<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 12, 1993)
$150,000,000
Household International, Inc.
FLOATING RATE NOTES DUE OCTOBER 20, 1996
------------------------
THE NOTES WILL MATURE ON OCTOBER 20, 1996. INTEREST ON THE NOTES IS PAYABLE
QUARTERLY ON JANUARY 20, APRIL 20, JULY 20 AND OCTOBER 20, COMMENCING JANUARY
20, 1995. THE INTEREST RATE IN EFFECT FOR THE INTEREST PERIOD COMMENCING
ON EACH INTEREST RESET DATE WILL BE LIBOR (AS DEFINED HEREIN) PLUS
.0625%. THE NOTES ARE NOT REDEEMABLE OR REPAYABLE PRIOR TO
MATURITY AND DO NOT PROVIDE FOR ANY SINKING FUND. SEE
"DESCRIPTION OF NOTES."
------------------------------------------------
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 OR PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------
The Underwriters have agreed to purchase the Notes from the Company at
99.835% of their principal amount ($149,752,500 aggregate proceeds to the
Company, before deducting expenses payable by the Company estimated at
$300,000), subject to the terms and conditions set forth in the Underwriting
Agreement.
The Underwriters propose to offer the Notes from time to time for sale in
one or more negotiated transactions, or otherwise, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. For further information with respect to the plan of
distribution and any discounts, commissions or profits on resale that may be
deemed underwriting discounts or commissions, see "Underwriters" herein.
------------------------
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 October 20, 1994, at the office of Morgan Stanley
& Co. Incorporated, New York, N.Y., against payment therefor in New York funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
MERRILL LYNCH & CO.
October 13, 1994
<PAGE> 2
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 IN THIS PROSPECTUS AND PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER MADE HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR AGENT. NEITHER THE DELIVERY OF
THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THE PROSPECTUS AND PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
DESCRIPTION OF THE NOTES
The following description of the terms of the Floating Rate Notes due
October 20, 1996 (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, to which description reference is hereby made.
The Notes will be issued in fully registered form only in denominations of
$1,000 and integral multiples thereof. The Notes will mature on October 20, 1996
(the "Maturity Date").
The Notes are not redeemable or repayable prior to maturity and do not
provide for any sinking fund.
The Notes will be issued under an Indenture dated as of October 1, 1993,
between the Company and The First National Bank of Maryland, as Trustee.
INTEREST
Interest Payment Dates. Interest on the Notes will be payable quarterly on
each January 20, April 20, July 20 and October 20, commencing January 20, 1995
(each an "Interest Payment Date"). Interest payable on each Interest Payment
Date will include interest accrued from and including October 20, 1994 or from
and including the most recent Interest Payment Date to which interest has been
paid or duly provided for to but excluding the next Interest Payment Date.
Interest payable prior to maturity will be payable to the person in whose name a
Note is registered at the close of business on the fifteenth calendar day
preceding an Interest Payment Date. The interest payment at maturity will
include interest accrued to but excluding the Maturity Date and will be payable
to the person to whom principal is payable.
"Interest Period" shall mean the period beginning on and including October
20, 1994 to but excluding the first Interest Payment Date and each successive
period from and including an Interest Payment Date to but excluding the next
Interest Payment Date. Interest shall be computed on the basis of the actual
number of days in the applicable Interest Period divided by 360.
"Interest Reset Date" means the first day of any Interest Period.
The "Spread" for each Interest Period will be .0625%.
Interest Rate. The per annum rate of interest for each Interest Period will
be (i) LIBOR (as defined herein) on the second London Business Day preceding the
Interest Reset Date for such Interest Period (the
S-2
<PAGE> 3
"Interest Determination Date") plus (ii) the Spread. "LIBOR" for each Interest
Period will be determined by the Company in accordance with the following
provisions:
(i) On each Interest Determination Date, the Company will ascertain
the offered rate for three-month deposits in U.S. dollars in the London
interbank market, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London time) on such Interest Determination Date.
(ii) If such rate does not appear on the Telerate Page 3750, or the
Telerate Page 3750 is unavailable, the Company will request four major
banks in the London interbank market (the "Reference Banks") to provide the
Company with their offered quotation (expressed as a rate per annum) for
three-month deposits in U.S. dollars to leading banks in the London
interbank market, in a principal amount equal to an amount of not less than
$1 million that is representative for a single transaction in such market
at such time, at approximately 11:00 a.m. (London time) on the Interest
Determination Date. If at least two such quotations are provided, LIBOR in
respect of that Interest Determination Date will be the arithmetic mean of
such quotations.
(iii) If less than two of the Reference Banks provide the Company with
such offered quotations, LIBOR in respect of that Interest Determination
Date will be the arithmetic mean of the rates quoted by three major banks
in The City of New York selected by the Company at approximately 11:00
a.m., New York City time, on that Interest Determination Date for
three-month loans in U.S. dollars to leading European banks, in a principal
amount equal to an amount of not less than $1 million that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the Company
are not quoting as mentioned in this sentence, LIBOR will be LIBOR in
effect on such Interest Determination Date.
"London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
The Paying Agent will not be responsible for determining the interest rates
applicable to any Note. All percentages resulting from any calculations will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point (with five one-millionths of a percentage point being rounded upward).
USE OF PROCEEDS
The Company will apply the net proceeds from the sale of the Notes to its
general funds to be used to fund investments in, or extensions of credit to, its
subsidiaries and for other general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for Household International and
subsidiaries for the periods indicated below was as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEAR ENDED
30, DECEMBER 31,
------------- ------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Household International and subsidiaries......... 1.43 1.31 1.38 1.19 1.10 1.17 1.19
</TABLE>
For purposes of calculating the ratio, earnings consist of income from
continuing operations to which has been added income taxes and fixed charges.
Fixed charges consist of interest on all indebtedness (including capitalized
interest) and one-third of rental expense (approximate portion representing
interest).
S-3
<PAGE> 4
UNDERWRITERS
Under the terms of and subject to the conditions set forth in the
Underwriting Agreement, 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 following principal amounts of the Notes at a price of
99.835% of the principal amount thereof:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
NAME OF NOTES
----------------------------------------------------------- ------------
<S> <C>
Morgan Stanley & Co. Incorporated.......................... $ 50,000,000
Donaldson, Lufkin & Jenrette Securities Corporation........ 50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................. 50,000,000
------------
Total............................................... $150,000,000
===========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to take and pay for all of the Notes
if any are taken.
The Underwriters have advised the Company that they propose to offer the
Notes from time to time for sale in one or more negotiated transactions, or
otherwise, at market prices prevailing at the time of sale, at prices relating
to such prevailing market prices or at negotiated prices. The Underwriters may
effect such transactions by selling the Notes to or through dealers, and such
dealers may receive compensation in the form of concessions or commissions from
the Underwriters and/or the purchasers of the Notes for whom they may act as
agents. The Underwriters and any dealers that participate with the Underwriters
in the distribution of the Notes may be deemed to be underwriters, and any
discounts or commissions received by them and any profit on the resale of the
Notes by them may be deemed to be underwriting compensation.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
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, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market making may be discontinued at any time at the
sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Notes.
LEGAL OPINIONS
The legality of the Notes will be passed upon by John W. Blenke, Assistant
General Counsel and Secretary for the Company. As of the date of this Prospectus
Supplement, Mr. Blenke is a full-time employee and an officer of the Company and
owns, and holds options to purchase, shares of Common Stock of the Company.
Certain legal matters in connection with the Notes will be passed upon for the
Underwriters by McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The financial statements and schedules of the Company 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 &
Co., independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said reports.
S-4
<PAGE> 5
HOUSEHOLD INTERNATIONAL, INC.
DEBT SECURITIES
AND
WARRANTS TO PURCHASE DEBT SECURITIES
PREFERRED STOCK (WITHOUT PAR VALUE)
COMMON STOCK (PAR VALUE $1.00 PER SHARE)
Household International, Inc. ("Household International" or the "Company")
from time to time may offer one or more series of debt securities ("Debt
Securities") and warrants ("Warrants") to purchase Debt Securities, shares of
one or more series of its preferred stock, without par value ("Preferred
Shares"), or shares of its common stock, par value $1.00 per share ("Common
Stock"; collectively with the Debt Securities, Warrants and Preferred Shares
being hereinafter called "Securities"), or any combination of the foregoing, for
proceeds of up to $300,000,000, or the equivalent thereof if any of the Debt
Securities or Warrants are denominated in a foreign currency or a foreign
currency unit. All specified terms of the offering and sale of the Securities
shall be set forth in one or more supplements to this Prospectus ("Prospectus
Supplement") including (a) in the case of Debt Securities, the designations,
aggregate principal amount, the currency or currency unit for which the Debt
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 and any redemption terms, (b) in the case of Preferred Shares, the
designations, rights, preferences, privileges, and restrictions applicable
thereto, including dividend rate or rates (or method of ascertaining the same),
dividend payment dates, voting rights, liquidation preferences, and any
conversion, exchange, redemption or sinking fund provisions, (c) in the case of
Common Stock, the number of shares of Common Stock, and (d) in the case of the
Securities generally, the initial public offering price, listing on a securities
exchange, if any, and any other specific terms relating to the Securities in
respect of which this Prospectus is being delivered. With regard to the
Warrants, if any, in respect of which this Prospectus is being delivered, the
Prospectus Supplement shall set 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 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. The Debt Securities will be unsecured obligations of
Household International and will rank on a parity with other unsecured senior
indebtedness of Household International.
The shares of any series of Preferred Shares may be represented by
Depositary Shares as described herein.
Household International 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 are 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 NOVEMBER 12, 1993.
<PAGE> 6
AVAILABLE INFORMATION
Household International is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission ("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, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
reports, proxy statements and other material concerning Household 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. Although Household International may
not be required to send a copy of its latest Annual Report to Shareholders to
holders of Debt Securities, Warrants or Preferred Shares, 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, which
contains 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 with the Commission (File No.
1-8198) pursuant to the Exchange Act and are incorporated herein by reference
and made a part of this Prospectus:
(a) Household International's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992;
(b) Household International's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1993 and June 30, 1993; and
(c) Household International's Current Reports on Form 8-K dated
January 13, February 4, April 3, and September 1, 1993.
All documents filed by Household International 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.
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
<PAGE> 7
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 the Company initiated a
restructuring program that has resulted in the disposition of its merchandising,
transportation and manufacturing businesses. This has enabled the Company to
focus its resources in the financial services industry through the operation of
businesses involved in finance and banking, and insurance. The Company's
principal executive office is located at 2700 Sanders Road, Prospect Heights,
Illinois 60070 (telephone: 708-564-5000).
The finance and banking business of the Company is the largest segment of
the Company's operations. Through subsidiaries, such as Household Finance
Corporation ("HFC"), Household Bank, f.s.b., Household Bank, National
Association, Household Retail Services, Inc., Household Bank (Illinois),
National Association, Household Financial Corporation Limited, Household Trust
Company, Household Financial Services Limited and HFC Bank plc, the Company
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, the Company
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 the Company's insurance subsidiary, Alexander
Hamilton Life Insurance Company of America ("Alexander Hamilton").
The Company 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.
The Company'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
approximately 8,700 independent agents in the United States.
In 1991 the Company withdrew from certain selected commercial product
lines, including commercial real estate and acquisition finance, which were
offered by Household Commercial. As a result, the Company intends to liquidate
the assets generated from these product lines in a manner that will maximize the
value of these assets. These product lines will continue to be managed by
Household Commercial pending their disposition.
Household International is principally a holding company whose primary
source of funds is dividends from its subsidiaries. Dividend distributions to
the Company 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 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 the Company may itself be a creditor with
recognized claims against the subsidiary. Nevertheless, there are no
restrictions that currently materially limit the Company's ability to make
payments to its creditors or to pay dividends on its Preferred Stock or Common
Stock at current levels nor are there any restrictions which Household
International reasonably believes are likely to limit materially such payments
in the future.
- ---------------
* VISA and MasterCard are registered trademarks of VISA, USA, Inc. and
MasterCard International Incorporated, respectively.
3
<PAGE> 8
USE OF PROCEEDS
Household International will apply the net proceeds from the sale of the
Securities to its general funds to be used to fund investments in, or extensions
of credit to, its subsidiaries; to reduce other outstanding indebtedness (which
may include indebtedness owed to its subsidiaries); to fund acquisitions by
Household International and its subsidiaries of other companies; or for such
other purposes as may be set forth in the Prospectus Supplement. Pending such
application, such net proceeds may be temporarily invested or applied to the
reduction of short-term debt.
SELECTED FINANCIAL INFORMATION
The financial information which is set forth below for the three years
ended December 31, 1992 has been derived from the financial statements of the
Company which have been audited by Arthur Andersen & Co., independent certified
public accountants. All financial information of the Company 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" in the Prospectus. The results
of operations of the Company and subsidiaries for the six month periods ended
June 30, 1993 and 1992 reflect all adjustments of a normal recurring nature
which are, in the opinion of the Company'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.
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------------
1993 1992 1992 1991 1990
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Finance income.................................... $1,282.5 $1,300.2 $ 2,584.4 $ 3,037.5 $ 3,101.1
Interest income from noninsurance investment
securities...................................... 68.0 81.0 152.8 187.4 163.1
Interest expense.................................. 598.4 750.7 1,420.2 1,886.9 2,025.9
-------- -------- --------- --------- ---------
Interest margin................................... 752.1 630.5 1,317.0 1,338.0 1,238.3
Provision for credit losses on owned
receivables..................................... 357.0 310.6 671.5 843.2 463.7
-------- -------- --------- --------- ---------
Interest margin after provision for credit
losses.......................................... 395.1 319.9 645.5 494.8 774.6
-------- -------- --------- --------- ---------
Securitization and servicing fee income........... 191.5 167.9 376.0 398.3 164.1
Insurance premiums and contract revenues.......... 137.4 141.4 281.2 288.4 256.3
Investment income................................. 273.9 251.5 523.7 471.5 372.4
Fees and other income............................. 202.7 118.4 262.5 210.8 262.7
-------- -------- --------- --------- ---------
Other revenues.................................... 805.5 679.2 1,443.4 1,369.0 1,055.5
-------- -------- --------- --------- ---------
Interest margin after provision for credit losses
and other revenues.............................. 1,200.6 999.1 2,088.9 1,863.8 1,830.1
-------- -------- --------- --------- ---------
Salaries and fringe benefits...................... 299.4 263.2 535.9 507.9 476.4
Other operating expenses.......................... 442.7 365.5 761.1 683.9 623.0
Policyholders' benefits........................... 265.9 254.1 513.9 472.2 382.0
-------- -------- --------- --------- ---------
Total costs and expenses.......................... 1,008.0 882.8 1,810.9 1,664.0 1,481.4
-------- -------- --------- --------- ---------
Income before income taxes........................ 192.6 116.3 278.0 199.8 348.7
Income taxes...................................... 62.4 37.8 87.1 50.0 113.4
-------- -------- --------- --------- ---------
Net income........................................ $ 130.2 $ 78.5 $ 190.9 $ 149.8 $ 235.3
======= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------
1993 1992 1991 1990
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PERIOD END BALANCE SHEET DATA:
Total assets............................................... $32,751.8 $ 31,128.4 $ 29,982.3 $ 29,454.7
Total debt................................................. 22,914.7 22,298.0 21,906.5 22,380.1
Deposits................................................... 7,632.7 8,030.3 7,969.6 6,938.0
Convertible preferred stock subject to mandatory
redemption............................................... 20.1 36.0 54.4 74.0
Preferred stock............................................ 300.0 300.0 250.0 195.0
Common shareholders' equity................................ $ 1,918.7 $ 1,545.6 $ 1,462.1 $ 1,281.1
</TABLE>
4
<PAGE> 9
SELECTED RATIOS
The ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends for Household International
and subsidiaries for the periods indicated below was as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------ ------------------------------------
1993 1992 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges................ 1.31 1.15 1.19 1.10 1.17 1.19 1.23
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends....................... 1.26 1.12 1.15 1.08 1.15 1.18 1.22
</TABLE>
For purposes of calculating the above ratios, earnings consist of income
from continuing operations to which has been added income taxes and fixed
charges. Fixed charges consist of interest on all indebtedness (including
capitalized interest) and one-third of rental expense (approximate portion
representing interest). Preferred stock dividends represent an amount equal to
income, before income tax, which would be required to meet the dividends on
preferred stocks.
DESCRIPTION OF DEBT SECURITIES
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
Household International and will rank on a parity with other unsecured senior
debt of Household International. The Offered Debt Securities will be issued
under one of two indentures specified elsewhere herein ("Indentures"). Copies of
the forms of the Indentures are filed as exhibits to Household International's
Registration Statement which registers the Debt Securities 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 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) Household
International 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
<PAGE> 10
(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 to any
purchase fund provisions, be redeemed by Household International, 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 Household International or of the Holder thereof and the other
detailed terms and provisions of such optional redemption; (10) the
denominations in which the Offered Debt Securities are authorized to be issued;
(11) the securities exchange, if any, on which the Offered Debt Securities will
be listed; and (12) 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 Household International 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.
INDENTURES
Offered Debt Securities will be issued under (i) an Indenture dated as of
October 1, 1993, between Household International and The First National Bank of
Maryland, as Trustee, or (ii) an Indenture dated as of February 1, 1993, between
Household International and First Interstate Bank of California, 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 Household
International in either Baltimore, Maryland, with respect to the Indenture with
The First National Bank of Maryland, or in Los Angeles, California, with respect
to the Indenture with First Interstate Bank of California; provided, however,
that payment of interest may be made at the option of Household International by
check or draft mailed to the person entitled thereto.
COVENANT AGAINST CREATION OF PLEDGES OR LIENS
All Debt Securities issued under the Indentures will be unsecured.
Household International covenants 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 Debt
Securities then outstanding are, by supplemental indenture, 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.
6
<PAGE> 11
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 by 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 or refinancing 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 the date of the
applicable Indenture; and (h) any extension, renewal, refunding, or replacement
(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 Debt Securities, 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
defined). 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 in 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 3.08)
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 Household International has paid or
caused to be paid all other sums payable by it under the applicable Indenture
with respect to such series, then Household International will be deemed to have
satisfied and discharged the entire indebtedness represented by such series of
Debt Securities and all the obligations of 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 6.03)
7
<PAGE> 12
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.
Prospective investors are urged to consult their own tax advisors as to the
specific consequences to them of defeasance.
THE TRUSTEES
The First National Bank of Maryland and First Interstate Bank of California
provide lines of credit to Household International or its subsidiaries in the
normal course of business.
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 11.02)
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 and to provide for the assumption of all the
obligations of the Company under the Debt Securities and 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 of Holders
of Debt Securities or add additional Events of Default. (Section 11.01)
SUCCESSOR ENTITY
The Company 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 the Company under the Indenture terminate. (Sections
10.01 and 10.02)
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
8
<PAGE> 13
reorganization. Household International is required to file with each Trustee
annually an Officers' Certificate as to the absence of certain defaults under
the Indenture. (Sections 7.01 and 3.05)
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
and all accrued but unpaid interest of all the Debt Securities of such series to
be due and payable immediately. At any time after a declaration of acceleration
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 7.02)
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 7.13)
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
8.02)
Holders of Debt Securities may not enforce an Indenture except as provided
therein. (Section 7.07) 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 7.12) 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
8.03(e))
DESCRIPTION OF WARRANTS
Household International 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 between 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 describes 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: (i) 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
9
<PAGE> 14
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.
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,
Household International 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.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of the capital stock of the Company is qualified
in its entirety by reference to the Company's Restated Certificate of
Incorporation, as amended, which has been filed with and is available from the
offices of the Commission as referred to under "Available Information".
The Company's Restated Certificate of Incorporation authorizes the issuance
of 158,155,004 shares of capital stock of which 8,155,004 shares shall be
designated preferred stock, without par value ("Preferred Stock"), and
150,000,000 shares shall be designated common stock, par value $1.00 per share
("Common Stock"). As of September 30, 1993, there were 6,454,635 shares of
Preferred Stock authorized and issued or reserved for issuance as follows:
3,454,635 shares of $6.25 Cumulative Convertible Voting Preferred Stock ("$6.25
Preferred"), 750,000 shares of 9 1/2% Cumulative Preferred Stock, Series 1989-A
("1989 Preferred"), 400,000 shares of Flexible Rate Auction Preferred Stock,
Series B ("Series B Flex APS"), 550,000 shares of 9 1/2% Cumulative Preferred
Stock, Series 1991-A ("1991 Preferred"), 50,000 shares of 8 1/4% Cumulative
Preferred Stock, Series 1992-A ("1992 Preferred"), 100,000 shares of 7.35%
Cumulative Preferred Stock, Series 1993-A ("1993 Preferred"), 450,000 shares of
11 1/4% Enhanced Rate Cumulative Preferred Stock ("Enhanced Rate Preferred") and
700,000 shares of Series A Junior Participating Preferred Stock ("Junior
Preferred"). As of September 30, 1993, 402,052 shares of $6.25 Preferred,
400,000 shares of Series B Flex APS, 750,000 shares of 1989 Preferred, 550,000
shares of 1991 Preferred, 50,000 shares of 1992 Preferred, 100,000 shares of
1993 Preferred, 450,000 shares of Enhanced Rate Preferred, and 46,956,077 shares
of the Company's Common Stock were issued and outstanding. All outstanding
shares of Common Stock and Preferred Stock are fully paid and non-assessable. On
October 1, 1993, the Company redeemed all the shares of Enhanced Rate Preferred.
On October 15, 1993, the Company effected a two for one Common Stock split in
the form of a 100 percent stock dividend.
10
<PAGE> 15
PREFERRED STOCK
The Preferred Stock of the Company may be issued from time to time in one
or more series as authorized by the Board of Directors or a duly authorized
committee of the Board of Directors. The Board of Directors has adopted a
resolution creating an Offering Committee of the Board with the power to
authorize the issuance and sale of one or more series of Preferred Stock
("Preferred Shares") and to determine the particular designations, powers,
preferences and relative, participating, optional or other special rights (other
than voting rights which shall be fixed by the Board of Directors) and
qualifications, limitations or restrictions of the Preferred Shares. The
following description sets forth certain general terms and provisions of the
Preferred Stock of the Company. Certain other terms of any series of Preferred
Shares, including the dividend rate, liquidation preference, redemption rights,
if any, voting rights, conversion or sinking fund provisions, if any, and other
special terms as determined by the Offering Committee will be set forth in the
Prospectus Supplement relating to such series.
Dividends. Holders of shares of Preferred Stock are entitled to receive,
when and as declared by the Board of Directors of the Company out of any funds
legally available for that purpose, dividends in cash at such respective rates,
payable on such dates in each year and in respect of such dividend periods, as
stated in the Company's Restated Certificate of Incorporation or applicable
Certificate of Designation, Preferences and Rights for each series of Preferred
Stock, before any dividends may be declared or paid or set apart for payment
upon the Common Stock. No dividend may be declared or paid on any series of
Preferred Stock unless at the same time a dividend in like proportion to the
respectively designated dividend rates shall be declared or paid on each other
series of Preferred Stock then issued and outstanding ranking prior to or on a
parity with such particular series with respect to the payment of dividends.
Dividends may be either cumulative or non-cumulative.
Liquidation Preference. In the event of dissolution, liquidation or
winding up of the Company, whether voluntary or involuntary, holders of
Preferred Stock of each series (if any shares thereof are then issued and
outstanding) will be entitled to payment of the applicable liquidation price or
prices, out of the available assets of the Company, after payment to the
Company's creditors but in preference to the holders of the Common Stock. The
Company's Restated Certificate of Incorporation, as amended, provides that a
consolidation, merger or sale by the Company of its assets as an entirety or
substantially as an entirety shall not be deemed to be a liquidation,
dissolution or winding up of the Company.
Redemption. No Preferred Stock or Common Stock may be purchased by the
Company if any dividends on any shares of Preferred Stock are in arrears, and no
Preferred Stock may be redeemed in such case unless all shares of issued and
outstanding Preferred Stock are redeemed.
Voting Rights. Voting rights of the holders of Preferred Stock are
non-cumulative. Holders of Preferred Stock have such voting rights as are set
forth in the Company's Restated Certificate of Incorporation, as amended, or
applicable Certificate of Designation, Preferences and Rights or as otherwise
provided for by law.
The Company's Restated Certificate of Incorporation, as amended, provides
that, without the vote or consent of the holders of at least two-thirds of the
outstanding shares of all series of Preferred Stock (except for a series of
Preferred Stock in which the right is expressly withheld) voting as a single
class, the Company may not (i) consolidate or merge with another corporation or
corporations or sell its assets as an entirety or substantially as an entirety;
(ii) issue any shares of Preferred Stock of any series if the cumulative
dividends payable on shares of any series of outstanding Preferred Stock are in
arrears; (iii) adopt any amendment to the Company's Restated Certificate of
Incorporation which adversely alters the preferences, powers and special rights
of the Preferred Stock, provided, however, that if any such amendment would
adversely alter any preference, power or special right of one or more but not
all of the series of the Preferred Stock, then only the vote or consent of the
outstanding shares of all series of Preferred Stock so affected, voting as one
class, shall be required; or (iv) increase the authorized amount of the
Preferred Stock, or create or issue any class of stock ranking prior to or on a
parity with the Preferred Stock, or any series thereof, as to the payment of
dividends or the distribution of assets. In addition, the holders of the
outstanding shares of all series of Preferred Stock (except for a series of
Preferred Stock in which the right is expressly withheld) shall be entitled to
elect one-third of the members of the Board of Directors of the Company out of
the number fixed by the Company's
11
<PAGE> 16
Bylaws in the event the Company fails to declare and pay any four quarterly
cumulative dividends, whether consecutive or not, on any series of Preferred
Stock and shall be entitled to elect a majority of said directors should any
eight quarterly cumulative dividends, whether consecutive or not, be unpaid. Any
such right to elect members of the Board of Directors of the Company shall
continue until all unpaid dividends upon all series of Preferred Stock shall
have been paid in full.
Under current provisions of the General Corporation Law of the State of
Delaware, the holders of issued and outstanding Preferred Stock are entitled to
vote as a class upon a proposed amendment to the Company's Restated Certificate
of Incorporation (whether or not entitled to vote thereon by the Company's
Restated Certificate of Incorporation), with the consent of a majority of said
class being required to increase or decrease the aggregate number of authorized
shares of Preferred Stock, increase or decrease the par value of shares of
Preferred Stock, or alter or change the powers, preferences or special rights of
the Preferred Stock as to affect them adversely. If any proposed amendment would
alter or change the powers, preferences or special rights of one or more series
of Preferred Stock as to affect them adversely, but would not affect the entire
class of Preferred Stock, then only the shares of the series so affected by the
amendment would be considered a separate class for the purpose of determining
who is entitled to vote on the proposed amendment.
Preemptive Rights. Holders of Preferred Stock have no preemptive rights to
purchase any securities of the Company.
DEPOSITARY SHARES
General. The Company may, at its option, elect to issue fractional shares
of Preferred Shares, rather than full shares of Preferred Shares. In the event
such option is exercised, the Company may elect to have a Depositary (as defined
below) issue receipts for Depositary Shares, each receipt representing a
fraction (to be set forth in the Prospectus Supplement relating to a particular
series of Preferred Shares) of a share of a particular series of Preferred
Shares as described below.
The shares of any series of Preferred Shares represented by Depositary
Shares will be deposited under a Deposit Agreement ("Deposit Agreement") between
the Company and a bank or trust company selected by the Company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000 ("Depositary"). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share will be entitled, in proportion to
the applicable fraction of a share of Preferred Shares represented by such
Depositary Share, to all the rights and preferences of the Preferred Share
represented thereby (including dividend, voting, redemption and liquidation
rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Shares in accordance with the terms of an offering of the Preferred
Shares. Copies of the forms of Deposit Agreement and Depositary Receipt are
filed as exhibits to the Registration Statement of which this Prospectus is a
part, and the following summary is qualified in its entirety by reference to
such exhibits.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to the
terms thereof, a holder of Depositary Receipts is entitled to have the
Depositary deliver to such holder the whole shares of Preferred Shares relating
to the surrendered Depositary Receipts. Holders of Depositary Shares will be
entitled to receive whole shares of the related series of Preferred Shares on
the basis set forth in the related Prospectus Supplement for such series of
Preferred Shares, but holders of such whole shares will not thereafter be
entitled to receive Depositary Shares therefor. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess
12
<PAGE> 17
of the number of Depositary Shares representing the number of whole shares of
the related series of Preferred Shares to be withdrawn, the Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred
Shares to the record holders of Depositary Shares relating to such Preferred
Shares in proportion to the numbers of such Depositary Shares owned by such
holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
Redemption of Depositary Shares. If a series of Preferred Shares
represented by Depositary Shares is subject to redemption, the Depositary Shares
will be redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Shares held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Shares held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Shares so redeemed. If less than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
Voting the Preferred Shares. Upon receipt of notice of any meeting at
which the holders of the Preferred Shares are entitled to vote, the Depositary
will mail the information contained in such notice of meeting to the record
holders of the Depositary Shares relating to such Preferred Shares. Each record
holder of such Depositary Shares on the record date (which will be the same date
as the record date for the Preferred Shares) will be entitled to instruct the
Depositary as to the exercise of the voting rights pertaining to the amount of
the Preferred Shares represented by such holder's Depositary Shares. The
Depositary will endeavor, insofar as practicable, to vote the amount of the
Preferred Shares represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all action which may be deemed
necessary by the Depositary in order to enable the Depositary to do so. The
Depositary will abstain from voting shares of the Preferred Shares to the extent
it does not receive specific instructions from the holders of Depositary Shares
representing such Preferred Shares.
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which materially and adversely alters the
rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement may be terminated by
the Company or the Depositary only if (i) all outstanding Depositary Shares have
been redeemed or (ii) there has been a final distribution in respect of the
Preferred Shares in connection with any liquidation, dissolution or winding up
of the Company and such distribution has been distributed to the holders of
Depositary Receipts.
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay charges of the Depositary in connection with
the initial deposit of the Preferred Shares and any redemption of the Preferred
Shares. Holders of Depositary Receipts will pay other transfer and other taxes
and governmental charges and such other charges as are expressly provided in the
Deposit Agreement to be for their accounts.
Miscellaneous. The Depositary will forward to the record holders of the
Depositary Shares relating to such Preferred Shares all reports and
communications from the Company which are delivered to the Depositary.
Neither the Depositary or the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of
13
<PAGE> 18
the Company and the Depositary under the Deposit Agreement will be limited to
performance in good faith of their duties thereunder, and they will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Shares unless satisfactory indemnity is
furnished. They may rely upon written advice of counsel or accountants, or
information provided by persons presenting Preferred Shares for deposit, holders
of Depositary Receipts or other persons believed to be competent and on
documents believed to be genuine.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
DESCRIPTION OF AUTHORIZED SERIES OF PREFERRED STOCK
The following summary descriptions of the authorized series of Preferred
Stock of the Company are qualified in their entirety by reference to the
Company's Restated Certificate of Incorporation, as amended (including the
respective Certificates of Designation, Preferences and Rights relating to such
series).
$6.25 PREFERRED
Dividends. Holders of the $6.25 Preferred are entitled to receive
quarterly cumulative dividends at an annual rate of $6.25 per share. All
dividends on the $6.25 Preferred have been paid to date.
Conversion Rights. Prior to October 15, 1993, holders of the $6.25
Preferred had the right to convert such shares into shares of Common Stock at a
conversion rate of 2.327 shares of Common Stock for each share of $6.25
Preferred. Upon the consummation of the Company's two for one stock split in the
form of a 100% stock dividend on October 15, 1993, the conversion rate became
4.654 shares of Common Stock for each share of $6.25 Preferred.
The conversion rate is subject to adjustment in certain events, including
(i) the issuance of Common Stock as a dividend by the Company on its Common
Stock; (ii) subdivision, combination, reclassification or change of the Common
Stock; (iii) consolidation or merger of the Company or sale or conveyance of all
or substantially all of the property of the Company; (iv) unless holders of the
$6.25 Preferred are issued rights or warrants on a reasonably equivalent basis,
the issuance to holders of the Company's Preferred Stock (other than holders of
the $6.25 Preferred) or Common Stock of rights or warrants entitling them to
subscribe for or purchase shares of the Company's Common Stock at less than the
then current market price; provided that if such rights or warrants have a term
not exceeding 45 days and if any such rights or warrants expire unexercised,
then the conversion rate will be readjusted to the rate which would have been
obtained had such unexercised rights or warrants not been issued; and (v) unless
holders of $6.25 Preferred are issued evidences of indebtedness or assets on a
reasonably equivalent basis, the distribution to holders of Common Stock of
evidences of indebtedness or other assets of the Company (other than cash
dividends to the extent paid out of retained earnings, dividends in shares of
Common Stock and rights and warrants for Common Stock, but including securities
convertible into capital stock of the Company).
Sinking Fund. Pursuant to a cumulative sinking fund, the Company is
required to redeem, but only from retained earnings, at a redemption price of
$50 per share plus accrued and unpaid dividends, in 1991 and each year
thereafter to 2010, a number of shares of the $6.25 Preferred equal to at least
4% of the shares originally issued (but not more than 8%), and all remaining
shares during the year 2011. In 1991, 1992 and 1993 the Company called for
redemption 276,371 shares of the $6.25 Preferred in each year (the maximum
amount permitted) and intends to call the same number of shares for redemption
in 1994. Any shares of the $6.25 Preferred converted into Common Stock or
acquired by the Company otherwise than by operation of the sinking fund may be
applied against future sinking fund payments. As of September 30, 1993, the
Company had 1,887,295 shares of $6.25 Preferred held in its treasury which may
be used for such purpose. Sinking fund payments may be made only if there is not
an arrearage in dividends on any series of Preferred Stock and if the Company is
not and would not be rendered insolvent or have its capital impaired by such
payments.
14
<PAGE> 19
Optional Redemption. The $6.25 Preferred may be redeemed at the option of
the Company at any time, in whole or in part, at a redemption price equal to $50
per share plus accrued and unpaid dividends provided the aggregate amount of
regular annual dividends per share on the Common Stock multiplied by the
conversion rate then in effect on the $6.25 Preferred has equalled or exceeded
$6.25 at all times during the twelve consecutive months preceding the date of
the notice of redemption. Currently, the $6.25 Preferred may not be redeemed at
the option of the Company.
Voting Rights. The $6.25 Preferred is entitled to one vote per share on
each matter submitted to a vote at a meeting of stockholders in addition to the
voting rights generally available to all series of Preferred Stock as described
above.
Liquidation Rights. In the event of the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, holders of the
$6.25 Preferred are entitled to receive $50 per share plus accrued and unpaid
dividends.
1989 PREFERRED, SERIES B FLEX APS, 1991 PREFERRED, 1992 PREFERRED AND 1993
PREFERRED
General. The 1989 Preferred, Series B Flex APS, 1991 Preferred, 1992
Preferred and 1993 Preferred are senior to the Junior Preferred and rank on a
parity with the $6.25 Preferred as to the payment of dividends and distribution
of assets of the Company upon the voluntary or involuntary liquidation,
dissolution, or winding up of the Company.
1989 Preferred. Holders of the 1989 Preferred are entitled to receive
quarterly cumulative dividends at an annual rate of $9.50 per share. All
dividends on the 1989 Preferred have been paid to date. In the event of the
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, holders of the 1989 Preferred are entitled to receive $100 per
share plus accrued and unpaid dividends. The 1989 Preferred is not redeemable
prior to November 9, 1994. The 1989 Preferred is redeemable, at the option of
the Company, in whole or in part from time to time on or after November 9, 1994,
at a premium until November 9, 1999, and at $100 per share thereafter. The 1989
Preferred Stock is not entitled to the benefits of any sinking fund.
Series B Flex APS. Holders of the Series B Flex APS are entitled to
receive quarterly cumulative dividends at an annual rate of $9.50 per share from
the date of original issue to July 15, 1995. Thereafter, dividends will be paid
at rates established every 49 days (or such longer period of time as is
established by an agent of the Company in accordance with the terms of the
Series B Flex APS) pursuant to auction procedures. All dividends on the Series B
Flex APS have been paid to date. In the event of the liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, holders of the
Series B Flex APS are entitled to receive $100 per share plus accrued and unpaid
dividends. The Series B Flex APS are redeemable, at the option of the Company,
in whole or in part, in July, 1995, at $100 per share plus an amount equal to
accrued and unpaid dividends to the redemption date (the "Flex APS Redemption
Price"). Thereafter, during periods in which dividends rates on the Series B
Flex APS are set pursuant to auction every 49 days, shares of such Series B Flex
APS will be redeemable, at the option of the Company, in whole or in part, on
each dividend payment date at the Flex APS Redemption Price. If the dividend
rate on the Series B Flex APS is set pursuant to auction for a period longer
than 49 days, the Series B Flex APS will be redeemable during such period on
such dates and upon such terms as specified by an agent of the Company. The
Series B Flex APS is not entitled to the benefits of any sinking fund.
1991 Preferred. Holders of the 1991 Preferred are entitled to receive
quarterly cumulative dividends at an annual rate of $9.50 per share. All
dividends on the 1991 Preferred have been paid to date. In the event of the
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, holders of the 1991 Preferred are entitled to receive $100 per
share plus accrued and unpaid dividends. The 1991 Preferred is not redeemable
prior to August 13, 1996. The 1991 Preferred is redeemable, at the option of the
Company, in whole or in part from time to time on or after August 13, 1996, at
$100 per share plus an amount equal to accrued and unpaid dividends. The 1991
Preferred is not entitled to the benefits of any sinking fund.
1992 Preferred. Holders of the 1992 Preferred are entitled to receive
quarterly cumulative dividends at an annual rate of $82.50 per share. All
dividends on the 1992 Preferred have been paid to date. In the event of
15
<PAGE> 20
the liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, holders of the 1992 Preferred are entitled to receive $1,000 per
share plus accrued and unpaid dividends. The 1992 Preferred is not redeemable
prior to October 15, 2002. The 1992 Preferred is redeemable, at the option of
the Company, in whole or in part from time to time on or after October 15, 2002,
at $1,000 per share plus an amount equal to accrued and unpaid dividends. The
1992 Preferred is not entitled to the benefits of any sinking fund.
1993 Preferred. Holders of the 1993 Preferred are entitled to receive
quarterly cumulative dividends at an annual rate of $73.50 per share. All
dividends on the 1993 Preferred have been paid to date. In the event of the
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, holders of the 1993 Preferred are entitled to receive $1,000 per
share plus accrued and unpaid dividends. The 1993 Preferred is not redeemable
prior to October 15, 1998. The 1993 Preferred is redeemable, at the option of
the Company, in whole or in part, from time to time on or after October 15,
1998, at $1,000 per share plus an amount equal to accrued and unpaid dividends.
The 1993 Preferred is not entitled to the benefits of any sinking fund.
Voting Rights. The 1989 Preferred, Series B Flex APS, 1991 Preferred, 1992
Preferred and 1993 Preferred have the right, voting as a class with each other
and any other series of Preferred Stock ranking on a parity thereto as to the
payment of dividends or the distribution of assets and upon which like voting
rights have been conferred and are exercisable, to elect two members of the
Board of Directors of the Company at the meeting of stockholders called for such
purpose after six quarterly cumulative dividends on such Preferred Stock,
whether consecutive or not, shall be in arrears. The right of such holders of
Preferred Stock to elect said members to the Board of Directors shall continue
until such time as all dividends accrued on such stock shall have been paid in
full, at which time such right shall terminate.
On any item with respect to which the holders of the 1989 Preferred, Series
B Flex APS, 1991 Preferred, 1992 Preferred and 1993 Preferred are entitled to
vote, such holders shall be entitled to one vote for each share held.
Conversion Rights. The holders of the 1989 Preferred, Series B Flex APS,
1991 Preferred, 1992 Preferred and 1993 Preferred do not have any rights to
convert the shares thereof into shares of any other class or series of capital
stock (or any other security) of the Company.
JUNIOR PREFERRED
Issuance. Currently, there are no shares of Junior Preferred issued or
outstanding. Rights to purchase shares or fractions thereof of the Junior
Preferred ("Rights") have been distributed to holders of the Common Stock. Each
Right entitles the registered holder to purchase from the Company one-hundredth
of a share of the Junior Preferred at a price of $100 per one-hundredth of a
share, subject to adjustment in the event of any dividend of shares of Common
Stock or any subdivision, combination, reclassification or change of the Common
Stock. The description and terms of the Rights are set forth in a Rights
Agreement ("Rights Agreement") between the Company and Harris Trust and Savings
Bank, as Rights Agent, a copy of which has been filed with and is available from
the offices of the Commission as referred to under "Available Information".
The Rights are not exercisable until ten days following (i) a public
announcement that a person or group of affiliated or associated persons
acquired, or obtained the right to acquire, 20% or more of the outstanding
shares of Common Stock of the Company or (ii) the commencement or announcement
of a tender offer or exchange offer for 30% or more of the outstanding shares of
such Common Stock. The Rights will expire on August 31, 1994, unless earlier
redeemed by the Company as described below.
In the event that the Company is acquired in a merger or other business
combination transaction, the Rights Agreement provides that each holder of a
Right shall receive, upon the payment of the then current exercise price of the
Right, that number of shares of the common stock of the surviving company which
at the time of such transaction would have a market value of two times the
exercise price of the Right. In the event the Company is the surviving
corporation of the merger and its Common Stock were not changed, each holder of
a Right would thereafter have the right to receive upon exercise that number of
shares of Junior Preferred
16
<PAGE> 21
(or a new series of the Company's Preferred Stock having the same rights,
privileges and preferences as the Junior Preferred) having a market value of two
times the exercise price of the Right.
At any time prior to public announcement that a person or group of
affiliated persons has acquired, or obtained the right to acquire, 20% or more
of the outstanding shares of Common Stock of the Company, the Company may redeem
the Rights in whole, but not in part, at a price of $.50 per Right ("Redemption
Price"). Immediately upon the action of the Board of Directors of the Company
electing to redeem the Rights, the Company will make announcement thereof, and
from and after the tenth day after the date of such announcement, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Dividends. The holders of the Junior Preferred will be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for that purpose, quarterly dividends payable in cash commencing after
such shares or a fraction thereof are issued. Quarterly dividends will be in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $25
or (b) subject to adjustment as described below, 100 times the aggregate per
share amount of all cash dividends and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision, combination or
reclassification thereof, declared on the Common Stock since the immediately
preceding quarterly dividend payment date or the date of the first issuance of
the Junior Preferred if the first dividend date has not yet occurred. In the
event the Company shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
reclassification of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock, then in each such case the amount of
dividends to which holders of Junior Preferred are entitled to shall be
adjusted.
Dividends will begin to accrue and be cumulative on the Junior Preferred
from the dividend date next preceding the date of issue unless the date of issue
is prior to the record date for the first dividend date, in which case dividends
will accrue and be cumulative from the date of issue. Dividends paid on shares
of Junior Preferred in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
Conversion, Sinking Fund and Redemption. The Junior Preferred will not
have any rights to convert to any other security issued by the Company and such
shares are not redeemable at the option of the Company. In addition, there is no
sinking fund for the Junior Preferred.
Voting Rights. The Junior Preferred generally votes together with the
Common Stock as one class. Each share of Junior Preferred is entitled to 100
votes on all matters submitted to a vote of the stockholders of the Company. In
the event the Company declares or pays any dividend on its Common Stock payable
in shares of Common Stock, or subdivides, combines or reclassifies its shares of
Common Stock into a greater or lesser number of shares of Common Stock, then the
number of votes per share of the Junior Preferred shall be adjusted.
Additionally, the Junior Preferred will have the right (as described above under
"General -- Voting Rights") to vote, together with all other outstanding series
of Preferred Stock for which such voting right has not been expressly withheld,
to elect directors in the event dividends on any series of Preferred Stock are
in arrears. In addition, the Restated Certificate of Incorporation of the
Company shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Junior Preferred so as
to affect the Junior Preferred adversely without the affirmative vote of the
holders of two-thirds or more of the outstanding shares of Junior Preferred,
voting together as a single class. The Certificate of Designation, Preferences
and Rights of the Junior Preferred expressly withholds all other special voting
rights to which holders of Preferred Stock are entitled, except for voting
rights otherwise provided by law.
Liquidation Preference. No distribution shall be made on any shares of
stock ranking junior to the Junior Preferred upon any voluntary liquidation,
dissolution or winding up of the Company unless the holders of the Junior
Preferred have received the greater of (i) $100 per share plus accrued and
unpaid dividends or
17
<PAGE> 22
(ii) 100 times the aggregate amount to be distributed per share to holders of
Common Stock. This liquidation amount shall be adjusted in the event the Company
declares or pays any dividend on Common Stock payable in shares of Common Stock,
or effects a subdivision, combination or reclassification of the Common Stock
into a greater or lesser number of shares. In the event the assets of the
Company are insufficient to satisfy the liquidation preference of the Junior
Preferred, the Junior Preferred shall share ratably with each series of
Preferred Stock ranking on a parity (as to dividends or liquidation) with the
Junior Preferred.
COMMON STOCK
If shares of Common Stock are offered, the Prospectus Supplement relating
thereto will set forth the number of shares offered, the public offering price
and information regarding Household International's dividend history and Common
Stock prices as reflected on the New York Stock Exchange Composite Tape,
including a recent last sale price of the Common Stock. The shares of Common
Stock offered hereby, if any, include the Preferred Stock Purchase Rights as
described below.
Holders of Common Stock are entitled to receive dividends out of any funds
legally available for that purpose as and if declared by the Board of Directors
of the Company, subject to the prior dividend rights of Preferred Stock.
Subject to certain voting rights of the Preferred Stock described elsewhere
herein, the holders of shares of Common Stock are entitled to vote at all
meetings of the stockholders and are entitled to one vote for each share of
Common Stock held. Subject to certain voting rights of the $6.25 Preferred
described elsewhere herein, holders of Common Stock currently vote together as a
class with the $6.25 Preferred Stock.
The issued and outstanding shares of Common Stock are fully paid and
non-assessable. The holders of Common Stock are not entitled to preemptive
rights or conversion or redemption rights. The Common Stock does not have
cumulative voting rights in the election of directors.
In the event of the voluntary dissolution, liquidation or winding up of the
Company, holders of Common Stock will be entitled to receive, pro rata, after
satisfaction in full of the prior rights of creditors and holders of Preferred
Stock, all of the remaining assets of the Company available for distribution.
PREFERRED STOCK PURCHASE RIGHTS
In August 1984, the Company entered into a Rights Agreement with Harris
Trust and Savings Bank, as Rights Agent. The Rights Agreement is intended to
address the threat of certain types of takeover activity deemed abusive and
unfair to stockholders and to assure that all stockholders receive fair and
equal treatment in the event of an unsolicited takeover of the Company. The
Rights Agreement also enhances the bargaining position of the Company's Board of
Directors in negotiating on behalf of stockholders with potential acquirors of
the Company. The Rights Agreement provides that attached to each share of Common
Stock is one right (a "Right") to purchase from the Company one-hundredth of a
share of Junior Preferred at a price of $100 per one-hundredth of a share
("Purchase Price"), subject to adjustment. The following description of the
Rights is qualified in its entirety by reference to the Rights Agreement, as
amended, which has been filed with and is available from the offices of the
Commission as referred to under "Available Information".
Until ten days following (i) a public announcement that a person or group
of affiliated or associated persons acquired, or obtained the right to acquire,
20% or more of the outstanding shares of Common Stock of the Company or (ii) the
commencement or announcement of a tender offer or exchange offer for 30% or more
of the outstanding shares of such Common Stock (the earlier of such dates being
called "Distribution Date"), the Rights will be evidenced by outstanding Common
Stock certificates. The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Company's Common
Stock. Common Stock certificates contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date the surrender for transfer
of any of the Company's Common Stock certificates also constitutes the transfer
of the Rights associated with the Common Stock represented by such certificate.
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights will be mailed
18
<PAGE> 23
to holders of record of the Company's Common Stock as of the close of business
on the Distribution Date, and such separate certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on August 31, 1994, unless earlier redeemed by the Company as described
below.
The Purchase Price, and the number of shares of Junior Preferred or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Junior
Preferred, (ii) upon the grant to holders of Junior Preferred of certain rights
or warrants to subscribe for shares of Junior Preferred or convertible
securities at less than the current market price of the Junior Preferred or
(iii) upon the distribution to holders of Junior Preferred of evidences of
indebtedness or assets (excluding regular periodic cash dividends out of
earnings or retained earnings or dividends payable in Junior Preferred) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares (other than fractions which are
integral multiples of one-hundredth of a share) will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Junior Preferred on the last trading date prior to the date of exercise.
Fractions of shares of Junior Preferred in integral multiples of one-hundredth
of a share may, at the election of the Company, be evidenced by depositary
receipts.
A description of the Junior Preferred appears elsewhere herein.
SPECIAL CHARTER PROVISIONS
The Rights Agreement and Junior Preferred were adopted to address the
threat of certain types of takeover activity deemed abusive and unfair to
stockholders and to assure that all stockholders receive fair and equal
treatment in the event of an unsolicited takeover of the Company. The Rights
Agreement also enhances the bargaining position of the Company's Board of
Directors in negotiating on behalf of stockholders with potential acquirors of
the Company. In addition, the right of the $6.25 Preferred to vote as a class
for any merger, consolidation or sale of all or substantially all of the assets
of the Company may have the effect of discouraging certain attempts to acquire
the Company. For a general description of the $6.25 Preferred and the Junior
Preferred, see the discussion above.
The Company's Restated Certificate of Incorporation, as amended, also
contains provisions, in accordance with Section 102(b)(7) of the General
Corporation Law of the State of Delaware, eliminating the personal liability of
a director to the Company or its stockholders for money damages for breach of
fiduciary duty as a director, provided that the liability of a director may not
be eliminated or limited (i) for any breach of the directors' duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized acquisitions or redemptions
of, or dividends on, capital stock) of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an improper personal
benefit.
PLAN OF DISTRIBUTION
Household International 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. Any such underwriters,
dealers or agents may include one or more of Hamilton Investments, Inc., a
wholly-owned subsidiary of Household International, and Craig-Hallum, Inc., a
wholly-owned subsidiary of Hamilton Investments, Inc. The Prospectus Supplement
sets forth the terms of the offering of the Securities (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
Household International from such sale, any underwriting discounts and other
items constituting underwriters' compensation, and any discounts and
19
<PAGE> 24
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 describes 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 are named in the Prospectus
Supplement relating to such offering, and, if an underwriting syndicate is used,
the managing underwriter or underwriters are 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 Household International or
through agents designated by Household International from time to time. Any
agent involved in the offer or sale of the Offered Securities in respect of
which this Prospectus is delivered is named, and any commissions payable by
Household International to such agent are 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
Household International to indemnification by 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.
If so indicated in the Prospectus Supplement, Household International will
authorize underwriters, dealers or other persons acting as Household
International's agents to solicit offers by certain institutions to purchase
Offered Securities from Household International 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 Household
International. 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, Household International 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.
Any distribution of Securities will conform to the requirements set forth
in the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc. Underwriters' compensation with respect
to any distribution will not exceed 5% of the public offering price.
20
