<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-27305
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 27, 1997)
9,100,000 Shares
Household International, Inc.
COMMON STOCK
---------------
OF THE 9,100,000 SHARES OF COMMON STOCK BEING OFFERED, 7,600,000 SHARES
ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE
U.S. UNDERWRITERS AND 1,500,000 SHARES ARE BEING OFFERED INITIALLY
OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS. ALL OF THE SHARES OF COMMON STOCK OFFERED
HEREBY ARE BEING SOLD BY THE COMPANY. THE COMPANY'S
COMMON STOCK IS LISTED ON THE NEW YORK AND CHICAGO
STOCK EXCHANGES UNDER THE SYMBOL "HI". ON JUNE
19, 1997, THE REPORTED LAST SALE PRICE OF
THE COMMON STOCK ON THE NEW YORK STOCK
EXCHANGE WAS $111 1/8 PER SHARE.
SEE "UNDERWRITERS".
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
PRICE $110 1/2 A SHARE
---------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share............................ $110.50 $3.04 $107.46
Total................................ $1,005,550,000 $27,664,000 $977,886,000
</TABLE>
- -------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at
$1,000,000.
---------------
The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to approval of
certain legal matters by McDermott, Will & Emery, counsel for the
Underwriters. It is expected that delivery of the shares of Common Stock will
be made on or about June 25, 1997 at the office of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
---------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
June 20, 1997
<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 27, 1997)
9,100,000 Shares
Household International, Inc.
COMMON STOCK
---------------
OF THE 9,100,000 SHARES OF COMMON STOCK BEING OFFERED, 1,500,000 SHARES
ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY
THE INTERNATIONAL UNDERWRITERS AND 7,600,000 SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE
U.S. UNDERWRITERS. ALL OF THE SHARES OF COMMON STOCK
OFFERED HEREBY ARE BEING SOLD BY THE COMPANY. THE
COMPANY'S COMMON STOCK IS LISTED ON THE NEW
YORK AND CHICAGO STOCK EXCHANGES UNDER
THE SYMBOL "HI". ON JUNE 19, 1997,
THE REPORTED LAST SALE PRICE
OF THE COMMON STOCK ON THE
NEW YORK STOCK EXCHANGE
WAS $111 1/8 PER SHARE.
SEE "UNDERWRITERS".
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
PRICE $110 1/2 A SHARE
---------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-------- -------------- -----------
<S> <C> <C> <C>
Per Share............................ $110.50 $3.04 $107.46
Total................................ $1,005,550,000 $27,664,000 $977,886,000
</TABLE>
- -------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at
$1,000,000.
---------------
The shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to approval of
certain legal matters by McDermott, Will & Emery, counsel for the
Underwriters. It is expected that delivery of the shares of Common Stock will
be made on or about June 25, 1997 at the office of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
---------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
GOLDMAN SACHS INTERNATIONAL
SMITH BARNEY INC.
June 20, 1997
<PAGE>
[Household Logo]
Household International is one of the nation's leading providers of consumer
loans and credit cards to middle-income consumers-a market it has served since
1878. Household focuses on high-return businesses with strong market share.
Additionally, Household is one of the most efficient companies in the financial
services industry. Today, Household is:
[HFC Logo]
The oldest, and one of the largest, consumer finance companies in the United
States.
[Pictures of Co-Branded Visa and MasterCard Credit Cards]
The nation's sixth largest issuer of Visa and MasterCard credit cards.*
[Pictures of Private-Label Credit Cards]
The second largest, third party private-label credit card issuer in the United
States.**
[Canadian Flag]
One of the largest providers of consumer loans and private-label credit cards in
Canada.
[United Kingdom Flag]
A major provider of consumer loans and Visa and MasterCard credit cards in the
United Kingdom.
*Bankcard Barometer, April 1997
**Credit Card Directory, 1997
S-2
<PAGE>
Building Value
- -------------------------------------------------------------------------------
Household's strategy is to concentrate on its strengths-and compete in
businesses where it can excel. Today, Household is more efficient, responsive
and profitable than ever before. Household's strategy is based on four key
principles:
- -------------------------------------------------------------------------------
1. Keep it simple-Focus on high-return businesses.
- -------------------------------------------------------------------------------
2. Be efficient-Drive down costs, be low-cost producers.
- -------------------------------------------------------------------------------
3. Serve the customer-Use speed and agility to meet customers' changing needs.
- -------------------------------------------------------------------------------
4. Think like an owner-Assume ownership of all we do.
- -------------------------------------------------------------------------------
S-2A
<PAGE>
[GRAPH HERE]
We are not interested in growing for growth's sake. Our focus is on the bottom
line.
Graph showing Core Product Growth (in percent) for 92 (12.5%), 93 (18.7%), 94
---- ----
(16.1%), 95 (19.4%) and 96 (23.1%)
---- ---- --
[GRAPH HERE]
Of all of the tools that we have, the one that is most powerful, and always will
be, is to be a low-cost producer.
Graph showing Efficiency Ratio (in percent) for 92 (51.9%), 93 (51.8%), 94
(52.7%), 95 (46.0%) and 96 (40.8%)
[GRAPH HERE]
Our record earnings reflect what can be done with discipline, im- proved
fundamentals and a clear focus on where the business should go.
Graph showing Earnings Per Share
(Dollars) and Return on Equity (in percent)
EPS ROE
92 $1.93 10.7%
93 2.85 14.2
94 3.50 16.0
95 4.30 17.4
96 5.30 18.9
S-2B
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER, AGENT OR DEALER. THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary.............................................. S- 4
Special Note Regarding Forward-Looking Statements.......................... S- 5
The Company................................................................ S- 5
Recent Developments........................................................ S- 7
Use of Proceeds............................................................ S- 8
Common Stock Price Range and Dividends..................................... S- 8
Capitalization............................................................. S- 9
Selected Financial Information............................................. S-10
Underwriters............................................................... S-12
Legal Matters.............................................................. S-15
Experts.................................................................... S-15
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Household International.................................................... 3
Use of Proceeds............................................................ 3
Selected Ratios............................................................ 3
Description of Debt Securities............................................. 4
Description of Warrants.................................................... 9
Description of Capital Stock............................................... 10
Plan of Distribution....................................................... 18
ERISA Matters.............................................................. 19
</TABLE>
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
S-3
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information appearing elsewhere or
incorporated by reference in this Prospectus Supplement or the Prospectus to
which it relates.
Household International, Inc., through its subsidiaries ("Household
International" or the "Company"), is a leading provider of consumer lending
products to "middle-market consumers" in the United States, Canada and the
United Kingdom. The Company offers a diversified line of lending products to
consumers including home equity loans, Visa/Mastercard* and private-label
credit cards, student loans and other unsecured loans. Household Finance
Corporation ("HFC"), a subsidiary of Household International, is the oldest
consumer finance company in the United States, with operations dating back to
1878. At March 31, 1997, the Company served approximately 22 million customer
accounts with $41.6 billion in managed (owned and serviced with limited
recourse) receivables and $22.4 billion in owned receivables. The Company
believes it is one of the largest providers of home equity loans and of
private-label credit cards in the United States. As of March 31, 1997, the
Company has been ranked as the sixth largest Visa/MasterCard issuer in the
United States. The Company originates loans through multiple channels of
distribution, including branch offices (532 in the United States at March 31,
1997), direct mail, telemarketing, and alliances. From 1992 to 1996, the
Company's managed receivables in its core businesses have grown from $20.2
billion to $40.9 billion and earnings per share have increased at least 20
percent each year, from $1.93 in 1992 to $5.30 in 1996. The Company's
efficiency ratio has decreased from 52.7% for 1994 to 40.8% for 1996. The
Company's 1996 return on average common shareholders' equity was 18.9%.
Commencing in 1994 the Company initiated actions to further narrow its focus
on higher return consumer lending businesses. The Company implemented tighter
expense management and emphasized growth in the branch-based consumer finance
business and credit card operations. In addition, the Company discontinued
operations in mortgage banking and consumer banking and disposed of its
individual life insurance and annuity product lines. As part of the Company's
strategic goal to focus on its higher-return businesses, the Company recently
agreed to acquire the capital stock of Transamerica Financial Services Holding
Company ("TFS"), the branch-based consumer finance subsidiary of Transamerica
Corporation. It is anticipated that the acquisition will increase the Company's
portfolio of secured loans by approximately $3.0 billion and managed
receivables by approximately $3.3 billion, and will enable HFC to reach many
new markets and customers in the United States, Canada and the United Kingdom
and to achieve additional penetration in existing markets. See "Recent
Developments".
- -------
* VISA and MasterCard are registered trademarks of VISA USA, Inc. and
MasterCard International, Incorporated, respectively.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
United States offering....... 7,600,000 shares
International offering....... 1,500,000 shares
Total.................... 9,100,000 shares
Common Stock to be
outstanding after the offering. 106,408,547 shares(a)
Use of proceeds................. The Company will apply the net proceeds to
repay certain short-term borrowings in
connection with the acquisition of the
capital stock of TFS.
Listing......................... The Common Stock is listed on the New York
Stock Exchange and the Chicago Stock
Exchange.
New York Stock Exchange symbol.. HI
</TABLE>
- -------
(a) Does not include approximately 4.1 million shares of Common Stock which are
subject to options or rights granted pursuant to the Company's Long-Term
Executive Incentive Compensation Plan.
S-4
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "The Company" and
"Recent Developments" and elsewhere in this Prospectus Supplement and the
accompanying Prospectus or in the information incorporated by reference herein
or therein may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and as such may involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of Household International to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
THE COMPANY
Household International is a provider of consumer financial services,
primarily offering consumer lending products to "middle-market consumers" in
the United States, Canada and the United Kingdom. The Company offers the
following types of consumer loans: home equity loans, Visa/MasterCard credit
cards, private-label credit cards, student loans and other unsecured products.
The Company's primary target customer for consumer lending is generally
between 25 and 50 years of age with a household income of $15,000 to $50,000.
At December 31, 1996, approximately 85 and 90 percent of the Company's owned
and managed consumer receivables, respectively, were located in the United
States.
In its consumer lending businesses, the Company competes with banks,
thrifts, finance companies and other financial institutions by offering a
variety of consumer products, maintaining a strong service orientation and
developing innovative marketing programs. The Company has focused on being a
low-cost producer. Highly automated processing facilities have been developed
to support underwriting, loan administration and collection functions across
consumer business lines. By supporting its multiple-distribution networks with
centralized processing centers, the Company has improved efficiency through
specialization and economies of scale. A centralized collection system for
past due accounts is augmented by early collection efforts in the consumer
finance branch network for products other than credit cards.
Underwriting and collection of consumer credit products have been segregated
and centralized over the last several years. These functions are supported by
automated systems which analyze the applicant's ability to repay the loan and
assess the likelihood of bankruptcy. The Company considers factors such as the
applicant's income, expenses, paying habits, value of collateral, if any, and
length and stability of employment in its effort to determine whether the
individual has the ability to support the loan.
Major business units within the Company are described below.
Household Finance Corporation
Household Finance Corporation traces its origins to a loan office
established in 1878. HFC offers a variety of secured and unsecured lending
products to middle-income customers primarily through a network of branch
lending offices (532 at March 31, 1997) in the United States. This business is
conducted primarily through state-licensed companies. The Company believes it
is one of the largest providers of home equity loans in the United States.
HFC's operations primarily focus on revolving and closed-end home equity
loans and unsecured lines of credit, which are offered on both a fixed rate
and floating rate basis. Home equity loans and unsecured consumer credit
products in the HFC network represented approximately $13.3 billion or 32
percent of the Company's managed consumer receivables at March 31, 1997.
Historically, home equity loans have lower chargeoff rates
S-5
<PAGE>
than unsecured product lines. HFC also offers reverse mortgage home equity
loans and credit insurance products. HFC offers its products in 41 states
through branch offices, direct mail and telemarketing solicitations and also
purchases loans and credit lines under a wholesale program.
Household Credit Services
Household Credit Services is the tradename used for the marketing of
Visa/MasterCard credit cards throughout the United States and Puerto Rico by
the Company's national credit card banks and Household Bank, f.s.b. Corporate
and small business credit cards, revolving lines of credit and credit
insurance products are also offered. Household Credit Services had $17.0
billion of Visa/MasterCard managed receivables at March 31, 1997, an increase
of $4.2 billion from March 31, 1996. As of March 31, 1997 the Company has been
ranked as the sixth largest issuer of VISA and MasterCard credit cards in the
United States.
The Company strives to build its Visa/MasterCard business by developing
strategic alliances with industry leaders to effectively create and market
general purpose credit cards to targeted consumers. In accordance with this
philosophy, in 1996 the Company acquired the Union Privilege affinity card
portfolio and selected credit card receivables of Barnett Banks, Inc. while
establishing new alliances with those organizations. In prior years the
Company established programs with other organizations for co-branded credit
cards, most notably with General Motors Corporation to issue the GM Card. The
Company continues to explore affinity relationships with various other
entities.
The Visa/MasterCard business is a highly competitive and fragmented
industry. The Company believes its size provides substantial competitive
advantages over smaller credit card issuers through operating efficiencies.
Currently, the Company's largest account base is in California supplemented by
significant hubs in the Midwestern and Eastern United States. The Company's
focus is to develop a diverse customer franchise to promote operating and
marketing efficiencies without creating over-dependence on a single geographic
area that would potentially expose the Company to regional credit risk and
usage patterns.
The Company solicits applications through direct mail, telemarketing and
event marketing efforts, as well as on-counter displays. In an effort to
further expand the credit card portfolio, in 1996 the Company increased its
marketing expenditures with respect to the credit card operations.
Household Retail Services
Household Retail Services ("HRS") operates a revolving private-label credit
card business, in all 50 states and Puerto Rico, which accounted for
approximately 10 percent of total managed receivables at March 31, 1997. HRS
purchases and services revolving charge accounts originated by merchants.
These accounts result from consumer purchases of electronics, furniture,
appliances, home improvement products and other durable merchandise, and
generally are without credit recourse to the originating merchant. HRS also
originates closed-end sales contracts and offers credit insurance products.
Products are marketed through dealer networks and retail stores, as well as
direct mail solicitations. Loans are underwritten by HRS based on its credit
standards. The private-label business is an important source of new customers
for the Company's consumer finance business. HRS has been ranked as the second
largest provider of private-label credit cards in the United States. This
business is conducted through state-licensed companies and through Household
Bank (Nevada), National Association, which originates accounts directly with
consumers.
International Operations
International operations in Canada and the United Kingdom accounted for
approximately 15 percent of owned receivables and 10 percent of total managed
receivables at March 31, 1997.
In the United Kingdom, the Company owns HFC Bank plc, a fully licensed
United Kingdom bank. HFC Bank plc had 142 branches at March 31, 1997 and
offers secured and unsecured lines of credit, secured and unsecured closed-end
loans, credit cards (including The GM Card from Vauxhall and the Goldfish Card
under an alliance with British Gas) and credit insurance products. It operates
in England, Scotland, Wales and Northern Ireland and solicits loans through
the branch network, merchants and direct mail marketing.
S-6
<PAGE>
Due to the similarities of operations and in order to lower operating costs,
the Company integrated certain operations previously conducted in Canada with
operations in the United States. The Canadian consumer finance business
operates under the HFC tradename through 64 branch offices in 10 provinces at
March 31, 1997. Home equity and unsecured lines of credit, secured and
unsecured closed-end loans, private-label credit cards and credit insurance
products are offered through branch office, direct mail and telemarketing
sales.
Credit Insurance
Through its consumer lending operations and where applicable laws permit,
the Company makes credit life, credit accident, health and disability, term
and specialty insurance products available to its customers. Such products are
currently offered in 46 states, Canada and the United Kingdom. Insurance is
generally directly written by or reinsured with Household Life Insurance
Company or its affiliates.
Other Businesses
Since the Company's exit from the consumer banking business, Household Bank,
f.s.b. (the "Bank"), a federally chartered savings bank, has operated
primarily as a vehicle for managing credit card, real estate secured, student
loan and other unsecured receivables. The Bank offers its products through
telemarketing and direct mail solicitations throughout the United States.
During 1995 the Company began developing its auto finance business,
initially focusing in the Midwest. The Company principally offers this product
through a dealer network and alliances.
RECENT DEVELOPMENTS
On May 20, 1997, the Company, through one of its subsidiaries, entered into
an agreement to acquire the capital stock of TFS, the branch-based consumer
finance subsidiary of Transamerica Corporation (the "Acquisition"). The
Company will pay $1.1 billion for the stock of TFS and will repay
approximately $2.9 billion of TFS debt owed to its affiliates. TFS has over
400 branches located throughout the United States as well as having certain
branches located in Canada and the United Kingdom. The Company intends to
combine the operations of TFS with its HFC operations. It is anticipated that
the Acquisition will add approximately $3.3 billion of receivables, of which
approximately $3.0 billion are secured primarily by home mortgages. The
portfolio of receivables acquired will not include any real estate secured
loans foreclosed upon or charged-off or delinquent by more than 90 days prior
to closing or any loans that were not core to the TFS branch business.
The Company expects to achieve several strategic objectives with the
Acquisition, including:
Expanding the Company's core consumer finance operations. As a result of
the Acquisition, it is expected that the Company will reach many new
markets and will achieve additional penetration in existing markets.
Providing significant opportunities for cost savings. The Company's
historical efficiency ratio is superior to that of TFS and the Company
expects that its cost management culture, implementation of HFC's
centralized underwriting, collection and servicing practices and
elimination of duplicative facilities and functions will result in
significant cost savings and improve the profitability of the TFS
operations being acquired.
Balancing the Company's portfolio with additional secured loans. Following
the Acquisition, the Company's percentage of real estate secured loans will
increase to approximately 26% of Household International's managed
portfolio from 21% at March 31, 1997.
Providing significant opportunities for cross selling. The Company will
acquire a significant number of new customer accounts. The Company believes
that HFC offers a broader array of consumer lending products than did TFS
and has superior brand recognition. As a result, revenue enhancements may
be achieved by cross-selling other products to such accounts and improving
sales productivity to existing HFC standards.
Goodwill associated with the Acquisition will be approximately $750 million
and will be amortized over a 25-year period. After goodwill amortization and
the additional shares issued in connection with financing the Acquisition, the
Company expects that the Acquisition will be slightly accretive to GAAP
(generally accepted accounting principles) earnings per share in 1997 and
accretive in 1998. Accretion on a cash earnings basis will be greater.
S-7
<PAGE>
USE OF PROCEEDS
The net proceeds to Household International from the offering of the Common
Stock will be approximately $976.9 million. The net proceeds will be used to
repay certain short-term borrowings in connection with the Acquisition of the
capital stock of TFS. See "Recent Developments." The Company intends to
finance the Acquisition with a combination of debt financing and equity,
including the proceeds from the shares of Common Stock offered hereby.
COMMON STOCK PRICE RANGE AND DIVIDENDS
Household International's Common Stock is listed on the New York Stock
Exchange (the "NYSE") and the Chicago Stock Exchange under the symbol "HI."
The following table sets forth for the periods indicated the high and low sale
prices per share of Common Stock on the NYSE, together with the dividends
declared by the Company per share of Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK CASH
PRICE DIVIDENDS
--------------- DECLARED
HIGH LOW PER SHARE
------- ------- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
First Quarter..................................... $45 $35 7/8 $.315
Second Quarter.................................... 51 1/2 43 1/8 .315
Third Quarter..................................... 62 48 7/8 .340
Fourth Quarter.................................... 68 3/8 54 1/4 .340
YEAR ENDED DECEMBER 31, 1996
First Quarter..................................... 71 1/2 52 .340
Second Quarter.................................... 76 1/2 63 .340
Third Quarter..................................... 83 7/8 68 1/2 .390
Fourth Quarter.................................... 98 1/8 82 1/2 .390
YEAR ENDED DECEMBER 31, 1997
First Quarter..................................... 108 1/4 85 .390
Second Quarter (through June 19, 1997)............ 111 3/8 78 5/8 .390
</TABLE>
On May 14, 1997, a dividend was declared on the Common Stock payable July
15, 1997 to the holders of record thereof on June 30, 1997. As of March 19,
1997, there were approximately 10,900 holders of record of Common Stock.
A recent reported last sale price per share for the Common Stock on the NYSE
is set forth on the cover page of this Prospectus Supplement.
Household International or its predecessor, HFC, has paid a regular
quarterly cash dividend on its Common Stock since 1926. Household
International increased its quarterly dividend by $.025 to $.340 per share,
effective with the third quarter of 1995, and to $.390 per share effective
with the third quarter of 1996. Holders of Common Stock are entitled to
receive dividends from funds legally available therefor, when, as and if
declared by the Board of Directors of the Company, subject to the prior rights
of holders of any shares of preferred stock of the Company. See "Household
International" and "Description of Capital Stock" in the accompanying
Prospectus.
S-8
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at March 31, 1997, and as adjusted to give effect to (i) the
issuance of $4.1 billion of commercial paper, senior debt and other borrowings
during May and June 1997 in connection with the Acquisition, (ii) the sale of
9.1 million shares of Common Stock and (iii) the application of the net
proceeds from the offering of Common Stock to repay certain short-term
borrowings in connection with the Acquisition. The following table should be
read in conjunction with the Company's 1996 Consolidated Financial Statements
and Notes thereto and the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1997 incorporated herein by reference.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Deposits................................................ $ 2,173.1 $ 2,173.1
Commercial paper, bank and other borrowings............. 5,507.7 6,717.8
Senior and senior subordinated debt (with original
maturities over one year).............................. 14,216.1 16,129.1
--------- ---------
Total debt.............................................. 21,896.9 25,020.0
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts(1)..................... 175.0 175.0
Preferred stock......................................... 150.0 150.0
Common shareholders' equity:
Common stock, 250,000,000 shares authorized,
115,231,175 shares issued (124,331,175 shares issued,
as adjusted)(2)(3)................................... 115.2 124.3
Additional paid-in capital............................ 402.6 1,370.4
Retained earnings..................................... 3,167.2 3,167.2
Foreign currency translation adjustments.............. (114.3) (114.3)
Unrealized loss on investments, net................... (37.8) (37.8)
Less common stock in treasury, 17,922,628 shares, at
cost................................................. (501.8) (501.8)
--------- ---------
Total common shareholders' equity..................... 3,031.1 4,008.0
--------- ---------
Total capitalization.................................... $25,253.0 $29,353.0
========= =========
</TABLE>
- --------
(1) The sole asset of the two trusts are Junior Subordinated Deferrable
Interest Notes issued by Household International in June 1996 and June
1995, bearing interest at 8.70 and 8.25 percent, respectively, with
principal balances of $103.1 and $77.3 million, respectively, and due June
30, 2036 and June 30, 2025, respectively.
(2) Excludes approximately 4.1 million shares of Common Stock which are subject
to options or rights granted pursuant to the Company's Long-Term Executive
Incentive Compensation Plan.
(3) Shares authorized were increased to 250,000,000 shares at the Company's
annual shareholders' meeting on May 14, 1997.
S-9
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
of the Company as of and for the preceding five years ended December 31, 1996,
and as of and for the three months ended March 31, 1996 and 1997. The
statement of income and balance sheet data have been derived from the
Company's audited Consolidated Financial Statements and Notes thereto. The
statement of income and balance sheet data as of and for the three months
ended March 31, 1996 and 1997 are unaudited but include, in the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of such data. The results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the entire year. The
information set forth below should be read in conjunction with the Company's
1996 Consolidated Financial Statements and Notes thereto, the Company's
Quarterly Report on Form 10-Q for the period ended March 31, 1997 and other
financial information incorporated by reference or included in this Prospectus
Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Finance income.......... $ 2,584.4 $ 2,561.4 $ 2,642.3 $ 2,878.8 $ 2,949.9 $ 679.5 $ 751.6
Interest income from
noninsurance investment
securities............. 152.8 129.3 131.9 123.4 80.6 20.3 8.3
Interest expense........ 1,420.2 1,149.5 1,242.7 1,557.1 1,520.6 353.4 365.1
---------- ---------- ---------- ---------- ---------- --------- ---------
Net interest margin..... 1,317.0 1,541.2 1,531.5 1,445.1 1,509.9 346.4 394.8
Provision for credit
losses on owned
receivables............ 671.5 735.8 606.8 761.3 759.6 191.3 293.4
---------- ---------- ---------- ---------- ---------- --------- ---------
Net interest margin
after provision for
credit losses.......... 645.5 805.4 924.7 683.8 750.3 155.1 101.4
---------- ---------- ---------- ---------- ---------- --------- ---------
Securitization income... 376.0 436.0 655.5 873.6 1,149.0 279.4 330.7
Insurance revenues...... 281.2 288.3 282.0 322.1 253.4 63.9 65.4
Investment income....... 523.7 574.0 514.4 470.2 153.2 56.9 33.2
Fee income.............. 164.5 292.6 250.5 196.4 240.3 49.9 77.4
Other income............ 98.0 172.9 126.7 279.9 232.4 25.3 69.1
---------- ---------- ---------- ---------- ---------- --------- ---------
Total other revenues.... 1,443.4 1,763.8 1,829.1 2,142.2 2,028.3 475.4 575.8
---------- ---------- ---------- ---------- ---------- --------- ---------
Salaries and fringe
benefits............... 535.9 615.4 656.6 545.6 534.5 136.7 147.6
Occupancy and equipment
expense................ 187.1 225.3 243.4 222.1 209.8 52.4 53.9
Other marketing
expenses............... 151.0 228.5 327.4 359.5 498.1 100.4 118.7
Other servicing and
administrative
expenses............... 423.0 510.2 533.7 470.6 484.8 105.8 109.4
Policyholders' benefits. 513.9 539.1 464.4 474.5 229.1 73.2 47.0
---------- ---------- ---------- ---------- ---------- --------- ---------
Total costs and
expenses............... 1,810.9 2,118.5 2,225.5 2,072.3 1,956.3 468.5 476.6
---------- ---------- ---------- ---------- ---------- --------- ---------
Income before income
taxes.................. 278.0 450.7 528.3 753.7 822.3 162.0 200.6
Income taxes............ 87.1 152.0 160.7 300.5 283.7 51.5 69.1
---------- ---------- ---------- ---------- ---------- --------- ---------
Net income.............. $ 190.9 $ 298.7 $ 367.6 $ 453.2 $ 538.6 $ 110.5 $ 131.5
========== ========== ========== ========== ========== ========= =========
Net income available to
common shareholders.... $ 165.6 $ 270.5 $ 340.0 $ 426.8 $ 521.9 $ 106.4 $ 128.3
========== ========== ========== ========== ========== ========= =========
PER COMMON SHARE DATA
Net income.............. $ 1.93 $ 2.85 $ 3.50 $ 4.30 $ 5.30 $ 1.08 $ 1.30
Dividends declared...... 1.15 1.18 1.23 1.31 1.46 0.34 0.39
Book value.............. 18.65 22.01 22.78 27.70 30.30 27.75 31.15
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED MARCH
AT OR FOR THE YEAR ENDED DECEMBER 31, 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(ALL DOLLAR AMOUNTS ARE STATED IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets (1):
Owned.................. $31,128.4 $32,961.5 $34,338.4 $29,218.8 $29,594.5 $27,892.2 $28,046.8
Managed................ 39,074.7 42,789.3 46,833.5 44,103.4 48,120.9 43,382.5 47,271.5
Managed receivables (2):
First mortgage......... $ 4,513.8 $ 3,534.1 $ 3,364.2 $ 2,066.9 $ 725.6 $ 1,896.7 $ 701.9
Home equity............ 7,742.9 7,880.4 7,940.2 8,810.1 7,985.4 8,814.6 7,957.9
Visa/MasterCard........ 5,726.6 8,842.6 11,100.2 13,343.1 18,737.4 13,207.0 17,621.2
Private label.......... 2,666.3 2,949.1 3,433.1 4,446.2 5,587.0 4,490.4 5,688.0
Other unsecured........ 4,085.4 4,320.8 5,378.2 6,660.8 8,620.2 6,975.8 8,745.1
Commercial............. 3,279.6 2,831.2 1,834.8 1,289.6 937.8 1,179.3 911.7
--------- --------- --------- --------- --------- --------- ---------
Total managed
receivables............ 28,014.6 30,358.2 33,050.7 36,616.7 42,593.4 36,563.8 41,625.8
Receivables serviced
with limited recourse.. (7,946.3) (9,827.8) (12,495.1) (14,884.6) (18,526.4) (15,490.3) (19,224.7)
--------- --------- --------- --------- --------- --------- ---------
Owned receivables....... $20,068.3 $20,530.4 $20,555.6 $21,732.1 $24,067.0 $21,073.5 $22,401.1
========= ========= ========= ========= ========= ========= =========
Deposits (3)............ $ 8,030.3 $ 7,516.1 $ 8,439.0 $ 4,708.8 $ 2,365.1 $ 4,766.5 $ 2,173.1
Total other debt........ 14,267.7 14,755.9 14,646.2 17,887.3 21,230.1 16,236.0 19,723.8
Company obligated
mandatorily redeemable
preferred securities of
subsidiary trusts...... -- -- -- 75.0 175.0 75.0 175.0
Convertible preferred
stock.................. 36.0 19.3 2.6 -- -- -- --
Preferred stock......... 300.0 320.0 320.0 205.0 205.0 205.0 150.0
Common shareholders'
equity................. 1,545.6 2,078.3 2,200.4 2,690.9 2,941.2 2,700.9 3,031.1
SELECTED FINANCIAL
RATIOS
Return on average owned
assets................. 0.62% 0.91% 1.08% 1.34% 1.82% 1.53% 1.77%
Return on average common
shareholders' equity... 10.7 14.2 16.0 17.4 18.9 15.7 17.1
Total shareholders'
equity as a percent of
owned assets (4)....... 5.93 7.28 7.34 10.17 11.22 10.69 11.97
Total shareholders'
equity as a percent of
managed assets (4)..... 4.72 5.60 5.38 6.74 6.90 6.87 7.10
Managed net interest
margin................. 6.47 6.92 6.70 6.43 6.98 6.91 7.35
Managed consumer net
chargeoff ratio........ 3.45 2.91 2.84 2.95 3.35 3.24 4.15
Managed basis efficiency
ratio, normalized...... 51.9 51.8 52.7 46.0 40.8 41.3 38.3
Common dividends to net
income................. 49.3 36.9 32.1 28.1 26.3 30.0 28.8
</TABLE>
- --------
(1) In 1994, the Company sold its Australian subsidiary and its retail
securities brokerage business. In 1995, the Company sold its first
mortgage servicing portfolio and servicing business as well as the
individual life and annuity product lines of its life insurance business.
(2) In 1996, the Company acquired credit card portfolios with outstandings of
$4.1 billion. In addition, the Company sold $1.7 billion of lower-margin
loans primarily from the previously divested mortgage and consumer banking
businesses.
(3) The Company sold its domestic consumer banking operations, including $2.8
and $3.4 billion in deposits in 1996 and 1995, respectively. The Company's
Canadian subsidiary also sold $725 million in deposits in 1995.
(4) Total shareholders' equity includes common shareholders' equity, preferred
stock and company obligated mandatorily redeemable preferred securities of
subsidiary trusts. Total shareholders' equity excludes convertible
preferred stock that was fully converted or redeemed during 1995.
S-11
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the U.S. Underwriters named below and the
International Underwriters named below have severally agreed to purchase, and
the Company has agreed to sell to them, severally, the respective number of
shares of Common Stock set forth opposite the names of such Underwriters
below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................. 1,422,500
Merrill Lynch, Pierce, Fenner & Smith Incorporated............ 1,422,500
Bear, Stearns & Co. Inc....................................... 569,000
Credit Suisse First Boston Corporation........................ 569,000
Donaldson, Lufkin & Jenrette Securities Corporation........... 569,000
Goldman, Sachs & Co. ......................................... 569,000
Smith Barney Inc. ............................................ 569,000
ABN Amro Chicago Corporation.................................. 210,000
BancAmerica Securities, Inc. ................................. 210,000
William Blair & Company, L.L.C. .............................. 210,000
Alex. Brown & Sons Incorporated............................... 210,000
Chase Securities Inc. ........................................ 210,000
EVEREN Securities, Inc. ...................................... 110,000
J.P. Morgan Securities Inc.................................... 210,000
Nesbitt Burns Securities Inc.................................. 110,000
Piper Jaffray Inc............................................. 210,000
RBC Dominion Securities Inc. ................................. 110,000
TD Securities (USA) Inc....................................... 110,000
---------
Subtotal.................................................... 7,600,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited.................... 275,000
Merrill Lynch International................................... 275,000
Bear, Stearns International Limited........................... 110,000
Credit Suisse First Boston (Europe) Limited................... 110,000
Donaldson, Lufkin & Jenrette Securities Corporation........... 110,000
Goldman Sachs International................................... 110,000
Smith Barney Inc. ............................................ 110,000
ABN Amro Rothschild........................................... 50,000
Banca Commerciale Italiana SpA................................ 50,000
Barclays de Zoete Wedd Limited................................ 50,000
William Blair & Company, L.L.C. .............................. 50,000
Den Danske Bank Aktieselskab.................................. 50,000
Morgan Grenfell & Co. Limited................................. 50,000
NatWest Securities Limited.................................... 50,000
Societe Generale.............................................. 50,000
---------
Subtotal.................................................... 1,500,000
---------
Total..................................................... 9,100,000
=========
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that
the obligations of the several Underwriters to pay
S-12
<PAGE>
for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and certain
other conditions. The Underwriters are obligated to take and pay for all of
the shares of Common Stock offered hereby if any such shares are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly,
any Shares or distribute any prospectus relating to the Shares outside the
United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement Between U.S. and International Underwriters,
each International Underwriter has represented and agreed that, with certain
exceptions, (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares within the United States or Canada or to any United
States or Canadian Person. With respect to any Underwriter that is a U.S.
Underwriter and an International Underwriter, the foregoing representations
and agreements (i) made by it in its capacity as a U.S. Underwriter will apply
only to it in its capacity as a U.S. Underwriter and (ii) made by it in its
capacity as an International Underwriter will apply only to it in its capacity
as an International Underwriter. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States or Canada of any United States or Canadian Person) and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
Underwriters are referred to herein as the "Shares".
Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of
any number of Shares as may be mutually agreed. The per share price of any
Shares so sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any Shares, directly or indirectly, in any
province or territory of Canada in contravention of the securities laws
thereof and has represented that any offer or sale of Shares in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, directly or indirectly, any such Shares in any
province or territory of Canada or to, or for the benefit of, any resident of
Canada in contravention of the securities laws thereof and that any offer or
sale of Shares in Canada will be made only pursuant to an exemption from the
requirement to file a prospectus in the province or territory of Canada in
which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any Shares a notice containing substantially the
same statement as is contained in this sentence.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not
offered or sold and, prior to the date six months after the closing date for
the sale of the Shares, will not offer or sell any Shares to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995; (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Shares in, from or otherwise involving the United
S-13
<PAGE>
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
offering of the Shares to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996, or is a person to whom the document may otherwise lawfully be
issued or passed on.
Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or
sales to Japanese International Underwriters or dealers and except pursuant to
any exemption from the registration requirements of the Securities and Exchange
Law and otherwise in compliance with applicable provisions of Japanese law.
Each International Underwriter has further agreed to send to any dealer who
purchases from it any of the Shares a notice stating in substance that, by
purchasing such Shares, such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, any of such Shares, directly or
indirectly, in Japan or to or for the account of any resident thereof except
for offers or sales to Japanese International Underwriters or dealers and
except pursuant to any exemption from the registration requirements of the
Securities and Exchange Law and otherwise in compliance with applicable
provisions of Japanese law, and that such dealer will send to any other dealer
to whom it sells any of such Shares a notice containing substantially the same
statement as is contained in this sentence.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price which represents a
concession not in excess of $1.84 a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $.10 a share to other Underwriters or to certain dealers. After the initial
offering of the shares of Common Stock, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated, on behalf of the Underwriters, it will not, during
the period ending 90 days after the date of this Prospectus Supplement, (a)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (b) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (a) or
(b) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise (other than (i) the shares of Common Stock
offered hereby, (ii) shares of Common Stock issuable by the Company pursuant to
the exercise of options or warrants or the conversion of a security outstanding
on the date hereof, or (iii) the grant of any options or issuance of any shares
of Common Stock pursuant to the terms of existing employee benefit plans and
its dividend reinvestment plan).
In order to facilitate the offering of the Common Stock, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase shares in
the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an Underwriter or a dealer for distributing shares of
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and
may end any of these activities at any time.
Certain of the Underwriters and/or their affiliates engage in transactions
with and, from time to time perform services for the Company and its
subsidiaries in the ordinary course of business, and have received customary
fees in connection therewith.
S-14
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by John W. Blenke, Vice President--Corporate Law and Assistant
Secretary for the Company. Mr. Blenke is a full-time employee and an officer of
the Company and owns and holds options to purchase shares of the Common Stock
of the Company. Certain legal matters relating to the sale of the shares of
Common Stock offered hereby will be passed upon for the Underwriters by
McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The financial statements of the Company and its subsidiaries incorporated by
reference in this Prospectus Supplement and the Prospectus hereto, to the
extent and for the periods indicated in its reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are incorporated
herein by reference in reliance upon the authority of said firm as experts in
giving said reports.
S-15
<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
DEBT SECURITIES
AND
WARRANTS TO PURCHASE DEBT SECURITIES
PREFERRED STOCK (WITHOUT PAR VALUE)
COMMON STOCK (PAR VALUE $1.00 PER SHARE)
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
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"), shares of its common stock, par value $1.00 per share ("Common
Stock"), stock purchase contracts ("Stock Purchase Contracts") to purchase
Common Stock or stock purchase units ("Stock Purchase Units"), each
representing ownership of a Stock Purchase Contract and either Debt Securities
or debt obligations of third parties, including U.S. Treasury Securities,
securing the holder's obligation to purchase Common Stock under the Stock
Purchase Contract (the Debt Securities, Warrants, Preferred Shares, Common
Stock, Stock Purchase Contracts and Stock Purchase Units being hereinafter
collectively referred to as the "Securities"), or any combination of the
foregoing, for proceeds of up to $1,500,000,000, 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, (d) in the case of Stock Purchase Contracts, the designation and
number of shares of Common Stock issuable thereunder, the purchase price of
the Common Stock, the date or dates on which the Common Stock is required to
be purchased by the holders of the Stock Purchase Contracts, any periodic
payments required to be made by the Company to the holders of the Stock
Purchase Contracts or vice versa, and the terms of the offering and sale
thereof, (e) in the case of Stock Purchase Units, the specific terms of the
Stock Purchase Contracts and any Debt Securities or debt obligations of third
parties securing the holders' obligation to purchase the Common Stock under
the Stock Purchase Contracts, and the terms of the offering and sale thereof,
and (f) 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 May 27, 1997.
<PAGE>
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, and may
also be accessed through the Web site maintained by the Commission at
http://www.sec.gov. 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, Preferred Shares, Stock Purchase
Contracts or Stock Purchase Units, 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, 1996;
(b) Household International's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997; and
(c) Household International's Current Reports on Form 8-K dated January
23, February 10, and May 23, 1997.
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: 847-564-6989
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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 its primary businesses, consumer finance and credit cards.
The Company's principal executive office is located at 2700 Sanders Road,
Prospect Heights, Illinois 60070 (telephone: 847-564-5000).
Through subsidiaries, such as Household Finance Corporation ("HFC"),
Household Bank, f.s.b., Household Retail Services, Inc., Household Bank
(Nevada), National Association, Household Financial Corporation Limited and
HFC Bank plc, the Company offers numerous consumer finance products to
customers in the United States, Canada and the United Kingdom, including home
equity credit lines, revolving and closed-end unsecured personal loans,
private label credit cards, student loans, 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, health
and disability, and term and specialty insurance products available to its
customers. This insurance is generally directly written by or reinsured with
one of its insurance subsidiaries.
Household International is principally a holding company whose primary
source of funds is cash received from its subsidiaries, primarily in the form
of dividends and borrowings under intercorporate agreements. 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.
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 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>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------- ------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 1.54 1.45 1.53 1.47 1.41 1.38 1.19
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.. 1.52 1.42 1.50 1.43 1.37 1.33 1.15
</TABLE>
- --------
*VISA and MasterCard are registered trademarks of VISA, USA, Inc. and
MasterCard International Incorporated, respectively.
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For purposes of calculating the above ratios, earnings consist of net income
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 the indentures specified elsewhere herein ("Indentures"). Copies
of the Indentures are included 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.
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) 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; (12)
additional provisions, if any, with respect to the Offered Debt Securities;
and (13) the Indenture under which the Offered Debt Securities are to be
issued. 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
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<PAGE>
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 that 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.
BOOK-ENTRY SYSTEM
The Offered Debt Securities will be represented by one or more global
securities (the "Global Security"). The Global Security will be deposited
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in the name of a nominee of the Depositary. Except under
circumstances described below, such Offered Debt Securities will not be
issuable in definitive form.
The Depositary has advised Household International and will advise any
underwriters, dealers or agents to be named in the applicable Prospectus
Supplement as follows: the Depositary is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. The
Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of securities certificates. The Depositary's participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of which (and/or their representatives)
own the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies, that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of the Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of participants with
the respective principal amounts of the Offered Debt Securities represented by
the Global Security. Ownership of beneficial interests in the Global Security
will be limited to persons that have accounts with the Depositary or its
nominee ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary or its nominee (with respect to interests
of participants) and on the records of participants (with respect to interests
of persons other than participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in the Global Security.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Offered Debt Securities represented
by the Global Security for all purposes under the Indenture. Except as
provided below, owners of beneficial interests in the Global Security will not
be entitled to have Offered Debt Securities represented by the Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Offered Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Principal and interest payments on Offered Debt Securities registered in the
name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security.
None of the Company, the Trustee, any paying agent or the registrar for the
Offered Debt Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in the Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial interests.
The Company expects that the Depositary for the Offered Debt Securities or
its nominee, upon receipt of any payment of principal or interest, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Security as shown on
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<PAGE>
the records of the Depositary or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within
90 days, the Company will issue Offered Debt Securities in definitive form in
exchange for the entire Global Security. In addition, the Company may at any
time and in its sole discretion determine not to have the Offered Debt
Securities represented by the Global Security and, in such event, will issue
Offered Debt Securities in definitive form in exchange for the entire Global
Security. In any such instance, an owner of a beneficial interest in the
Global Security will be entitled to physical delivery in definitive form of
Offered Debt Securities represented by the Global Security equal in principal
amount to such beneficial interest and to have such Offered Debt Securities
registered in its name. Offered Debt Securities so issued in definitive form
will be issued as registered Offered Debt Securities in denominations of
$1,000 and integral multiples thereof, unless otherwise specified by the
Company.
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 January 1, 1995,
between Household International and Harris Trust and Savings Bank, as Trustee
(collectively, the "Trustees").
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 Chicago, Illinois,
with respect to the Indenture with Harris Trust and Savings Bank; 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.
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,
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<PAGE>
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)
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
Household International and certain of its subsidiaries maintain banking
relationships with each of the Trustees or affiliates thereof. Certain of the
Trustees are also trustees under other indentures of Household International
or its subsidiaries under which outstanding senior or subordinated unsecured
debt securities of such entities have been issued. The Trustees or affiliates
thereof may also have other financial relationships with Household
International and its subsidiaries.
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
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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 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)
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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 betweeen 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: (1)
the designation, aggregate principal amount, and terms of the Debt Securities
purchasable upon exercise of the Offered Warrants; (2) the designation and
terms of any related Debt Securities with which the Offered Warrants are
issued and the number of Offered Warrants issued with each such Debt Security;
(3) the date, if any, on and after which the Offered Warrants and the related
Offered Debt Securities will be separately transferable; (4) the principal
amount of Debt Securities purchasable upon exercise of one Offered Warrant and
the price at which such principal amount of Debt Securities may be purchased
upon such exercise; (5) the date on which the right to exercise the Offered
Warrants shall commence and the date ("Expiration Date") on which such right
shall expire; (6) whether the Warrants represented by the Warrant Certificates
will be issued in registered or bearer form, and if registered, where they may
be transferred and registered; and (7) any other terms of the Offered
Warrants.
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
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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 258,155,004 shares of capital stock of which 8,155,004 shares shall be
designated preferred stock, without par value ("Preferred Stock"), and
250,000,000 shares shall be designated common stock, par value $1.00 per share
("Common Stock"). Although 8,155,004 shares of preferred stock are authorized,
3,454,635 shares are reserved in the Restated Articles of Incorporation for a
series of convertible preferred stock that was issued in 1981, all of which
shares have been converted to Common Stock, redeemed or repurchased by the
Company. As of May 15, 1997, of the remaining 4,700,369 authorized shares of
preferred stock, 400,000 shares were issued and outstanding or reserved for
issuance as follows: 50,000 shares of 8 1/4% Cumulative Preferred Stock,
Series 1992-A ("1992 Preferred") and 100,000 shares of 7.35% Cumulative
Preferred Stock, Series 1993-A ("1993 Preferred") were issued and outstanding
and 250,000 shares of Series A Junior Participating Preferred Stock ("Junior
Preferred") were reserved for issuance. As of March 31, 1997, 97,308,547,
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.
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.
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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 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
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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 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.
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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 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 Deposition, 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).
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1992 PREFERRED AND 1993 PREFERRED
General. The 1992 Preferred and 1993 Preferred rank on a parity 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.
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 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 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 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 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
thousandth of a share of the Junior Preferred at a price of $300 per one
thousandth 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 the "Distribution Date", which will be
the date which is ten days following (i) a public announcement that a person
or group of affiliated or associated persons acquired 15% or more of the
outstanding shares of Common Stock of the Company or (ii) the commencement or
announcement of an intention to make a tender offer or exchange offer for 15%
or more of the outstanding shares of the Common Stock. The Rights will expire
on July 31, 2006, unless the expiration date is extended or the Rights are
earlier redeemed or exchanged by the Company, in each case, as described
below.
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In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold to a person or a group, 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 that any person or group
of affiliated or associated persons acquires beneficial ownership of 15% or
more of the Common Stock, proper provision shall be made so that each holder
of a Right, other than Rights beneficially owned by such person or group
(which will thereafter be void), will thereafter have the right to receive
upon exercise that number of Common Shares 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, beneficial
ownership of 15% 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 $.01 per Right ("Redemption Price"). The redemption of the Rights may
be made effective at such time on such basis with such conditions as the Board
of Directors, in its sole discretion, may establish. Immediately upon the
action of the Board of Directors of the Company electing to redeem the Rights,
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) $1 or (b) subject to adjustment as described below, 1,000 times the
aggregate per share amount of all cash dividends and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision, 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 1,000 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 "DESCRIPTION OF CAPITAL STOCK--Preferred Stock--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
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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) $1,000 per share plus accrued and
unpaid dividends or (ii) 1,000 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 a stock split of the Common Stock
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.
In the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, each Preferred Share will be entitled to
receive 1,000 times the amount received per Common Share. These rights are
protected by customary anti-dilution provisions.
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.
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.
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 SHARE PURCHASE RIGHTS
In July 1996, 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.
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The Rights Agreement provides that attached to each share of Common Stock is
one right (a "Right") to purchase from the Company one thousandth of a share
of Junior Preferred at a price of $300 per one thousandth 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 beneficial ownership of 15% or more
of the outstanding shares of Common Stock of the Company or (ii) the
commencement or announcement of an intention to make a tender offer or
exchange offer for 15% 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 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 July 31, 2006, unless earlier redeemed or exchanged by the Company,
in each case, as described below.
The Purchase Price payable, 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 or purchase shares of Junior
Preferred at a price, or convertible securities into Preferred Shares with a
conversion price 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).
At any time after any person or group acquires beneficial ownership of 15%
or more of the Common Stock, and prior to the acquisition by such person or
group of 50% or more of the outstanding Common Stock, the Board of Directors
of the Company may exchange the Rights (other than Rights owned by such person
or group which will have become void), in whole or in part, at an exchange
ratio of one share of Common Stock, or one thousandth of a Preferred Share (or
of a share of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges), per Right (subject to
adjustment).
The number of outstanding Rights and the number of one thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such
case, prior to the Distribution Date.
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 will be issued (other than fractions
which are integral multiples of one thousandth of a share which may, at the
election of the Company, be evidenced by depository receipts) 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.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not less than the
greater of (i) the sum of .001% and the largest percentage of the outstanding
Common Shares then known to the Company to be beneficially owned by any person
or group of affiliated or associated persons and (ii) 10%, except that from
and after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
See the description of the Junior Preferred herein.
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SPECIAL CHARTER PROVISIONS
The Rights Agreement was 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.
The Company's Restated Certificate of Incorporation, as amended, 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.
STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
Household International may issue Stock Purchase Contracts, representing
contracts obligating holders to purchase from Household International, and
Household International to sell to the holders, a specified number of shares
of Common Stock at a future date or dates. The price per share of Common Stock
may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as a part
of units ("Stock Purchase Units") consisting of a Stock Purchase Contract and
either Debt Securities, or debt obligations of third parties, including U.S.
Treasury securities, securing the holders obligations to purchase the Common
Stock under the Stock Purchase Contracts. The Stock Purchase Contracts may
require Household International to make periodic payments to the holders of
the Stock Purchase Units or vice versa, and such payments may be unsecured or
prefunded on some basis. The Stock Purchase Contracts may require holders to
secure their obligations thereunder in a specified manner.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not purport to be complete and will be qualified in its
entirety by reference to the Stock Purchase Contracts, and, if applicable,
collateral arrangements and depositary arrangements, relating to such Stock
Purchase Contracts or Stock Purchase Units.
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. 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 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
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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.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") that are
subject to ERISA and on persons who are fiduciaries with respect to such
Plans. In accordance with ERISA's general fiduciary requirements, a fiduciary
with respect to any such Plan who is considering the purchase of Notes on
behalf of such Plan should determine whether such purchase is permitted under
the governing Plan documents and is prudent and appropriate for the Plan in
view of its overall investment policy and the composition and diversification
of its portfolio. Other provisions of ERISA and Section 4975 of the Code
prohibit certain transactions between a Plan and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning
of ERISA or "disqualified persons" within the meaning of Section 4975 of the
Code). Thus, a Plan fiduciary considering the purchase of Notes should
consider whether such a purchase might constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code.
Household International may be considered a "party in interest" or a
"disqualified person" with respect to many Plans that are subject to ERISA.
The purchase of Notes by a Plan that is subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
Section 4975 of the Code (including individual retirement accounts and other
plans described in Section 4975(e)(1) of the Code) and with respect to which
Household International is a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975
of the Code, unless such Notes are "marketable obligations" (as defined in
Section 407(e) of ERISA) or are acquired pursuant to and in accordance with an
applicable exemption, such as Prohibited Transaction Class Exemption ("PTCE")
84-14 (an exemption for certain transactions determined by an independent
qualified professional asset manager), PTCE 91-38 (an exemption for certain
transactions involving bank collective investment funds), PTCE 90-1 (an
exemption for certain transactions involving insurance company pooled separate
accounts) or PTCE 95-60 (an exemption for certain transactions involving
insurance company general accounts). ANY PENSION OR OTHER EMPLOYEE BENEFIT
PLAN PROPOSING TO ACQUIRE ANY NOTES SHOULD CONSULT WITH ITS COUNSEL.
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