amount of the
outstanding Debt Securities of each series may, on behalf of all Holders of
Debt Securities of such series, waive any past default under the Indenture and
its consequences with respect to Debt Securities of such series, except a
default (a) in the payment of principal of or premium, if any, or interest, if
any, on any Debt Securities of such series, or (b) in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Debt Security of such series
affected. (Section 8.13)
Each Indenture provides that the Trustee thereunder may withhold notice to
Holders of Debt Securities of any default (except in payment of the principal
of (or premium, if any) or interest on any Debt Security issued under such
Indenture or in the payment of any sinking fund or similar payment) if it
considers it in the interest of Holders of Debt Securities to do so. (Section
9.02)
Holders of Debt Securities may not enforce an Indenture except as provided
therein. (Section 8.07) Each Indenture provides that the Holders of a majority
in principal amount of the outstanding Debt Securities issued under such
Indenture have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee. (Section 8.12) The Trustee will not be
required to comply with any request or direction of Holders of Debt Securities
pursuant to the Indenture unless offered indemnity against costs and
liabilities which might be incurred by the Trustee as a result of such
compliance. (Section 9.03(e))
DESCRIPTION OF WARRANTS
The Company may issue, together with any Debt Securities offered by any
Prospectus Supplement or separately, Warrants for the purchase of other Debt
Securities. The Warrants are to be issued under warrant agreements (each a
"Warrant Agreement") to be entered into among the Company, Household
International and a bank or trust company, as warrant agent ("Warrant Agent"),
all as set forth in the Prospectus Supplement relating to the particular issue
of Warrants ("Offered Warrants"). A copy of the forms of Warrant Agreement,
including the form of warrant certificates representing the Warrants ("Warrant
Certificates"), reflecting the alternative provisions to be included in the
Warrant Agreements that will be entered into with respect to particular
offerings of Warrants, is filed as an exhibit to the Registration Statement.
The following summaries of certain provisions of the Warrant Agreement and the
Warrant Certificates do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Warrant
Agreement and the Warrant Certificates, respectively, including the
definitions therein of certain terms.
GENERAL
The Prospectus Supplement will describe the terms of the Offered Warrants,
the Warrant Agreement relating to the Offered Warrants and the Warrant
Certificates representing the Offered Warrants, including the following: (1)
the designation, aggregate principal amount, and terms of the Debt Securities
purchasable upon exercise of the Offered Warrants; (2) the designation and
terms of any related Debt Securities with which the Offered Warrants are
issued and the number of Offered Warrants issued with each such Debt Security;
(3) the date, if any, on and after which the Offered Warrants and the related
Offered Debt Securities will be separately transferable; (4) the principal
amount of Debt Securities purchasable upon exercise of one Offered Warrant and
the price at which such principal amount of Debt Securities may be purchased
upon such exercise; (5) the date on which the right to exercise the Offered
Warrants shall commence and the date ("Expiration Date") on which such right
shall expire; (6) whether the Warrants represented by the Warrant Certificates
will be issued in registered or bearer form, and if registered, where they may
be transferred and registered; and (7) any other terms of the Offered
Warrants.
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Warrant Certificates will be exchangeable on the terms specified in the
Prospectus Supplement for new Warrant Certificates of different denominations,
and Warrants may be exercised at the corporate trust office of the Warrant
Agent or any other office indicated in the Prospectus Supplement. Prior to the
exercise of their Warrants, holders of Warrants will not have any of the
rights of holders of the Debt Securities purchasable upon such exercise and
will not be entitled to payments of principal of, premium, if any, or
interest, if any, on the Debt Securities purchasable upon such exercise.
EXERCISE OF WARRANTS
Each Offered Warrant will entitle the holder to purchase such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement
relating to the Offered Warrants by payment of such exercise price in full in
the manner specified in the Prospectus Supplement. Offered Warrants may be
exercised at any time up to the close of business on the Expiration Date set
forth in the Prospectus Supplement relating to the Offered Warrants. After the
close of business on the Expiration Date, unexercised Warrants will become
void.
Upon receipt of payment of the exercise price and the Warrant Certificate
properly completed and duly executed at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement, the
Company will, as soon as practicable, forward the Debt Securities purchasable
upon such exercise. If less than all of the Warrants represented by such
Warrant Certificate are exercised, a new Warrant Certificate will be issued
for the remaining amount of Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of purchasers or to
a single purchaser; or (iii) through agents. The Prospectus Supplement will
set forth the terms of the offering of the Offered Debt Securities and any
Offered Warrants (collectively, the "Offered Securities"), including the name
or names of any underwriters, dealers or agents, the purchase price of the
Offered Securities and the proceeds to the Company from such sale, any
underwriting discounts and other items constituting underwriters'
compensation, and any discounts and commissions allowed or paid to dealers.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If the Offered Securities are sold through underwriters, the Prospectus
Supplement relating thereto will describe the nature of the obligation of the
underwriters to take the Offered Securities. The Offered Securities may be
offered to the public either through underwriting syndicates represented by
one or more managing underwriters or directly by one or more underwriting
firms acting alone. The underwriter or underwriters with respect to a
particular underwritten offering of Offered Securities will be named in the
Prospectus Supplement relating to such offering, and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all the Offered Securities if any
are purchased.
The Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer
or sale of the Offered Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement relating thereto.
Underwriters and agents who participate in the distribution of the Offered
Securities may be entitled under agreements which may be entered into by the
Company or Household International to indemnification by the Company and
Household International against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
which the underwriters or agents may be required to make in respect thereof.
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If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Offered Securities from the
Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial
and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will not be subject to any conditions except that (i)
the purchase of the Offered Securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject, and (ii) if the Offered Securities are also being sold to
underwriters, the Company shall have sold to such underwriters the Offered
Securities not sold for delayed delivery. The underwriters, dealers and such
other persons will not have any responsibility in respect to the validity or
performance of such contracts.
There can be no assurance that a secondary market will be created for the
Offered Securities or, if it is created, that it will continue.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") that are
subject to ERISA and on persons who are fiduciaries with respect to such
Plans. In accordance with the ERISA's general fiduciary requirements, a
fiduciary with respect to any such Plan who is considering the purchase of
Securities on behalf of such Plan should determine whether such purchase is
permitted under the governing Plan documents and is prudent and appropriate
for the Plan in view of its overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code"), prohibit
certain transactions between a Plan and persons who have certain specified
relationships to the Plan ("parties in interest" within the meaning of ERISA
or "disqualified persons" within the meaning of Section 4975 of the Code).
Thus, a Plan fiduciary considering the purchase of Securities should consider
whether such purchase might constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code.
The Company or Household International may be considered a "party in
interest" or a "disqualified person" with respect to many Plans that are
subject to ERISA. The purchase of Securities by a Plan that is subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 4975 of the Code (including individual retirement
accounts and other plans described in Section 4975(c)(1) of the Code) and with
respect to which the Company or Household International is a party in interest
or a disqualified person may constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code, unless such Securities are acquired
pursuant to and in accordance with an applicable exemption, such as Prohibited
Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset
manager), PTCE 80-51 (an exemption for certain transactions involving bank
collective investment funds) or PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts). Any
pension or other employee benefit plan proposing to acquire any Securities
should consult with its counsel.
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