<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HOUSEHOLD INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6711 36-3121988
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE IDENTIFICATION NO.)
ORGANIZATION) NUMBER)
2700 SANDERS ROAD, PROSPECT HEIGHTS, ILLINOIS, 60070, (847) 564-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JOHN W. BLENKE, ESQ.
VICE PRESIDENT -- CORPORATE LAW AND ASSISTANT SECRETARY
HOUSEHOLD INTERNATIONAL, INC.
2700 SANDERS ROAD
PROSPECT HEIGHTS, ILLINOIS 60070
(847) 564-6150
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
ANDREW R. BROWNSTEIN, JAMES H. GILLIAM, JR., RICHARD L. EASTON, ESQ.
ESQ. ESQ. SKADDEN, ARPS, SLATE,
WACHTELL, LIPTON, ROSEN & BENEFICIAL CORPORATION MEAGHER & FLOM LLP
KATZ 301 NORTH WALNUT STREET ONE RODNEY SQUARE
51 WEST 52ND STREET WILMINGTON, DELAWARE WILMINGTON, DELAWARE
NEW YORK, NEW YORK 10019 19801 19801
(212) 403-1000 (302) 425-2501 (302) 651-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective time of this Registration Statement and the
effective time of the merger of a subsidiary of Household International, Inc.
and Beneficial Corporation, as described in the Agreement and Plan of Merger,
dated as of April 7, 1998, attached as Appendix A to the Joint Proxy
Statement--Prospectus forming a part of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
(continued on next page)
<PAGE>
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF OFFERING MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE PRICE PER AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) SHARE OFFERING PRICE FEE(6)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$1.00 per share........ 167,362,654 $43.068(2) $7,207,974,782 $2,126,353
- -----------------------------------------------------------------------------------
5% Cumulative Preferred
Stock.................. 407,718 $46.25 (3) $ 18,856,958 $ 5,563
- -----------------------------------------------------------------------------------
$4.50 Dividend
Cumulative Preferred
Stock.................. 103,976 $81.875(4) $ 8,513,035 $ 2,511
- -----------------------------------------------------------------------------------
$4.30 Dividend
Cumulative Preferred
Stock.................. 836,585 $78.50 (5) $ 65,671,923 $ 19,373
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
(1) Based upon an estimate of the maximum number of shares of common stock,
par value $1.00 per share ("Household Common Stock"), 5% Cumulative
Preferred Stock, $4.50 Dividend Cumulative Preferred Stock and $4.30
Dividend Convertible Preferred Stock, respectively, of Household
International, Inc. ("Household") to be issued in connection with the
merger (the "Merger") of a wholly owned subsidiary of Household with and
into Beneficial Corporation ("Beneficial").
(2) Calculated in accordance with Rule 457(f)(1) based on the aggregate market
value of the shares of common stock, par value $1.00 per share, of
Beneficial ("Beneficial Common Stock") expected to be cancelled in
connection with the Merger and the shares of $5.50 Dividend Convertible
Preferred Stock of Beneficial ("Beneficial Convertible Stock") to be
deemed converted into shares of Beneficial Common Stock at the time of the
Merger, and computed by dividing (a) the sum of (i) the product of (A) the
average of the high and low sales prices of Beneficial Common Stock as
reported on the New York Stock Exchange, Inc. (the "NYSE") Composite
Transactions List on May 28, 1998 ($132.0625) and (B) 54,435,871,
representing the maximum number of shares of Beneficial Common Stock
expected to be cancelled in connection with the Merger and (ii) the
product of (A) the average of the high and low sales prices of Beneficial
Convertible Stock as reported on the NYSE Composite Transactions List on
May 26, 1998 ($1,222.00) and (B) 15,566, representing the maximum number
of shares of Beneficial Convertible Stock to be deemed converted into
shares of Beneficial Common Stock at the time of the merger, by (b)
167,362,654, representing the maximum number of shares of Household Common
Stock expected to be issued in connection with the Merger.
(3) Calculated in accordance with Rule 457(f)(1) based on the average of the
high and low sales prices of the 5% Cumulative Preferred Stock of
Beneficial on the NYSE Composite Transactions List on May 28, 1998
($46.25).
(4) Calculated in accordance with Rule 457(f)(1) based on the average of the
high and low sales prices of the $4.50 Dividend Cumulative Preferred Stock
of Beneficial on the NYSE Composite Transactions List on May 28, 1998
($81.875).
(5) Calculated in accordance with Rule 457(f)(1) based on the product of the
average of the high and low sales prices of the $4.30 Dividend Cumulative
Preferred Stock of Beneficial on the NYSE Composite Transactions List on
May 29, 1998 ($78.50).
(6) In accordance with Rule 457(b), $1,433,559 paid on April 20, 1998 in
connection with the filing of the Joint Proxy Statement-Prospectus forming
a part of this Registration Statement as preliminary proxy material has
been credited against the registration fee of $2,153,800, leaving $720,241
payable in connection with the filing of this Registration Statement.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
LOGO
June 2, 1998
Dear Fellow Stockholder:
We are pleased to enclose information relating to a Special Meeting of
Stockholders of Household International, Inc. ("Household") to be held at 2445
M Street, N.W., 9th Floor, Washington, D.C., at 8:30 a.m. local time on June
30, 1998.
On April 7, 1998, Household and Beneficial Corporation ("Beneficial")
entered into a definitive agreement to combine Household with Beneficial by
merging Beneficial with a wholly owned subsidiary of Household. The merger has
been approved by the Boards of Directors of both Household and Beneficial.
The purpose of our Special Meeting is to consider and vote on the issuance
of Household capital stock to Beneficial stockholders in the proposed merger.
The merger with Beneficial is strategically important for our company as the
financial industry consolidates. This combination will bring together two of
the oldest brands in the consumer finance industry which we believe will
create a preeminent branch based consumer finance company. As a result of the
merger, Household will be a stronger company financially, one that we believe
will be better positioned to continue to provide superior total shareholder
returns as compared to the S&P 500. Our combined company will have pro forma
combined managed assets of approximately $72.3 billion, approximately 29.8
million customer accounts on a combined basis and pro forma combined common
shareholders' equity of approximately $5.8 billion.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE MERGER AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ISSUANCE OF HOUSEHOLD COMMON
SHARES IN CONNECTION WITH THE MERGER. The enclosed Joint Proxy Statement-
Prospectus explains in detail the terms of the proposed Merger and related
matters. Please carefully review and consider all of this information.
Consummation of the Merger is subject to certain conditions, including among
others approval of certain matters in connection with the Merger by the
requisite vote of the stockholders of both Beneficial and Household, and
approval of the Merger by various regulatory authorities.
Stockholders are entitled to vote all shares of common stock held by them on
May 28, 1998, which is Household's record date for the Special Meeting.
The approval of the issuance of Household common shares in connection with
the Merger by the Household common stockholders requires the affirmative vote
of a majority of the votes cast by holders of Household common stock, provided
that the total number of votes cast represents over 50% of the total number of
outstanding shares. In order to ensure that your vote is represented at the
meeting, please sign, date and mail your proxy card in the enclosed envelope.
You are, of course, welcome to attend the meeting and to vote your shares in
person.
/s/ William F. Aldinger
William F. Aldinger
Chairman and Chief Executive Officer
<PAGE>
HOUSEHOLD INTERNATIONAL, INC.
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
----------------
A Special Meeting of Stockholders of Household International, Inc.
("Household") will be held at 2445 M Street, N.W., 9th Floor, Washington, D.C.
20037, at 8:30 a.m. local time on June 30, 1998, to consider and act upon:
(1) The issuance of shares of common stock of Household, par value $1.00
per share ("Common Stock"), pursuant to the merger (the "Merger") of
Household Acquisition Corporation II, a wholly owned subsidiary of
Household ("Merger Sub"), with and into Beneficial Corporation
("Beneficial"), upon the terms and subject to the conditions set forth
in the Agreement and Plan of Merger, dated as of April 7, 1998, among
Household, Beneficial and Merger Sub.
(2) A proposal to adjourn the Special Meeting, if necessary, to allow for
the soliciting of additional proxies in the event that there are not
sufficient votes at the time of the Special Meeting to approve the
foregoing proposal or for any such other reason deemed appropriate.
Only holders of record of Common Stock at the close of business on May 28,
1998, are entitled to vote at the Special Meeting or any adjournments or
postponements thereof. Approval of the matters to be voted on at the Special
Meeting requires the affirmative vote of a majority of the votes cast by
holders of Common Stock, provided that the total number of votes cast
represents over 50% of the total number of outstanding shares.
/s/ Paul R. Shay
Paul R. Shay
Assistant General Counsel
and Corporate Secretary
June 2, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING.
THE BOARD OF DIRECTORS OF HOUSEHOLD UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE MATTERS TO BE VOTED
UPON AT THE SPECIAL MEETING.
<PAGE>
LOGO
June 2, 1998
Dear Fellow Stockholder:
We are pleased to enclose information relating to a Special Meeting of
Stockholders of Beneficial Corporation ("Beneficial") to be held at
Beneficial's executive offices, One Christina Centre, 301 North Walnut Street,
Wilmington, Delaware, at 9:30 a.m. local time on June 30, 1998.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger dated April 7, 1998, among
Beneficial, Household International, Inc. ("Household") and Household
Acquisition Corporation II, a wholly owned subsidiary of Household ("Merger
Sub"). Under the terms of this Agreement, Merger Sub will be merged with and
into Beneficial (the "Merger"), each outstanding share of common stock of
Beneficial will be converted into the right to receive 3.0666 shares (as
adjusted for Household's recent 3-for-1 stock split effected in the form of a
stock dividend and paid on June 1, 1998, and subject to further adjustment
under certain circumstances) of Household common stock (and cash, without
interest, in lieu of fractional shares), each outstanding share of Beneficial
$5.50 Dividend Convertible Preferred Stock will be converted into the right to
receive the number of shares of Household common stock that the holder thereof
would have been entitled to receive in the Merger had such holder converted
such share of Beneficial $5.50 Dividend Convertible Preferred Stock into
shares of Beneficial Common Stock immediately prior to the Merger, and each
outstanding share of Beneficial 5% Cumulative Preferred Stock, $4.50 Dividend
Cumulative Preferred Stock and $4.30 Dividend Preferred Stock will be
converted into the right to receive the same number of shares of an equivalent
new series of Household preferred stock.
The Merger will provide you with the opportunity to participate as a
stockholder in a combined company that we believe will be the world's
preeminent consumer finance company. We likewise believe the resulting company
in the Merger will be well positioned to compete more effectively in the
increasingly competitive financial services industry and to achieve
Beneficial's goals for continued revenue growth, improved profitability and
superior stockholder returns.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
The enclosed Joint Proxy Statement-Prospectus explains in detail the terms of
the proposed Merger and related matters. Please carefully review and consider
all of this information.
Consummation of the Merger is subject to certain conditions, including among
others approval of certain matters in connection with the Merger by the
requisite vote of the stockholders of both Beneficial and Household, and
approval of the Merger by various regulatory authorities.
It is very important that your shares are represented at the Special
Meeting, whether or not you plan to attend in person. The affirmative vote of
the holders of a majority of the voting power represented by the outstanding
shares of Beneficial common stock, Beneficial $5.50 Dividend Convertible
Preferred Stock and Beneficial $4.30 Dividend Preferred Stock voting together
as a single
<PAGE>
class is required for approval of the Merger. Your failure to vote for
approval of the Merger will have the same effect as a vote against the Merger.
In order to ensure that your vote is represented at the Special Meeting,
please sign, date and mail the proxy card in the enclosed envelope. You are,
of course, welcome to attend the meeting and to vote your shares in person.
/s/ Finn M. W. Caspersen
Finn M. W. Caspersen
Chairman of the Board
<PAGE>
BENEFICIAL CORPORATION
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1998
----------------
A Special Meeting of Stockholders of Beneficial Corporation ("Beneficial")
will be held at Beneficial's executive offices, One Christina Centre, 301
North Walnut Street, Wilmington, Delaware, at 9:30 a.m. local time on June 30,
1998, for the following purpose:
To consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of April 7, 1998 (the "Merger Agreement"), among
Beneficial, Household International, Inc. ("Household"), and Household
Acquisition Corporation II ("Merger Sub"), a wholly owned subsidiary of
Household, providing for the merger (the "Merger") of Merger Sub with and
into Beneficial. A copy of the Merger Agreement is attached as Appendix A
to the accompanying Joint Proxy Statement-Prospectus.
Only holders of record of Beneficial Common Stock, $5.50 Dividend
Convertible Preferred Stock and $4.30 Dividend Preferred Stock at the close of
business on May 26, 1998, are entitled to vote at such meeting or any
adjournments or postponements thereof. The affirmative vote of holders of a
majority of the voting power represented by the outstanding shares of
Beneficial common stock, $5.50 Dividend Convertible Preferred Stock and $4.30
Dividend Preferred Stock voting together as a single class is required for
approval of the Merger Agreement and the transactions contemplated thereby.
/s/ Scott A. Siebels
Scott A. Siebels
Senior Vice President and Corporate
Secretary
June 2, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, WHETHER OR NOT YOU
PLAN TO ATTEND THE SPECIAL MEETING.
THE BOARD OF DIRECTORS OF BENEFICIAL CORPORATION UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
<PAGE>
JOINT PROXY STATEMENT
HOUSEHOLD INTERNATIONAL, INC. BENEFICIAL CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 30, 1998
TO BE HELD ON JUNE 30, 1998
---------------
HOUSEHOLD INTERNATIONAL, INC.
PROSPECTUS
---------------
This Joint Proxy Statement-Prospectus relates to up to 167,362,654 shares of
common stock, par value $1.00 per share ("Household Common Stock"), up to
407,718 shares of 5% Cumulative Preferred Stock ("Household 5% Preferred
Stock"), up to 103,976 shares of $4.50 Dividend Cumulative Preferred Stock
("Household $4.50 Preferred Stock") and up to 836,585 shares of $4.30 Dividend
Preferred Stock ("Household $4.30 Preferred Stock," together with the
Household Common Stock, Household 5% Preferred Stock and Household $4.50
Preferred Stock, the "Household Stock") of Household International, Inc., a
Delaware corporation ("Household"), offered hereby to the stockholders of
Beneficial Corporation, a Delaware corporation ("Beneficial"), upon
consummation of the proposed merger (the "Merger") of Household Acquisition
Corporation II, a Delaware corporation and a wholly owned subsidiary of
Household ("Merger Sub"), with and into Beneficial, with Beneficial being the
surviving corporation in the Merger (the "Surviving Corporation"), pursuant to
an Agreement and Plan of Merger, dated as of April 7, 1998 (the "Agreement"),
by and among Household, Merger Sub and Beneficial. This Joint Proxy Statement-
Prospectus also serves as the Joint Proxy Statement of Household and
Beneficial for use in connection with the solicitation of proxies by the
Boards of Directors of Household and Beneficial to be used at the special
meeting of stockholders of Household (the "Household Special Meeting") and at
the special meeting of stockholders of Beneficial (the "Beneficial Special
Meeting" and, together with the Household Special Meeting, the "Special
Meetings"), respectively, to approve (in the case of Household) the issuance
of Household Common Stock in connection with the Merger and (in the case of
Beneficial) the Agreement and the transactions contemplated thereby. The
Agreement is attached to this Joint Proxy Statement-Prospectus as Appendix A
and is incorporated herein by reference.
Upon consummation of the Merger (the "Effective Time"), each share of
Beneficial common stock, par value $1.00 per share, including the associated
preferred stock purchase right (a "Beneficial Right") issued pursuant to the
Renewed Rights Agreement, dated August 22, 1996, as amended (the "Beneficial
Rights Agreement"), by and between Beneficial and the Rights Agent named
therein (such stock and the accompanying Beneficial Rights, "Beneficial Common
Stock"), will be converted into the right to receive 3.0666 (as adjusted for
Household's 3-for-1 stock split effected in the form of a stock dividend and
paid on June 1, 1998, and as may be further adjusted pursuant to the Agreement
under certain circumstances, including in connection with certain termination
rights (see "THE MERGER--Termination of the Agreement" and "HOUSEHOLD CAPITAL
STOCK--General"), the "Exchange Ratio") shares of Household Common Stock (and
cash, without interest, in lieu of fractional shares). Based upon information
available as of the date hereof, immediately after the Merger holders of
Beneficial Common Stock are expected to hold approximately 34% of the shares
of outstanding common stock of the combined company on a fully diluted basis.
In addition, in the Merger each outstanding share of $5.50 Dividend
Convertible Preferred Stock of Beneficial ("Beneficial Convertible Preferred
Stock") will be converted into the right to receive the number of shares of
Household Common Stock that the holder thereof would have been entitled to
receive in the Merger had such holder converted such share of Beneficial
Convertible Preferred Stock into shares of Beneficial Common Stock immediately
prior to the Merger, each outstanding share of 5%
(Continued on next page)
THIS JOINT PROXY STATEMENT-PROSPECTUS AND THE ACCOMPANYING FORMS OF PROXY ARE
FIRST BEING MAILED TO HOUSEHOLD STOCKHOLDERS AND BENEFICIAL STOCKHOLDERS ON
OR ABOUT JUNE 2, 1998. 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 JOINT PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS OR BANK DEPOSITS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY
BANKING OR NONBANKING AFFILIATE OF HOUSEHOLD OR BENEFICIAL AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
---------------
The date of this Joint Proxy Statement-Prospectus is June 2, 1998.
<PAGE>
(Continued from previous page)
Cumulative Preferred Stock of Beneficial ("Beneficial 5% Preferred Stock")
will be converted into the right to receive the same number of shares of
Household 5% Preferred Stock, each outstanding share of $4.50 Dividend
Cumulative Preferred Stock of Beneficial ("Beneficial $4.50 Preferred Stock")
will be converted into the right to receive the same number of shares of
Household $4.50 Preferred Stock and each outstanding share of $4.30 Dividend
Preferred Stock of Beneficial ("Beneficial $4.30 Preferred Stock") will be
converted into the right to receive the same number of shares of Household
$4.30 Preferred Stock. The Household 5% Preferred Stock, Household $4.50
Preferred Stock and Household $4.30 Preferred Stock are collectively referred
to herein as the "New Household Preferred Stock." Each new series of Household
preferred stock will have rights, preferences and terms substantially
identical to the rights, preferences and terms of the equivalent series of
Beneficial preferred stock, except that each share of New Household Preferred
Stock will entitle the holder thereof to one vote, voting together with the
Household Common Stock, and not as a separate class, on all matters brought
before Household stockholders. Each share of Household capital stock
outstanding immediately prior to the Merger will continue to be outstanding
after the Effective Time. The Beneficial Common Stock, Beneficial Convertible
Preferred Stock, Beneficial $4.50 Preferred Stock and Beneficial $4.30
Preferred Stock are collectively referred to hereinafter as the "Beneficial
Stock."
For a more complete description of the Agreement and the Merger, see "THE
MERGER."
The last reported sale price of Household Common Stock on the New York Stock
Exchange, Inc. ("NYSE") Composite Transactions List on May 29, 1998 was $45.10
per share and on April 6, 1998, the last trading day preceding public
announcement of the proposed Merger, was $48.92 per share (as adjusted for
Household's 3-for-1 stock split effected in the form of a stock dividend and
paid on June 1, 1998). The last reported sale price of Beneficial Common Stock
as reported on the NYSE Composite Transactions List on May 29, 1998 was
$134.00 per share and on April 6, 1998 was $130.50 per share. Because the
number of shares of Household Common Stock to be received by holders of
Beneficial Common Stock and Beneficial Convertible Preferred Stock in the
Merger is fixed (subject to possible increase in certain circumstances) and
because the market price of Household Common Stock is subject to fluctuation,
the value of the shares of Household Common Stock that holders of Beneficial
Common Stock and Beneficial Convertible Preferred Stock will receive in the
Merger may increase or decrease prior to and after the Merger. See "SUMMARY--
Share Information and Market Prices" and "PRICE RANGE OF STOCK AND DIVIDENDS."
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION..................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................ 3
SUMMARY................................................................... 4
General................................................................. 4
The Companies........................................................... 4
Household Special Meeting and Vote Required............................. 5
Beneficial Special Meeting and Vote Required............................ 6
The Merger.............................................................. 6
Conditions to the Merger................................................ 7
Recommendations of Boards of Directors.................................. 7
Opinion of Household's Financial Advisor................................ 7
Opinions of Beneficial's Financial Advisors............................. 7
Effective Time of the Merger............................................ 8
Expenses, Termination, Amendment and Waiver............................. 8
Certain U.S. Federal Income Tax Consequences............................ 9
Accounting Treatment.................................................... 9
Interests of Certain Persons in the Merger.............................. 10
The Household and Beneficial Stock Option Agreements.................... 10
Amendment to Beneficial Rights Agreement................................ 11
Dissenters' Rights...................................................... 11
Regulatory Approvals.................................................... 12
Share Information and Market Prices..................................... 12
Unaudited Comparative Per Share Data.................................... 13
Summary Selected Financial Data......................................... 15
RATIOS OF EARNINGS TO FIXED CHARGES AND OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS.................................... 18
HOUSEHOLD SPECIAL MEETING................................................. 19
General................................................................. 19
Matters to be Considered................................................ 19
Proxies................................................................. 19
Record Date and Voting Rights........................................... 19
Recommendation of the Household Board................................... 20
BENEFICIAL SPECIAL MEETING................................................ 21
General................................................................. 21
Matters to be Considered................................................ 21
Proxies................................................................. 21
Record Date and Voting Rights........................................... 21
Recommendation of the Beneficial Board.................................. 22
THE MERGER................................................................ 23
Description of the Merger............................................... 23
Background of the Merger................................................ 25
Household's Reasons for the Merger...................................... 28
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Beneficial's Reasons for the Merger..................................... 30
Opinion of Household's Financial Advisor................................ 32
Opinions of Beneficial's Financial Advisors............................. 36
The Effective Time...................................................... 42
Exchange of Certificates; Fractional Shares............................. 43
Conduct of Business Prior to the Merger and Other Covenants............. 44
Conditions to the Merger................................................ 47
Representations and Warranties.......................................... 48
Expenses................................................................ 48
Termination of the Agreement............................................ 48
Amendment; Waiver....................................................... 50
Certain U.S. Federal Income Tax Consequences............................ 50
Accounting Treatment.................................................... 52
Interests of Certain Persons in the Merger.............................. 53
Household and Beneficial Stock Option Agreements........................ 55
Amendment to Beneficial Rights Agreement................................ 60
Regulatory Matters...................................................... 60
Restrictions on Resales by Affiliates................................... 63
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................ 63
PRICE RANGE OF STOCK AND DIVIDENDS........................................ 65
Market Prices........................................................... 65
Dividends............................................................... 66
INFORMATION ABOUT HOUSEHOLD............................................... 67
General................................................................. 67
Operations.............................................................. 67
Management and Additional Information................................... 68
Merger Sub.............................................................. 68
Selected Financial Data................................................. 69
INFORMATION ABOUT BENEFICIAL.............................................. 72
General Information and Operations...................................... 72
Recent Developments..................................................... 72
Management and Additional Information................................... 72
Selected Financial Data................................................. 73
SUPERVISION AND REGULATION OF HOUSEHOLD AND BENEFICIAL.................... 75
HOUSEHOLD CAPITAL STOCK................................................... 75
General................................................................. 75
Household Preferred Stock............................................... 76
Description of Authorized Series of Household Preferred Stock........... 77
Household 1992 Preferred and Household 1993 Preferred................... 78
Household 5% Preferred Stock, Household $4.50 Preferred Stock and
Household $4.30 Preferred Stock........................................ 78
Household Junior Preferred.............................................. 81
Household Common Stock.................................................. 83
Household Preferred Share Purchase Rights............................... 84
Dividends............................................................... 84
Special Charter Provisions.............................................. 84
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISSENTERS' RIGHTS...... 84
LEGAL OPINION........... 84
EXPERTS................. 85
STOCKHOLDER PROPOSALS... 85
OTHER MATTERS........... 85
UNAUDITED PRO FORMA
CONDENSED COMBINED
FINANCIAL INFORMATION.. 86
INDEX OF DEFINED TERMS.. 95
APPENDIX A--Agreement
and Plan of Merger..... A-1
APPENDIX B--Opinion of
Morgan Stanley & Co.
Incorporated........... B-1
APPENDIX C--Opinion of
Goldman, Sachs & Co.... C-1
APPENDIX D--Opinion of
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated........... D-1
</TABLE>
----------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS JOINT PROXY STATEMENT-
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOUSEHOLD OR BENEFICIAL. THIS
JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR
SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE SECURITIES
OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-
PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY
INDICATED. INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS
REGARDING HOUSEHOLD, AND PRO FORMA INFORMATION, HAS BEEN FURNISHED BY
HOUSEHOLD, AND INFORMATION HEREIN REGARDING BENEFICIAL HAS BEEN FURNISHED BY
BENEFICIAL.
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AVAILABLE INFORMATION
Household has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
S-4 under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the Household Stock to be issued in connection with the Merger.
For further information pertaining to the securities of Household to which
this Joint Proxy Statement-Prospectus relates, reference is made to the
Registration Statement, including the exhibits and schedules filed as a part
thereof. As permitted by the rules and regulations of the Commission, certain
information included in the Registration Statement is omitted from this Joint
Proxy Statement-Prospectus. In addition, Household and Beneficial are subject
to certain of the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, file
certain reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information can be inspected and
copied at the public reference room of the Commission, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and copies of such materials can be
obtained by mail from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Commission maintains an Internet worldwide web site that contains reports,
proxy and information statements and other information regarding issuers, like
Household and Beneficial, who file electronically with the Commission. The
address of that site is http://www.sec.gov. In addition, copies of such
materials are available for inspection and reproduction at the public
reference facilities of the Commission at its New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048; and at its Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Reports, proxy statements and other information concerning Household and
Beneficial also may be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Household with the Commission
are hereby incorporated by reference in this Joint Proxy Statement-Prospectus:
(i) the Household Annual Report on Form 10-K for the year ended December 31,
1997, as filed on March 30, 1998; (ii) the Household Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1998, as filed on May 12, 1998;
(iii) the description of the Household Common Stock contained in any Household
registration statements filed pursuant to Section 12 of the Exchange Act,
including any amendments or reports filed for the purpose of updating such
description; and (iv) the Household Current Reports on Form 8-K dated January
21, March 6, April 7 and April 20, 1998.
The following documents previously filed by Beneficial with the Commission
are hereby incorporated by reference in this Joint Proxy Statement-Prospectus:
(i) the Beneficial Annual Report on Form 10-K for the year ended December 31,
1997, as filed on March 30, 1998 and amended by Amendment No. 1 on Form 10-
K/A, filed April 29, 1998; (ii) the Beneficial Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1998, as filed on May 13, 1998; (iii)
the description of the Beneficial Common Stock, the Beneficial Rights,
Beneficial Convertible Preferred Stock, Beneficial 5% Preferred Stock,
Beneficial $4.50 Preferred Stock and Beneficial $4.30 Preferred Stock set
forth in any Beneficial registration statements filed pursuant to Section 12
of the Exchange Act, including any amendments or reports filed for the purpose
of updating any such description; and (iv) the Beneficial Current Reports on
Form 8-K dated January 28, February 10 (2 reports), February 17 (2 reports),
March 2, April 7 (2 reports), and April 23, 1998.
In addition, all documents filed by Household and Beneficial with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date hereof and prior to the time at which the Beneficial Special
Meeting and the Household Special Meeting have been finally adjourned are
hereby deemed to be incorporated by reference herein. Any statements 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 Joint Proxy
Statement-Prospectus to the extent that a statement
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contained herein or in any other subsequently filed document that also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Joint Proxy
Statement-Prospectus.
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE DOCUMENTS
RELATING TO HOUSEHOLD (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS
ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM PAUL R. SHAY,
ASSISTANT GENERAL COUNSEL AND CORPORATE SECRETARY, HOUSEHOLD INTERNATIONAL,
INC., 2700 SANDERS ROAD, PROSPECT HEIGHTS, ILLINOIS 60070, TELEPHONE NUMBER
(847) 564-6989. THE DOCUMENTS RELATING TO BENEFICIAL (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS WHICH EXHIBITS ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST
FROM SCOTT A. SIEBELS, SENIOR VICE PRESIDENT AND CORPORATE SECRETARY,
BENEFICIAL CORPORATION, 301 NORTH WALNUT STREET, WILMINGTON, DELAWARE 19801,
TELEPHONE NUMBER (302) 425-2500. HOUSEHOLD OR BENEFICIAL, AS THE CASE MAY BE,
WILL SEND THE REQUESTED DOCUMENTS BY FIRST-CLASS MAIL WITHIN ONE BUSINESS DAY
OF THE RECEIPT OF THE REQUEST. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JUNE 23, 1998. PERSONS REQUESTING
COPIES OF EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED THE COSTS OF REPRODUCTION AND
MAILING OF SUCH EXHIBITS.
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<PAGE>
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
THIS JOINT PROXY STATEMENT-PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF HOUSEHOLD FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING
STATEMENTS RELATING TO THE COST SAVINGS AND OTHER ADVANTAGES THAT ARE EXPECTED
TO BE REALIZED FROM THE MERGER, THE EXPECTED IMPACT OF THE MERGER ON
HOUSEHOLD'S FINANCIAL PERFORMANCE AND EARNINGS ESTIMATES FOR THE COMBINED
COMPANY (SEE "THE MERGER--HOUSEHOLD'S REASONS FOR THE MERGER," "--BENEFICIAL'S
REASONS FOR THE MERGER," "--OPINION OF HOUSEHOLD'S FINANCIAL ADVISOR," "--
OPINIONS OF BENEFICIAL'S FINANCIAL ADVISORS," "MANAGEMENT AND OPERATIONS AFTER
THE MERGER" AND "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION"). THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. NEITHER HOUSEHOLD NOR BENEFICIAL UNDERTAKES ANY OBLIGATION TO
REFLECT EVENTS AND CIRCUMSTANCES THAT ARISE AFTER THE DATE HEREOF. FACTORS
THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING
POSSIBILITIES: (1) EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY
REALIZED OR REALIZED WITHIN THE EXPECTED TIME FRAME; (2) COMPETITIVE PRESSURE
IN THE CONSUMER CREDIT INDUSTRY, OR IN THE FINANCIAL SERVICES ENVIRONMENT IN
THE COUNTRIES AND LOCALITIES WHERE HOUSEHOLD AND BENEFICIAL OPERATE, INCREASES
SIGNIFICANTLY; (3) GREATER THAN EXPECTED COSTS OR DIFFICULTIES RELATED TO
REGULATORY REQUIREMENTS ATTENDANT TO THE CONSUMMATION OF THE MERGER OR THE
INTEGRATION OF THE BUSINESSES OF HOUSEHOLD AND BENEFICIAL; (4) CHANGES IN THE
INTEREST RATE ENVIRONMENT REDUCE MARGINS; (5) GENERAL ECONOMIC CONDITIONS,
EITHER NATIONALLY, REGIONALLY OR IN FOREIGN MARKETS IN WHICH THE COMBINED
COMPANY OPERATES, ARE LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER
THINGS, A DETERIORATION IN CREDIT QUALITY; (6) LEGISLATION OR REGULATORY
REQUIREMENTS OR CHANGES ADVERSELY AFFECT THE BUSINESSES IN WHICH THE COMBINED
COMPANY WOULD BE ENGAGED; (7) CHANGES IN BUSINESS CONDITIONS AND INFLATION;
AND (8) CHANGES IN THE SECURITIES MARKETS. THE FORWARD-LOOKING EARNINGS
ESTIMATES INCLUDED IN, OR INCORPORATED BY REFERENCE INTO, THIS JOINT PROXY
STATEMENT-PROSPECTUS HAVE NOT BEEN EXAMINED OR COMPILED BY THE INDEPENDENT
PUBLIC ACCOUNTANTS OF HOUSEHOLD OR BENEFICIAL NOR HAVE SUCH ACCOUNTANTS
APPLIED ANY PROCEDURES THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS
AN OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM. FURTHER INFORMATION ON
OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF HOUSEHOLD AFTER THE
MERGER IS INCLUDED IN THE COMMISSION FILINGS INCORPORATED BY REFERENCE HEREIN.
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<PAGE>
SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS NOT INTENDED TO BE COMPLETE. IT
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MORE DETAILED INFORMATION
CONTAINED ELSEWHERE IN THIS JOINT PROXY STATEMENT-PROSPECTUS, THE ACCOMPANYING
APPENDICES AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
GENERAL
This Joint Proxy Statement-Prospectus, Notice of the Beneficial Special
Meeting to be held on June 30, 1998, Notice of the Household Special Meeting to
be held on June 30, 1998, and forms of proxy solicited in connection therewith
are first being mailed to Beneficial stockholders and Household stockholders on
or about June 2, 1998. At the Household Special Meeting, holders of Household
Common Stock (the "Household Common Stockholders") will consider and vote on
the approval of the issuance of shares of Household Common Stock to holders of
Beneficial Common Stock and Beneficial Convertible Preferred Stock in
connection with the Merger. At the Beneficial Special Meeting, holders of
Beneficial Common Stock, Beneficial Convertible Preferred Stock and Beneficial
$4.30 Preferred Stock (collectively, the "Voting Beneficial Stockholders") will
consider and vote on a proposal to approve the Agreement and the transactions
contemplated thereby. A copy of the Agreement is attached to this Joint Proxy
Statement-Prospectus as Appendix A and is incorporated herein by reference.
THE COMPANIES
Household. Household is a corporation organized as a holding company under
the laws of the State of Delaware in 1981, as a result of a stockholder
approved restructuring of Household Finance Corporation, which was established
in 1878. Household has as its principal assets the stock of its subsidiaries.
Through its subsidiaries, Household offers a variety of lending products to
consumers in the United States, Canada, England, Scotland, Wales and Northern
Ireland. At March 31, 1998, Household employed approximately 14,900 people and
serviced approximately 23.2 million customer accounts with $46.3 billion in
managed receivables and $25.6 billion in owned receivables. The principal
executive offices of Household are located at 2700 Sanders Road, Prospect
Heights, Illinois 60070, and its telephone number is (847) 564-5000. All
references herein to Household refer to Household International, Inc. and its
subsidiaries, unless the context otherwise requires.
For additional information regarding Household and the combined company that
would result from the Merger, see "THE MERGER," "MANAGEMENT AND OPERATIONS
AFTER THE MERGER" and "INFORMATION ABOUT HOUSEHOLD."
Beneficial. Beneficial is a holding company and has as its principal assets
the stock of its subsidiaries. Beneficial was organized under the laws of the
State of Delaware in 1929, through the consolidation of three companies which
had been operated under the same management. Through its subsidiaries,
Beneficial is principally engaged in the consumer finance and credit related
insurance business. At March 31, 1998, Beneficial and its subsidiaries employed
approximately 9,600 people and serviced approximately 6.6 million customer
accounts with $17.2 billion in managed receivables and $14.6 billion in owned
receivables.
Operations conducted by the subsidiaries of Beneficial consist principally of
a consumer finance network with over 1,100 offices located in the United States
and the United Kingdom; Personal Mortgage Corporation, a direct-response
mortgage lending unit, which originates home equity loans
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<PAGE>
chiefly in the Northeast, Middle Atlantic and West Coast regions; Beneficial
National Bank USA, a specialized private-label credit card bank located in
Delaware; Beneficial Credit Services, which is engaged in sales finance
activities; Beneficial National Bank, a full service commercial bank located in
Delaware, which is also engaged in making income tax refund anticipation loans;
The Central National Life Insurance Company of Omaha and its subsidiary, First
Central National Life Insurance Company of New York, which underwrite life and
disability consumer credit insurance; Wesco Insurance Company, which provides
credit property insurance; BFC Insurance (Life) Limited and BFC Insurance
Limited, which are located in Ireland, and underwrite life, accident and health
insurance; and Harbour Island Inc. and subsidiaries, which are engaged in real
estate development in Tampa, Florida.
The principal executive offices of Beneficial are located at 301 North Walnut
Street, Wilmington, Delaware 19801, and its telephone number is (302) 425-2500.
All references herein to Beneficial refer to Beneficial Corporation and its
subsidiaries, unless the context otherwise requires. See "THE MERGER" and
"INFORMATION ABOUT BENEFICIAL."
Merger Sub. Household Acquisition Corporation II, a Delaware corporation, is
a wholly-owned subsidiary of Household created for the express purpose of
consummating the Merger and has not engaged in any significant business
activity and has no material assets or liabilities other than those incident to
its formation.
HOUSEHOLD SPECIAL MEETING AND VOTE REQUIRED
The Household Special Meeting will be held on June 30, 1998 at 8:30 a.m.,
local time, at 2445 M Street, N.W., 9th Floor, Washington, D.C. At that time,
Household Common Stockholders will be asked to consider and vote upon the
approval of the issuance of shares of Household Common Stock to holders of
Beneficial Common Stock and Beneficial Convertible Preferred Stock pursuant to
the Agreement (the "Household Matter"). The record holders of Household Common
Stock at the close of business on May 28, 1998 (the "Household Record Date")
are entitled to vote at the Household Special Meeting. On the Household Record
Date, there were approximately 9,962 holders of record of Household Common
Stock and 107,334,921 shares (on a pre-split basis) of Household Common Stock
outstanding.
Each share of Household Common Stock entitles its holder to one vote and the
affirmative vote of a majority of the votes cast at the Household Special
Meeting is required to approve the Household Matter, provided that, the total
number of votes cast represents at least 50% of the total number of outstanding
shares (the "Household Stockholder Approval"). As of the Household Record Date,
directors and executive officers of Household beneficially owned 395,662 shares
(on a pre-split basis) of Household Common Stock, equivalent to approximately
.004% of the votes entitled to be cast at the Household Special Meeting. It is
currently expected that each such director and executive officer of Household
will vote the shares of Household Common Stock beneficially owned by him or her
for approval of the Household Matter. See "HOUSEHOLD SPECIAL MEETING."
Household would resolicit proxies with respect to the Household Matter with
an updated Joint Proxy Statement-Prospectus in the event that Household waives
any conditions that materially adversely affect the Household Common
Stockholders with respect to the Household Matter. Household does not presently
intend to waive any such condition.
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BENEFICIAL SPECIAL MEETING AND VOTE REQUIRED
The Beneficial Special Meeting will be held on June 30, 1998 at 9:30 a.m.,
local time, at Beneficial's executive offices, One Christina Centre, 301 North
Walnut Street, Wilmington, Delaware, at which time the Voting Beneficial
Stockholders will be asked to approve the Agreement and the transactions
contemplated thereby. Record holders of Beneficial Stock are entitled to notice
of and only holders of Beneficial Common Stock, Beneficial Convertible
Preferred Stock and Beneficial $4.30 Preferred Stock at the close of business
on May 26, 1998 (the "Beneficial Record Date") are entitled to vote at the
Beneficial Special Meeting. On the Beneficial Record Date, there were
approximately 12,769 holders of record of Beneficial Common Stock and
54,435,871 shares of Beneficial Common Stock outstanding, 420 holders of record
of Beneficial Convertible Preferred Stock and 15,566 shares of Beneficial
Convertible Preferred Stock outstanding and 937 holders of record of Beneficial
$4.30 Preferred Stock and 836,585 shares of Beneficial $4.30 Preferred Stock
outstanding.
Each share of Beneficial Common Stock and Beneficial $4.30 Preferred Stock is
entitled to one vote; each share of Beneficial Convertible Preferred Stock is
entitled to nine votes. The affirmative vote of the holders of a majority of
the voting power represented by the outstanding shares of Beneficial Common
Stock, Beneficial Convertible Preferred Stock and Beneficial $4.30 Preferred
Stock voting together as a single class is required to approve the Agreement
and the transactions contemplated thereby (the "Beneficial Stockholder
Approval"). As of the Beneficial Record Date, directors and executive officers
of Beneficial beneficially owned approximately 6,060,544 shares of Beneficial
Common Stock, 73 shares of Beneficial Convertible Preferred Stock and 4,740
shares of Beneficial $4.30 Preferred Stock, equivalent to approximately 10.95%
of the votes entitled to be cast at the Beneficial Special Meeting. It is
currently expected that each such director and executive officer of Beneficial
will vote the shares of Beneficial Common Stock, Beneficial Convertible
Preferred Stock and Beneficial $4.30 Preferred Stock beneficially owned by him
or her for approval of the Agreement and the transactions contemplated thereby.
See "BENEFICIAL SPECIAL MEETING."
Beneficial would resolicit proxies to approve the Agreement with an updated
Joint Proxy Statement-Prospectus in the event that Beneficial waives any
conditions that materially adversely affect the Voting Beneficial Stockholders
with respect to the Merger. Beneficial does not presently intend to waive any
such condition.
THE MERGER
In the Merger, subject to the terms of the Agreement, Merger Sub will merge
with and into Beneficial, which will be the surviving entity, and each
outstanding share of Beneficial Common Stock will be converted at the Exchange
Ratio into the right to receive shares of Household Common Stock, each
outstanding share of Beneficial Convertible Preferred Stock will be converted
into the right to receive the number of shares of Household Common Stock that
the holder thereof would have been entitled to receive in the Merger had such
holder converted such share of Beneficial Convertible Preferred Stock into
shares of Beneficial Common Stock immediately prior to the Merger, each
outstanding share of Beneficial 5% Preferred Stock will be converted into the
right to receive the same number of shares of Household 5% Preferred Stock,
each outstanding share of Beneficial $4.50 Preferred Stock will be converted
into the right to receive the same number of shares of Household $4.50
Preferred Stock and each outstanding share of Beneficial $4.30 Preferred Stock
will be converted into the right to receive the same number of shares of
Household $4.30 Preferred Stock, with cash to be paid in lieu of any resulting
fractional shares of Household Common Stock. See
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"HOUSEHOLD CAPITAL STOCK." Each share of Household capital stock outstanding
immediately prior to the Merger will continue to be outstanding after the
Effective Time.
CONDITIONS TO THE MERGER
The Merger is subject to the satisfaction of certain conditions, including
among others, the receipt of the Household Stockholder Approval and the
Beneficial Stockholder Approval; the approval of certain specified regulatory
agencies; the effectiveness of the registration statement of which this Joint
Proxy Statement-Prospectus forms a part; receipt by Beneficial and Household of
opinions of counsel substantially to the effect that the Merger will qualify,
for federal income tax purposes, as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
the receipt by Household and Beneficial of a letter from each of Arthur
Andersen LLP and Deloitte & Touche LLP that the Merger will qualify for
"pooling of interests" accounting treatment; the listing, subject to notice of
issuance, on the NYSE of the Household Stock to be issued in the Merger; and
certain other customary closing conditions. There can be no assurance as to
when and if such conditions will be satisfied (or, where permissible, waived)
or that the Merger will be consummated. See "THE MERGER--Conditions to the
Merger" and "--Certain U.S. Federal Income Tax Consequences."
For additional information relating to the Merger, see "THE MERGER."
RECOMMENDATIONS OF BOARDS OF DIRECTORS
THE BOARD OF DIRECTORS OF BENEFICIAL (THE "BENEFICIAL BOARD") HAS
UNANIMOUSLY, AND THE BOARD OF DIRECTORS OF HOUSEHOLD (THE "HOUSEHOLD BOARD")
HAS, BY A UNANIMOUS VOTE OF THOSE PRESENT, APPROVED THE AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY. THE BENEFICIAL BOARD AND THE HOUSEHOLD BOARD
EACH BELIEVE THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF BENEFICIAL
AND HOUSEHOLD AND THEIR RESPECTIVE STOCKHOLDERS AND UNANIMOUSLY RECOMMEND THAT
SUCH STOCKHOLDERS VOTE "FOR" THE MATTER TO BE VOTED UPON BY SUCH STOCKHOLDERS
IN CONNECTION WITH THE MERGER. FOR A DISCUSSION OF THE FACTORS CONSIDERED BY
THE BENEFICIAL BOARD AND THE HOUSEHOLD BOARD IN REACHING THEIR RESPECTIVE
CONCLUSIONS, SEE "THE MERGER--Background of the Merger," "--Household's Reasons
for the Merger" and "--Beneficial's Reasons for the Merger."
OPINION OF HOUSEHOLD'S FINANCIAL ADVISOR
Morgan Stanley & Co. Incorporated ("Morgan Stanley") has served as financial
advisor to Household in connection with the Merger. Morgan Stanley has rendered
an opinion to the Household Board, dated as of April 6, 1998, that, as of such
date and subject to certain considerations set forth in the written opinion,
the Exchange Ratio pursuant to the Agreement is fair from a financial point of
view to Household. A copy of the opinion delivered by Morgan Stanley is
attached to this Joint Proxy Statement-Prospectus as Appendix B and should be
read in its entirety with respect to assumptions made, matters considered and
limitations of the review undertaken by Morgan Stanley in rendering its
opinion. See "THE MERGER--Opinion of Household's Financial Advisor."
OPINIONS OF BENEFICIAL'S FINANCIAL ADVISORS
Each of Goldman, Sachs & Co. ("Goldman Sachs") and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch" and together with Goldman Sachs,
the "Beneficial Financial Advisors"),
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has served as a financial advisor to Beneficial in connection with the Merger,
and rendered its oral opinion to the Beneficial Board on April 7, 1998,
subsequently confirmed in writing, that the Exchange Ratio pursuant to the
Agreement is fair from a financial point of view to the holders of Beneficial
Common Stock. Copies of the opinions delivered by Goldman Sachs and Merrill
Lynch are attached to this Joint Proxy Statement-Prospectus as Appendix C and
Appendix D, respectively, and each should be read in its entirety with respect
to assumptions made, matters considered and limitations on the review
undertaken by Goldman Sachs and Merrill Lynch, as the case may be, in rendering
its opinion. See "THE MERGER--Opinions of Beneficial's Financial Advisors."
EFFECTIVE TIME OF THE MERGER
Subject to the satisfaction or waiver of certain conditions set forth in the
Agreement, the parties will cause the Effective Time to occur as soon as
practicable on or after (i) the date that is no later than the third NYSE
trading day after the satisfaction or waiver of the conditions to both parties'
obligations to effect the Merger described under "THE MERGER--Conditions to the
Merger" or (ii) such other date to which the parties may agree in writing. The
date on which the Effective Time occurs is referred to as the "Effective Date."
EXPENSES, TERMINATION, AMENDMENT AND WAIVER
At any time prior to the Effective Time, each of Household and Beneficial, by
action taken or authorized by its Board of Directors, may, to the extent
legally allowed: (i) extend the time for the performance of any of the
obligations or other acts of the other party to the Agreement, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
in the Agreement or in any document delivered pursuant to the Agreement and
(iii) waive compliance with any of the agreements or conditions by the other
party contained in the Agreement. Additionally, the Agreement permits Household
at any time to change the method of effecting the combination with Beneficial
if and to the extent that Household deems such change desirable, including,
without limitation, to provide for a merger of Beneficial into Household;
provided, however, that no such change will alter or change the amount or kind
of consideration to be issued to holders of Beneficial Common Stock as provided
for in the Agreement (the "Merger Consideration"), adversely affect the tax
treatment of Beneficial stockholders as a result of receiving the Merger
Consideration or materially impede or delay consummation of the Merger.
Pursuant to the foregoing, Household has specified that the Merger be effected
in the manner described under "--The Merger." Neither Household nor Beneficial
would resolicit its respective stockholders as a result of a change in the
method of effecting the Merger that meets the specified criteria.
The Agreement may be terminated and the Merger abandoned (i) by the mutual
consent of the parties, (ii) by either party if the other party materially
breaches its representations, warranties, covenants or agreements, in each case
after inability or failure to cure within 30 days or which cannot be cured
prior to the Effective Time, (iii) by either party in the event that the Merger
is not consummated by December 31, 1998, except to the extent that the failure
of the Merger then to be consummated arises out of or results from the failure
of the party seeking to terminate to perform or observe the covenants and
agreements of that party under the Agreement or (iv) by either party (a) 60
days after the date on which any request or application for a Requisite
Regulatory Approval (as defined herein) is denied or withdrawn at the request
of the governmental entity which must grant such approval, unless within 60
days following such denial or withdrawal a petition for rehearing or an amended
application has been filed with the applicable governmental entity or (b) if
either the Beneficial Stockholder Approval or the Household Stockholder
Approval is not obtained at the Beneficial Special Meeting or the Household
Special Meeting, as the case may be, or any adjournments or postponements
thereof.
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In addition, the Agreement may be terminated by Beneficial by giving notice
to Household at least two days prior to the anticipated closing date of the
Merger if either (i) the average closing price (the "Average Closing Price") of
Household Common Stock for the ten full trading days ending on the date three
days prior to the anticipated closing date (the "Determination Date") is less
than $39.13 (as adjusted for Household's 3-for-1 stock split effected in the
form of a stock dividend and paid on June 1, 1998) or (ii) both of the
following occur: (a) the Average Closing Price is less than $41.58 (adjusted
for the stock split) and (b) (1) the number obtained by dividing the Average
Closing Price by $48.92 (the closing price of Household Common Stock on April
6, 1998, as adjusted for the stock split), is less than (2) the number obtained
by dividing the average of the closing prices of the S&P Financials Index,
excluding Household and Beneficial, during the above mentioned ten-day period
on the Determination Date by the closing price of such index on April 6, 1998
and subtracting 0.15 (the satisfaction of either of the conditions set forth in
the foregoing clauses (i) and (ii) a "Termination Event"). If any company in
the S&P Financials Index declares or effects a stock dividend, reclassification
or similar transaction, the price for the common stock for such company will be
adjusted accordingly. Such termination right will not apply, however, if
Household decides, within 24 hours of receiving notice of Beneficial's intent
to terminate the Agreement following a Termination Event to increase the
Exchange Ratio to a number calculated pursuant to the Agreement, such that the
holders of Beneficial Common Stock and Beneficial Convertible Preferred Stock
would receive consideration having the same implied market value (based on the
Average Closing Price) as they would have received if the Average Closing Price
had been sufficient to prevent Beneficial from having a termination right under
this provision. If Household elects to increase the Exchange Ratio as set forth
in the Agreement and as described above, it must give Beneficial prompt notice
of that election and such increased Exchange Ratio, in which case no
termination of the Agreement would occur as a result of a Termination Event.
See "THE MERGER--Termination of the Agreement."
Each party to the Agreement will bear all expenses incurred by it in
connection with the Agreement and the transactions contemplated thereby.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section 368(a) of
the Code. In connection with the closing of the Merger, Wachtell, Lipton, Rosen
& Katz will deliver, at the Effective Time, to Household its opinion, based
upon certain customary assumptions and representations, to the effect that, for
U.S. federal income tax purposes, the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code. In addition,
at the Effective Time, Skadden, Arps, Slate, Meagher & Flom LLP will deliver to
Beneficial its opinion, based on certain customary assumptions and
representations, to the effect that, for U.S. federal income tax purposes, the
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Code. In addition, Household has received an opinion of Wachtell,
Lipton, Rosen & Katz, dated the date of this Joint Proxy Statement-Prospectus,
to the foregoing effect. For a more complete description of the federal income
tax consequences of the Merger, see "THE MERGER--Certain U.S. Federal Income
Tax Consequences."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a "pooling of
interests" by Household under U.S. generally accepted accounting principles
("GAAP"). It is a condition to each party's obligation to consummate the Merger
that it receive a letter from each of Arthur Andersen LLP and Deloitte & Touche
LLP to the effect that the Merger will qualify for "pooling of interests"
accounting treatment. See "THE MERGER--Accounting Treatment."
9
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Beneficial management and of the Beneficial Board have
certain arrangements with Household, including those relating to the election
of Finn M. W. Caspersen, Chairman of the Beneficial Board to the position of
Chairman of the Board of Directors of Household, the election or appointment of
three additional directors of Beneficial, Robert C. Clark, David J. Farris and
James H. Gilliam, Jr., to the Household Board (commencing at the Effective Time
or, in the case of Mr. Farris, on January 1, 1999, which is the date of the
commencement of his consulting arrangement), certain benefits under existing
employment agreements and severance and benefit plans, and certain post-Merger
employment opportunities and compensation arrangements. Under the terms of
their existing severance agreements, Beneficial's four senior executives,
Messrs. Caspersen, Farris, Gilliam and Andrew C. Halvorsen, will receive
approximately $7.95 million, $5.7 million, $3.25 million and $3.25 million,
respectively, as lump sum severance payments, and approximately $15.75 million,
$8.2 million, $3.15 million and $3.05 million, respectively, with respect to
certain deferred and other benefits. Each of Messrs. Caspersen, Farris, Gilliam
and Halvorsen will receive an additional cash payment to offset any federal
excise tax that may be imposed by reason of payments made in connection with
the change in control of Beneficial. In addition, under the Beneficial
Corporation Directors' Annuity Plan, as a result of the change in control of
Beneficial, all non-employee directors and directors emeriti of Beneficial will
receive quarterly payments ranging from $4,250 to $8,500, or an aggregate of
$151,250 per quarter, for the remainder of their lives, in consideration for
and subject to their continued availability to the combined company for
purposes of consultation.
In addition, Household has agreed to indemnify directors, officers, employees
and agents of Beneficial and its subsidiaries from and after the Effective Date
against certain liabilities arising prior to the Effective Date to the full
extent permitted under law and to maintain Beneficial's existing directors' and
officers' liability insurance policy or a comparable policy for six years after
the Merger; provided that Household is not required to pay a premium for such
insurance in excess of 200% of the last annual premium paid prior to April 7,
1998, but in such case will purchase as much coverage as possible for such
amount. For a more complete description of the benefits to be received by
certain members of Beneficial management and certain members of the Beneficial
Board in connection with the Merger, see "THE MERGER--Interests of Certain
Persons in the Merger."
The Beneficial Board was aware of these interests and considered them, among
other matters, in approving the Agreement and the transactions contemplated
thereby.
THE HOUSEHOLD AND BENEFICIAL STOCK OPTION AGREEMENTS
As an inducement to Household to enter into the Agreement, Beneficial (as
issuer) and Household (as grantee) entered into the Stock Option Agreement,
dated April 7, 1998 (the "Beneficial Stock Option Agreement"), pursuant to
which Beneficial granted Household an irrevocable option (the "Beneficial
Option") to purchase from Beneficial up to 19.9% of the shares of Beneficial
Common Stock outstanding upon exercise thereof, at a price of $130.50 per share
(the closing sale price of Beneficial Common Stock on the last trading day
preceding the execution of the Agreement).
As an inducement to Beneficial to enter into the Agreement, Household (as
issuer) and Beneficial (as grantee) entered into the Stock Option Agreement,
dated April 7, 1998 (the "Household Stock Option Agreement" and, together with
the Beneficial Stock Option Agreement, the "Stock Option Agreements"), pursuant
to which Household granted Beneficial an irrevocable option (the "Household
Option" and, together with the Beneficial Option, the "Options") to purchase
from Household up to 19.9% of the shares of Household Common Stock outstanding
upon exercise thereof, at a price of $48.92 per share (the closing sale price
of Household Common Stock on the last trading day preceding the execution of
the Agreement, as adjusted for Household's 3-for-1 stock split effected in the
form of a stock dividend and paid on June 1, 1998).
10
<PAGE>
The grantee of each of the Options may exercise such Option only under
certain limited and specifically defined circumstances (none of which, to the
best knowledge of Household and Beneficial, has occurred as of the date
hereof). At the request of the holder of each Option, under certain
circumstances, the issuer of that Option will repurchase for a formula price
such Option and any shares of the issuer's Common Stock purchased upon the
exercise of the Option and beneficially owned by such holder at that time.
Under certain circumstances, the type and number of Issuer Option Shares
purchasable upon exercise of the applicable Issuer Option, and the applicable
option price will be subject to adjustment. Notwithstanding anything in the
Stock Option Agreements to the contrary, the total profit that either grantee
may derive directly from the Option granted to it cannot exceed $240 million.
See "THE MERGER--Household and Beneficial Stock Option Agreements."
The purchase of any shares of Beneficial Common Stock or Household Common
Stock, as the case may be, pursuant to the Options is subject to compliance
with applicable law. See "THE MERGER--Regulatory Matters" and "--Household and
Beneficial Stock Option Agreements."
Certain aspects of the Stock Option Agreements may have the effect of
discouraging parties who might now, or prior to the Effective Time, be
interested in acquiring all of or a significant interest in Beneficial or
Household, as the case may be, from considering or proposing such an
acquisition, even if such persons, in the case of an acquisition with respect
to Beneficial, were prepared to offer to pay consideration to holders of
Beneficial Common Stock that had a higher current market price than the shares
of Household Common Stock to be received by holders of Beneficial Common Stock
pursuant to the Agreement.
In the event that either the Beneficial Stockholder Approval or the Household
Stockholder Approval is not obtained, either Household or Beneficial may
terminate the Agreement. See "THE MERGER--Termination of the Agreement." If
such termination occurs prior to the occurrence of an Initial Triggering Event
(as defined under the pertinent Stock Option Agreement; see "THE MERGER--
Household and Beneficial Stock Option Agreements") under the pertinent Stock
Option Agreement, such Stock Option Agreement will automatically terminate at
such time. If an Initial Triggering Event occurs under a Stock Option Agreement
prior to the termination of the Agreement, however, the grantee will be
entitled to exercise the Option in accordance with its terms upon the
occurrence of a Subsequent Triggering Event (as defined under the pertinent
Stock Option Agreement; see "THE MERGER--Household and Beneficial Stock Option
Agreements") under the applicable Stock Option Agreement within the 12 months
after the termination of the Agreement (subject to extension in certain
situations described in the Stock Option Agreements, but in no event more than
18 months after termination of the Agreement).
AMENDMENT TO BENEFICIAL RIGHTS AGREEMENT
In connection with the execution of the Agreement, Beneficial amended the
Beneficial Rights Agreement so that, so long as the Agreement and the
Beneficial Stock Option remain in effect, the acquisition by Household or its
affiliates of shares of Beneficial Common Stock upon consummation of the
Merger, exercise of the Household Option or otherwise will not result in the
ability of any person to exercise any Beneficial Rights under the Beneficial
Rights Agreement or enable or require the Beneficial Rights to be separated
from the shares of Beneficial Common Stock to which they are attached or to be
triggered or become exercisable. See "THE MERGER--Amendment to Beneficial
Rights Agreement."
DISSENTERS' RIGHTS
Neither Beneficial stockholders nor Household stockholders have dissenters'
appraisal rights under the General Corporation Law of the State of Delaware
(the "DGCL") or any other statute with respect to the Merger.
11
<PAGE>
REGULATORY APPROVALS
On May 14, 1998, Household and Beneficial received notice from the Federal
Trade Commission that the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, was terminated. On May 18,
1998, the United Kingdom Office of Fair Trade approved the Merger. The Merger
is also subject to notice to or the approval of certain other federal, state
and foreign regulatory authorities, including the Office of Thrift Supervision,
the Bank of England, the Minister of Finance of the Department of Enterprise
and Employment (Insurance Division) of Ireland, and the Commissioner or
superintendent of the departments of insurance in Delaware, New York and Ohio.
In addition, the Merger may be subject to prior approval of or pre- or post-
merger notice to state regulators in some or all of the states where Beneficial
and Household conduct consumer finance, insurance or mortgage lending
operations.
Household and Beneficial have filed all required applications for regulatory
review and approval or notices with the above mentioned authorities, as
applicable in connection with the Merger. There can be no assurance that such
approvals will be obtained or as to the date of any such approvals. See "THE
MERGER--Conditions to the Merger" and "--Regulatory Matters."
SHARE INFORMATION AND MARKET PRICES
The Household Common Stock is listed on the NYSE and the Chicago Stock
Exchange (the "CSE") under the symbol "HI." The Beneficial Common Stock is
listed on the NYSE under the symbol "BNL."
The following table sets forth the last sale price reported on the NYSE
Composite Transactions List for shares of Household Common Stock on April 6,
1998, the last trading day preceding public announcement of the proposed
Merger, and on May 29, 1998. Household Common Stock prices have been adjusted
for Household's 3-for-1 stock split effected in the form of a stock dividend
and paid on June 1, 1998. The table also sets forth the last sale prices per
share reported on the NYSE Composite Transactions List for shares of Beneficial
Common Stock and Beneficial Convertible Preferred Stock on April 6, 1998 and on
May 29, 1998. The "Beneficial Common Stock Equivalent" represents the last sale
price of a share of Household Common Stock on such date multiplied by the
Exchange Ratio.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
HOUSEHOLD BENEFICIAL CONVERTIBLE COMMON
COMMON COMMON PREFERRED STOCK
STOCK STOCK STOCK EQUIVALENT
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
April 6, 1998................. $48.92 $130.50 $1,000.00 $150.01
May 29, 1998.................. $45.10 $134.00 $1,222.00 $138.32
------ ------- --------- -------
</TABLE>
For additional information regarding the market prices of the Household
Common Stock and Beneficial Common Stock during the previous two years, see
"PRICE RANGE OF COMMON STOCK AND DIVIDENDS--Market Prices."
Beneficial and Household stockholders are advised to obtain current market
quotations for Beneficial Common Stock, Beneficial Convertible Preferred Stock
and Household Common Stock. It is expected that the market price of Household
Common Stock will fluctuate between the date of this Joint Proxy Statement-
Prospectus and the date on which the Merger is consummated and thereafter.
Because the number of shares of Household Common Stock to be received by
Beneficial Stockholders in the Merger is fixed (subject to possible increase in
certain circumstances) and because the market price of Household Common Stock
is subject to fluctuation, the value of the shares of Household Common Stock
that holders of Beneficial Common Stock and Beneficial Convertible Preferred
Stock will receive in the Merger may increase or decrease prior to the Merger.
No assurance can be given concerning the market price of Household Common Stock
before or after the Effective Time. See "THE MERGER--Termination of the
Agreement."
12
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth (i) selected comparative per share data for
each of Household and Beneficial on a historical basis and (ii) selected
unaudited pro forma comparative per share data reflecting the consummation of
the Merger. The unaudited pro forma comparative per share data assume the
Merger had been consummated at the beginning of the periods presented. The
unaudited pro forma data have been prepared giving effect to the Merger using
the "pooling of interests" method of accounting. See "THE MERGER--Accounting
Treatment." All Household share information has been adjusted for Household's
3-for-1 stock split effected in the form of a stock dividend and paid on June
1, 1998.
The comparative per share data presented below are based on and derived from,
and should be read in conjunction with, the historical consolidated financial
statements and the related notes thereto of Household, the historical
consolidated financial statements and the related notes thereto of Beneficial,
all of which are incorporated by reference herein, and the unaudited pro forma
condensed combined financial information of Household and the related notes
thereto included elsewhere in this Joint Proxy Statement-Prospectus. See
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION." Pro forma
amounts are not necessarily indicative of results of operations or the combined
financial position that would have resulted had the Merger been consummated at
the beginning of the periods indicated. No adjustment has been included in the
unaudited pro forma financial information for the anticipated annual pre-tax
cost savings of approximately $450 million (approximately $300 million after-
tax), or approximately 42% of Beneficial's 1997 operating expenses. There can
be no assurance that the anticipated cost savings will be in the expected
amounts or at the times anticipated. See "CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS."
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
----------------- ----------------
1995 1996 1997 1997 1998
----- ----- ----- ------- --------
<S> <C> <C> <C> <C> <C>
HOUSEHOLD COMMON STOCK (1)
Basic income per common share:
Historical............................... $1.46 $1.79 $2.20 $ .44 $ .52
Pro forma (2)............................ 1.26 1.76 1.97 .50 .73
Diluted income per common share:
Historical............................... 1.44 1.77 2.17 .43 .51
Pro forma (2)............................ 1.24 1.73 1.93 .49 .71
Cash dividends declared per common share:
Historical............................... .44 .49 .54 .13 .15
Pro forma (3)............................ .44 .49 .54 .13 .15
Book value per common share as of end of
period:
Historical............................... 14.40
Pro forma (4)............................ 11.90
BENEFICIAL COMMON STOCK
Basic income per common share:
Historical (5)........................... $2.77 $5.19 $4.68 $ 1.85 $ 3.49
Equivalent pro forma (6)................. 3.86 5.40 6.04 1.53 2.24
Diluted income per common share:
Historical (5)........................... 2.71 5.05 4.54 1.80 3.34
Equivalent pro forma (6)................. 3.80 5.31 5.92 1.50 2.18
Cash dividends declared per common share:
Historical............................... 1.80 1.98 2.18 .52 .57
Equivalent pro forma (6)................. 1.35 1.50 1.66 .40 .46
Book value per common share as of end of
period:
Historical............................... 34.44
Equivalent pro forma (6)................. 36.49
</TABLE>
- -------
(1) In connection with the Merger, Household intends to merge corporate
functions, sell Beneficial's commercial bank business, sell or combine
overlapping branches, sell or merge Beneficial's mortgage operations into
13
<PAGE>
Household's, close Beneficial's United Kingdom ("UK") headquarters and merge
Beneficial's UK operations into Household's existing UK business.
Household expects to incur pre-tax Merger and integration related costs of
approximately $1 billion ($751 million after-tax). These costs include
approximately $284 million in lease exit costs, $161 million in fixed asset
write-offs related to closed facilities, $240 million in severance and
change in control payments, $140 million in asset writedowns to reflect
modified business plans, $66 million in investment banking fees, $34 million
in legal and other expenses, and $75 million in prepayment premiums related
to debt.
The estimated Merger and integration related costs include approximately
$286 million in non-cash charges. Cash payments of approximately $714
million will be funded through Household's existing operations and
commercial paper and other borrowings. In addition, Household expects to
receive tax benefits of approximately $249 million. Substantially all of the
cash payments are expected to be made by the end of 1998.
These amounts, including the related tax effect, have been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1998
and are not reflected in the Unaudited Pro Forma Condensed Combined
Statements of Income as they are not expected to have a continuing impact on
the combined company.
The combined company expects to achieve substantial cost savings through the
elimination of redundant staff functions and corporate overhead,
consolidation of product lines, data processing and back office functions,
and the elimination of certain duplicate or excess office facilities. Based
on Household management's current estimates, approximately 90% of the
operating cost savings are expected to be achieved on a run-rate basis by
the end of 1999 (which estimates as to timing and amount have been modestly
refined since the public announcement of the Merger and the time that the
analyses were performed by Household's and Beneficial's financial advisors
in connection with their respective fairness opinions). These savings should
continue to benefit the combined company in future years. No adjustment has
been included in the unaudited pro forma financial information for the
anticipated operating cost savings. There can be no assurance that the
anticipated cost savings will be in the expected amounts or at the times
anticipated. See "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS."
(2) The pro forma average common shares outstanding used in the calculation
reflect the combined weighted average outstanding shares of Household
Common Stock and Beneficial Common Stock, adjusted to equivalent shares of
Household Common Stock.
(3) The pro forma cash dividends declared per common share are equal to the
historical Household cash dividends per common share.
(4) The pro forma book value per common share was determined by combining the
common equity of Household and Beneficial, including pro forma
adjustments, and dividing the result by the total number of shares of
Household Common Stock and Beneficial Common Stock outstanding at March
31, 1998, adjusted to equivalent shares of Household Common Stock.
(5) The first quarter of 1998 includes a $118.5 million after-tax ($2.13 per
share) gain on disposal of Beneficial's Canadian consumer finance
subsidiary which was partially offset by a $7.7 million ($.14 per share)
addition to the tax reserves for certain outstanding tax issues. In
addition, the first quarter of 1998 includes an earnings decline in the
tax refund anticipation loan business of $16.5 million after-tax compared
to the first quarter of 1997, reflecting certain limited measures taken by
the Internal Revenue Service to delay payment on the returns of selected
taxpayers claiming an earned income tax credit. 1997 reflects a $27.8
million after-tax ($.51 per share) provision for loss on disposal of
Beneficial's German consumer banking subsidiary and $18.7 million ($.34
per share) of after-tax special items relating to additional legal
reserves, a write down of certain real estate investments and costs
associated with Beneficial's re-engineering efforts. Income from
continuing operations includes a provision for credit losses related to
the German liquidating loan portfolio of $15.0 million ($.28 per share) in
1995 and $38.0 million ($.72 per share) in 1994, and a $5.9 million after-
tax ($.11 per share) provision for restructuring in 1995. See "INFORMATION
ABOUT BENEFICIAL--Recent Developments."
(6) The equivalent pro forma amounts are computed by multiplying the Household
pro forma amounts by a factor of 3.0666 to reflect the Exchange Ratio.
14
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
The following tables present (i) summary selected financial data for each of
Household and Beneficial on a historical basis and (ii) summary selected
unaudited pro forma financial data for Household reflecting the consummation of
the Merger. The summary selected unaudited pro forma financial data assume that
the Merger had been consummated at the beginning of the periods indicated and
have been prepared giving effect to the Merger as a "pooling of interests." For
a description of the effect of "pooling of interests" accounting on the Merger,
see "THE MERGER--Accounting Treatment." The summary selected unaudited pro
forma financial data do not reflect any anticipated reorganization or
restructuring expenses resulting from the Merger. All Household share
information has been adjusted for Household's 3-for-1 stock split effected in
the form of a stock dividend and paid on June 1, 1998.
The summary selected historical financial data for Household for each of the
five years ended December 31, 1997 are based on and derived from, and should be
read in conjunction with, the historical consolidated financial statements and
the related notes thereto of Household, audited by Arthur Andersen LLP,
independent accountants, which are incorporated herein by reference. Summary
selected historical financial data for Beneficial for each of the five years
ended December 31, 1997 are set forth in the following table. Such data have
been derived from, and should be read in conjunction with, the audited
financial statements of Beneficial and are qualified in their entirety by
reference to the more detailed consolidated financial statements incorporated
by reference herein. The summary selected financial data for Household for the
three months ended March 31, 1997 and 1998 are unaudited and should be read in
conjunction with Household's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998, which is incorporated by reference herein. The
summary selected financial data for Beneficial for the three months ended March
31, 1997 and 1998 are unaudited and should be read in conjunction with
Beneficial's Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998, which is incorporated by reference herein. Operating results for the
three months ended March 31, 1998 should not be considered indicative of the
results for any future quarters or the year ending December 31, 1998. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The information set forth in the summary selected unaudited pro forma financial
data should be read in connection with the unaudited pro forma condensed
combined financial information and notes thereto appearing elsewhere herein.
Pro forma amounts are not necessarily indicative of results of operations or
the combined financial position that would have resulted had the Merger been
consummated at the beginning of the periods indicated. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
SUMMARY SELECTED HISTORICAL FINANCIAL DATA OF HOUSEHOLD (IN MILLIONS, EXCEPT
PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------- -----------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest margin and
other revenues......... $3,305.0 $3,360.6 $3,587.3 $3,538.2 $3,999.7 $ 970.6 $ 991.2
Net income.............. 298.7 367.6 453.2 538.6 686.6 131.5 170.3
Earnings per share:
Basic.................. .99 1.19 1.46 1.79 2.20 .44 .52
Diluted................ .95 1.17 1.44 1.77 2.17 .43 .51
Cash dividends declared
per common share....... .39 .41 .44 .49 .54 .13 .15
Total assets (end of
period)................ 32,961.5 34,338.4 29,218.8 29,594.5 30,302.6 28,046.8 32,896.9
Total managed assets
(end of period) (1).... 42,789.3 46,833.5 44,103.4 48,120.9 51,868.4 47,271.5 53,593.3
Deposits (end of
period)................ 7,516.1 8,439.0 4,708.8 2,365.1 1,788.9 2,173.1 1,881.6
Total other debt (end of
period)................ 14,755.9 14,646.2 17,887.3 21,230.1 20,930.0 19,723.8 23,066.1
Company obligated
mandatorily redeemable
preferred securities of
subsidiary trusts (end
of period)............. -- -- 75.0 175.0 175.0 175.0 375.0
Convertible preferred
stock (end of period).. 19.3 2.6 -- -- -- -- --
Preferred stock (end of
period)................ 320.0 320.0 205.0 205.0 150.0 150.0 150.0
Common shareholders'
equity (end of period). 2,078.3 2,200.4 2,690.9 2,941.2 4,516.2 3,031.1 4,637.3
</TABLE>
15
<PAGE>
SUMMARY SELECTED HISTORICAL FINANCIAL DATA OF BENEFICIAL (IN MILLIONS, EXCEPT
PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest margin and
other revenues......... $ 1,324.3 $ 1,463.8 $ 1,582.0 $ 1,959.1 $ 2,100.7 $ 557.9 $ 753.1
Income before
extraordinary loss..... 186.0 177.7 150.5 281.0 253.7 100.7 187.5
Net income.............. 183.2 177.7 150.5 281.0 253.7 100.7 187.5
Earnings per share
before extraordinary
loss:
Basic................. 3.49 3.33 2.77 5.19 4.68 1.85 3.49
Diluted............... 3.43 3.26 2.71 5.05 4.54 1.80 3.34
Cash dividends declared
per common share....... 1.43 1.62 1.80 1.98 2.18 .52 .57
Total assets (end of
period)................ 12,916.9 14,376.6 15,737.3 16,931.2 17,645.1 17,013.3 16,618.0
Total managed assets
(end of period) (1).... 13,109.4 15,007.0 16,850.8 19,120.2 20,294.6 18,975.2 18,966.7
Deposits (end of
period)................ 616.2 654.4 642.5 635.0 555.3 575.4 509.7
Total other debt (end of
period)................ 9,689.2 10,798.7 11,816.4 12,800.4 13,472.3 12,727.5 12,598.3
Total shareholders'
equity
(end of period) (2).... 1,312.2 1,400.3 1,503.0 1,694.8 1,772.3 1,748.8 2,048.0
</TABLE>
- --------
(1) Total managed assets data includes assets on the balance sheet and those
assets serviced for investors as part of asset securitization programs.
(2) Beneficial's total shareholders' equity includes common shareholders'
equity and preferred stock.
SUMMARY SELECTED UNAUDITED PRO FORMA FINANCIAL DATA (IN MILLIONS, EXCEPT PER
SHARE DATA)
The following summary selected unaudited pro forma financial data combine
Household's historical results with Beneficial's historical results for the
three months ended March 31, 1997 and 1998 and for each of the five years ended
December 31, 1997 and at March 31, 1998. The Pro Forma Combined Financial Data
give effect to the Merger as if it had occurred on January 1, 1993. The Pro
Forma Combined Balance Sheet Data give effect to the Merger as if it had
occurred on March 31, 1998.
See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------- -----------------
PRO FORMA COMBINED
FINANCIAL DATA (1) 1993 1994 1995 1996 1997 1997 1998
- ------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest margin and
other revenues......... $4,629.3 $4,824.4 $5,169.3 $5,497.3 $6,100.4 $1,528.5 $1,744.3
Income before
extraordinary loss..... 484.7 545.3 603.7 819.6 940.3 232.2 357.8
Net income.............. 481.9 545.3 603.7 819.6 940.3 232.2 357.8
Earnings per share
before extraordinary
loss (2):
Basic................. 1.04 1.15 1.26 1.76 1.97 .50 .73
Diluted............... 1.01 1.13 1.24 1.73 1.93 .49 .71
Cash dividends declared
per common share (3)... .39 .41 .44 .49 .54 .13 .15
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
PRO FORMA COMBINED BALANCE SHEET DATA (1) 1998
- ----------------------------------------- ---------
<S> <C>
Total assets......................................................... $49,228.9
Total managed assets................................................. 72,274.0
Deposits............................................................. 2,391.3
Total other debt..................................................... 35,664.4
Company obligated mandatorily redeemable preferred securities of
subsidiary trusts................................................... 375.0
Preferred stock...................................................... 264.5
Common shareholders' equity.......................................... 5,819.8
Book value per common share (4)...................................... 11.90
</TABLE>
16
<PAGE>
(1) In connection with the Merger, Household intends to merge corporate
functions, sell Beneficial's commercial bank business, sell or combine
overlapping branches, sell or merge Beneficial's mortgage operations into
Household's, close Beneficial's UK headquarters and merge Beneficial's UK
operations into Household's existing UK business.
Household expects to incur pre-tax Merger and integration related costs of
approximately $1 billion ($751 million after-tax). These costs include
approximately $284 million in lease exit costs, $161 million in fixed asset
write-offs related to closed facilities, $240 million in severance and
change in control payments, $140 million in asset writedowns to reflect
modified business plans, $66 million in investment banking fees, $34
million in legal and other expenses, and $75 million in prepayment premiums
related to debt.
The estimated Merger and integration related costs include approximately
$286 million in non-cash charges. Cash payments of approximately $714
million will be funded through Household's existing operations and
commercial paper and other borrowings. In addition, Household expects to
receive tax benefits of approximately $249 million. Substantially all of
the cash payments are expected to be made by the end of 1998.
These amounts, including the related tax effect, have been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1998
and are not reflected in the Unaudited Pro Forma Condensed Combined
Statements of Income as they are not expected to have a continuing impact
on the combined company.
The combined company expects to achieve substantial cost savings through
the elimination of redundant staff functions and corporate overhead,
consolidation of product lines, data processing and back office functions,
and the elimination of certain duplicate or excess office facilities. Based
on Household management's current estimates, approximately 90% of the
operating cost savings are expected to be achieved on a run-rate basis by
the end of 1999 (which estimates as to timing and amount have been modestly
refined since the public announcement of the Merger and the time that the
analyses were performed by Household's and Beneficial's financial advisors
in connection with their respective fairness opinions). These savings
should continue to benefit the combined company in future years. No
adjustment has been included in the unaudited pro forma financial
information for the anticipated operating cost savings. There can be no
assurance that the anticipated cost savings will be in the expected amounts
or at the times anticipated. See "CAUTIONARY STATEMENT CONCERNING FORWARD-
LOOKING STATEMENTS."
(2) The pro forma average common shares outstanding used in the calculation
reflect the combined weighted average outstanding shares of Household
Common Stock and Beneficial Common Stock, adjusted to equivalent shares of
Household Common Stock.
(3) The pro forma cash dividends declared per common share are equal to the
historical Household cash dividends per common share.
(4) The pro forma book value per common share was determined by combining the
common equity of Household and Beneficial, including pro forma adjustments,
and dividing the result by the total number of shares of Household Common
Stock and Beneficial Common Stock outstanding at March 31, 1998, adjusted
to equivalent shares of Household Common Stock.
17
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES AND OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following are Household's and Beneficial's consolidated ratios of
earnings to fixed charges and of earnings to combined fixed charges and
preferred stock dividend requirements for the periods indicated below:
HOUSEHOLD:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ -------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 1.38 1.41 1.47 1.53 1.67 1.54 1.64
Ratio of Earnings to Combined Fixed
Charges and
Preferred Stock Dividends.............. 1.33 1.37 1.43 1.50 1.65 1.52 1.62
</TABLE>
For purposes of calculating Household's 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.
BENEFICIAL:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ -------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 1.49 1.47 1.32 1.55 1.42 1.74 2.35
Ratio of Earnings to Combined Fixed
Charges and
Preferred Stock Dividends.............. 1.47 1.45 1.31 1.53 1.41 1.72 2.33
</TABLE>
For purposes of calculating Beneficial's ratios, earnings consist of net
income to which has been added income taxes and fixed charges. Fixed charges
consist principally of interest on all indebtedness and that portion of
rentals considered to represent an appropriate interest factor. Preferred
dividend requirements are grossed up to their pre-tax equivalent.
18
<PAGE>
HOUSEHOLD SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed to stockholders
of Household on or about June 2, 1998 and is accompanied by the Notice of
Special Meeting and a form of proxy that is solicited by the Household Board
for use at the Household Special Meeting to be held on June 30, 1998, at 8:30
a.m. local time, at 2445 M Street, N.W., 9th Floor, Washington, D.C., and at
any adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
At the Household Special Meeting, Household Common Stockholders will be
asked, in accordance with the requirements of the NYSE, to consider and vote
upon the Household Matter. The NYSE requires stockholder approval of the
Household Matter because the number of shares of Household Common Stock to be
issued in the Merger is expected to exceed 20% of the shares of Household
Common Stock outstanding immediately prior to the Effective Time. (The
Household Common Stockholders may also be asked to vote upon a proposal to
adjourn the Household Special Meeting, which adjournment could be used for the
purpose, among others, of allowing additional time for the soliciting of
additional votes to approve the Household Matter.)
PROXIES
The accompanying form of proxy is for use at the Household Special Meeting
if a Household Common Stockholder is unable to attend the Household Special
Meeting in person or wishes to have his or her shares voted by proxy even if
such stockholder does attend the meeting. The proxy may be revoked by such
Household Common Stockholder at any time before it is exercised, either by
submitting to the Corporate Secretary of Household written notice of
revocation or a properly executed proxy of a later date or by attending the
meeting and electing to vote in person. Written notices of revocation and
other communications with respect to the revocation of Household proxies
should be addressed to Household International, Inc., 2700 Sanders Road,
Prospect Heights, Illinois 60070, Attention: Corporate Secretary. All shares
represented by valid proxies received pursuant to this solicitation, and not
revoked before they are exercised, will be voted in the manner specified
therein.
The entire cost of soliciting the proxies from the Household Common
Stockholders will be borne by Household. In addition to the solicitation of
the proxies by mail, Household will request banks, brokers and other record
holders to send proxies and proxy material to the beneficial owners of
Household Common Stock and secure their voting instructions, if necessary.
Household will reimburse such record holders for their reasonable expenses in
so doing. Household has also made arrangements with Corporate Investor
Communications, Inc. to assist it in soliciting proxies from banks, brokers
and nominees and has agreed to pay $7,000, plus expenses, for such services.
If necessary, Household may also use several of its regular employees, who
will not be specially compensated, to solicit proxies from Household Common
Stockholders, either personally or by telephone, telegram, facsimile or
special delivery letter.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the DGCL, May 28, 1998 has been fixed as the
Household Record Date for the determination of Household Common Stockholders
entitled to vote at the Household Special Meeting. Accordingly, only Household
Common Stockholders of record at the close of business on the Household Record
Date will be entitled to vote at said meeting. At the close of business on the
Household Record Date, the number of outstanding shares of Household Common
Stock entitled to vote at the Household Special Meeting was 322,004,763 (as
adjusted for Household's 3-for-1 stock split effected in the form of a stock
dividend and paid on June 1, 1998). In accordance with the DGCL, abstentions
from voting will be counted for purposes of determining whether a quorum
19
<PAGE>
exists at the Household Special Meeting. Furthermore, shares represented by
proxies returned by a broker holding such shares in nominee or "street" name
will be counted for purposes of determining whether a quorum exists, even if
such shares are not voted in matters where discretionary voting by the broker
is not allowed ("broker non-votes"). In addition, abstentions from voting and
broker non-votes will not be deemed to have been cast either "for" or "against"
the Household Matter and, since approval of the Household Matter requires the
vote of a majority of the votes cast at the Household Special Meeting, will
have no effect on the approval of the Household Matter. Accordingly, the
Household Board urges Household Common Stockholders to complete, date and sign
the accompanying proxy and return it promptly in the enclosed postage-paid
envelope.
A Household Common Stockholder who participates in the Household
International Tax Reduction Investment Plan ("TRIP"), an employee benefit plan
of Household, should return his or her completed proxy/voting instruction card
to Harris Trust and Savings Bank ("Harris") in the envelope provided. Vanguard
Fiduciary Trust Company, the TRIP Trustee, will act as such participant's proxy
for shares of Household Common Stock held in such participant's TRIP account.
If Harris does not receive instructions for such participant's TRIP shares by
June 25, 1998, those shares will be voted by the Trustee in the same way as the
majority of TRIP held shares for which voting instructions are received.
All proxies, consents, ballots and voting materials will be kept confidential
and not disclosed to anyone other than the inspectors of election and the
tabulator. Voting records will be disclosed if required by law or if the
election results are contested. If a Household Common Stockholder writes
comments on a returned proxy, the tabulator will send them to Household with
such stockholder's name but without revealing how such stockholder voted,
unless disclosure is necessary for Household to understand such stockholder's
comment.
Each share of Household Common Stock entitles its holder to one vote and the
affirmative vote of a majority of the votes cast at the Household Special
Meeting is required to approve the Household Matter, provided that the total
number of votes cast represents over 50% of the total number of outstanding
shares. As of the Household Record Date, 395,662 shares (on a pre-split basis)
of Household Common Stock equivalent to approximately .004% of the votes
entitled to be cast at the Household Special Meeting, were beneficially owned
by directors and executive officers of Household. It is currently expected that
each such director and executive officer of Household will vote the shares of
Household Common Stock beneficially owned by him or her for approval of the
Household Matter.
Additional information with respect to beneficial ownership of Household
Common Stock by individuals and entities owning more than 5% of such stock and
more detailed information with respect to beneficial ownership of Household
Common Stock by directors and executive officers of Household is incorporated
by reference to Household's Annual Report on Form 10-K for the year ended
December 31, 1997. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
RECOMMENDATION OF THE HOUSEHOLD BOARD
The Household Board has approved, by a unanimous vote of those present, the
Agreement and the transactions contemplated thereby. The Household Board
believes that the Agreement and the transactions contemplated thereby and the
Household Matter are fair to and in the best interests of Household and the
stockholders of Household and unanimously recommends that the Household Common
Stockholders vote "FOR" the Household Matter. See "THE MERGER--Household's
Reasons for the Merger."
20
<PAGE>
BENEFICIAL SPECIAL MEETING
GENERAL
This Joint Proxy Statement-Prospectus is first being mailed to the
stockholders of Beneficial on or about June 2, 1998, and is accompanied by the
Notice of Special Meeting and a form of proxy that is solicited by the
Beneficial Board for use at the Beneficial Special Meeting to be held on June
30, 1998, at 9:30 a.m., local time, at Beneficial's executive offices, One
Christina Centre, 301 North Walnut Street, Wilmington, Delaware, and at any
adjournments or postponements thereof.
MATTERS TO BE CONSIDERED
The purpose of the Beneficial Special Meeting is to take action with respect
to the approval of the Agreement and the transactions contemplated thereby.
(The Voting Beneficial Stockholders may also be asked to vote upon a proposal
to adjourn or postpone the Beneficial Special Meeting, which adjournment or
postponement could be used for the purpose, among others, of allowing
additional time for the soliciting of additional votes to approve the
Agreement.)
PROXIES
The accompanying form of proxy is for use at the Beneficial Special Meeting
if a Voting Beneficial Stockholder is unable to attend the Beneficial Special
Meeting in person or wishes to have his or her shares voted by proxy even if
such stockholder does attend the meeting. Any proxy may be revoked by such
Voting Beneficial Stockholder at any time before it is exercised, either by
submitting to the Corporate Secretary of Beneficial written notice of
revocation or by attending the Beneficial Special Meeting and electing to vote
in person. Written notices of revocation and other communications with respect
to the revocation of Beneficial proxies should be addressed to Beneficial
Corporation, 301 North Walnut Street, Wilmington, Delaware 1980, Attention:
Corporate Secretary. All shares represented by valid proxies received pursuant
to this solicitation, and not revoked before they are exercised, will be voted
in the manner specified therein.
The entire cost of soliciting the proxies from the Voting Beneficial
Stockholders will be borne by Beneficial. In addition to the solicitation of
the proxies by mail, Beneficial will request banks, brokers and other record
holders to send proxies and proxy material to the beneficial owners of the
stock and secure their voting instructions, if necessary. Beneficial will
reimburse such record holders for their reasonable expenses in so doing.
Beneficial has also made arrangements with Kissel-Blake, Inc. to assist it in
soliciting proxies from banks, brokers and nominees and has agreed to pay
approximately $7,500, plus expenses, for such services. If necessary,
Beneficial may also use several of its regular employees, who will not be
specially compensated, to solicit proxies from Voting Beneficial Stockholders,
either personally or by telephone, telegram, facsimile or special delivery
letter.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the DGCL, May 26, 1998 has been fixed as the
Beneficial Record Date for the determination of the stockholders of Beneficial
entitled to receive notice of and the Voting Beneficial Stockholders entitled
to vote at the Beneficial Special Meeting. At the close of business on the
Beneficial Record Date, the number of outstanding shares of Beneficial Common
Stock, Beneficial Convertible Preferred Stock and Beneficial $4.30 Preferred
Stock entitled to vote at the Beneficial Special Meeting were 54,435,871,
15,566 and 836,585, respectively. In accordance with the DGCL, abstentions
from voting will be counted for purposes of determining whether a quorum
exists at the Beneficial Special Meeting. Furthermore, shares represented by
proxies returned by a broker holding such shares in nominee or "street" name
will be counted for purposes of determining whether a quorum exists, even if
such shares are broker non-votes. In addition, abstentions from voting and
broker non-votes will not be deemed to have been cast either "for" or
"against" approval of the Agreement and, since approval of the Agreement
requires the vote of a majority of the voting power
21
<PAGE>
represented by the outstanding shares of Beneficial Common Stock, Beneficial
Convertible Preferred Stock and Beneficial $4.30 Preferred Stock entitled to
vote at the Beneficial Special Meeting, will have no effect on the approval of
the Agreement.
Each share of Beneficial Common Stock and Beneficial $4.30 Preferred Stock
entitles its holder to one vote, and each share of Beneficial Convertible
Preferred Stock currently entitles its holder to nine votes. All such shares
vote together as a single class, and, under the DGCL, the affirmative vote of
a majority of the outstanding shares entitled to vote at the Beneficial
Special Meeting is required to approve the Agreement.
BECAUSE APPROVAL OF THE AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE VOTING POWER REPRESENTED BY THE OUTSTANDING SHARES OF
BENEFICIAL COMMON STOCK, BENEFICIAL CONVERTIBLE PREFERRED STOCK AND BENEFICIAL
$4.30 PREFERRED STOCK ENTITLED TO VOTE AT THE BENEFICIAL SPECIAL MEETING,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS NEGATIVE VOTES.
ACCORDINGLY, THE BENEFICIAL BOARD URGES VOTING BENEFICIAL STOCKHOLDERS TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the Beneficial Record Date, 6,060,544 shares of Beneficial Common
Stock, 73 shares of Beneficial Convertible Preferred Stock and 4,740 shares of
Beneficial $4.30 Preferred Stock, respectively, equivalent to approximately
10.95% of the votes entitled to be cast at the Beneficial Special Meeting,
were beneficially owned by directors and executive officers of Beneficial. It
is currently expected that each such director and executive officer of
Beneficial will vote the shares of Beneficial Common Stock, Beneficial
Convertible Preferred Stock and Beneficial $4.30 Preferred Stock beneficially
owned by him or her for approval of the Agreement.
Additional information with respect to beneficial ownership of Beneficial
Common Stock by persons and entities owning more than 5% of such stock and
more detailed information with respect to beneficial ownership of Beneficial
Common Stock by directors and executive officers of Beneficial is incorporated
by reference to Beneficial's Annual Report on Form 10-K for the year ended
December 31, 1997 (as filed March 30, 1998 and amended by Amendment No. 1 on
Form 10-K/A, filed April 29, 1998). See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
RECOMMENDATION OF THE BENEFICIAL BOARD
The Beneficial Board has unanimously approved the Agreement and the
transactions contemplated thereby. The Beneficial Board believes that the
Merger is fair to and in the best interests of Beneficial and the stockholders
of Beneficial and unanimously recommends that the Voting Beneficial
Stockholders vote "FOR" approval of the Agreement and the transactions
contemplated thereby. See "THE MERGER--Beneficial's Reasons for the Merger."
22
<PAGE>
THE MERGER
THE FOLLOWING INCLUDES A SUMMARY OF CERTAIN TERMS AND PROVISIONS OF THE
AGREEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT,
WHICH IS ATTACHED TO THIS JOINT PROXY STATEMENT-PROSPECTUS AS APPENDIX A AND
IS INCORPORATED HEREIN BY REFERENCE.
DESCRIPTION OF THE MERGER
At the Effective Time, Merger Sub will merge with and into Beneficial, the
separate corporate existence of Merger Sub will cease and Beneficial will
survive and continue to exist as a Delaware corporation and a wholly-owned
subsidiary of Household. Subject to the satisfaction or waiver of the
conditions set forth in the Agreement and described more fully in "--
Conditions to the Merger," the Merger will become effective upon the filing of
a certificate of merger with the Secretary of State of Delaware or at such
later date and time as may be specified in the certificate of merger. The
Merger will have the effects prescribed in Section 259 of the DGCL, and the
certificate of incorporation of Beneficial as in effect immediately prior to
the Effective Time (the "Beneficial Charter") will be the certificate of
incorporation of the Surviving Corporation. The by-laws of Merger Sub as in
effect immediately prior to the Effective Time will be the by-laws of the
Surviving Corporation.
At the Effective Time, (i) each share of Beneficial Common Stock will be
converted into the right to receive shares of Household Common Stock at the
Exchange Ratio; (ii) each share of Beneficial Convertible Preferred Stock will
be converted into the right to receive the number of shares of Household
Common Stock that the holder thereof would have been entitled to receive in
the Merger had such holder converted such share of Beneficial Convertible
Preferred Stock into shares of Beneficial Common Stock immediately prior to
the Effective Time; and (iii) each share of Beneficial 5% Preferred Stock,
Beneficial $4.50 Preferred Stock and Beneficial $4.30 Preferred Stock
(together, the "Other Beneficial Preferred Stock") will be converted into the
right to receive New Household Preferred Stock with substantially identical
terms, except that each such share of New Household Preferred Stock will
entitle the holder thereof to one vote, voting as a single class with the
holders of shares of Household Common Stock, on all matters brought before a
vote of Household Stockholders. Cash will be paid in lieu of fractional
shares.
It is expected that the market price of Household Common Stock will
fluctuate between the date of this Joint Proxy Statement-Prospectus and the
date on which the Merger is consummated and thereafter. Because the number of
shares of Household Common Stock to be received by Beneficial Stockholders in
the Merger is fixed and because the market price of Household Common Stock is
subject to fluctuation, the value of the shares of Household Common Stock that
holders of Beneficial Common Stock and Beneficial Convertible Preferred Stock
would receive in the Merger may increase or decrease prior to the Merger. For
further information concerning the historical market prices of Household and
Beneficial Common Stock, see "PRICE RANGE OF COMMON STOCK AND DIVIDENDS--
Market Prices." No assurance can be given concerning the market price of
Household Common Stock before or after the Effective Time.
The Agreement may be terminated and the Merger abandoned (i) by the mutual
consent of the parties, (ii) by either party (provided the other party is not
then in material breach of the Agreement) if the other party materially
breaches its representations and warranties, covenants, or agreements, in each
case after inability or failure to cure within 30 days or which cannot be
cured prior to the Effective Date provided such breach together with all other
breaches would cause a condition to closing of the non-breaching party to be
unsatisfied, (iii) by either party in the event that the Merger is not
consummated by December 31, 1998, except to the extent that the failure of the
Merger then to be
23
<PAGE>
consummated arises out of or results from the failure of the party seeking to
terminate the Agreement to perform or observe the covenants and agreements of
that party under the Agreement or (iv) by either party 60 days after the date
on which any request or application for a Requisite Regulatory Approval is
denied or withdrawn at the request of the governmental entity which must grant
such approval, unless within 60 days following such denial or withdrawal a
petition for rehearing or an amended application has been filed with the
applicable governmental entity (provided that the request for withdrawal is
not due to a breach of the Agreement by the party seeking to terminate) or if
any governmental entity of competent jurisdiction has issued a final
nonappealable order prohibiting the Merger or (v) by either party if either
the Beneficial Stockholder Approval or the Household Stockholder Approval is
not obtained at the Beneficial Special Meeting or the Household Special
Meeting, as the case may be, or any adjournments or postponements thereof.
In addition, the Agreement may be terminated by Beneficial by giving notice
to Household at least two days prior to the anticipated closing date of the
Merger if either (i) the average closing price (the "Average Closing Price")
of Household Common Stock for the ten full trading days ending on the date
(the "Determination Date") three days prior to the anticipated closing date is
less than $39.13 (as adjusted for Household's 3-for-1 stock split effected in
the form of a stock dividend and paid on June 1, 1998) or (ii) both of the
following occur: (a) the Average Closing Price is less than $41.58 (adjusted
for the stock split) and (b) (1) the number obtained by dividing the Average
Closing Price by $48.92 (the closing price of Household Common Stock on April
6, 1998, as adjusted for the stock split) is less than (2) the number obtained
by dividing the average of the closing prices of the S&P Financials Index,
excluding Household and Beneficial, during the above-mentioned ten-day period
on the Determination Date by the closing price of such index on April 6, 1998
and subtracting 0.15 (the satisfaction of either of the conditions set forth
in the foregoing clauses (i) and (ii) a "Termination Event"). If any company
in the S&P Financials Index declares or effects a stock dividend,
reclassification or similar transaction, the price for the common stock for
such company will be adjusted accordingly. Such termination right will not
apply, however, if Household decides, within 24 hours of receiving notice of
Beneficial's intent to terminate the Agreement following a Termination Event,
to increase the Exchange Ratio to a number calculated pursuant to the
Agreement, such that Beneficial Stockholders would receive consideration
having the same implied market value (based on the Average Closing Price) as
they would have received if the Average Closing Price has been sufficient to
prevent Beneficial from having a termination right under this provision. If
Household elects to increase the Exchange Ratio as set forth in the Agreement
and as described above, it must give Beneficial prompt notice of that election
and such increased Exchange Ratio, in which case no termination of the
Agreement would occur as a result of a Termination Event. See "--Termination
of the Agreement."
Whether or not Beneficial will have a right to terminate the Agreement
pursuant to the foregoing paragraph will not be known until the date that the
Average Closing Price can be determined. If such date were the date of this
Joint Proxy Statement-Prospectus, no such right of termination would exist,
based on the prevailing market price of Household Common Stock. Beneficial has
made no decision as to whether it would exercise its termination right if such
a right were to arise, and Household has made no decision as to whether it
would exercise its correlative right to increase the Exchange Ratio. In the
event such a situation occurs, each of the Household Board and the Beneficial
Board would, consistent with its fiduciary duties, take into account all
relevant facts and circumstances as they exist at such time and would consult
with its respective financial advisors and legal counsel. Approval of the
Agreement by the Voting Beneficial Stockholders at the Beneficial Special
Meeting and approval of the Household Matter by the Household Common
Stockholders at the Household Special Meeting will confer on the Beneficial
Board and the Household Board, respectively, the power, should such an event
occur and consistent with the fiduciary duties of such Boards, to elect to
consummate the Merger in such an event (in the case of the Beneficial Board)
or to elect to increase the Exchange Ratio (in the case of the Household
Board) without any further action by, or resolicitation of the votes of, the
24
<PAGE>
Voting Beneficial Stockholders or Household Common Stockholders, as the case
may be. The fairness opinions received by Beneficial and Household were dated
as of the respective dates that the Boards approved the Merger and were based
on conditions in effect on such dates. Accordingly, none of such opinions
address the circumstances that might arise if the matters contemplated by the
previous paragraph were to occur.
At the Effective Time, each of the employee and non-employee Director stock
options (the "Beneficial Stock Options") issued pursuant to the Beneficial
1990 Non-Qualified Stock Option Plan or the BenShares Equity Participation
Plan (the "Beneficial Stock Option Plans") which is outstanding and
unexercised will be converted automatically into an option to purchase shares
of Household Common Stock (the "New Option"), subject to the terms of such
plans, in an amount and at an exercise price determined as follows: (i) the
number of shares of Household Common Stock to be issued upon exercise of the
New Option will be equal to the product of the number of shares of Beneficial
Common Stock to be issued upon exercise of the original option and the
Exchange Ratio; and (ii) the exercise price per share of Household Common
Stock under the New Option will be equal to the aggregate exercise price of
the original option divided by the total number of full shares of Household
Common Stock to be issued upon exercise of the New Option, rounded up to the
nearest cent. Pursuant to the terms of the Beneficial Stock Option Plans, the
Beneficial Stock Options will be fully vested and exercisable at the Effective
Time. The duration and other terms of the New Option will be the same as that
of the original option, except that all references to Beneficial will be
deemed to be references to Household. In connection with the conversion of the
Beneficial Stock Options in the Merger, Household will file with the
Commission a registration statement on Form S-8 (or other appropriate form) or
a post-effective amendment to a previously filed registration statement as
promptly as practicable after the Effective Time for purposes of registering
all shares of Household Common Stock issuable after the Effective Time upon
exercise of the New Options, and will have such registration statement or
post-effective amendment become effective and comply, to the extent
applicable, with state securities or "blue sky" laws.
Household may at any time change the method of effecting the combination
with Beneficial if and to the extent it deems such change to be desirable,
including, without limitation, to provide for a merger of Beneficial into
Household; provided, however, that no such change will (i) alter or change the
amount or kind of Merger Consideration to be received by holders of Beneficial
Common Stock as provided for in the Agreement, (ii) adversely affect the tax
treatment of the stockholders of Beneficial as a result of receiving the
Merger Consideration to be received by the stockholders of Beneficial
Stockholders upon consummation of the Merger, or (iii) materially impede or
delay consummation of the transactions contemplated by the Agreement.
BACKGROUND OF THE MERGER
In the fall of 1997, after a year-long strategic planning process, including
an internal review by Beneficial's Strategic Planning Council and a review by
Beneficial's financial advisors, Beneficial's management and the Beneficial
Board determined that the best strategy for significantly enhancing the return
to the Beneficial stockholders was to focus on those businesses with the
highest potential returns and growth--its core consumer financial services
businesses in the United States, United Kingdom and Ireland, including
consumer finance, related credit insurance, private-label credit card and tax
refund lending. In connection with this strategy, Beneficial publicly
announced that it would take several steps to restructure Beneficial,
including, among other things, the sale of non-core businesses and assets and
a significant reengineering of the loan office system. The reengineering
effort involves technological enhancements for the loan office network in the
United States and is intended to enable branch office personnel to devote more
of their time to loan origination efforts by centralizing much of the
marketing, solicitation, credit decisioning and collection functions that are
currently done in the individual loan offices.
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In October 1997, as a result of the noted strategy, Beneficial announced its
intent to sell its German and Canadian subsidiaries. Household entered into
two Confidentiality Agreements with respect to these businesses dated November
7, 1997 (Canada) and November 10, 1997 (Germany). Household submitted a
preliminary non-binding bid for Beneficial's Canadian subsidiary and, in
connection with the bid, offered to enter into discussions to purchase all of
Beneficial's international operations, including its United Kingdom business.
Finn M.W. Caspersen, Chairman and Chief Executive Officer of Beneficial,
indicated to William F. Aldinger, Chairman and Chief Executive Officer of
Household, that Beneficial had no interest in selling its United Kingdom
operations.
On January 11, 1998, the Household Board approved the submission of a
definitive bid to Beneficial to purchase its Canadian operations. Beneficial's
financial advisor with respect to this transaction subsequently informed
Household that Beneficial had agreed to sell its Canadian operations to
another party.
In late January 1998, Beneficial released earnings for 1997, reporting a
loss of $12.8 million in the fourth quarter of 1997 and a 10% decline in
earnings for 1997 as compared to 1996. Nevertheless, Beneficial's management
remained optimistic that the potential earnings benefits of the loan offices'
reengineering effort and the overall restructuring plan would deliver
significant value to the stockholders of Beneficial. On January 29, 1998,
Beneficial's management met with a number of major institutional stockholders
and analysts in New York City to discuss Beneficial's reengineering and
restructuring plans. At that meeting, a number of major stockholders expressed
dissatisfaction with 1997 earnings and suggested that, as an alternative to
management's reengineering plan, the Beneficial Board should consider a sale
of Beneficial or a business combination with another company. Following that
meeting, Beneficial's management received two letters from major stockholders
reiterating the views expressed at the meeting.
On February 10, 1998, Beneficial announced that it had entered into an
agreement to sell its Canadian operations in a transaction that was expected
to generate a net after-tax gain in excess of $100 million. See "INFORMATION
ABOUT BENEFICIAL--Recent Developments."
On February 13, 1998, members of Beneficial's management met with
Beneficial's financial, legal and other advisors to discuss all alternatives
for enhancing stockholder value. Following this meeting, Beneficial's
management determined that it would recommend to the Beneficial Board that it
evaluate thoroughly the full range of tactical and strategic alternatives for
enhancing shareholder value. On February 16, 1998, the Beneficial Board met to
discuss management's recommendation. Following presentations by Beneficial's
management and financial advisors, the Beneficial Board authorized
Beneficial's management and financial advisors to evaluate thoroughly the full
range of tactical and strategic alternatives to enhance shareholder value,
including, without limitation, continuing to pursue or modifying Beneficial's
reengineering plan, the merger or other business combination or strategic
alliance with another entity, or the sale of Beneficial. The Beneficial Board
also created an Ad Hoc Committee of the Beneficial Board, consisting of
Messrs. Caspersen, Halvorsen and Gilliam, and five outside directors, Robert
J. Callander, Robert C. Clark, Leonard S. Coleman, Jr., Steven Muller and
Gerald L. Holm (the "Ad Hoc Committee"), to monitor the evaluation of such
alternatives between meetings of the Beneficial Board.
Following this announcement, Beneficial's financial advisors contacted or
were contacted by a total of 29 companies that expressed an interest in a
possible transaction with Beneficial. Confidentiality agreements were signed
by 23 prospective bidders who were then furnished with certain confidential
information. Household and Beneficial entered into a Confidentiality Agreement
with respect to this transaction on February 18, 1998.
On February 25, 1998, Mr. Aldinger met with Mr. Caspersen to discuss the
strategic process being undertaken by Beneficial and to answer any questions
Mr. Caspersen might have had with respect to the cultures, corporate policies
and objectives of Household.
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On March 5, 1998, Beneficial received preliminary indications of interest
from several of the parties including, among others, Household. Following a
review of such indications of interest, the Ad Hoc Committee determined to
continue discussions with five parties, including Household, based upon a
review of such parties' indications of interest, particularly which
indications of interest provided the greatest potential for value to the
stockholders of Beneficial.
On March 10, 1998 at a regularly scheduled Board meeting, Household's Board
reviewed preliminary pro forma financial results, discussed industry
consolidation trends and reviewed the competitive bidding environment before
authorizing management to continue to pursue a business combination with
Beneficial.
On March 11 and March 19, 1998 Mr. Aldinger and Mr. Caspersen met again to
discuss certain matters relating to the strategic and business fit of
Household with Beneficial, including potential management issues and board
representation of the combined company.
During mid-to-late March, the five parties with which the Ad Hoc Committee
had determined to continue discussions were permitted access to extensive due
diligence pertaining to Beneficial, subject to the condition that such parties
comply with their previously executed confidentiality agreements. During this
time period, Beneficial's financial advisors notified each of the parties that
definitive proposals, including comments on a form of the Agreement prepared
by Beneficial, were to be submitted by 5:00 p.m., New York City time, on April
6, 1998.
On April 6, 1998, the Household Board met (with one director absent) with
its financial and legal advisors to review the financial terms of the Merger
and the terms of the Agreement. The members of the Household Board present at
the meeting then voted unanimously to approve a proposal to Beneficial to be
delivered that day providing for the Merger and authorized management to
conclude the final terms of, and enter into, the Agreement and the related
Household Stock Option Agreement.
On April 6, 1998, in accordance with the bid procedures established by
Beneficial, Household delivered its definitive proposal (the "Household
Proposal") providing for the strategic combination of Household and Beneficial
based on a fixed exchange ratio of 1.0222 shares (on a pre-split basis, or
3.0666 on a post-split basis) of Household Common Stock for each share of
Beneficial Common Stock which, based on the closing share price of Household
Common Stock on April 6, 1998, had an indicated value of $150.00 per share of
Beneficial Common Stock and represented a premium of approximately 15% over
Beneficial's then per share market price and a premium of approximately 82%
over Beneficial's unaffected per share market price of $82.25 on February 13,
1998. No other definitive proposals were received prior to the bid deadline
and Beneficial's financial advisors were able to confirm through contacts with
the other four potentially interested parties that none of them was willing to
submit a superior proposal at that time. Later the evening of April 6, 1998
and into the next morning, representatives of Household and Beneficial
negotiated the terms of the definitive Agreement and the related reciprocal
Stock Option Agreements.
On April 7, 1998, Household and Beneficial requested the NYSE to halt
trading in the common stock of each of Household and Beneficial pending an
announcement to be made later that day concerning a potential business
combination.
The Beneficial Board met on the morning of April 7, 1998 with its financial
and legal advisors to discuss the Household Proposal. Following presentations
by its financial and legal advisors and after questions by the Beneficial
Board to Beneficial's management and its financial and legal advisors and
further discussion, the Beneficial Board determined that it was advisable and
in the best interest of Beneficial and its stockholders that Beneficial
combine its operations with Household by means of the Merger and that, in
connection with the Merger, Beneficial and Household grant to each other the
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Beneficial Option and the Household Option, respectively. The members of the
Beneficial Board then voted unanimously to approve the Merger and the
Agreement discussed at the meeting, and the grant of the Beneficial Option and
the Beneficial Stock Option Agreement discussed at the meeting.
Shortly following the conclusion of the Beneficial Board Meeting, Beneficial
and Household executed the Agreement and Stock Option Agreements and issued a
press release announcing the Merger.
HOUSEHOLD'S REASONS FOR THE MERGER
In reaching its determination to approve the Agreement and to recommend that
Household Common Stockholders approve the issuance of shares of Household
Common Stock pursuant to the Merger, Household's Board considered a number of
factors, including, without limitation:
. the rapid consolidation of the financial services industry and the need
to expand product distribution channels and improve operational
efficiencies to effectively compete in this marketplace, including
competing with national banks as well as the traditional branch based
consumer finance franchises, and in that context the fact that the
Household Board and management considered Beneficial to be the single
best acquisition candidate of large scale possible for Household in terms
of business fit and potential synergies and that Beneficial had initiated
a process that was likely to result in its sale or merger, representing a
unique opportunity for Household to combine with Beneficial;
. Beneficial's unique franchise, including, (a) its long history and focus
on customer service and retention which has created a strong brand
loyalty, (b) its markets, products and customers which complement those
of Household, and (c) its well trained, high quality pool of employees
available to staff the combined company to create an organization that is
"best-in-class";
. its knowledge and review of the financial condition, results of
operations and business prospects of Beneficial, including Household's
confirmation through due diligence that (a) the Merger would not restrict
Household's ability to continue to operate its business as currently
conducted, (b) Household could utilize certain of Beneficial's major
facilities to support the anticipated growth of the combined company, and
(c) selected key managers of Beneficial could be available for leadership
positions within the combined company;
. (a) its evaluation of the financial terms of the Merger and its effect on
the stockholders of Household, including the potential negative short-
term effect on the per share market price of Household Common Stock due
to the premium being paid and the negative impact on Household's earnings
for 1998, the severance and other financial costs associated with
integrating the two companies' operations and the short-term dilutive
impact of the transaction, and the Household Board's belief that such
terms, in light of all known factors, are fair and in the best interests
of Household and its stockholders, (b) the Household Board's view that
the Merger is consistent with Household's long-term strategy to
selectively acquire portfolios or businesses that complement its focus on
its core lending products, and (c) the Merger is expected to be accretive
to earnings per share beginning in 1999, using the current consensus
"street" per share estimates published by Institutional Brokers Estimate
System ("IBES") for Household. The Household Board also considered the
potential impact of the transaction on the financial position of
Household, including the dilutive impact on the book value per common
share and the improved capital ratios of equity to managed assets
resulting from the Merger. The Household Board considered that the
combined company's ability to achieve such financial results is dependent
upon various factors, including economic conditions, the ability to
integrate the cultures and operations of both entities and to realize
cost savings from the elimination of redundant functions, regulatory
environment, the effect centralization of certain operational functions
of Beneficial will have on customer retention or payment patterns and
unanticipated changes in business conditions. As a result, there can be
no assurances given that the combined company can attain such financial
results;
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. its belief that (a) the Merger represents an opportunity to leverage
Household's existing infrastructure and technology to accelerate
Beneficial's initiative to streamline its branch operations to
principally focus on the sales function while having underwriting and
collection functions managed from central locations, (b) it can achieve
significant annual pre-tax cost savings and operating efficiencies of
approximately $450 million (approximately $300 million after-tax)
through, among other things, the elimination of duplicate efforts and
redundant functions and (c) the Merger will provide revenue growth
opportunities through the combined company's strong brand recognition,
expanded branch network, new product offerings and experienced sales
force;
. the nonfinancial terms of the Agreement and related agreements, including
(a) that Messrs. Caspersen, Clark and Gilliam would be elected to the
Household Board at the Effective Time and that Mr. Farris would join the
Household Board on January 1, 1999, (b) that Mr. Caspersen would become
Chairman of the combined company, (c) the employment and consulting
arrangements with Messrs. Caspersen, Gilliam and Farris, (d) the benefits
potentially realizable by the officers, directors and employees of
Beneficial (see "--Interests of Certain Persons in the Merger") and (e)
the Stock Option Agreements (see "--Household and Beneficial Stock Option
Agreements");
. (a) that the Exchange Ratio would reflect a premium to Beneficial's
current stock price, which had increased significantly as a result of
Beneficial's previous announcement to review various strategic
alternatives with respect to its business, (b) its belief that
Household's current competitive position within the consumer finance
industry may be eroded should another consumer finance franchise acquire
Beneficial and (c) that Household may not be the preferred bidder in the
transaction due to the competitive history of the two companies resulting
in the need to make a strong bid;
. the opinion of Morgan Stanley, including the assumptions and financial
information relied upon by Morgan Stanley in arriving at such opinion,
that, as of April 6, 1998, and subject to certain considerations set
forth in the written opinion, the Exchange Ratio pursuant to the
Agreement is fair from a financial point of view to Household (see "--
Opinion of Household's Financial Advisor");
. the likelihood that the Merger would receive the Requisite Regulatory
Approvals (see "--Regulatory Matters"); and
. the expectation that the Merger would constitute a "reorganization" under
Section 368(a) of the Code and that it would be accounted for as a
"pooling of interests" for accounting and financial reporting purposes
(see "--Certain U.S. Federal Income Tax Consequences" and "--Accounting
Treatment").
The foregoing discussion of the information and factors considered by the
Household Board is not intended to be exhaustive but is believed to include
all material factors considered by the Household Board. In reaching its
determination to approve the Merger, the Household Board did not assign any
relative or specific weights to the foregoing factors, and individual
directors may have given differing weights to differing factors. After
deliberating with respect to the Merger and other transactions contemplated by
the Agreement and the Stock Option Agreements, and considering, among other
things, the factors set forth above, the Household Board, by a unanimous vote
of those present, approved the Agreement and the transactions contemplated
thereby as being in the best interests of Household and the stockholders of
Household.
BASED ON THE FOREGOING, THE HOUSEHOLD BOARD UNANIMOUSLY RECOMMENDS THAT THE
HOUSEHOLD COMMON STOCKHOLDERS VOTE "FOR" THE ISSUANCE OF THE SHARES OF
HOUSEHOLD COMMON STOCK IN CONNECTION WITH THE MERGER.
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BENEFICIAL'S REASONS FOR THE MERGER
In reaching its determination to approve and adopt the Agreement, the
Beneficial Board consulted with Beneficial's management and its financial and
legal advisors, and considered a number of factors, including, without
limitation, the following:
. the Beneficial Board's familiarity with and review of Beneficial's
business, operations, financial condition and earnings on an historical
and a prospective basis, including Beneficial's announced restructuring
and loan office reengineering plans and the proposed execution risks
associated therewith (see "--Background of the Merger"). In this regard,
the Beneficial Board believed that, although Beneficial's reengineering
efforts should ultimately improve loan office efficiency and
productivity, it also believed that the costs associated with their
implementation were likely to burden near-term operating earnings before
benefits began to be realized in 1999. The Beneficial Board also
considered the fact that potential risks existed for the actual costs of
system and process improvements and for the actual benefits realized to
differ significantly from expectations;
. the Beneficial Board's review, based in part on the presentations of its
advisors over the course of several months, of alternatives to the Merger
for enhancing shareholder value, the range of possible values to
Beneficial's stockholders obtainable through implementation of such
alternatives, and the timing and likelihood of actually achieving such
value, and the Beneficial Board's belief, based upon such review, that
such alternatives were not likely to result in greater value for the
stockholders of Beneficial than the value to be realized in the Merger.
In this regard, the Beneficial Board considered specifically, among other
things, the factors relating to Beneficial's ability to continue to
generate revenue growth, improved profitability and superior shareholder
returns on a stand-alone basis, and the cost of further investment
necessary to improve Beneficial's competitive posture and the risks
attendant thereto;
. the dissatisfaction expressed by major stockholders with respect to 1997
earnings and their view that, as an alternative to management's
reengineering plan, the Beneficial Board should consider a sale of
Beneficial or a business combination with another company;
. the recently completed sale of Beneficial's Canadian operations
indicated that it was an opportune time for the sale of consumer finance
companies (see "INFORMATION ABOUT BENEFICIAL--Recent Developments");
. the process conducted by Beneficial's management and its financial
advisors in exploring and determining the potential value which could be
realized by the stockholders of Beneficial in a business combination
transaction as described above under "--Background of the Merger," and
the fact that the indicated value of the Exchange Ratio in the Household
Proposal as of April 6, 1998 was the highest per share value of any
proposal indicated to Beneficial;
. the Beneficial Board's knowledge and review, based in part on
presentations by its financial advisors and Beneficial's management, of
(a) the business, operations, financial condition and earnings of
Household on an historical and a prospective basis and of the combined
company on a pro forma basis and (b) the historical stock price
performance of the Household Common Stock, the resulting relative
interests of the holders of Beneficial Common Stock and Household Common
Stockholders in the common equity of the combined company, the potential
for increased earnings and dividends for the holders of Beneficial Common
Stock and Beneficial Convertible Preferred Stock of the combined company,
and Household's substantial market capitalization;
. the opinions of Goldman Sachs and Merrill Lynch, each delivered orally on
April 7, 1998, and subsequently confirmed in writing that, as of such
date, the Exchange Ratio was fair from a financial point of view to the
holders of Beneficial Common Stock (see "--Opinions of Beneficial's
Financial Advisors");
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. the terms of the Agreement, the Merger and the Stock Option Agreements,
noting in particular the financial benefits to be received in the Merger,
including the fact that the Exchange Ratio reflected an 82% premium for
the holders of Beneficial Common Stock based on the unaffected closing
price of the Beneficial Common Stock on February 13, 1997 and the closing
price of Household Common Stock on April 6, 1998;
. the current and prospective economic and competitive environment facing
the financial services industry generally, and Beneficial in particular,
including the continued rapid consolidation in the industry, increased
competition from national banks, and the increasing importance of
operational scale and financial resources in maintaining efficiency and
remaining competitive over the long term and in being able to capitalize
on technological developments which significantly impact competition. In
this regard, the Beneficial Board noted that the combined company
resulting from the Merger would be the largest consumer finance company
in the United States in managed assets and the second largest in market
capitalization based on financial information as of December 31, 1997 and
market prices as of April 6, 1998, and likely would possess the financial
resources and economies of scale necessary to compete more effectively in
the financial services industry in the future;
. the general impact that the Merger could be expected to have on the
constituencies served by Beneficial, including its customers, employees
and communities;
. the benefits of the coming together of two strong consumer finance names.
In this regard, the Beneficial Board considered that Household intends to
operate the Beneficial branches under the "Beneficial" name and to
operate the private label credit card businesses of Household and
Beneficial under a combined brand name;
. the prospects for unparalleled business synergies including, among other
factors, the complimentary geographic layout of the branch networks of
Household and Beneficial which would serve to limit branch closings;
. the expectations that the Merger will be a tax-free reorganization for
federal income tax purposes and will qualify as a "pooling of interests"
for accounting and financial reporting purposes (see "--Certain U.S.
Federal Income Tax Consequences" and "--Accounting Treatment");
. the anticipated annual pre-tax cost savings and operating efficiencies
available to the combined company from the Merger (estimated by Household
to be approximately $450 million (approximately $300 million after-tax))
through, among other things, the elimination of duplicate efforts and
redundant functions, as well as opportunities for revenue enhancement
through the combined company's strong brand recognition, expanded branch
network, new product offerings, and experienced sales force; and the
significant experience of the senior management of Household in the
consummation of significant acquisition transactions and its proven
record of achieving cost savings, operating efficiencies and revenue
enhancements in connection with the integration of acquired companies. In
this regard, the Beneficial Board considered the fact that many of the
anticipated cost savings and operating efficiencies were likely to be
realized through branch closings and job eliminations, and that not all
of Beneficial's employees would continue as employees of the combined
company. However, the Beneficial Board also took into account the fact
that Household had agreed to provide all Beneficial employees who are
involuntarily terminated, other than for cause or non-performance, with
severance benefits no less favorable than Beneficial's current severance
pay plan (see "--Interests of Certain Persons in the Merger--Severance
Pay Plan");
. the fact that Mr. Caspersen would be appointed as Chairman of the
Household Board for one year following the Merger and retained as a
consultant for an additional one-year period thereafter while continuing
to serve on the Household Board, and that certain other Beneficial
executives would become members of the Household Board. The Beneficial
Board also
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considered that several of Beneficial's other top officers would be
afforded the opportunity to assume important positions with the combined
company (see "--Interests of Certain Persons in the Merger");
. the Beneficial Board's assessment, with the assistance of counsel,
concerning the likelihood that Household would obtain all Requisite
Regulatory Approvals (see "--Regulatory Matters"); and
. the terms of the Stock Option Agreements, including the risk that the
Beneficial Stock Option Agreement might discourage third parties from
offering to acquire Beneficial by increasing the cost of such an
acquisition and recognizing that the execution of the Beneficial Stock
Option Agreement was a condition to Household's willingness to enter into
the Agreement (see "--Household and Beneficial Stock Option Agreements").
The foregoing discussion of the information and factors considered by the
Beneficial Board is not intended to be exhaustive but is believed to include
all material factors considered by the Beneficial Board. In reaching its
determination to approve and recommend the Merger, the Beneficial Board did
not assign any relative or specific weights to the factors considered in
reaching such determination, and individual directors may have given differing
weights to different factors.
THE BENEFICIAL BOARD BELIEVES THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, BENEFICIAL AND ITS STOCKHOLDERS. THE BENEFICIAL BOARD
UNANIMOUSLY RECOMMENDS THAT THE VOTING BENEFICIAL STOCKHOLDERS VOTE FOR THE
MERGER, THE APPROVAL OF THE AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY.
OPINION OF HOUSEHOLD'S FINANCIAL ADVISOR
Household retained Morgan Stanley to act as its financial advisor in
connection with the Merger. Morgan Stanley was retained based upon its
qualifications, expertise and reputation as well as upon its prior investment
banking relationship with Household.
At the April 6, 1998 meeting of the Household Board, Morgan Stanley
delivered its oral opinion to the Household Board that, as of such date, the
Exchange Ratio was fair from a financial point of view to Household. Morgan
Stanley subsequently delivered to the Household Board a written opinion dated
April 6, 1998 confirming its oral opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN STANLEY, DATED APRIL 6, 1998,
WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN
CONNECTION THEREWITH, IS ATTACHED AS APPENDIX B TO THIS JOINT PROXY STATEMENT-
PROSPECTUS, AND IS INCORPORATED HEREIN BY REFERENCE. HOUSEHOLD STOCKHOLDERS
ARE URGED TO, AND SHOULD, READ THE OPINION CAREFULLY AND IN ITS ENTIRETY. THE
OPINION OF MORGAN STANLEY IS ADDRESSED TO THE HOUSEHOLD BOARD, IS DIRECTED
ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIO
PURSUANT TO THE AGREEMENT TO HOUSEHOLD AND DOES NOT ADDRESS ANY OTHER ASPECT
OF THE MERGER, NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY HOUSEHOLD COMMON
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE HOUSEHOLD SPECIAL
MEETING WITH RESPECT TO THE HOUSEHOLD MATTER. THE SUMMARY OF THE OPINION OF
MORGAN STANLEY SET FORTH IN THIS JOINT PROXY STATEMENT-PROSPECTUS IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Morgan Stanley, among other things: (i) reviewed
certain publicly available financial statements and other information of
Beneficial and Household ; (ii) reviewed certain internal financial statements
and other financial and operating data concerning Beneficial and Household
prepared by the managements of Beneficial and Household, respectively; (iii)
analyzed
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certain financial projections prepared by the managements of Beneficial and
Household, respectively; (iv) discussed the past and current operations and
financial condition and the prospects of Beneficial with senior executives of
Beneficial; (v) reviewed the pro forma impact of the Merger on Household's
earnings per share, consolidated capitalization and financial ratios; (vi)
reviewed the reported prices and trading activity for the Beneficial Common
Stock and the Household Common Stock; (vii) compared the financial performance
of Beneficial and Household and the prices and trading activity of the
Beneficial Common Stock and the Household Common Stock with that of certain
other comparable publicly-traded companies and their securities; (viii)
reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions; (ix) participated in discussions and
negotiations among representatives of Beneficial and Household and their
financial and legal advisors; (x) reviewed with the management of Household
their estimates of certain strategic, financial and operational benefits of
the Merger to Household; (xi) reviewed a draft of the Agreement dated April 6,
1998 and certain related documents; and (xii) performed such other analyses
and considered such other factors as it deemed appropriate.
Morgan Stanley assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the
purposes of its opinion. With respect to the financial projections, including
the estimates of the strategic, financial and other benefits anticipated from
the Merger, Morgan Stanley assumed that they were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of Household and Beneficial. In addition, Morgan Stanley
assumed that the Merger will be consummated in accordance with the terms set
forth in the Agreement, including, among other things, that the Merger will be
accounted for as a "pooling of interests" business combination in accordance
with GAAP and will be treated as a tax-free reorganization pursuant to the
Code. Morgan Stanley did not make any independent valuation or appraisal of
the assets or liabilities of Beneficial, nor was it furnished any such
appraisals. Morgan Stanley's opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made available to it
as of, the date of such opinion.
The following is a brief summary of the analyses performed by Morgan Stanley
that it considered relevant in connection with the preparation of its opinion
and reviewed with the Household Board as part of Morgan Stanley's presentation
on April 6, 1998.
Comparable Company Analysis. Comparable company analysis analyzes a
company's operating performance relative to a group of publicly-traded peers.
Morgan Stanley analyzed the operating performance of Beneficial relative to
Household, Associates First Capital Corporation, and The Money Store Inc. (the
"Comparable Companies"). Historical financial information used in calculating
the market price to book value multiples for the Comparable Companies was as
of December 31, 1997, and market information used in calculating the market
price to estimated 1998 and 1999 earnings per share multiples for the
Comparable Companies was as of February 13, 1998. Earnings per share estimates
for Beneficial and for the Comparable Companies were based on IBES median
estimates as of February 13, 1998.
The market price to estimated 1998 and 1999 earnings per share multiples for
Beneficial were 14.7x and 13.6x, respectively, compared to median multiples of
16.9x and 14.1x, respectively, for the Comparable Companies. The market price
to book value multiple for Beneficial was 2.7x compared to a median multiple
of 3.2x for the Comparable Companies. The implied range of standalone values
for Beneficial Common Stock derived from the comparable company analysis,
based on a range of market price to book value multiples of 2.4x to 2.8x,
market price to 1998 earnings per share multiples of 13.5x to 15.5x, and
market price to 1999 earnings per share multiples of 12.0x to 14.0x, was
approximately $77.00 to approximately $87.00 per share.
No company used in the comparable company analysis is identical to Household
or Beneficial. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of Household or
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Beneficial and other factors that could affect the public trading value of the
companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not in itself a meaningful method of
using comparable company data.
Implied Acquisition Value Analysis. In order to estimate an implied
acquisition value of the Beneficial Common Stock, the potential value of
future cost savings associated with the Merger were added to the standalone
value of Beneficial Common Stock of $82.25 (the closing stock price of
Beneficial Common Stock on February 13, 1998). The potential value of future
cost savings was estimated by Morgan Stanley based on estimates provided by
the management of Household. The management of Household provided Morgan
Stanley with two sets of estimates for cost savings which ranged from
approximately 40% to 46% of Beneficial's core non-interest expense base (i.e.,
excluding provisions for losses) of approximately $1.1 billion estimated for
1998. Morgan Stanley estimated the potential value of both sets of estimates
for cost savings provided by Household management using two different
methodologies. First, Morgan Stanley estimated the potential value of the cash
cost savings using a ten-year discounted cash flow analysis assuming discount
rates ranging from 10%-14%, full phase-in of cost savings by 1999, a perpetual
annual expense growth rate of 2.5% after year five, a marginal tax rate of
38%, and year ten terminal multiples ranging from 13x to 15x. Based on this
methodology, the range of present values for the cost savings was
approximately $58.00 to approximately $94.00 per share of Beneficial Common
Stock.
Second, Morgan Stanley estimated the potential value of future cost savings
by capitalizing the estimated 1999 after-tax total cost savings provided by
the management of Household using price-to-earnings multiples ranging from 13x
to 15x. Based on this methodology, the range of values for the cost savings
was approximately $62.00 to approximately $81.00 per share of Beneficial
Common Stock. Using these two methodologies to estimate the value of future
cost savings associated with the Merger, adding these estimates to the
standalone value of the Beneficial Common Stock of $82.25 per share after
consideration of the after-tax cash restructuring charge resulted in an
implied acquisition value range of approximately $135.00 to approximately
$162.00 per fully diluted share of Beneficial Common Stock. Morgan Stanley
noted that the implied price in the Merger of $150.00 as of April 6, 1998 was
within the range yielded under this methodology.
Dividend Discount Analysis. Morgan Stanley performed a dividend discount
analysis to determine a range of present values per share of Beneficial Common
Stock including the present value of any cost savings expected to be derived
from the Merger provided by Household management. This range was determined by
adding (i) the present value of the estimated future dividend stream that
Beneficial could generate over the five-year period from 1998 through 2002 and
(ii) the present value of the terminal value of Beneficial Common Stock at the
end of 2002. To determine a projected dividend stream, Morgan Stanley assumed
a tangible equity to managed assets ratio of 8.0%. Morgan Stanley used
projections for Beneficial provided by Household management. The terminal
value of Beneficial Common Stock at the end of the five-year period was
determined by applying three price-to-earnings multiples (13x, 14x and 15x) to
projected net income for Beneficial in 2003. The dividend stream and terminal
value were discounted to present values using discount rates of 13.0%, 14.5%
and 16.0% which Morgan Stanley viewed as the appropriate discount rate for a
company with Beneficial's risk characteristics. Using this analysis, the fully
diluted value of Beneficial Common Stock ranged from approximately $137.00 to
approximately $164.00 per fully diluted share of Beneficial Common Stock.
Morgan Stanley noted that the implied price in the Merger of $150.00 as of
April 6, 1998 was within the range yielded under this methodology.
Overview of Household Common Stock Price Performance. Morgan Stanley
reviewed the performance of the Household Common Stock, which included a
comparison of stock price performance data for Household to corresponding data
for a peer group comprised of Beneficial and Associates First Capital
Corporation, including (i) price to 1998 and 1999 estimated earnings per
share; (ii) price to book value; (iii) current stock price as a percentage of
52-week high and low closing stock prices; and (iv) one-year and ten-year
stock price performance.
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Pro forma Merger Analysis. Morgan Stanley reviewed the impact of the Merger
on Household's earnings per share ("EPS") on a fully diluted basis, based on
Household management's projections for Beneficial's standalone earnings and
potential cost savings associated with the Merger and IBES estimates for
Household's EPS. This analysis indicated that at the contemplated Exchange
Ratio the Merger would be accretive to Household's 1999 and future year
estimated earnings.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all its
analyses as a whole and did not attribute any particular weight to any
analysis or factor considered by it. Morgan Stanley believes that selecting
any portion of its analyses, without considering all its analyses, would
create an incomplete view of the process underlying its opinion.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Household or
Beneficial. The analyses performed by Morgan Stanley are not necessarily
indicative of actual values, which may be significantly more or less favorable
than suggested by such analyses. Such analyses were prepared solely as a part
of Morgan Stanley's analysis of the fairness of the Exchange Ratio from a
financial point of view to Household and were conducted in connection with the
delivery of Morgan Stanley's opinion. The analyses do not purport to be
appraisals or to reflect the prices at which Beneficial might actually be
sold.
As described above, Morgan Stanley's opinion and the information provided by
Morgan Stanley to the Household Board were two of a number of factors taken
into consideration by the Household Board in making its determination to
approve the Merger. Consequently, the Morgan Stanley analyses described above
should not be viewed as determinative of the opinion of the Household Board as
to the value of Beneficial or Household. The Exchange Ratio was determined
through negotiations between Household and its advisors and Beneficial and its
advisors, and was approved by the Household Board.
The Household Board retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. As part of its investment banking business, Morgan Stanley
is regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuation for estate, corporate and other
purposes. In the course of its business, Morgan Stanley and its affiliates may
actively trade the debt and equity securities and senior loans of Household
and Beneficial for their own account and for the accounts of customers and,
accordingly may at times hold a long or short position in such securities. In
the past, Morgan Stanley has provided financial advisory and investment
banking services to Household for which services Morgan Stanley has received
customary fees.
Household has agreed to pay Morgan Stanley: (i) an advisory fee estimated to
be between $200,000 and $300,000 which is payable if the Merger is not
consummated, (ii) an exposure fee of $3.75 million and (iii) a transaction fee
equal to $19,720,500, which transaction fee is payable upon the consummation
of the Merger. The exposure fee will be credited against the transaction fee.
The exposure fee is intended to compensate Morgan Stanley for publicly
associating Morgan Stanley's name as the financial advisor to Household with
respect to the Merger and for Morgan Stanley's contribution in negotiating the
Agreement. In addition, Household has agreed, among other things, to reimburse
Morgan Stanley for its expenses incurred in connection with the services
provided by Morgan Stanley, and to indemnify and hold harmless Morgan Stanley
and certain related parties from and against certain liabilities and expenses,
which may include certain liabilities under the federal securities laws, in
connection with its engagement.
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OPINIONS OF BENEFICIAL'S FINANCIAL ADVISORS
The Beneficial Board retained Goldman Sachs and Merrill Lynch in connection
with the possible sale of, or merger involving Beneficial. The Beneficial
Financial Advisors were retained based upon their qualifications, expertise
and reputations as well as upon their prior investment banking relationships
with Beneficial.
Opinion of Goldman, Sachs & Co. On April 7, 1998, Goldman Sachs delivered
its oral opinion to the Beneficial Board, subsequently confirmed in writing as
of the same date, that, based upon and subject to the factors and assumptions
set forth in such written opinion, the Exchange Ratio pursuant to the Merger
Agreement was fair to the holders of Beneficial Common Stock.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED APRIL 7, 1998,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
APPENDIX C TO THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN
BY REFERENCE. HOLDERS OF BENEFICIAL COMMON STOCK ARE URGED TO, AND SHOULD,
READ SUCH OPINION IN ITS ENTIRETY. THE SUMMARY OF THE OPINION SET FORTH BELOW
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
THE OPINION OF GOLDMAN SACHS REFERRED TO HEREIN WAS PROVIDED FOR THE
INFORMATION AND ASSISTANCE OF THE BENEFICIAL BOARD IN CONNECTION WITH ITS
CONSIDERATION OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW
ANY VOTING BENEFICIAL STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Agreement; (ii) the Annual Reports to Stockholders and Annual Reports
on Form 10-K of Beneficial and Household for the five years ended December 31,
1997; (iii) certain interim reports to stockholders and Quarterly Reports on
Form 10-Q of Beneficial and Household; (iv) certain other communications from
Beneficial and Household to their respective stockholders; and (v) certain
internal financial analyses and forecasts for Beneficial and Household
prepared by their respective managements, including forecasts of certain cost
savings and revenue enhancements ("Synergies") resulting from the Merger
prepared by the management of Household and reviewed by the management of
Beneficial.
Goldman Sachs also held discussions with members of the senior management of
Beneficial and Household regarding the strategic rationale for, and the
potential benefits of, the Merger and the past and current business
operations, financial condition, and future prospects of their respective
companies. In addition, Goldman Sachs reviewed the reported price and trading
activity for Beneficial Common Stock and Household Common Stock, compared
certain financial and stock market information for Beneficial and Household
with similar information for certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain recent business
combinations, including certain transactions in the consumer finance industry,
and performed such other studies and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In that regard, Goldman
Sachs assumed, with the consent of Beneficial, that the financial forecasts of
Household, including, without limitation, the Synergies, were reasonably
prepared on a basis that reflected the best currently available judgments and
estimates of Household and that such forecasts would be realized in the
amounts and at the times contemplated thereby. Goldman Sachs also assumed,
with the consent of Beneficial, the adequacy of allowances for losses with
respect to the loan portfolios of Household and Beneficial. In addition,
Goldman Sachs has not reviewed individual credit files or made an independent
evaluation or appraisal of the assets and liabilities of Beneficial or
Household or any of their respective subsidiaries and Goldman Sachs has not
been furnished with any such evaluation or appraisal. Goldman Sachs also
assumed for purposes of rendering its opinion that the Merger will be
accounted for as a "pooling of interests" for accounting purposes.
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Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Beneficial having provided certain investment banking services
to Beneficial from time to time, including advisory services to Beneficial in
connection with the sale of its Canadian subsidiary ("BNL Canada") and the
sale of its German subsidiary ("BNL Germany"), having participated as a co-
advisor on Beneficial's September 1997 asset securitization and having acted
as its financial advisor in connection with, and having participated in
certain of the negotiations leading to, the Agreement. Goldman Sachs has also
acted as principal in the purchase of certain assets owned by BNL Germany.
Goldman Sachs has also provided certain investment banking services to
Household from time to time, including acting as a lead or co-manager on
various asset securitizations and various debt financings and as a co-manager
of the June 1997 secondary offering of Household Common Stock, and may provide
investment banking services to Household in the future. Goldman Sachs provides
a full range of financial advisory and security services and, in the course of
its normal trading activities, may from time to time effect transactions and
hold securities, including derivative securities, of Beneficial or Household
for its own account and for the accounts of customers.
Opinion of Merrill Lynch. On April 7, 1998, Merrill Lynch rendered to the
Beneficial Board its oral opinion, subsequently confirmed in writing on April
16, 1998 (the "Merrill Lynch Opinion"), that, as of April 7, 1998 and based
upon and subject to the factors and assumptions set forth therein, the
Exchange Ratio was fair from a financial point of view to the holders of
shares of Beneficial Common Stock, other than Household and its affiliates.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS APPENDIX D TO THIS JOINT PROXY
STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF
THE MERRILL LYNCH OPINION SET FORTH IN THIS JOINT PROXY STATEMENT-PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERRILL
LYNCH OPINION. STOCKHOLDERS OF BENEFICIAL ARE URGED TO READ SUCH OPINION IN
ITS ENTIRETY. THE MERRILL LYNCH OPINION WAS PROVIDED TO THE BENEFICIAL BOARD
FOR ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL
POINT OF VIEW OF THE EXCHANGE RATIO TO THE HOLDERS OF BENEFICIAL COMMON STOCK,
OTHER THAN HOUSEHOLD AND ITS AFFILIATES, DOES NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISION BY BENEFICIAL TO ENGAGE IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY VOTING BENEFICIAL STOCKHOLDER AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE ON THE PROPOSED MERGER OR ANY MATTER RELATED
THERETO.
In arriving at its opinion, Merrill Lynch, among other things, (i) reviewed
certain publicly available business and financial information relating to
Beneficial and Household which Merrill Lynch deemed to be relevant, (ii)
reviewed certain information, including certain internal financial analyses
and forecasts for Beneficial and Household prepared by their respective
managements, including forecasts of the Synergies resulting from the Merger
prepared by the management of Household and reviewed by the management of
Beneficial, (iii) conducted discussions with members of senior management of
Beneficial and Household concerning the matters described in clauses (i) and
(ii) above, as well as their respective businesses and prospects before and
after giving effect to the Merger and the Synergies, (iv) reviewed the market
prices and valuation multiples for Beneficial Common Stock and Household
Common Stock and compared them with those of certain publicly traded companies
which Merrill Lynch deemed to be relevant, (v) reviewed the results of
operations of Beneficial and Household and compared them with those of certain
publicly traded companies which Merrill Lynch deemed to be relevant, (vi)
compared the proposed financial terms of the Merger with the financial terms
of certain other transactions which Merrill Lynch deemed to be relevant, (vii)
participated in certain discussions and negotiations among representatives of
Beneficial and Household and their financial and legal
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advisors, (viii) reviewed the potential pro forma impact of the Merger, (ix)
reviewed the final form of the Agreement and (x) reviewed such other financial
studies and analyses and took into account such other matters as Merrill Lynch
deemed necessary, including Merrill Lynch's assessment of general economic,
market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for
independently verifying such information. Merrill Lynch has not undertaken an
independent evaluation or appraisal of any of the assets or liabilities of
Beneficial or Household. In addition, Merrill Lynch did not assume any
obligation to conduct any physical inspection of the properties or facilities
of Beneficial or Household. With respect to the financial forecast information
and the Synergies furnished to or discussed with Merrill Lynch by Beneficial
or Household, Merrill Lynch assumed that they have been reasonably prepared
and reflect the best currently available estimates and judgment of
Beneficial's or Household's management as to (i) the expected future financial
performance of Beneficial or Household, as the case may be, and (ii) the
Synergies. Merrill Lynch further assumed that the Merger will be accounted for
as a "pooling of interests" under GAAP and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, the date of such opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger.
Merrill Lynch, as part of its investment banking business, is continuously
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Merrill Lynch is currently
providing, and has in the past provided, financial advisory and financing
services to Beneficial and Household and/or its or their affiliates and may
continue to do so, and has received, and may receive, fees for the rendering
of such services. In addition, in the ordinary course of its business, Merrill
Lynch may actively trade Beneficial Common Stock and other securities of
Beneficial, as well as Household Common Stock and other securities of
Household, for its account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
Financial Analyses. The following is a summary of the material financial
analyses jointly used by the Beneficial Financial Advisors in providing their
respective opinions to the Beneficial Board and does not purport to be a
complete description of the analyses performed by the Beneficial Financial
Advisors. For each of the transaction-specific analyses performed by the
Beneficial Financial Advisors and discussed below, the corresponding
percentage, multiple or other parameter for the Merger is greater than or
within the reference range, mean or median calculated for purposes of such
analysis.
Summary of Terms of Proposed Transaction. The Beneficial Financial Advisors
reviewed the terms of the proposed Merger, including the form of consideration
offered, the expected method of accounting, the expected tax treatment, the
Exchange Ratio, the closing price of Household Common Stock as of April 6,
1998, and the resulting notional price per share of Beneficial Common Stock
(the "Notional Price") pursuant to the proposed Merger. The proposed form of
consideration to holders of Beneficial Common Stock offered in connection with
the Merger was Household Common Stock. The proposed method of accounting for
the Merger was the pooling method. The proposed tax treatment for the Merger
was that it would be treated as a reorganization within the meaning of Section
368(a) of the Code. Assuming a per share price of Household Common Stock of
$146.75 (the closing price of Household Common Stock on April 6, 1998 on a
pre-split basis) and multiplying such price by the
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Exchange Ratio, the Beneficial Financial Advisors calculated the Notional
Price of $150.00. The Notional Price, therefore, was necessarily dependent on
the closing price of the Household Common Stock at a specific time. Based upon
the Notional Price, the aggregate consideration to be received by holders of
Beneficial Common Stock in the Merger is approximately $8,521 million.
In addition to reviewing the Notional Price resulting from the Merger, the
Beneficial Financial Advisors conducted the analyses described below, which
analyses indicated values resulting from the Merger expressed as multiples of
Beneficial's 1997 reported EPS, estimated 1998 EPS (provided by Beneficial
management) and tangible book value per share at December 31, 1997 (pro forma
to show the sales of BNL Canada and BNL Germany) and as premiums to the market
price per share of Beneficial Common Stock on February 13, 1998, the business
day preceding the announcement of a potential sale of Beneficial, and to
Beneficial's managed receivables at December 31, 1997 (pro forma to show the
sales of BNL Canada and BNL Germany). Under these analyses the Notional Price
(x) reflected (i) a multiple of 33.0x 1997 reported EPS, (ii) a multiple of
27.3x estimated 1998 EPS and (iii) a multiple of 4.9x tangible book value per
share at December 31, 1997 (pro forma to show the sales of BNL Canada and BNL
Germany) and (y) represented (i) a premium to the February 13, 1998 market
price per share of 82.4% and (ii) a premium to managed receivables at December
31, 1997 (pro forma to show the sales of BNL Canada and BNL Germany) of 40.2%.
Contribution Analysis. The Beneficial Financial Advisors reviewed certain
historical and estimated operating and financial information and analyzed (i)
the pro forma ownership of the combined company by the Beneficial and
Household stockholders and (ii) the respective contributions of earnings and
various balance sheet measures including total assets, managed receivables and
shareholder equity by Beneficial and Household stockholders to the combined
company on a pro forma basis before taking into account any of the possible
benefits that may be realized following the Merger. The review was based on
financial data for Beneficial and Household for 1997 and financial data and
projections for 1998 and 1999 for Beneficial (provided by Beneficial
management) and for Household (provided by IBES). The analysis of the
Beneficial Financial Advisors indicated that the Beneficial stockholders' pro
forma ownership of the combined company would be approximately 34% after the
Merger. The earnings contribution analysis indicated that in 1997 Beneficial
would have contributed 28.3% to combined net income and that in 1998 and 1999
Beneficial would contribute 25.9% and 25.2%, respectively, to combined
operating income. The contribution analysis also indicated that at December
31, 1997 Beneficial would have contributed 35.7%, 27.1% and 28.4% of the
combined company's total assets, managed receivables and common equity,
respectively.
Summary Merger Analysis. The Beneficial Financial Advisors reviewed the
impact of the Merger on the combined company's EPS, based on management
estimates for Beneficial EPS and IBES estimates for Household EPS and assuming
the achievement of no Synergies in 1998 and $440 million of pre-tax Synergies
($289 million after-tax) in 1999 (based on financial forecasts provided by
Household management). This analysis indicated that, for the fiscal year
ending December 31, 1998, the transaction would be dilutive to estimated 1998
EPS and that, for the fiscal year ending December 31, 1999, the transaction
would be accretive to estimated 1999 EPS. The Beneficial Financial Advisors
then analyzed the effects on the combined company's EPS (using the same
earnings estimates) of achieving different levels ($190 million, $228 million,
$289 million, $304 million and $342 million) of after-tax Synergies in 1999.
This sensitivity analysis indicated that the transaction would be dilutive to
estimated 1999 EPS if $190 million in after-tax Synergies were achieved,
slightly accretive to estimated 1999 EPS if $228 million in after-tax
Synergies were achieved and increasingly accretive to estimated 1999 EPS at
all levels of achievement of after-tax Synergies above $228 million.
Public Market Analysis. The Beneficial Financial Advisors reviewed and
compared certain financial information relating to Beneficial to corresponding
financial information, ratios and public market multiples for 7 publicly
traded specialty finance corporations (the "Beneficial Comparable Companies"):
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Associates First Capital Corporation ("Associates"), Household, MBNA
Corporation ("MBNA"), Providian Financial Corporation ("Providian"), Capital
One Financial Corporation ("Capital One"), The CIT Group, Inc. ("CIT") and The
FINOVA Group Inc. ("FINOVA"). The Beneficial Comparable Companies were chosen
because they are publicly-traded companies with operations that for purposes
of analysis may be considered similar to certain operations of Beneficial. The
Beneficial Financial Advisors calculated and compared various financial
multiples and ratios for Beneficial with those of the Beneficial Comparable
Companies using the Notional Price of Beneficial and the respective closing
price per share on April 6, 1998 for the common stock of each of the
Beneficial Comparable Companies. The multiples and ratios for Beneficial and
each of the Comparable Companies were based on the most recent publicly-
available information and from estimates provided by Beneficial management.
With respect to the Beneficial Comparable Companies, the Beneficial
Financial Advisors considered (A) 1997 price/earnings ("P/E") ratios, which
ranged from 16.4x to 32.8x, with a median of 26.6x, as compared to 33.0x for
Beneficial, (B) estimated 1998 and 1999 P/E ratios, which ranged from 15.7x to
26.2x, with a median of 23.7x, for 1998, and from 13.9x to 21.8x, with a
median of 19.4x, for 1999, as compared to 27.3x for 1998 and 23.7x for 1999
for Beneficial, (C) price to tangible book value at December 31, 1997, which
ranged from 2.5x to 12.4x, with a median of 5.7x, as compared to 4.9x for
Beneficial (pro forma to show the sales of BNL Canada and BNL Germany) and (D)
premium to managed receivables, which ranged from 15.8% to 53.9%, with a
median of 34.8%, as compared to 40.2% for Beneficial (pro forma to show the
sales of BNL Canada and BNL Germany).
Selected Transactions Analysis. The Beneficial Financial Advisors analyzed
certain information relating to the following selected transactions in the
consumer finance industry since 1996 (the "Selected Transactions"): The Money
Store Inc./First Union Corporation (announced), Beneficial Canada Holdings
Inc./Associates, Security Pacific Financial Services of California
Inc./Travelers Group Inc., Transamerica Consumer Finance Holding
Company/Household, First USA Financial, Inc./Banc One Corporation and AT&T
Capital Corporation/The Nomura Securities Co., Ltd.
Such analysis indicated that for the Selected Transactions, with several
data points being unavailable, equity consideration per share (x) represented
a premium to (i) the market price per share that ranged from 10% to 43% and
(ii) managed receivables that ranged from 12% to 29% and (y) reflected a
multiple of (i) last twelve months ("LTM") operating EPS that ranged from
10.7x to 24.5x, (ii) projected operating EPS (provided by IBES) that ranged
from 13.8x to 19.6x and (iii) tangible GAAP book value per share that ranged
from 2.1x to 5.8x. The Beneficial Financial Advisors then conducted the same
analysis of the proposed Beneficial/Household transaction. This analysis
indicated that, based on the Notional Price, the equity consideration per
share to be received by holders of Beneficial Common Stock pursuant to the
Agreement (x) represented a premium to (i) the February 13, 1998 market price
per share of 82% and (ii) managed receivables at December 31, 1997 (pro forma
to show the sales of BNL Canada and BNL Germany) of 40% and (y) reflected a
multiple of equity consideration per share to (i) LTM operating EPS of 33.0x,
(ii) projected operating 1998 EPS of 27.3x and (iii) tangible book value per
share at December 31, 1997 of 4.9x (pro forma to show the sales of BNL Canada
and BNL Germany).
The Beneficial Financial Advisors also analyzed certain information relating
to selected bank and thrift merger transactions (the "Selected Bank/Thrift
Transactions") that were announced after January 1, 1996 and involved the
payment of consideration in excess of $1 billion. Such analysis indicated that
for the Selected Bank/Thrift Transactions that were announced in 1998, with
several data points being unavailable, equity consideration per share (x)
reflected a multiple of (i) tangible book value per share that ranged from
1.9x to 4.6x, with a mean of 3.7x and a median of 4.1x, and (ii) LTM EPS that
ranged from 22.4x to 27.8x, with a mean of 25.2x and a median of 25.3x, and
(y) represented a premium to market price per share that ranged from 10.6% to
27.9%, with a mean of 14.7% and a median of
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20.2%. Such analysis also indicated that for the Selected Bank/Thrift
Transactions that were announced in 1997 equity consideration per share (x)
reflected a multiple of (i) tangible book value per share that ranged from
2.5x to 6.0x, with a mean of 4.1x and a median of 3.8x, and (ii) LTM EPS that
ranged from 19.2x to 69.5x, with a mean of 28.6x and a median of 23.1x, and
(y) represented a premium to market price per share that ranged from 3.1% to
43.1%, with a mean of 26.6% and a median of 26.6%. Such analysis further
indicated that for the Selected Bank/Thrift Transactions that were announced
in 1996, with several data points being unavailable, equity consideration per
share (x) reflected a multiple of (i) tangible book value per share that
ranged from 1.6x to 3.8x, with a mean of 2.4x and a median of 2.3x, and (ii)
LTM EPS that ranged from 11.4x to 39.6x, with a mean of 18.4x and a median of
16.2x, and (y) represented a premium to market price per share that ranged
from 7.8% to 37.0%, with a mean of 15.1% and a median of 11.8%. The Beneficial
Financial Advisors then conducted the same analysis of the proposed
Beneficial/Household transaction. This analysis indicated that, based on the
Notional Price, equity consideration per share (x) reflected a multiple of (i)
tangible book value per share of 4.9x (pro forma to show the sales of BNL
Canada and BNL Germany) and (ii) LTM EPS of 33.0x and (y) represented a
premium to the February 13, 1998 market price per share of 82.2%.
Discounted Cash Flow Analysis. The Beneficial Financial Advisors prepared a
discounted cash flow analysis for Beneficial Common Stock on a stand-alone
basis through December 31, 2002. The analysis calculated the net present value
of the December 31, 2002 stock price and of the annual dividends (assuming
that earnings in excess of those necessary to maintain a tangible equity to
managed asset ratio of 9.5% are paid out in the form of a dividend to
Beneficial stockholders) through the discounting period and was performed
using discount rates ranging from 10.0% to 17.5% and P/E multiples ranging
from 14.0x to 22.0x. The analysis was performed using three different earnings
growth rate assumptions for Beneficial Common Stock through 2002. Assuming an
earnings growth rate of 8.0%, Beneficial's historical rate from 1993 to 1997,
the analysis indicated present values per share of Beneficial Common Stock
ranging from $57 to $115. Assuming an earnings growth rate of 11.0%, the IBES
projected rate, the analysis indicated present values per share of Beneficial
Common Stock ranging from $66.00 to $131.00. Assuming an earnings growth rate
of 15.5%, the rate derived from the earnings projections of Beneficial
management, the analysis indicated present values per share of Beneficial
Common Stock ranging from $79.00 to $159.00.
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set forth
above, without considering the analyses as a whole, could create an incomplete
view of the processes underlying the opinions of the Beneficial Financial
Advisors. In arriving at its fairness determination, each Beneficial Financial
Advisor considered the results of all such analyses and did not attribute any
particular weight to any factor or analysis considered by it; rather such
Beneficial Financial Advisor made its determination as to fairness on the
basis of its experience and professional judgment after considering the
results of all such analyses. In addition, in performing its analyses, each
Beneficial Financial Advisor made numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions and other matters. No company or transaction used in the above
analyses as a comparison is directly comparable to Beneficial or Household or
the contemplated transaction. The analyses were prepared solely for purposes
of the Beneficial Financial Advisors providing their respective opinions to
the Beneficial Board as to the fairness of the Exchange Ratio and do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of Beneficial,
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Household, Goldman Sachs, Merrill Lynch or any other person assumes
responsibility if future results are materially different from those forecast.
As described above, the Beneficial Financial Advisors' opinions to the
Beneficial Board were among many factors taken into consideration by the
Beneficial Board in making its determination to approve the Agreement.
Fee Arrangements. Pursuant to a letter agreement dated February 19, 1998,
Beneficial has agreed to pay Goldman Sachs (i) a fee of $1 million, payable
upon the execution of the letter agreement, (ii) a fee of $3 million, payable
upon execution of the Agreement and (iii) a transaction fee equal to (x) 0.30%
of the aggregate consideration paid in the Merger for the equity securities of
Beneficial (including amounts paid to holders of options, warrants and
convertible securities) for the first $6.0 billion in aggregate consideration
plus (y) 0.60% of any aggregate consideration in excess of $6.0 billion,
payable upon consummation of the Merger. Any fees previously paid to Goldman
Sachs under clauses (i) and (ii) above will be deducted from any fee to which
Goldman Sachs is entitled pursuant to clause (iii). The value of the Household
Common Stock to be received by holders of Beneficial Common Stock, for
purposes of calculating the transaction fee, will be determined by the average
of the last sales prices for the Household Common Stock on the five trading
days ending five days prior to the consummation of the Merger. Beneficial also
has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorneys' fees, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities under the federal
securities laws.
Pursuant to a letter agreement dated as of February 13, 1998, Beneficial
agreed to pay Merrill Lynch (i) a fee of $1 million, payable upon the
execution of the letter agreement, (ii) a fee of $3 million, payable upon
execution of the Agreement and (iii) a fee equal to (x) 0.20% of the aggregate
purchase price paid in the Merger (determined by Beneficial and Merrill Lynch
as of the closing of the Merger) for that portion of the aggregate purchase
price that is less than or equal to $6.0 billion, plus (y) 0.40% of the
aggregate purchase price paid in the Merger (determined by Beneficial and
Merrill Lynch as of the closing of the Merger) for that portion of the
aggregate purchase price that is greater than $6.0 billion, payable upon the
closing of the Merger. Any fees previously paid to Merrill Lynch under clauses
(i) and (ii) above will be deducted from any fee to which Merrill Lynch is
entitled pursuant to clause (iii). Beneficial also has agreed to reimburse
Merrill Lynch for reasonable out-of-pocket expenses, including the reasonable
fees and disbursements of its legal counsel. Beneficial has also agreed to
indemnify Merrill Lynch and certain related persons for certain liabilities
related to or arising out of its engagement, including liabilities under the
federal securities laws.
THE EFFECTIVE TIME
Subject to the satisfaction or waiver of certain conditions contained in the
Agreement, the parties will cause the Effective Time to occur no later than
(i) the third NYSE trading day after satisfaction or waiver of the conditions
to both parties' obligations to effect the Merger described under "--
Conditions to the Merger," including, without limitation: (a) the receipt of
the required stockholder approvals of Household and Beneficial, (b) the
receipt of all Requisite Regulatory Approvals to consummate the transactions
contemplated by the Agreement and (c) the listing on the NYSE of the Household
Common Stock to be issued in the Merger, subject to official notice of
issuance; or (ii) such other date to which the parties may agree in writing.
At the Effective Time, holders of Beneficial Common Stock and Beneficial
Convertible Preferred Stock will cease to be, and will have no rights as
stockholders of Beneficial, other than to receive Household Common Stock and
holders of the Other Beneficial Preferred Stock will cease to be, and will
have no rights as stockholders of Beneficial, other than to receive New
Household Preferred Stock. After the Effective Time, there will be no
transfers on the stock transfer books of Beneficial or the Surviving
Corporation of shares of Beneficial Stock.
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At the Effective Time, each issued and outstanding share of capital stock of
Merger Sub will be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $1.00 per share, of the
Surviving Corporation.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At or prior to the Effective Time, Household will deposit, or will cause to
be deposited, with the Exchange Agent, for the benefit of the holders of
shares of Beneficial Common Stock, Beneficial Convertible Preferred Stock, and
Other Beneficial Preferred Stock, for exchange in accordance with the
Agreement, (i) certificates representing the number of shares of Household
Common Stock issuable in the Merger, to be issued in respect of all shares of
Beneficial Common Stock and Beneficial Convertible Preferred Stock outstanding
immediately prior to the Effective Time and which are to be exchanged pursuant
to the Merger (other than shares to be cancelled pursuant to Agreement), (ii)
certificates representing the number of shares of New Household Preferred
Stock issuable in the Merger, to be issued in respect of all shares of Other
Beneficial Preferred Stock outstanding immediately prior to the Effective Time
and which are to be exchanged pursuant to the Merger and (iii) an estimated
amount of cash to be paid in lieu of fractional shares to which a holder of
certificates formerly representing Beneficial Common Stock or Beneficial
Convertible Preferred Stock, as the case may be, would otherwise be entitled
pursuant to terms of the Agreement (such cash and certificates for shares of
Household Stock being hereinafter referred to collectively as the "Exchange
Fund").
As soon as reasonably practicable after the Effective Time, Household will
cause the Exchange Agent to mail (or deliver at its principal office) to each
holder of record of a certificate or certificates representing shares of
Beneficial Common Stock, Beneficial Convertible Preferred Stock, or Other
Beneficial Preferred Stock, as the case may be (the "Beneficial
Certificates"), transmittal materials for use in exchanging such stockholder's
Beneficial Certificates to the Exchange Agent for the consideration due in
respect thereof. Upon surrender of Beneficial Certificates for cancellation to
the Exchange Agent, together with the letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Beneficial Certificates will be entitled to receive in exchange therefor that
portion of the Exchange Fund which such holder has the right to receive
pursuant to the Agreement, after giving effect to any required withholding
tax, and the Beneficial Certificates so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on either the stock or the cash
portion of the Exchange Fund. In the event of any transfer of ownership of
shares of Beneficial Common Stock, Beneficial Convertible Preferred Stock, or
Other Beneficial Preferred Stock, as the case may be, which has not been
registered in the transfer records of Beneficial, Household Certificates
representing the proper number of shares of Household Common Stock or New
Household Preferred Stock, if any, and a check in an amount equal to the
proper amount of the cash component, if any, of the Exchange Fund, will be
issued to the transferee of the Beneficial Certificates only upon presentation
to the Exchange Agent of the appropriate Beneficial Certificate or
Certificates, accompanied by all documents required to evidence and effect the
prior transfer thereof and to evidence that any applicable stock transfer
taxes associated with such transfer were paid.
Any portion of the Exchange Fund which remains undistributed to the
stockholders of Beneficial for six months after the Effective Time will be
delivered to Household, upon demand, and any stockholders of Beneficial who
have not complied with the procedures for the exchange of their Beneficial
Certificates may thereafter look only to Household for payment of their claim
for the applicable shares of Household Stock and cash and dividends or other
distributions, if any.
STOCKHOLDERS OF BENEFICIAL SHOULD NOT SEND IN THEIR BENEFICIAL CERTIFICATES
UNTIL THEY RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT.
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No dividends that are declared on shares of Household Common Stock or New
Household Preferred Stock will be paid to persons entitled to receive
Household Certificates until such persons surrender their Beneficial
Certificates. Upon proper surrender of Beneficial Certificates, there will be
paid to the person in whose name the Household Certificates are issued, any
dividends which became payable with respect to such shares of Household Common
Stock or New Household Preferred Stock between the Effective Time and the time
of such surrender. In no event will the person entitled to receive such
dividends be entitled to receive interest on such dividends. If any
certificates for any shares of Household Common Stock or New Household
Preferred Stock are to be issued in a name other than that in which the
Beneficial Certificate surrendered in exchange therefor is registered, the
person requesting such exchange must pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of the Household Certificates
in a name other than that of the registered holder of the Beneficial
Certificate surrendered or will establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, (i) neither the Exchange Agent nor any party
to the Agreement shall be liable to a holder of shares of Beneficial Common
Stock, Beneficial Convertible Preferred Stock or Other Beneficial Convertible
Preferred Stock, as the case may be, for any shares of Household Common Stock
or New Household Preferred Stock or dividends thereon, or any cash in lieu of
fractional share interests, in each case, delivered to a public official
pursuant to applicable escheat laws and (ii) any shares of Household Common
Stock or New Household Preferred Stock held by the Exchange Agent prior to
surrender of Beneficial Certificates will not be deemed outstanding for quorum
and voting purposes.
No certificates or scrip representing fractional shares of Household Common
Stock will be issued in the Merger and no dividend, stock split or other
change in the capital structure of Household will relate to any fractional
security, and such fractional interests will not entitle the owner thereof to
vote or to any rights of a security holder. In lieu of any fractional shares
of Household Common Stock, each holder of shares of Beneficial Common Stock or
Beneficial Convertible Preferred Stock, as the case may be, who would
otherwise have been entitled to a fraction of a share of Household Common
Stock upon surrender of certificates for exchange pursuant to the Agreement
will be paid cash upon such surrender in an amount equal to the product of
such fraction multiplied by the closing sale price of one share of Household
Common Stock on the NYSE on the day of the Effective Time, or, if shares of
Household Common Stock are not so traded on such day, the closing sale price
of one such share on the next preceding day on which such share was traded on
the NYSE. For purposes of calculating cash to be paid in lieu of fractional
shares, shares of Beneficial Common Stock or Beneficial Convertible Preferred
Stock, as the case may be, of any holder represented by two or more
certificates may be aggregated. In no event shall any holder be paid an amount
of cash in respect of more than one share of Household Common Stock.
CONDUCT OF BUSINESS PRIOR TO THE MERGER AND OTHER COVENANTS
Prior to the Effective Time, except as expressly provided in the Agreement,
Beneficial will, and will cause its subsidiaries to carry on the business of
Beneficial and its subsidiaries in the usual, regular and ordinary course in
substantially the same manner as previously conducted and in compliance in all
material respects with all applicable laws and regulations, and to the extent
consistent therewith, use all reasonable efforts to preserve intact the
current business organizations of Beneficial and its subsidiaries, use
reasonable efforts to keep available the services of the current officers and
other key employees of Beneficial and its subsidiaries and preserve its
relationships with those persons having business dealings with Beneficial and
its subsidiaries to the end that the goodwill and ongoing businesses of
Beneficial and its subsidiaries will be unimpaired at the Effective Time.
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Without limiting the generality of the foregoing, prior to the Effective
Time, except as expressly provided in the Agreement and subject to certain
exceptions, Beneficial and its subsidiaries will not (i) (a) declare, set
aside or pay any distributions (whether in cash, stock or property) with
respect to its capital stock (other than normal quarterly dividends on the
Beneficial Common Stock and the Beneficial Preferred Stock and dividends from
a wholly owned subsidiary of Beneficial to Beneficial or another wholly owned
subsidiary of Beneficial), (b) split, combine or reclassify any of
Beneficial's capital stock, or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock or (c) repurchase, redeem or call any of its equity securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of capital
stock of Beneficial or any of its subsidiaries, any other voting securities or
any securities convertible into, or any options, warrants, stock appreciation
rights or rights to acquire, any such shares, voting securities or convertible
securities (other than the issuance of Beneficial Common Stock (a) upon the
exercise of Beneficial Stock Options, (b) upon the conversion of Beneficial
Convertible Preferred Stock and (c) pursuant to the dividend reinvestment
provisions of the Beneficial Direct Investment Plan (in each case outstanding
on the date of the Agreement and/or in accordance with their present terms));
(iii) amend its certificate of incorporation or by-laws or other comparable
organizational documents; (iv) other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings and
the acquisition from time to time of receivables in the ordinary course of
business consistent with past practice, acquire or agree to acquire (a) by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, limited
liability company, partnership, joint venture, association or other business
organization or division thereof or (b) any assets that, individually or in
the aggregate, are material to Beneficial and its subsidiaries; (v) other than
activities in the ordinary course of business consistent with past practice,
sell, lease, license or otherwise encumber or subject to any lien or otherwise
dispose of any of the properties or assets of Beneficial and its subsidiaries;
(vi) other than in the ordinary course of business consistent with past
practice, (a) incur any indebtedness or (b) make any advances or capital
contributions to, or investments in, any other person or entity, other than to
officers and employees of Beneficial and its subsidiaries for travel, business
or relocation expenses in the ordinary course of business; (vii) make or agree
to make any capital expenditure or capital expenditures relating to a single
project in excess of $1,000,000 without the prior written consent of
Household; (viii) make any tax election or settle or compromise any material
income tax liability, except in respect of ongoing matters or in the ordinary
course of business consistent with past practice and in prior consultation
with Household; (ix) (a) enter into any material contracts, except in the
ordinary course of business consistent with past practice and in prior
consultation with Household or (b) modify or amend in any material respect or
terminate any material contract to which Beneficial or any of its subsidiaries
is a party or waive, release or assign any material rights or claims
thereunder; (x) except as required by law or in the ordinary course of
business consistent with past practice, (a) increase the compensation of any
of its employees, (b) enter into any contract with any of its employees
regarding his or her employment, compensation or benefits, or (c) adopt any
plan, arrangement or policy which would become a Beneficial Plan or amend any
Beneficial Plan to the extent such adoption or amendment would create or
increase any material liability or obligation on the part of Beneficial or its
subsidiaries; (xi) take any action or enter into any agreement that could
reasonably be expected to materially jeopardize or delay the receipt of any
requisite regulatory approval; (xii) make any change to accounting methods,
principles or practices, except as may be required by GAAP or Regulation S-X
promulgated by the Commission; (xiii) create, incur, suffer to exist or assume
any material lien on any of their material assets; (xiv) settle any material
claim, action or proceeding involving money damages or waive or release any
material rights or claims; (xv) materially restructure or materially change
its gap position, through purchases, sales, hedges, swaps, caps or collars or
otherwise or the manner in which any current hedges are classified or
reported; or (xvi) agree to commit to do any of the foregoing.
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Prior to the Effective Time, except as expressly provided in the Agreement
and subject to certain exceptions, Household and its subsidiaries will not (i)
(a) declare, set aside or pay any distributions (whether in cash, stock or
property) with respect to its capital stock (other than (i) normal quarterly
dividends on the Household Common Stock and the Household Preferred Stock (as
defined herein), (ii) dividends from a wholly owned subsidiary of Household to
Household or another wholly owned subsidiary of Household or (iii) the
dividend increase approved by Household's Board on March 10, 1998. See
"HOUSEHOLD CAPITAL STOCK--General") or (b) split, combine, or reclassify any
of Household's capital stock, or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock (other than Household's 3-for-1 stock split effected in the form
of a stock dividend and paid on June 1, 1998); (ii) take any action or enter
into any agreement that could reasonably be expected to jeopardize or delay
the receipt of any requisite regulatory approval; (iii) make any change to
their accounting methods, principles or practices, except as may be required
by GAAP or Regulation S-X promulgated by the Commission; or (iv) agree or
commit to any of the foregoing.
The Agreement also provides that neither Beneficial or Household nor their
respective subsidiaries may take any action that would, or could reasonably be
expected to interfere with the satisfaction of the conditions to the parties,
obligations to consummate the Merger. See "--Conditions to the Merger."
The Agreement contains certain other agreements relating to the conduct of
the parties prior to the Effective Time, including those requiring, subject to
certain specified exceptions, the parties (i) with respect to Beneficial, to
use its reasonable best efforts to cause its officers, directors and
employees, and investment bankers, attorneys, accountants and other agents
retained by it, not to, initiate, solicit or encourage, directly or
indirectly, any inquiries relating to, or the making of certain proposals from
third parties that would compete with the Merger, or engage in negotiations or
discussions with, or furnish any information to, any third party relating to
such proposal; (ii) to cooperate in the preparation and filing of the
Registration Statement and this Joint Proxy Statement-Prospectus; (iii) to
obtain all necessary stockholder approvals; (iv) to afford to the other party
and to the other party's financial advisors, legal counsel, accountants,
consultants and other representatives full access at all reasonable times
throughout the period prior to the Effective Time to all of its books,
records, properties, plants and personnel and, during such period; under the
condition that each such party and its respective affiliates, representatives
and agents shall hold in confidence all nonpublic information in accordance
with the terms of the confidentiality agreement between the parties until such
time as such information is otherwise publicly available; (v) with respect to
Beneficial, to use its reasonable efforts to cause to be delivered to
Household "comfort" letters of Deloitte & Touche LLP, Beneficial's independent
public accountants, and, with respect to Household, to use its reasonable best
efforts to cause to be delivered to Beneficial "comfort" letters of Arthur
Andersen LLP, Household's independent public accountants, dated the date on
which the Registration Statement shall become effective and as of the
Effective Date, and addressed to Household and Beneficial, in form and
substance reasonably satisfactory to the other party and as is reasonably
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions such as those contemplated by the
Agreement; (vi) to cooperate with each other and use their reasonable efforts
to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all requisite regulatory approvals; (vii) to consult and cooperate
with each other before issuing any press release or other public statements
with respect to the transactions contemplated by the Agreement; (viii) to use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by the Agreement; and (ix) to use its
respective best efforts to (a) cause the Merger to be accounted for as a
"pooling of interests" transaction under GAAP as described in "--Accounting
Treatment," and (b) cause the Merger to qualify as a reorganization under
Section 368(a) of the Code and obtain the
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opinions of counsel referred to in the Agreement as described in "--Certain
U.S. Federal Income Tax Consequences."
CONDITIONS TO THE MERGER
The obligation of each party to consummate the Merger is conditioned upon
the satisfaction or waiver, to the extent permitted by law, at or prior to the
Effective Time of each of the following conditions: (i) each of the Household
Stockholder Approval and the Beneficial Stockholder Approval will have been
obtained in accordance with applicable law; (ii) no preliminary or permanent
injunction or other order by any federal or state court in the United States
of competent jurisdiction ("Injunction") which prohibits the consummation of
the Merger will be issued and remain in effect and no statute, rule,
regulation, order, injunction or decree will have been enacted, entered,
promulgated or enforced by any governmental entity which prohibits, restricts
or makes illegal consummation of the Merger; (iii) the Requisite Regulatory
Approvals will have been obtained and remain in full force and effect and all
statutory waiting periods in respect thereof have, or will have, expired or
been terminated; (iv) no proceeding initiated by any governmental entity
seeking an Injunction will be pending; (v) the Registration Statement will
have become effective in accordance with the provisions of the Securities Act
and no stop order suspending the effectiveness of the Registration Statement
will be in effect and no proceeding for such purpose will be pending before or
threatened by the SEC; and (vi) the shares of Household Common Stock which are
to be issued to the holders of Beneficial Common Stock and Beneficial
Convertible Preferred Stock will have been approved for listing on the NYSE,
subject to official notice of issuance.
In addition, the obligation of Household to consummate the Merger is
conditioned upon the satisfaction or waiver, at or prior to the Effective
Time, of each of the following conditions: (i) the representations and
warranties of Beneficial set forth in the Agreement will be true and correct
as of the date of the Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the closing date as though
made on and as of the closing date; provided, that no representation or
warranty will be deemed to be untrue unless the breach thereof, individually
or when taken together with all other breaches of representations and
warranties, would reasonably be expected to have a material adverse effect;
(ii) Beneficial will have performed in all material respects all obligations
required to be performed by it under the Agreement at or prior to the closing
date; (iii) Household will have received an opinion of Wachtell, Lipton, Rosen
& Katz, its tax counsel, dated as of the date of the Effective Time, as
described under "--Certain U.S. Federal Income Tax Consequences"; and (iv)
Household will have received a letter from each of Arthur Andersen LLP and
Deloitte & Touche LLP, each addressed to Household and dated the closing date,
confirming that the Merger can properly be accounted for as a "pooling of
interests."
The obligation of Beneficial to consummate the Merger is conditioned upon
the satisfaction or waiver, at or prior to the Effective Time, of each of the
following conditions: (i) the representations and warranties of Household set
forth in the Agreement will be true and correct as of the date of the
Agreement and (except to the extent such representations and warranties speak
as of an earlier date) as of the closing date as though made on and as of the
closing date; provided, that no representation or warranty will be deemed to
be untrue unless the breach thereof, individually or when taken together with
all other breaches of representations and warranties, would reasonably be
expected to have a material adverse effect; (ii) Household will have performed
in all material respects all obligations required to be performed by it under
the Agreement at or prior to the closing date; (iii) Beneficial will have
received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, its tax
counsel, dated as of the date of the Effective Time, as described under "--
Certain U.S. Federal Income Tax Consequences"; and (iv) Beneficial will have
received copies of the letters from Arthur Andersen LLP and Deloitte & Touche
LLP, each addressed to Household and dated the closing date, confirming that
the Merger can properly be accounted for as a "pooling of interests."
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No assurance can be provided as to if or when the Requisite Regulatory
Approvals will be obtained or whether all of the other conditions precedent to
the Merger will be satisfied or waived by the party permitted to do so. If the
Merger is not effected on or before December 31, 1998, the Agreement may be
terminated by either Household or Beneficial, except to the extent the failure
to effect the Merger by such date is due to the failure of the party seeking
to terminate the Agreement to perform or observe its covenants and agreements
set forth therein.
REPRESENTATIONS AND WARRANTIES
Under the Agreement, Beneficial has made certain representations and
warranties to Household, including representations and warranties with respect
to: (i) the organization, existence and good standing of Beneficial and its
subsidiaries; (ii) Beneficial's capitalization; (iii) Beneficial's corporate
power and authority to enter into the Agreement and the absence of violations
of law, contracts or organizational documents; (iv) required consents and
approvals; (v) Beneficial's filings with the Commission and financial
statements; (vi) the absence of certain changes; (vii) certain legal
proceedings; (viii) compliance with applicable laws; (ix) employee benefit
plans; (x) certain tax matters; and (xi) certain regulatory matters.
Under the Agreement, Household has made certain representations and
warranties to Beneficial, including representations and warranties with
respect to: (i) the organization, existence and good standing of Household and
its subsidiaries; (ii) Household's capitalization; (iii) Household's corporate
power and authority to enter into the Agreement and the absence of violations
of law, contracts or organizational documents; (iv) required consents and
approvals; (v) Household's filings with the Commission and financial
statements; (vi) the absence of certain changes; (vii) certain legal
proceedings; (viii) compliance with applicable laws; (ix) ownership of
Beneficial Stock by Household or its affiliates or associates; (x) certain tax
matters; and (xi) certain regulatory matters.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses (including
transfer taxes) incurred in connection with the Agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses.
TERMINATION OF THE AGREEMENT
The Agreement may be terminated and the Merger abandoned (i) by the mutual
consent of the parties, (ii) by either party if the other party materially
breaches its representations and warranties, covenants, or agreements, in each
case after inability or failure to cure within 30 days or which cannot be
cured prior to the closing date of the Merger, (iii) by either party in the
event that the Merger is not consummated by December 31, 1998, except to the
extent that the failure of the Merger then to be consummated arises out of or
results from the failure of the party seeking to terminate the Agreement to
perform or observe the covenants and agreements of that party under the
Agreement, (iv) by either party (a) 60 days after the date on which any
request or application for a Requisite Regulatory Approval is denied or
withdrawn at the request of the governmental entity which must grant such
approval, unless within 60 days following such denial or withdrawal a petition
for rehearing or an amended application has been filed with the applicable
governmental entity or (b) if either the Beneficial Stockholder Approval or
the Household Stockholder Approval is not obtained at the Beneficial Special
Meeting or the Household Special Meeting, as the case may be, or any
adjournments or postponements thereof.
In addition, the Agreement may be terminated by Beneficial by giving notice
to Household at least two days prior to the anticipated closing date of the
Merger in the event of a Termination Event. Such termination right will not
apply, however, if Household decides, within 24 hours of receiving notice of
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Beneficial's intent to terminate the Agreement following a Termination Event,
to increase the Exchange Ratio to a number calculated pursuant to the
Agreement, such that Beneficial Stockholders would receive consideration
having the same implied market value (based on the Average Closing Price) as
they would have received if the Average Closing Price has been sufficient to
prevent Beneficial from having a termination right under this provision. If
Household elects to increase the Exchange Ratio as set forth in the Agreement
and as described above, it must give Beneficial prompt notice of that election
and such increased Exchange Ratio, in which case no termination of the
Agreement would occur as a result of a Termination Event.
If Beneficial elects to exercise its termination right pursuant to clause
(vi) of the immediately preceding paragraph, it must give prompt written
notice to Household; provided, however, that no right of termination will
arise under the Agreement if Household will have given written notice to
Beneficial at any time within 24 hours of its receipt of Beneficial's written
notice of termination that Household elects (x), in the case of a termination
invoked under clause (i) above, to adjust the Exchange Ratio to equal a number
equal to a quotient (rounded to the nearest one-ten-thousandth), the numerator
of which is the product of 0.80, the Starting Price and the Exchange Ratio (as
then in effect), and the denominator of which is the Average Closing Price, or
(y) in the case of clause (ii) above, to adjust the Exchange Ratio to equal
the lesser of (A) a number equal to a quotient (rounded to the nearest one-
ten-thousandth), the numerator of which is the product of 0.85, the Starting
Price and the Exchange Ratio (as then in effect), and the denominator of which
is the Average Closing Price, and (B) a number equal to a quotient (rounded to
the nearest one-ten-thousandth), the numerator of which is the Index Ratio
multiplied by the Exchange Ratio (as then in effect), and the denominator of
which is the Acquiror Ratio. If Household makes an election contemplated by
either of the foregoing clauses, within such 24-hour period, it shall give
prompt written notice to Beneficial of such election and the revised Exchange
Ratio, whereupon no termination shall have occurred and the Agreement will
remain in effect in accordance with its terms (except as the Exchange Ratio
will have been so modified), and any references in the Agreement to "Per Share
Merger Consideration" will thereafter be deemed to refer to the Exchange Ratio
as adjusted in accordance with the Agreement.
Whether or not Beneficial will have a right to terminate the Agreement
pursuant to the foregoing paragraph will not be known until the date that the
Average Closing Price can be determined. If such date were the date of this
Joint Proxy Statement-Prospectus, no such right of termination would exist,
based on the prevailing market price of Household Common Stock. Beneficial has
made no decision as to whether it would exercise its termination right if such
a right were to arise, and Household has made no decision as to whether it
would exercise its correlative right to increase the Exchange Ratio. In the
event such a situation occurs, each of the Household Board and the Beneficial
Board would, consistent with its fiduciary duties, take into account all
relevant facts and circumstances as they exist at such time and would consult
with its respective financial advisors and legal counsel. Approval of the
Agreement by the Voting Beneficial Stockholders at the Beneficial Special
Meeting and approval of the Household Matter by the Household Common
Stockholders at the Household Special Meeting will confer on the Beneficial
Board and the Household Board, respectively, the power, should such an event
occur and consistent with the fiduciary duties of such Boards, to elect to
consummate the Merger in such an event (in the case of the Beneficial Board)
or to elect to increase the Exchange Ratio (in the case of the Household
Board) without any further action by, or resolicitation of the votes of, the
Voting Beneficial Stockholders or Household Common Stockholders, as the case
may be. The fairness opinions received by Beneficial and Household were dated
as of the respective dates that the Boards approved the Merger and were based
on conditions in effect on such dates. Accordingly, none of such opinions
address the circumstances that might arise if the matters contemplated by the
previous paragraph were to occur.
In the event of termination of the Agreement by either Household or
Beneficial in accordance with the terms of the Agreement, the Agreement will
become void and have no effect except that (i) certain specified provisions of
the Agreement will survive the termination of the Agreement and (ii)
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notwithstanding anything to the contrary contained in the Agreement, no party
will be relieved or released from any liabilities or damages arising out of
its willful breach of any provision of the Agreement.
AMENDMENT; WAIVER
Subject to compliance with applicable law, the Agreement may be amended in
writing signed on behalf of each of the parties thereto, by action taken or
authorized by their respective Boards of Directors, at any time before or
after the Beneficial Stockholder Approval and the Household Stockholder
Approval; provided, however, that after the Beneficial Stockholder Approval,
there may not be, without further approval of such stockholders, any amendment
of the Agreement which reduces the amount or changes the form of the
consideration to be delivered to the stockholders of Beneficial under the
Agreement other than as contemplated therein.
At any time prior to the Effective Time, each of the parties to the
Agreement, by action taken or authorized by its Board of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other party to the Agreement, (b) waive
any inaccuracies in the representations and warranties of the other party
contained in the Agreement or in any document delivered pursuant thereto and
(c) waive compliance with any of the agreements or conditions of the other
party contained in the Agreement. Any agreement on the part of a party to the
Agreement to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party, but such extension or
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition will not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the Merger to holders of Beneficial Stock who hold such
stock as a capital asset. This summary is based on the Code, the legislative
history thereof and Treasury regulations thereunder, and administrative
rulings and court decisions in effect as of the date hereof, all of which are
subject to change at any time, possibly with retroactive effect. This summary
is not a complete description of all of the consequences of the Merger and, in
particular, does not address U.S. federal income tax considerations applicable
to stockholders subject to special treatment under U.S. federal income tax law
(including, for example, non-U.S. persons, financial institutions, dealers in
securities, insurance companies or tax-exempt entities, holders who acquired
Beneficial Common Stock pursuant to the exercise of an employee stock option
or right or otherwise as compensation, and holders who hold Beneficial Stock
as part of a hedge, straddle or conversion transaction). In addition, no
information is provided herein with respect to the tax consequences of the
Merger under applicable foreign, state or local laws.
EACH HOLDER OF BENEFICIAL STOCK IS URGED TO CONSULT WITH SUCH HOLDER'S TAX
ADVISOR REGARDING THE TAX CONSEQUENCES OF THE MERGER WITH RESPECT TO SUCH
HOLDER'S PARTICULAR TAX SITUATION, INCLUDING THE EFFECTS OF FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
On the date of the Effective Time, each of Wachtell, Lipton, Rosen & Katz,
special counsel to Household, and Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to Beneficial, will, subject to the qualifications discussed in the
following paragraph, deliver to Household and Beneficial, respectively, its
opinion (each, a "Closing Tax Opinion"), dated as of the date of the Effective
Time, to the effect that, for U.S. federal income tax purposes, the Merger
will be treated as a reorganization within the meaning of Section 368(a) of
the Code. In addition, Household has received an opinion of Wachtell,
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Lipton, Rosen & Katz, dated the date of this Joint Proxy Statement-Prospectus,
to the foregoing effect (the "Filing Tax Opinion" and, together with the
Closing Tax Opinions, the "Tax Opinions"). Based on such Tax Opinions, (i) no
gain or loss will be recognized by Household, Merger Sub, or Beneficial as a
result of the Merger, (ii) no gain or loss will be recognized by the holders
of Beneficial Common Stock and Beneficial Convertible Preferred Stock who
exchange all of their Beneficial Common Stock and Beneficial Convertible
Preferred Stock solely for Household Common Stock pursuant to the Merger
(except with respect to cash received in lieu of a fractional share interest
in Household Common Stock), (iii) the aggregate tax basis of the Household
Common Stock received by holders of Beneficial Common Stock and Beneficial
Convertible Preferred Stock who exchange all of their Beneficial Common Stock
and Beneficial Convertible Preferred Stock solely for Household Common Stock
pursuant to the Merger will be the same as the aggregate tax basis of the
Beneficial Common Stock and Beneficial Convertible Preferred Stock surrendered
in exchange therefor (reduced by any basis amount allocable to the fractional
share interest in Household Common Stock for which cash is received), and (iv)
the tax holding period of Household Common Stock received in the Merger
(including fractional share interests deemed received and redeemed as
described above) will include the holder's holding period in the Beneficial
Common Stock or Beneficial Convertible Preferred Stock surrendered in exchange
therefor.
The respective obligations of Household and Beneficial to consummate the
Merger are conditioned upon the receipt by each of Household and Beneficial of
its respective Closing Tax Opinion in form and substance reasonably
satisfactory to the party to whom such Tax Opinion is addressed. Wachtell,
Lipton, Rosen & Katz has rendered the Filing Tax Opinion on the basis of
facts, representations and assumptions set forth or referred to in such
opinion which are consistent with the state of facts expected to exist at the
Effective Time, and each of Wachtell, Lipton, Rosen & Katz and Skadden, Arps,
Slate, Meagher & Flom LLP will render its respective Tax Opinion on the basis
of facts, representations and assumptions set forth or referred to in such
opinion which are consistent with the state of facts existing at the Effective
Time. In rendering the Closing Tax Opinions, each such counsel may require and
rely upon representations and covenants including those contained in
certificates of officers of Household, Merger Sub, Beneficial and others,
reasonably satisfactory in form and substance to such counsel. The Tax
Opinions are not binding on the Internal Revenue Service (the "IRS") or the
courts, and the parties do not intend to request a ruling from the IRS with
respect to the Merger. Accordingly, there can be no assurance that the IRS
will not challenge the conclusions set forth in the Tax Opinions or that a
court will not sustain such challenge. Neither Household nor Beneficial
currently intends to waive the condition relating to receipt of its respective
Closing Tax Opinion. In the unlikely event that either Household or Beneficial
were to determine to waive such condition, the company doing so would mail
additional information to its stockholders describing any changes in the
material U.S. federal income tax consequences that will result from the Merger
and would resolicit proxies from its stockholders if there are any material
adverse changes in the U.S. federal income tax consequences to such
stockholders.
Based upon the current position of the IRS, cash received by a holder of
Beneficial Common Stock in lieu of a fractional share interest in Household
Common Stock will be treated as received in redemption of such fractional
share interest, and a Beneficial stockholder should generally recognize
capital gain or loss for U.S. federal income tax purposes measured by the
difference between the amount of cash received and the portion of the tax
basis of the shares of Beneficial Common Stock or Beneficial Convertible
Preferred Stock allocable to such fractional share interest. Such gain or loss
should be a long-term capital gain or loss if the holding period for such
shares of Beneficial Common Stock or Beneficial Convertible Preferred Stock is
greater than one year at the Effective Time. In general, holders of Beneficial
Common Stock or Beneficial Convertible Preferred Stock that are individuals
will be taxed on net long-term capital gains at preferential rates (i.e., in
the case of long-term capital gains from assets held for more than 18 months,
at a maximum federal income marginal tax rate of 20%, and in the case of long-
term capital gains from assets held for more than one year but not more than
18 months, at a maximum federal income marginal tax rate of 28%).
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Assuming that at the Effective Time it is not more likely than not that
Household will exercise its right to redeem or purchase the New Household
Preferred Stock, (i) no gain or loss will be recognized by the holders of
Other Beneficial Preferred Stock who exchange all of their Other Beneficial
Preferred Stock solely for New Household Preferred Stock pursuant to the
Merger, (ii) the aggregate tax basis of the New Household Preferred Stock
received by holders of Other Beneficial Preferred Stock who exchange all of
their Other Beneficial Preferred Stock solely for New Household Preferred
Stock pursuant to the Merger will be the same as the aggregate tax basis of
the Other Beneficial Preferred Stock surrendered in exchange therefor, and
(iii) the tax holding period of New Household Preferred Stock received in the
Merger will include the holder's holding period in the Other Beneficial
Preferred Stock surrendered in exchange therefor. No authorities provide clear
guidance with respect to determining, as a legal matter, whether Household is
more likely than not to redeem the New Household Preferred Stock, and,
therefore, it is possible that the IRS could treat the exchange of Other
Beneficial Preferred Stock for New Household Preferred Stock as a taxable
exchange. Holders of Other Beneficial Preferred Stock are urged to consult
their own tax advisors with respect to the tax treatment of their receipt of
New Household Preferred Stock in the Merger, including the character and
amount of any gain or loss in the event that the exchange of Other Beneficial
Preferred Stock for New Household Preferred Stock is treated as a taxable
exchange.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the "pooling
of interests" method of accounting. Under such method of accounting, holders
of Beneficial Common Stock will be deemed to have combined their existing
voting common stock interest with that of holders of Household Common Stock by
exchanging their shares for shares of Household Common Stock. Accordingly, the
book value of the assets, liabilities and shareholders' equity of Beneficial,
as reported on its consolidated balance sheet, will be carried over to the
consolidated balance sheet of Household and no goodwill will be created.
Household will be able to include in its consolidated income the consolidated
income of Beneficial for the entire fiscal year in which the Merger occurs;
however, certain expenses incurred to effect the Merger must be treated by
Household as current charges against income rather than adjustments to its
balance sheet. In order for the Merger to qualify for "pooling of interests"
accounting treatment, among other criteria, substantially all (90% or more) of
the outstanding Beneficial Common Stock must be exchanged for Household Common
Stock.
It is a condition to the parties' obligations to consummate the Merger that
Household and Beneficial receive a letter from each of Arthur Andersen LLP,
Household's independent accountants, and Deloitte & Touche LLP, Beneficial's
independent accountants, each addressed to Household and dated the Effective
Date, in form and substance reasonably acceptable to Household, confirming
that the transactions contemplated by the Agreement, if consummated, can
properly be accounted for as a "pooling of interests" business combination in
accordance with GAAP and the criteria of Accounting Principles Board Opinion
No. 16 and the regulations of the Commission. To conform to the provisions of
Staff Accounting Bulletin 96, "Treasury Stock Acquisitions Following
Consummation of a Business Combination Accounted for as a Pooling of
Interests," Household has terminated its limited employee benefit share
repurchase program. Beneficial had previously suspended its share repurchase
program in February 1998. The unaudited pro forma financial information
included in this Joint Proxy Statement-Prospectus gives effect to the Merger
using the "pooling of interests" method of accounting. See "SUMMARY--Unaudited
Comparative Per Share Data," "INFORMATION ABOUT BENEFICIAL--Selected Financial
Data," "INFORMATION ABOUT HOUSEHOLD--Selected Financial Data" and "UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION."
The unaudited pro forma information contained in this Joint Proxy Statement-
Prospectus has been prepared using the "pooling of interests" accounting
method to account for the Merger. See "SUMMARY--Selected Financial Data--
Summary Selected Unaudited Pro Forma Financial Data" and "UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. In considering the approval of the Merger by the Beneficial Board,
Voting Beneficial Stockholders should be aware that certain persons, including
certain members of Beneficial management and members of the Beneficial Board,
have interests in the Merger that are in addition to those of the stockholders
of Beneficial, generally including certain arrangements with respect to the
Household Board composition following the Merger, certain post-Merger
employment and consulting opportunities for senior executives of Beneficial
with Household and certain benefits under existing severance and benefit
plans. In addition, the Agreement contains certain provisions relating to the
indemnification of Beneficial directors and officers and directors' and
officers' liability insurance. The Beneficial Board was aware of these
interests and considered them, among other matters, in approving the Agreement
and the transactions contemplated thereby.
Board Composition and Related Matters Post-Merger. Finn M.W. Caspersen,
Chairman and Chief Executive Officer of Beneficial, will serve as Chairman of
the Household Board for one year following the Effective Time and serve as a
director of Household thereafter. In addition, Household will cause James H.
Gilliam, Jr., Executive Vice President and General Counsel of Beneficial,
Robert C. Clark, a director of Beneficial, and David J. Farris, Chief
Operating Officer of Beneficial, to become members of the Household Board at
the Effective Time (on January 1, 1999, in the case of Mr. Farris, at the
commencement of his proposed consulting arrangement; see "--New Employment and
Consulting Arrangements with Certain Beneficial Executives").
New Employment and Consulting Arrangements with Certain Beneficial
Executives. Household has agreed to pay Mr. Caspersen base compensation of
$1.5 million per annum and a bonus of $1.0 million per annum for his service
as Chairman of the Household Board for one year after the Effective Time.
Thereafter, Mr. Caspersen will continue to serve as a director of Household
and will enter into a one-year consulting arrangement pursuant to which he
will receive cash compensation of $2.5 million. Upon consummation of the
Merger, Mr. Caspersen will also receive a one-time grant of 750,000 options to
purchase shares of Household Common Stock (as adjusted for Household's 3-for-1
stock split effected in the form of a stock dividend and paid on June 1,
1998), to be issued under the Household 1996 Long Term Executive Incentive
Compensation Plan. Household has also agreed to provide Mr. Caspersen with an
office, secretarial support, a car and driver and other appropriate benefits
following the expiration of his consulting arrangement. To facilitate Mr.
Caspersen's involvement in the transition post-Merger, Household has also
agreed to make a company plane available to Mr. Caspersen.
At the Effective Time, Mr. Gilliam will enter into a two-year consulting
arrangement pursuant to which Mr. Gilliam will receive cash compensation of $1
million per annum. Household has also agreed to provide Mr. Gilliam with a
minimum pension of $500,000 per year commencing at age 55. In addition, Mr.
Farris will enter into a one-year consulting arrangement commencing on January
1, 1999 (until which time he is expected to continue to serve in his current
role) and providing for cash compensation of $1 million.
Household has also expressed its intention to provide certain other
executives of Beneficial with opportunities to continue with the combined
company. See "MANAGEMENT AND OPERATIONS AFTER THE MERGER."
Outstanding Stock-Based Awards. Pursuant to the Agreement, at the Effective
Time, each of the Beneficial Stock Options which is outstanding and
unexercised at the Effective Time shall be converted automatically into a New
Option in an amount and at an exercise price determined in accordance with the
terms of the Agreement. See "--Description of the Merger."
Pursuant to the Agreement and prior to the Effective Time, Beneficial will
take all actions necessary to amend the terms of the Beneficial Stock Option
Plans to eliminate the cash settlement of
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options granted thereunder as a result of or in connection with the Merger and
to provide that any such right will be settled in stock with a fair market
value equal to the cash that would otherwise have been payable thereunder.
Beneficial will use all reasonable efforts to obtain the consent of certain
holders of options granted under the Beneficial Stock Option Plans to the
foregoing treatment of such cash settlement right.
Severance Arrangements. Household has agreed to assume and honor the
obligations of Beneficial and its subsidiaries under all employment,
severance, consulting, retirement and other compensation contracts,
arrangements, commitments or understandings, in accordance with their terms.
Household has acknowledged that the Merger will constitute a "change in
control" in accordance with the provisions of certain specified Beneficial
plans and has agreed, after consummation of the Merger, to pay all amounts
provided under such Beneficial plans and agreements as a result of a change in
control of Beneficial, as applicable, in accordance with their respective
terms, and to honor all rights, privileges and modifications to or with
respect to any such Beneficial plans or agreements which become effective as a
result of such change in control. Beneficial has severance agreements (each, a
"Severance Agreement") with approximately 114 key officers of Beneficial and
its subsidiaries, including Messrs. Caspersen, Farris, Halvorsen and Gilliam
and Ms. Patti Prairie, Beneficial's Chief Information Officer. As amended and
restated as of March 26, 1996, the Severance Agreements provide, among other
things, for severance payments in the event of termination by Beneficial other
than for "cause" (as defined in the Severance Agreements) or by such officer
for "good reason" (as defined in the Severance Agreements) following a "change
in control" of Beneficial (as defined in the Severance Agreements). Severance
benefits under the Severance Agreements consist principally of (i) (A) with
respect to Tier I employees, three times the sum of the officer's (x) annual
base salary, (y) the highest of the three most recent awards under the
Beneficial Corporation Key Employees Stock Bonus Plan (the "Key Plan") and (z)
the most recent annual award under any cash incentive plan (no such plan
currently exists for U.S. executives, but would be covered if one should ever
be adopted); (B) with respect to Tier II employees, two times the sum of the
officer's (x) annual base salary and (y) the highest of the three most recent
awards under the Key Plan; (ii) lump sum payment equal to (a) the aggregate
nonvested share units credited to the officer's Employees' Stock Purchase Plan
and (b) the aggregate value of the officer's account under the Beneficial Key
Plan; (iii) with some restrictions, three years of continued coverage under
Beneficial's benefit plans; and (iv) three years of credit for eligibility for
retiree medical coverage. In addition to the foregoing, each of the Severance
Agreements for Messrs. Caspersen, Farris, Halvorsen and Gilliam and Ms.
Prairie provides (i) that if such person remains with Beneficial for three
months following a "change in control," such person may terminate employment
for any reason during the fourth month and upon such termination receive the
severance benefits set forth above and (ii) for additional cash payments to
offset any federal excise tax that may be imposed by reason of payments made
in connection with a "change in control" of Beneficial.
Under the Beneficial Corporation Directors' Annuity Plan, as adopted on May
23, 1996, as a result of the change in control of Beneficial, all non-employee
directors and directors emeriti will receive quarterly payments ranging from
$4,250 to $8,500, or an aggregate of $151,250 per quarter, depending on their
years of service, for the remainder of their lives, in consideration for and
subject to their continued availability to the combined company for purposes
of consultation. Dr. Charles H. Watts, a director of Beneficial, will receive
quarterly payments of $12,500 due to his prior service as a "General Director"
of Beneficial.
Severance Pay Plan. Household has agreed to provide to each individual who
is an employee of Beneficial or any of its subsidiaries in the United States
immediately prior to the Effective Time and whose employment is involuntarily
terminated other than for cause or non-performance during a period of two
years following the Effective Time (the "Continuation Period"), severance
benefits no less favorable to such individual than the existing Beneficial
Severance Pay Plan. During the Continuation
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Period, if the continuing employment of any of the Beneficial Employees is not
at the same or higher salary or wages, and on substantially the same terms and
conditions, including but not limited to reasonable geographic proximity to a
Beneficial Employee's employment location as of the date of the Agreement, and
any such Beneficial Employee declines to continue employment on that basis,
the termination of such Beneficial Employee's employment will be an
involuntary termination, other than for cause, for purposes of the Beneficial
Plans.
Indemnification and Insurance. The Agreement provides that Household will,
for six years after the Effective Time, indemnify directors and officers of
Beneficial against certain liabilities with respect to events occurring prior
to or at the Effective Time, in connection with such persons' status as such
or in connection with the Agreement or any of the transactions contemplated
thereby, to the full extent permitted by the DGCL, the Beneficial Charter or
Beneficial By-laws or any indemnification agreement to which Beneficial was a
party on the date of execution of the Agreement. Pursuant to the Agreement,
Household will also, for six years after the Effective Time, honor all rights
to indemnification, and all limitations with respect thereto, existing in
favor of the foregoing persons as provided in the Beneficial Charter, the
Beneficial By-laws and any indemnification agreement existing at the time of
the execution of the Agreement, to the extent such rights and limitations are
consistent with the DGCL. Household has also agreed, for six years after the
Effective Time, to maintain Beneficial's directors' and officers' liability
insurance, or a substantially similar policy in substitution therefor,
provided that Household will not be required to pay an annual premium for such
policy in excess of 200% of the last annual premium paid prior to the date of
the Agreement but in such case will be obligated to purchase as much coverage
as possible for such amount. See "--Conduct of Business Prior to the Merger
and Other Covenants."
Beneficial Foundation and Other Charitable Activities. Pursuant to the
Agreement, the parties have agreed that the Beneficial Foundation, Inc., a
not-for-profit corporation created and funded under the laws of the State of
Delaware in 1951 by certain senior officers of Beneficial (the "Foundation"),
will continue as a separate legal entity independent of Beneficial and
Household under the direction of its own board of directors. The current
directors of the Foundation include Messrs. Caspersen and Gilliam, Robert A.
Tucker, who currently is also a director of Beneficial, and Wheeler K. Neff,
Senior Vice President and Assistant General Counsel of Beneficial. Household
has further agreed to honor and to cause Beneficial to honor its obligations
to pay in a timely fashion all currently outstanding charitable pledges of
Beneficial and its subsidiaries to the extent they remain unpaid at the
Effective Time, and to fund by transfers to the Foundation all multi-year
scholarships awarded by the Foundation to children of employees of Beneficial
and its subsidiaries outstanding at the Effective Time, up to a combined
maximum of $3,000,000.
HOUSEHOLD AND BENEFICIAL STOCK OPTION AGREEMENTS
Concurrently with the execution of the Agreement, Household executed and
delivered the Household Stock Option Agreement, pursuant to which Household
granted to Beneficial the Household Option. At the same time, Beneficial
executed and delivered the Beneficial Stock Option Agreement, pursuant to
which Beneficial granted to Household the Beneficial Option. Household and
Beneficial approved and entered into the Household Stock Option Agreement and
the Beneficial Stock Option Agreement, respectively, as an inducement to the
other to enter into the Agreement.
Except as otherwise noted below, the terms and conditions of the Household
Stock Option Agreement and the Beneficial Stock Option Agreement are identical
in all material respects. For purposes of this section, except as otherwise
noted, (i) the Household Stock Option Agreement or the Beneficial Stock Option
Agreement, as the case may be, is sometimes referred to as the "Issuer Option
Agreement," (ii) Household, as issuer of the Household Common Stock, and
Beneficial, as issuer of the Beneficial Common Stock, upon the exercise of the
Household Stock Option and the
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Beneficial Stock Option, respectively, are sometimes individually referred to
as the "Issuer," (iii) Household and Beneficial, as the holder of the
Beneficial Stock Option and the Household Stock Option, respectively, are
sometimes individually referred to as the "Optionee," (iv) the Household
Option or the Beneficial Option, as the case may be, is sometimes referred to
as the "Issuer Option" and (v) Household Common Stock and Beneficial Common
Stock is referred to as "Issuer Common Stock."
The Stock Option Agreements are intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Agreement.
Consequently, certain aspects of the Stock Option Agreements may have the
effect of discouraging persons who might now or at any other time prior to the
Effective Time be interested in acquiring all of or a significant interest in
Household or Beneficial from considering or proposing such an acquisition,
even if, in the case of Beneficial, such persons were prepared to offer to pay
consideration to the Beneficial Stockholders which had a higher current market
price than the shares of Household Common Stock to be received per share of
Beneficial Common Stock pursuant to the Agreement. The acquisition of
Household or Beneficial could cause the Household Option or the Beneficial
Option, as the case may be, to become exercisable. The existence of the Issuer
Options could significantly increase the cost to a potential acquiror of
acquiring either Issuer compared to its cost had the Stock Option Agreements
and the Agreement not been entered into. Such increased cost might discourage
a potential acquiror from considering or proposing an acquisition or might
result in a potential acquiror proposing to pay a lower per share price to
acquire such Issuer than it might otherwise have proposed to pay. Moreover,
following consultation with their respective independent accountants,
Beneficial and Household believe that the exercise or repurchase of either of
the Issuer Options is likely to prohibit any other acquiror of an Issuer from
accounting for an acquisition of such Issuer using the pooling of interests
accounting method for a period of two years.
The Household Stock Option Agreement provides for the purchase by Beneficial
of 64,069,608 shares (as adjusted for Household's 3-for-1 stock split effected
in the form of a stock dividend and paid on June 1, 1998) (the "Household
Option Shares" or the "Issuer Option Shares," as the case may be) of Household
Common Stock at an exercise price of $48.92 per share (the closing price of
Household Common Stock on the last trading day preceding the execution of the
Agreement, as adjusted for the stock split), payable in cash. The Household
Option Shares, if issued pursuant to the Household Stock Option Agreement,
will in no event exceed 19.9% of the Household Common Stock issued and
outstanding without giving effect to the issuance of any Household Common
Stock subject to the Household Option.
The Beneficial Stock Option Agreement provides for the purchase by Household
of 10,818,800 shares (the "Beneficial Option Shares" or the "Issuer Option
Shares," as the case may be) of Beneficial Common Stock at an exercise price
of $130.50 per share (the closing price of Beneficial Common Stock on the last
trading day preceding the execution of the Agreement), payable in cash. The
Beneficial Option Shares, if issued pursuant to the Beneficial Stock Option
Agreement, will in no event exceed 19.9% of the Beneficial Common Stock issued
and outstanding without giving effect to the issuance of any Beneficial Common
Stock subject to the Beneficial Option.
The number of shares of Issuer Common Stock subject to the applicable Issuer
Option will be increased or decreased, as appropriate, to the extent that
additional shares of Issuer Common Stock are either (i) issued or otherwise
become outstanding (other than pursuant to the Issuer Option Agreement or as
permitted under the Merger Agreement) or (ii) redeemed, repurchased, retired
or otherwise cease to be outstanding after April 7, 1998, such that, after
such issuance, the number of Beneficial Option Shares will continue to equal
19.9% of the Beneficial Common Stock then issued and outstanding in the case
of the Beneficial Stock Option and the number of Household Option Shares will
continue to equal 19.9% of the Household Common Stock then issued and
outstanding in the case
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of the Household Option, in each case, without giving effect to the issuance
of any stock subject to the applicable Issuer Option. In the event of any
change in, or distributions in respect of, the number of shares of Issuer
Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, subdivision, conversion, exchange of shares,
distribution on or in respect of such Issuer Common Stock that would be
prohibited by the Merger Agreement, or similar transaction, the type and
number of Issuer Option Shares purchasable upon exercise of the applicable
Issuer Option, and the applicable option price will also be adjusted in such a
manner as will fully preserve the economic benefits of the Option.
Each Issuer Option Agreement provides that the Optionee or any other holder
or holders of the Issuer Option (as used in this section, collectively, the
"Holder") may exercise the Issuer Option, in whole or in part, subject to
regulatory approval, only if both an Initial Triggering Event (as defined
herein) and a Subsequent Triggering Event (as defined herein) have occurred
prior to the occurrence of an Exercise Termination Event (as defined herein);
provided that the Holder has sent to the Issuer written notice of such
exercise within 90 days following such Subsequent Triggering Event (subject to
extension as provided in each Issuer Option Agreement). The terms "Initial
Triggering Event" and "Subsequent Triggering Event" generally relate to
attempts by one or more third parties to acquire a significant interest in the
Issuer. Any exercise of the Issuer Option will be deemed to occur on the date
such notice is sent.
For purposes of each Issuer Option Agreement:
(i) The term "Initial Triggering Event" means the occurrence of any of
the following events or transactions after April 7, 1998: (a) the Issuer or
any subsidiary of the Issuer, without the Optionee's prior written consent,
enters into an agreement to engage in, or the Issuer's Board of Directors
recommends that stockholders of the Issuer approve or accept, an
Acquisition Transaction (as defined herein) with any person or group (other
than as contemplated by the Agreement); (b) the Issuer or any subsidiary of
the Issuer, without the Optionee's prior written consent, authorizes,
recommends, proposes or publicly announces its intention to authorize,
recommend or propose to engage in an Acquisition Transaction, or the
Issuer's Board of Directors publicly withdraws or modifies, or publicly
announces its intention to withdraw or modify, in any manner adverse to the
Optionee, its recommendation that its stockholders approve the Agreement in
anticipation of engaging in an Acquisition Transaction; (c) any person,
other than the Optionee, any subsidiary of the Optionee or any Issuer
subsidiary acting in a fiduciary capacity in the ordinary course of
business acquires beneficial ownership, or the right to acquire beneficial
ownership, of 10% or more of the outstanding shares of the Issuer's Common
Stock; (d) any person other than the Optionee or any subsidiary of the
Optionee made a bona fide proposal to the Issuer or its stockholders by
public announcement or written communication that becomes the subject of
public disclosure to engage in an Acquisition Transaction; (e) the Issuer
breaches any covenant or obligation in the Agreement after any person,
other than the Optionee or any subsidiaries of the Optionee, has proposed
an Acquisition Transaction, and such breach (1) would entitle the Optionee
to terminate the Agreement and (2) is not remedied prior to the date of the
Optionee's notice to the Issuer of the exercise of the Option; or (f) any
person other than the Optionee or any subsidiary of the Optionee, other
than in connection with a transaction to which the Optionee has given its
prior written consent, files an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(ii) For purposes of each Issuer Option Agreement, the term "Acquisition
Transaction" means (a) a merger or consolidation, or any similar
transaction with the Issuer or any of its Significant Subsidiaries (as
defined in Rule 1-02 of Regulation S-X of the Commission); (b) a purchase,
lease or other acquisition or assumption of all or substantially all of the
assets or deposits of the Issuer or any of its Significant Subsidiaries;
(c) a purchase or other acquisition of securities representing
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10% or more of the voting power of the Issuer; or (d) any substantially
similar transaction, provided, however, that in no event will any merger,
consolidation, purchase or similar transaction involving only the Issuer
and one or more of its subsidiaries or involving only any two or more of
such subsidiaries, be deemed to be an Acquisition Transaction, provided
that any such transaction is not entered into in violation of the terms of
the Agreement.
(iii) The term "Subsequent Triggering Event" means the occurrence of
either of the following events or transactions after April 7, 1998: (a) the
acquisition by any person of beneficial ownership of 25% or more of the
then outstanding shares of Issuer Common Stock; or (b) the occurrence of
the Initial Triggering Event described above in clause (i)(a), except that
the percentage referred to in clause (ii)(c) of the definition of
"Acquisition Transaction" set forth above will be 25%.
Each Issuer Option will expire upon the occurrence of an "Exercise
Termination Event," which includes: (i) the Effective Time of the Merger; (ii)
termination of the Agreement in accordance with the provisions thereof if such
termination occurs prior to the occurrence of an Initial Triggering Event; or
(iii) the date that is 12 months after the termination of the Agreement if
such termination occurs after the occurrence of an Initial Triggering Event
(provided that, if an Initial Triggering Event continues or occurs beyond such
termination of the Agreement and prior to the passage of such 12-month period,
the Issuer Option will terminate 12 months from the expiration of the last
Initial Triggering Event to expire, but in no event more than 18 months after
such termination of the Agreement).
As of the date of this Joint Proxy Statement-Prospectus, to the best
knowledge of Household and Beneficial, no Initial Triggering Event or
Subsequent Triggering Event has occurred.
Immediately prior to the occurrence of a Repurchase Event (as defined
herein), (i) following a request of a Holder, delivered prior to an Exercise
Termination Event, the Issuer (or any successor thereto) will repurchase the
Issuer Option from the Holder at a price (the "Issuer Option Repurchase
Price") equal to the amount by which (a) the market/offer price (as defined
herein) exceeds (b) the option price, multiplied by the number of shares for
which the Issuer Option may then be exercised and (ii) at the request of the
owner of Issuer Option Shares from time to time (the "Owner"), delivered
within 90 days of such occurrence (or such later period as provided in Section
10 of each of the Stock Option Agreements), the Issuer will repurchase such
number of the Issuer Option Shares from the Owner as the Owner will designate
at a price (the "Issuer Option Share Repurchase Price") equal to the
market/offer price multiplied by the number of Option Shares so designated.
The term "market/offer price" means the highest of (i) the price per share
of Issuer Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Issuer Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Issuer Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of the Issuer Option or the Owner gives notice of the required
repurchase of Issuer Option Shares, as the case may be, or (iv) in the event
of a sale of all or a substantial portion of the Issuer's assets, the sum of
the price paid in such sale for such assets and the current market value of
the remaining assets of the Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may
be, and the Issuer, divided by the number of shares of Issuer Common Stock
outstanding at the time of such sale. In determining the market/offer price,
the value of consideration other than cash will be determined by a nationally
recognized investment banking firm selected by the Holder or Owner, as the
case may be, and the Issuer. However, if the Issuer at any time after delivery
of a notice of repurchase as described in this paragraph is prohibited under
applicable law or regulation from delivering to the Holder and/or the Owner,
as appropriate, the Issuer Option Repurchase Price and the Issuer Option Share
Repurchase Price, respectively, in full, the Holder or Owner may revoke its
notice of repurchase of the Issuer Option or the Issuer Option Shares, either
in whole or to the extent of the prohibition, whereupon, in the latter case,
the Issuer will promptly (i) deliver to the Holder and/or the
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Owner, as appropriate, that portion of the Issuer Option Repurchase Price or
the Issuer Option Share Repurchase Price that the Issuer is not prohibited
from delivering and (ii) deliver, as appropriate, (a) to the Holder, a new
Issuer Option Agreement evidencing the right of the Holder to purchase that
number of shares of the Issuer Common Stock obtained by multiplying the number
of shares of the Issuer Common Stock for which the surrendered Issuer Option
Agreement was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Issuer Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the
denominator of which is the Issuer Option Repurchase Price, and (b) to the
Owner, a certificate for the Issuer Option Shares it is then so prohibited
from repurchasing. A "Repurchase Event" is deemed to have occurred (i) upon
the consummation of an Acquisition Transaction or (ii) upon the acquisition by
any person of the beneficial ownership of 50% or more of the then outstanding
Issuer Common Stock, provided that a Subsequent Triggering Event has occurred
prior to an Exercise Termination Event.
In the event that, prior to an Exercise Termination Event, the Issuer enters
into any agreement (i) to consolidate with or merge into any person, other
than the Optionee or one of its subsidiaries, such that Issuer is not the
continuing or surviving corporation of such consolidation or merger; (ii) to
permit any person, other than the Optionee or one of its subsidiaries, to
merge into the Issuer and the Issuer is the continuing or surviving
corporation, but, in connection with such consolidation or merger, the
outstanding shares of the Issuer Common Stock are changed into or exchanged
for stock or other securities of any other person or cash or any other
property, or the then outstanding shares of Issuer Common Stock after such
merger will represent less than 50% of the outstanding voting shares and
voting share equivalents of the merged corporation; or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than the Optionee or any of its subsidiaries, then, and in each such case, the
agreement governing such transaction must provide that, upon consummation of
such transaction and upon terms and conditions set forth in the Issuer Option
Agreement, the Option will be converted into, or exchanged for, an option
having substantially the same terms as the Option (the "Substitute Option") to
purchase securities, at the election of the Holder, of either the acquiring
person or any person that controls the acquiring person. At the request of the
Holder of the Substitute Option, the issuer of the Substitute Option will
repurchase it at a price, and subject to such other terms and conditions, as
set forth in the Issuer Option Agreement.
The Optionee may in no event obtain Total Profit or Notional Total Profit
(as defined herein) in excess of $240 million. "Total Profit" means the
aggregate amount (before taxes) of the following: (i) the amount received by
the Optionee pursuant to Issuer's repurchase of the Issuer Option (or any
portion thereof), (ii) (a) the amount received by Optionee pursuant to
Issuer's repurchase of Issuer Option Shares, less (b) Optionee's purchase
price for such Option Shares, (iii) (a) the net cash amounts received by
Optionee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
party, less (b) Optionee's purchase price of such Option Shares, (iv) any
amounts received by Optionee on the transfer of the Option (or any portion
thereof) to any unaffiliated party, and (v) any equivalent amount with respect
to the Substitute Option. "Notional Total Profit" with respect to any number
of shares as to which Optionee may propose to exercise the Option shall be the
Total Profit determined as of the date of such proposed exercise assuming that
the Option were exercised on such date for such number of shares and assuming
that such shares, together with all other Option Shares held by Optionee and
its affiliates as of such date, were sold for cash at the closing market price
for the Issuer Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
Within 90 days after the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Date (subject to extension as provided
in the Issuer Option Agreement), the Optionee may request the Issuer to
prepare, file and keep current with respect to the Option Shares, a
registration statement with the Commission. The Issuer is required to use its
reasonable best efforts to cause such registration statement to become
effective and then to remain effective for 180 days or
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such shorter time as may be reasonably necessary to effect such sales or other
disposition of Option Shares. The Optionee has the right to demand two such
registrations.
Neither the Issuer nor the Optionee may assign any of its rights and
obligations under the Issuer Option Agreements or the Issuer Option to any
other person without the express written consent of the other party, except
that, if a Subsequent Triggering Event occurs prior to an Exercise Termination
Event, the Optionee, subject to the terms of the Issuer Option Agreement, may
assign, in whole or in part, its rights and obligations thereunder, within 90
days (subject to extension as provided in the Issuer Option Agreement) of such
Subsequent Triggering Event; provided that, until the date 15 days after the
date on which the Federal Reserve Board approves an application by the
Optionee to acquire the Issuer Option Shares, the Optionee may not assign its
rights under the Issuer Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of the Issuer, (iii) an
assignment to a single party for the purpose of conducting a widely dispersed
public distribution on the Optionee's behalf, or (iv) any other manner
approved by the Federal Reserve Board.
Certain rights and obligations of the Optionee and the Issuer under the
Stock Option Agreements are subject to receipt of required regulatory
approvals. For example, the approval of the Federal Reserve Board may be
required for the acquisition by Household of the Beneficial Common Stock and
the approval of the Office of Thrift Supervision or the Office of the
Comptroller of the Currency may be required for the acquisition by Beneficial
of the Household Common Stock. See "--Regulatory Matters."
AMENDMENT TO BENEFICIAL RIGHTS AGREEMENT
Each share of Beneficial Common Stock has attached to it a Beneficial Right
issued pursuant to the Beneficial Rights Agreement. In connection with the
execution of the Agreement, Beneficial amended the Beneficial Rights Agreement
to provide, among other things, that, for so long as the Agreement and the
Beneficial Stock Option Agreement remain in effect, any acquisition of shares
of Beneficial Common Stock by Household or any of its affiliates upon
consummation of the Merger, exercise of the Beneficial Stock Option or
otherwise will not result in the ability of any person to exercise any
Beneficial Rights under the Beneficial Rights Agreement or enable or require
the Beneficial Rights to be separated from the shares of Beneficial Common
Stock to which they are attached or to be triggered or become exercisable.
REGULATORY MATTERS
The Merger is conditioned upon the filing of certain specified applications,
notices or registrations, the receipt of certain consents or approvals and the
expiration or termination of applicable waiting periods, as specified under
the Agreement (the "Requisite Regulatory Approvals"). The Requisite Regulatory
Approvals include the approval of the Office of Thrift Supervision (the "OTS")
under the Home Owners' Loan Act ("HOLA"). Based upon discussions with
appropriate bank regulatory agencies, no additional approvals from federal
bank regulatory agencies will be required to consummate the Merger if
Household merges Beneficial's commercial bank and its federal savings
association into Household's federal savings association. On April 20, 1998,
Household applied to the OTS under HOLA to acquire control of Beneficial. Also
on April 20, 1998, Household filed an application under the Bank Merger Act to
merge Beneficial's commercial bank and its federal savings association into
Household's federal savings association (the "Bank Merger"), which will occur
immediately after the consummation of the Merger. In the event that the Bank
Merger or other necessary disposition of Beneficial's commercial bank
subsidiary does not occur, the Merger would be subject to approval of the
Board of Governors of the Federal Reserve System under the Bank Holding
Company Act (the "BHC Act") and HOLA.
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Other Requisite Regulatory Approvals include filings with and approvals by
certain state insurance regulatory authorities and other domestic and foreign
regulatory authorities, as specified in the Agreement and described below.
Bank Regulatory Approvals. Household and Beneficial are both unitary thrift
holding companies subject to regulation by the OTS, as a result of each owning
a federal savings association. The Merger is subject to approval by the OTS
under HOLA. In reviewing the proposed transaction under the applicable
statutes, the OTS will consider the financial and managerial resources and
future prospects of the existing and proposed organizations and the
convenience and needs of the communities to be served. In considering
financial and managerial factors, the OTS will assess the degree to which
Household is taking appropriate steps to assure that electronic data
processing systems and those of their vendors can safely accommodate the
upcoming change to the new millennium and plans for ensuring Year 2000
readiness of the resulting organization. In addition, the OTS will evaluate,
among other things, the adequacy of the capital of the parties to the
transaction.
The OTS is prohibited from approving any transaction if it would result in a
monopoly or would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States or if its effect in any section of the United States would
be substantially to lessen competition, or to tend to create a monopoly, or
result in a restraint of trade, unless the OTS finds that the anti-competitive
effects of the transaction are clearly outweighed in the public interest by
the probable effect of the transaction in meeting the convenience and needs of
the communities to be served.
In addition, under the Community Reinvestment Act of 1977, as amended (the
"CRA"), the OTS must take into account the record of performance of each of
the depository institution subsidiaries of Household and Beneficial in meeting
the credit needs of the entire community of that institution, including low
and moderate income neighborhoods. OTS regulations require publication of
notice of, and the opportunity for public comment on, the application
submitted for approval of the Merger and authorize the OTS to hold a public
hearing in connection therewith. Any such hearing or comments provided by
third parties could prolong the period during which the application is subject
to review by the OTS.
As noted above, Household also has applied to the OTS for approval of the
Bank Merger and, in the event that the Bank Merger or other necessary
disposition of Beneficial's commercial bank subsidiary (other than the credit
card bank) does not occur, the Merger would be subject to approval of the
Board of Governors of the Federal Reserve System under the BHC Act and HOLA.
United States Consumer Finance and Mortgage Lending Operations. The consumer
finance operations currently hold licenses to operate as required by the laws
of the states in which they operate. The combined entity will continue to
operate under these licenses following the Merger. Pursuant to such licenses
and applicable state law, prior approval or post merger notification of
applicable state regulators may be required in some or all of the states where
Beneficial and Household conduct consumer finance or mortgage lending
operations. As of the date of this Joint Proxy Statement-Prospectus, Household
and Beneficial had made all required Merger-related filings with respect to
such licenses, with required pre-Merger approvals pending in Delaware,
Florida, Hawaii, Michigan, New Jersey and New York.
United States Insurance Operations. The Merger is subject to regulatory
approval by the respective insurance regulators in the states of Delaware, New
York, and Ohio and as of May 1, 1998, Household had filed all required
applications that must be filed with such regulators in connection therewith.
The insurance regulators in Delaware held a hearing on Household's application
in such state on May 29, 1998. In addition, notice of the Merger was mailed on
April 23, 1998 to the insurance
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regulators of the following states: Kansas, Maryland, Missouri, New Jersey,
Pennsylvania and Virginia. In general, these states have 30 days from receipt
of notice to object to the Merger or request additional information. No such
notices or requests have been received by Household or Beneficial. Several
other states may require post-merger change in control notification.
United Kingdom Operations. Household and Beneficial each have banking
operations in the UK that are regulated by the Bank of England. The Bank of
England will review an application with respect to the Merger from the
perspective of its safety and soundness standards. Household filed a
preliminary application with the Bank of England on April 27, 1998 and expects
to file a formal application on June 9, 1998. A decision by the Bank of England
with respect to Household's filings is expected to be made within several days
following such final application.
On May 18, 1998, the UK Office of Fair Trade approved the Merger with respect
to the combined UK operations.
Republic of Ireland Insurance Operations. Beneficial owns an insurance
company in the Republic of Ireland. Such insurance company is regulated by the
Minister of Finance and the Department of Enterprise and Employment (Insurance
Division). On April 27, 1998, the parties filed a merger notification which
will be reviewed for safety and soundness. A decision must be made within three
months of the notice.
Germany. Because certain assets of Beneficial's German consumer banking
operations were retained by Beneficial upon sale of that business, a filing was
made on April 23, 1998 with the German Federal Cartel Office (the "FCO"). The
FCO approved the Merger on May 6, 1998.
United States Antitrust Review. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules that have
been promulgated thereunder by the Federal Trade Commission (the "FTC"), the
Merger may not be consummated unless certain filings have been submitted to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. On April 17, 1998, Household and Beneficial submitted the required
filings to the FTC and the Antitrust Division and on May 14, 1998, Household
and Beneficial received notice from the FTC that the applicable waiting period
under the HSR Act was terminated.
Notwithstanding the termination of the applicable waiting period under the
HSR Act, at any time before or after the completion of the Merger, the
Antitrust Division or the FTC could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking the divestiture of substantial
assets of Household or Beneficial. Private parties and state attorneys general
may also bring actions under the U.S. antitrust laws under certain
circumstances. Although Household and Beneficial believe that the Merger does
not violate U.S. antitrust laws, there can be no assurance that a challenge to
the Merger on antitrust grounds will not be made or if such a challenge is
made, that it would not be successful.
General. There can be no assurance that any governmental agency will approve
or take any other required action with respect to the Merger, and, even if such
approvals are received or such action is taken, there can be no assurance as to
the date of such approvals or action, that such approvals or action will not be
conditioned upon matters that would cause the parties to mutually consent to
abandon the Merger or that no action will be brought challenging such approvals
or action or, if such a challenge is made, the result thereof.
See "--The Effective Time," "--Conditions to the Merger" and "--Termination
of the Agreement."
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RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Household Common Stock issuable to the holders of Beneficial
Common Stock and Beneficial Convertible Preferred Stock upon consummation of
the Merger have been registered under the Securities Act. Such securities may
be traded freely without restriction by those stockholders who are not deemed
to be "affiliates" of Household or Beneficial, as that term is defined in the
rules promulgated under the Securities Act.
Shares of Household Common Stock received by those Beneficial Stockholders
who are deemed to be "affiliates" of Beneficial at the time of the Beneficial
Special Meeting may be resold without registration under the Securities Act
only as permitted by Rule 145 under the Securities Act or as otherwise
permitted under the Securities Act. Commission guidelines regarding qualifying
for the "pooling of interests" method of accounting also limit sales of shares
of the acquiring and acquired company by affiliates of either company in a
business combination. Commission guidelines also indicate that the "pooling of
interests" method of accounting generally will not be challenged on the basis
of sales by affiliates of the acquiring or acquired company if such affiliates
do not dispose of any of the shares of the corporation they own, or shares of
a corporation they receive in connection with a merger, during the period
beginning 30 days before the merger is consummated and ending when financial
results covering at least 30 days of post-merger operations of the combined
companies have been published.
Beneficial prepared and delivered to Household, prior to mailing of this
Joint Proxy Statement-Prospectus, a list (reasonably satisfactory to counsel
for Household) identifying each person who, at the time of the Beneficial
Stockholders Meeting, may be deemed to be an "affiliate" of Beneficial, as
such term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act and for purposes of qualifying the Merger for "pooling of interests"
accounting treatment (the "Beneficial Rule 145 Affiliates"). Each person who
is identified as a Beneficial Rule 145 Affiliate on such list has delivered to
Household a written agreement, in customary form, intended to ensure
compliance with the Securities Act and to preserve the ability of the Merger
to be accounted for as a pooling of interests.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Household has agreed to cause Messrs. Caspersen, Gilliam and Clark, to be
elected or appointed as directors of Household at the Effective Time and to
cause Mr. Farris to be elected or appointed as a director of Household on
January 1, 1999, at the commencement of his proposed consulting arrangement
referred to below. Mr. Caspersen will be elected Chairman of the Household
Board for one year following the Effective Time and thereafter will continue
to serve as a director of Household and will enter into a one-year consulting
arrangement, and Mr. Gilliam will enter into a two-year consulting arrangement
with Household. Mr. Farris, who is expected to continue to serve in his
current role until January 1, 1999, will enter into a one-year consulting
arrangement to commence on January 1, 1999. Mr. Aldinger will continue as
Chief Executive Officer of Household with all other officers and directors of
Household retaining their current positions.
While no assurance can be given, Household and Beneficial, based on
information available at this time, expect to achieve annual pre-tax cost
savings of approximately $450 million (approximately $300 million after-tax),
or approximately 42% of Beneficial's 1997 operating expenses, as a result of
the Merger. Based on Household management's current estimates, approximately
90% of the operating cost savings are expected to be achieved on a run-rate
basis by the end of 1999 (which estimates as to timing and amount have been
modestly refined since the public announcement of the Merger and the time that
the analyses were performed by Household's and Beneficial's financial advisors
in connection with their respective fairness opinions). These savings should
continue to benefit the combined company in future years. The combined company
expects to achieve these
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savings in the areas of corporate overhead, infrastructure leverage,
administrative consolidations and consolidating redundant branch facilities.
This will include (i) combining corporate staff functions, (ii) combining
administrative and sales functions of the UK, insurance and private label
credit card businesses, (ii) leveraging the technological capabilities of
Household to accelerate Beneficial's planned centralization effort and
compliance with Year 2000 issues, (iv) utilizing the existing major facilities
of both Household and Beneficial to meet the demands of the combined company's
existing business as well as the anticipated growth of this business, and (v)
maximizing the efficiency of Beneficial's consumer finance branch network by
focusing branch personnel on sales efforts and closing overlapping offices of
either Household or Beneficial. The extent to which such cost savings will be
achieved is dependent upon various factors, some of which are beyond the
control of Household and Beneficial, including regulatory requirements
attendant to the consummation of the Merger, the general regulatory
environment, economic conditions and unanticipated changes in business
conditions and inflation. No assurances can be given with respect to the
ultimate level and composition of cost savings to be realized or that such
savings will be realized in the time frame currently anticipated. Amounts
attributed to potential cost savings have not been included in any of the
unaudited pro forma financial information included in this Joint Proxy
Statement-Prospectus.
For additional information regarding management and operations of the
combined company, see "INFORMATION ABOUT HOUSEHOLD" and "INFORMATION ABOUT
BENEFICIAL."
64
<PAGE>
PRICE RANGE OF STOCK AND DIVIDENDS
MARKET PRICES
Household Common Stock is listed on the NYSE and the CSE under the trading
symbol "HI." As of May 28, 1998, Household Common Stock was held of record by
approximately 9,962 persons. Beneficial Common Stock is listed on the NYSE
under the symbol "BNL." As of May 26, 1998, Beneficial Common Stock was held
of record by approximately 12,769 persons. The following tables set forth the
high and low sale prices for Household Common Stock, Beneficial Common Stock
and Beneficial Convertible Preferred Stock as reported by the NYSE Composite
Transactions List for the periods indicated. All Household Common Stock prices
have been adjusted for Household's 3-for-1 stock split effected in the form of
a stock dividend and paid on June 1, 1998. On February 13, 1998, the last
trading day prior to the public announcement that Beneficial was exploring its
strategic alternatives, the closing price of the Beneficial Common Stock was
$82.25, as reported on the NYSE Composite Transactions List and the closing
price of the Beneficial Convertible Preferred Stock was $737.50 per share. On
April 6, 1998, the last trading day preceding public announcement of the
proposed Merger, the closing price of the Household Common Stock was $48.92
per share (adjusted for the stock split), the closing price of the Beneficial
Common Stock was $130.50 per share and the closing price of the Beneficial
Convertible Preferred Stock was $1,132.00 per share, each as reported on the
NYSE Composite Transactions List. On May 29, 1998, the most recent practicable
date prior to the mailing of this Joint Proxy Statement-Prospectus, the
closing price of the Household Common Stock was $45.10 per share (adjusted for
the stock split), the closing price of the Beneficial Common Stock was $134.00
per share and the closing price of the Beneficial Convertible Preferred Stock
was $1,222.00 per share, each as reported on the NYSE Composite Transactions
List.
<TABLE>
<CAPTION>
HOUSEHOLD
SALES
PRICES
-----------
HIGH LOW
----- -----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
First Quarter............................................... 23.83 17.33
Second Quarter.............................................. 25.50 21.00
Third Quarter............................................... 27.96 22.83
Fourth Quarter.............................................. 32.71 27.50
YEAR ENDED DECEMBER 31, 1997:
First Quarter............................................... 36.08 28.33
Second Quarter.............................................. 39.15 26.21
Third Quarter............................................... 43.33 36.15
Fourth Quarter.............................................. 43.21 36.13
YEAR ENDING DECEMBER 31, 1998:
First Quarter............................................... 49.46 37.71
Second Quarter (through May 29, 1998)....................... 49.02 41.67
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL
BENEFICIAL CONVERTIBLE
COMMON STOCK PREFERRED STOCK
SALES PRICES SALES PRICES
--------------- -------------------
HIGH LOW HIGH LOW
------- ------- --------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
First Quarter...................... 58 3/8 43 1/2 504 1/2 419
Second Quarter..................... 61 1/4 54 1/8 503 1/2 490 1/2
Third Quarter...................... 59 1/2 50 7/8 516 501
Fourth Quarter..................... 66 1/2 57 1/8 577 527
YEAR ENDED DECEMBER 31, 1997:
First Quarter...................... 76 61 675 563
Second Quarter..................... 72 1/4 59 1/2 642 580
Third Quarter...................... 78 1/8 69 682 1/2 645
Fourth Quarter..................... 84 1/8 73 3/8 740 703
YEAR ENDING DECEMBER 31, 1998:
First Quarter...................... 131 1/8 75 7/16 1,132 704
Second Quarter (through May 29,
1998)............................. 140 1/8 123 1,222 1,181
</TABLE>
DIVIDENDS
The following table sets forth dividends declared per share of Household
Common Stock and Beneficial Common Stock, respectively, for the periods
indicated. The dividend information for Household has been adjusted for
Household's 3-for-1 stock split effected in the form of a stock dividend and
paid on June 1, 1998. The ability of either Household or Beneficial to pay
dividends to its respective stockholders is subject to certain restrictions.
See "SUPERVISION AND REGULATION OF HOUSEHOLD AND BENEFICIAL."
<TABLE>
<CAPTION>
HOUSEHOLD BENEFICIAL
DIVIDENDS DIVIDENDS
--------- ----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
First Quarter...................................... .11 .47
Second Quarter..................................... .11 .47
Third Quarter...................................... .13 .52
Fourth Quarter..................................... .13 .52
YEAR ENDED DECEMBER 31, 1997:
First Quarter...................................... .13 .52
Second Quarter..................................... .13 .52
Third Quarter...................................... .14 .57
Fourth Quarter..................................... .14 .57
YEAR ENDING DECEMBER 31, 1998:
First Quarter...................................... .15 .57
Second Quarter (through May 29, 1998).............. .15 .57
</TABLE>
On May 21, 1998, the Beneficial Board declared a regular quarterly cash
dividend of $.57 per share payable on June 30, 1998 to holders of record on
June 1, 1998. Holders of record of Beneficial Common Stock on such date will
be entitled to receive such dividend whether or not the Merger is consummated.
66
<PAGE>
INFORMATION ABOUT HOUSEHOLD
GENERAL
Household is a corporation organized as a holding company under the laws of
the State of Delaware in 1981, as a result of a stockholder approved
restructuring of Household Finance Corporation, which was established in 1878.
Household has as its principal assets the stock of its subsidiaries. Through
its subsidiaries, Household primarily provides consumers with several types of
loan products. At March 31, 1998, Household employed approximately 14,900
people and serviced approximately 23.2 million customer accounts with $46.3
billion in managed receivables and $25.6 billion in owned receivables. The
principal executive offices of Household are located at 2700 Sanders Road,
Prospect Heights, Illinois 60070, and its telephone number is (847) 564-5000.
Household and its subsidiaries are subject to regulation by various federal
and state regulatory authorities. See "SUPERVISION AND REGULATION OF HOUSEHOLD
AND BENEFICIAL."
OPERATIONS
Household is a provider of consumer financial services, primarily offering
consumer lending products to "middle-market consumers" in the United States,
Canada and the UK. Household offers the following types of consumer loans:
home equity loans, auto finance loans, MasterCard/VISA* credit cards, private
label credit cards and other unsecured products. Household manages its
operations under the following business lines:
Branch Based Consumer Finance in the United States. Household Finance
Corporation operates a branch based consumer finance business. It focuses
primarily on revolving and closed-end home equity and unsecured lines of
credit, which are offered on both a fixed and floating rate basis. Loan
products are marketed primarily through a network of 644 branch lending
offices located in 45 states as well as direct mail and telemarketing
solicitations. Household Finance Corporation also purchases loans and credit
lines originated by other lenders.
Private Label. Household Retail Services ("HRS") operates a revolving
private label credit card business in all 50 states. HRS purchases and
services revolving charge accounts originated by merchants. These accounts are
established in connection with consumer purchases of electronics, furniture,
appliances, home improvement products and other durable merchandise, and are
generally without recourse to the originating merchant. HRS also originates
closed-end sales contracts and offers credit insurance products. These
products are marketed through dealer networks and retail stores, as well as by
direct mail. Household's banking subsidiaries also originate private label
credit card accounts directly with consumers.
Credit Cards. MasterCard and Visa credit cards are offered in the United
States and Puerto Rico by Household's national credit card banks and its
federally chartered savings bank. Corporate and small business credit cards
and revolving lines of credit are also offered by the federal savings bank.
Household Credit Services, which manages the credit card operations, solicits
applications through direct mail, telemarketing and event marketing efforts,
as well as on-counter displays. It has developed strategic affinity and co-
branding relationships in order to build its MasterCard/VISA business under
alliances with industry leaders generating such products as the AFL-CIO's
Union Privilege affinity credit card and the co-branded GM Card with General
Motors Corporation.
International. Household's UK operation offers secured and unsecured lines
of credit, secured and unsecured closed-end loans and credit cards (including
the GM Card from Vauxhall and
- --------
*MasterCard and VISA are registered trademarks of MasterCard International,
Incorporated and VISA USA, Inc., respectively.
67
<PAGE>
the Goldfish Card, issued in alliance with Centrica Group, the United
Kingdom's major natural gas supplier). Such operations are conducted in
England, Scotland, Wales and Northern Ireland. Loans are marketed through a
branch network consisting of 143 branches, merchants and direct mail.
Household's Canadian consumer finance business offers home equity and
unsecured lines of credit, secured and unsecured closed-end loans and private
label credit cards that are marketed through 74 branch offices in 10
provinces, direct mail and telemarketing.
Auto Finance. Household offers loans to non-prime borrowers secured by
automobiles throughout the United States which are marketed principally
through dealer networks.
Credit Insurance. Where applicable laws permit, Household offers credit
life, credit accident, health and disability, term and specialty insurance
products to its customers. Such products are currently offered in 47 states,
Canada and the United Kingdom. Insurance is generally directly written by or
reinsured with one or more subsidiaries.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to Household is incorporated by reference or set forth in
the Household Annual Report on Form 10-K for the year ended December 31, 1997,
incorporated herein by reference. Stockholders of Household and Beneficial
desiring copies of such documents may contact Household at its address or
telephone number indicated under "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
MERGER SUB
Merger Sub, a Delaware corporation, is a wholly-owned subsidiary of
Household created for the express purpose of consummating the Merger and has
not engaged in any significant business activity and has no material assets or
liabilities other than those incident to its formation.
68
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of Household at and for the preceding five years ended December 31, 1997. The
statement of income and balance sheet data have been derived from Household's
audited Consolidated Financial Statements and Notes thereto. The information
for the preceding five years ended December 31, 1997 set forth below should be
read in conjunction with Household's 1997 Consolidated Financial Statements
and Notes thereto, and other financial information incorporated by reference
or included in this Prospectus. The selected financial data for Household for
the three months ended March 31, 1997 and 1998 are unaudited and should be
read in conjunction with Household's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998, which is incorporated by reference
herein. Operating results for the three months ended March 31, 1998 should not
be considered indicative of the results for any future quarters or the year
ending December 31, 1998. All Household share information has been adjusted
for Household's 3-for-1 stock split effected in the form of a stock dividend
and paid on June 1, 1998.
<TABLE>
<CAPTION>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
(IN MILLIONS, EXCEPT PER SHARE DATA)
----------------------------------------------------------
AT OR FOR
THE THREE
MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- -------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Finance income.......... $2,561.4 $2,642.3 $2,878.8 $2,949.9 $3,057.2 $751.6 $771.3
Other interest income... 129.3 131.9 123.4 80.6 36.8 8.3 12.3
Interest expense........ 1,149.5 1,242.7 1,557.1 1,520.6 1,503.4 365.1 388.6
-------- -------- -------- -------- -------- ------ ------
Net interest margin..... 1,541.2 1,531.5 1,445.1 1,509.9 1,590.6 394.8 395.0
Provision for credit
losses on owned
receivables............ 735.8 606.8 761.3 759.6 1,042.0 293.4 261.5
-------- -------- -------- -------- -------- ------ ------
Net interest margin
after provision for
credit losses.......... 805.4 924.7 683.8 750.3 548.6 101.4 133.5
-------- -------- -------- -------- -------- ------ ------
Securitization income... 436.0 655.5 873.6 1,149.0 1,400.6 330.7 377.8
Insurance revenues...... 288.3 282.0 322.1 253.4 276.4 65.4 74.5
Investment income....... 574.0 514.4 470.2 153.2 129.5 33.2 29.6
Fee income.............. 292.6 250.5 196.4 240.3 413.3 77.4 99.5
Other income............ 172.9 126.7 279.9 232.4 189.3 69.1 14.8
-------- -------- -------- -------- -------- ------ ------
Total other revenues.... 1,763.8 1,829.1 2,142.2 2,028.3 2,409.1 575.8 596.2
-------- -------- -------- -------- -------- ------ ------
Salaries and fringe
benefits............... 618.9 668.6 555.3 564.3 639.5 147.6 165.2
Occupancy and equipment
expense................ 225.3 243.4 222.1 209.8 207.9 53.9 54.5
Other marketing
expenses............... 147.5 236.4 249.7 354.4 337.7 81.9 81.1
Other servicing and
administrative
expenses............... 506.7 521.7 460.9 455.0 400.2 109.4 85.8
Amortization of acquired
intangibles and
goodwill............... 81.0 91.0 109.8 143.7 158.4 36.8 42.4
Policyholders' benefits. 539.1 464.4 474.5 229.1 184.8 47.0 47.7
-------- -------- -------- -------- -------- ------ ------
Total costs and
expenses............... 2,118.5 2,225.5 2,072.3 1,956.3 1,928.5 476.6 476.7
-------- -------- -------- -------- -------- ------ ------
Income before income
taxes.................. 450.7 528.3 753.7 822.3 1,029.2 200.6 253.0
Income taxes............ 152.0 160.7 300.5 283.7 342.6 69.1 82.7
-------- -------- -------- -------- -------- ------ ------
Net income.............. $ 298.7 $ 367.6 $ 453.2 $ 538.6 $ 686.6 $131.5 $170.3
======== ======== ======== ======== ======== ====== ======
Earnings available to
common shareholders.... $ 270.5 $ 340.0 $ 426.8 $ 521.9 $ 674.8 $128.3 $167.4
======== ======== ======== ======== ======== ====== ======
PER COMMON SHARE DATA
Basic earnings per
share.................. $ .99 $ 1.19 $ 1.46 $ 1.79 $ 2.20 $ .44 $ .52
Diluted earnings per
share.................. .95 1.17 1.44 1.77 2.17 .43 .51
Dividends declared...... .39 .41 .44 .49 .54 .13 .15
Book value.............. 7.34 7.59 9.23 10.10 14.05 10.38 14.40
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)
---------------------------------------------------------------------------
AT OR FOR THE
THREE MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets (1):
Owned................. $32,961.5 $34,338.4 $29,218.8 $29,594.5 $30,302.6 $28,046.8 $32,896.9
Managed............... 42,789.3 46,833.5 44,103.4 48,120.9 51,868.4 47,271.5 53,593.3
Managed receivables (2):
First mortgage........ $ 3,534.1 $ 3,364.2 $ 2,066.9 $ 725.6 $ 396.6 $ 701.9 $ 357.6
Home equity........... 7,880.4 7,940.2 8,810.1 7,985.4 11,059.1 7,957.9 11,453.2
Auto finance (3)...... -- -- -- -- 883.4 -- 1,002.4
MasterCard/VISA....... 8,842.6 11,100.2 13,343.1 18,737.4 18,264.3 17,621.2 18,323.5
Private label......... 2,949.1 3,433.1 4,446.2 5,587.0 5,707.9 5,688.0 5,639.3
Other unsecured....... 4,320.8 5,378.2 6,660.8 8,620.2 8,291.3 8,745.1 8,880.9
Commercial............ 2,831.2 1,834.8 1,289.6 937.8 774.2 911.7 683.8
--------- --------- --------- --------- --------- --------- ---------
Total managed
receivables............ 30,358.2 33,050.7 36,616.7 42,593.4 45,376.8 41,625.8 46,340.7
Receivables serviced
with limited recourse.. (9,827.8) (12,495.1) (14,884.6) (18,526.4) (21,565.8) (19,224.7) (20,696.4)
--------- --------- --------- --------- --------- --------- ---------
Owned receivables....... $20,530.4 $20,555.6 $21,732.1 $24,067.0 $23,811.0 $22,401.1 $25,644.3
========= ========= ========= ========= ========= ========= =========
Deposits (4)............ $ 7,516.1 $ 8,439.0 $ 4,708.8 $ 2,365.1 $ 1,788.9 $ 2,173.1 $ 1,881.6
Total other debt........ 14,755.9 14,646.2 17,887.3 21,230.1 20,930.0 19,723.8 23,066.1
Company obligated
mandatorily redeemable
preferred securities of
subsidiary trusts (5).. -- -- 75.0 175.0 175.0 175.0 375.0
Convertible preferred
stock.................. 19.3 2.6 -- -- -- -- --
Preferred stock......... 320.0 320.0 205.0 205.0 150.0 150.0 150.0
Common shareholders'
equity (6)............. 2,078.3 2,200.4 2,690.9 2,941.2 4,516.2 3,031.1 4,637.3
SELECTED FINANCIAL
RATIOS
Return on average owned
assets................. .91% 1.08% 1.34% 1.82% 2.26% 1.77% 2.14%
Return on average
managed assets......... .73 .83 .98 1.17 1.39 1.10 1.29
Return on average common
shareholders' equity... 14.2 16.0 17.4 18.9 18.2 17.1 14.7
Total shareholders'
equity as a percent of
owned assets (7)....... 7.28 7.34 10.17 11.22 15.98 11.97 15.69
Total shareholders'
equity as a percent of
managed assets (7)..... 5.60 5.38 6.74 6.90 9.33 7.10 9.63
Managed net interest
margin, normalized..... 6.92 6.70 6.48 7.07 7.48 7.35 7.48
Managed consumer net
chargeoff ratio........ 2.91 2.84 2.95 3.35 4.47 4.15 4.82
Managed basis efficiency
ratio, normalized...... 51.8 52.7 46.0 40.8 36.0 38.3 35.6
Common dividends to net
income................. 36.9 32.1 28.1 26.3 24.7 28.86 28.36
</TABLE>
- --------
(1) In 1995, Household sold its first mortgage servicing portfolio and
servicing business as well as the individual life and annuity product
lines of its life insurance business. In 1994, Household sold its
Australian subsidiary and retail securities brokerage business.
(2) In 1997, Household acquired the capital stock of Transamerica Financial
Services Holding Company ("TFS"). Household paid $1.1 billion for the
stock of TFS and repaid about $2.8 billion of TFS debt owed to its
affiliates. The acquisition included $3.1 billion of home equity
receivables. Household also sold its entire portfolio of student loans
totaling about $900 million in 1997, as Household exited this business. In
1996, Household acquired credit card portfolios with outstandings of $4.1
billion and sold $1.7 billion of lower margin loans primarily from the
previously divested mortgage and consumer banking businesses.
(3) In October 1997, Household purchased ACC Consumer Finance Corporation, an
auto finance company. Prior to the fourth quarter of 1997, auto finance
receivables were not significant and were included in other unsecured
receivables.
70
<PAGE>
(4) Household sold its domestic consumer banking operations, including
deposits of $2.8 billion in 1996 and $3.4 billion in 1995. Household's
Canadian subsidiary also sold $725 million in deposits in 1995.
(5) The sole assets of the three trusts are Junior Subordinated Deferrable
Interest Notes issued by Household in March 1998, June 1996 and June 1995,
bearing interest at 7.25, 8.70 and 8.25 percent, respectively, with
principal balances of $206.2, $103.1 and $77.3 million, respectively, and
due December 31, 2037, June 30, 2036 and June 30, 2025, respectively.
(6) In 1997, Household issued 27.3 million shares of common stock in a public
offering (as adjusted for the stock split), raising about $1.0 billion.
The net proceeds were used to repay certain short-term borrowings incurred
in connection with the acquisition of TFS.
(7) Total shareholders' equity at March 31, 1998 and 1997 and at December 31,
1997, 1996 and 1995 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.
71
<PAGE>
INFORMATION ABOUT BENEFICIAL
GENERAL INFORMATION AND OPERATIONS
Beneficial is a holding company, subsidiaries of which are engaged
principally in the consumer finance and credit-related insurance businesses.
Beneficial was organized under the laws of the State of Delaware in 1929,
through the consolidation of three companies which had been operated under the
same management. The principal executive office of Beneficial is located at
301 North Walnut Street, Wilmington, Delaware 19801. Its telephone number is
(302) 425-2500.
Operations conducted by the subsidiaries of Beneficial consist principally
of a consumer finance network with over 1,100 offices located in the United
States and the United Kingdom; Personal Mortgage Corporation, a direct-
response mortgage lending unit, which originates home equity loans chiefly in
the Northeast, Middle Atlantic and West Coast regions; Beneficial National
Bank USA, a specialized private-label credit card bank located in Delaware;
Beneficial Credit Services, which is engaged in sales finance activities;
Beneficial National Bank, a full service commercial bank located in Delaware,
which is also engaged in making income tax refund anticipation loans; The
Central National Life Insurance Company of Omaha and its subsidiary, First
Central National Life Insurance Company of New York, which underwrite life and
disability consumer credit insurance; Wesco Insurance Company, which provides
credit property insurance; BFC Insurance (Life) Limited and BFC Insurance
Limited, which are located in Ireland, and underwrite life, accident and
health insurance; and Harbour Island Inc. and subsidiaries, which are engaged
in real estate development in Tampa, Florida. At March 31, 1998, Beneficial
and its subsidiaries employed approximately 9,600 people and serviced
approximately 6.6 million customer accounts with $17.2 billion in managed
receivables and $14.6 billion in owned receivables.
RECENT DEVELOPMENTS
On March 2, 1998, Beneficial sold Beneficial Canada Holdings, Inc., its
Canadian subsidiary, to Associates Capital Corporation of Canada, a subsidiary
of Associates First Capital Corporation. As a result of the sale, Beneficial
has no assets remaining in Canada.
On April 28, 1998, Beneficial sold Beneficial Bank AG, its German
subsidiary, to Banque Sofinco, a bank based in Paris, France. As a result of
the sale, Beneficial has limited assets in Germany. 1997 results reflect a
$27.8 million after-tax ($.51 per share) provision for the loss on disposal.
On April 23, 1998, Beneficial announced its 1998 first quarter results. The
first quarter's results included a $118.5 million after-tax ($2.13 per share)
gain on disposal of Beneficial's Canadian consumer finance subsidiary which
was partially offset by a $7.7 million ($.14 per share) addition to the tax
reserves for certain outstanding tax issues. In addition, the first quarter's
results included an earnings decline in the tax refund anticipation loan
business of $16.5 million after-tax compared to the first quarter of 1997,
reflecting certain limited measures taken by the Internal Revenue Service to
delay payment on the returns of selected taxpayers claiming an earned income
tax credit.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, various benefit
plans (including stock option plans), voting securities and the principal
holders thereof, certain relationships and related transactions and other
related matters as to Beneficial is incorporated by reference or set forth in
the Beneficial Annual Report on Form 10-K for the year ended December 31, 1997
(filed March 30, 1998 and amended by Amendment No. 1 on Form 10-K/A, filed
April 29, 1998), incorporated herein by reference. Stockholders of Household
and Beneficial desiring copies of such documents may contact Beneficial at its
address or telephone number indicated under "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
72
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of Beneficial at and for the preceding five years ended December 31, 1997. The
statement of income and balance sheet data have been derived from Beneficial's
audited Consolidated Financial Statements and Notes thereto. The information
for the preceding five years ended December 31, 1997 set forth below should be
read in conjunction with Beneficial's 1997 Consolidated Financial Statements
and Notes thereto, and other financial information incorporated by reference
or included in this Prospectus. The selected financial data for Beneficial for
the three months ended March 31, 1997 and 1998 are unaudited and should be
read in conjunction with Beneficial's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998, which is incorporated by reference
herein. Operating results for the three months ended March 31, 1998 should not
be considered indicative of the results for any future quarters or the year
ending December 31, 1998. Certain amounts in the historical financial
statements of Beneficial have been reclassified to conform with Household's
historical financial statement presentation.
<TABLE>
<CAPTION>
BENEFICIAL CORPORATION AND SUBSIDIARIES
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------------------
AT OR FOR THE
THREE MONTHS
ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------- -------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Finance charges......... $1,553.9 $1,670.1 $1,913.6 $2,027.3 $2,127.3 $535.4 $562.8
Interest expense........ 633.2 673.6 816.2 812.8 855.0 214.7 223.6
-------- -------- -------- -------- -------- ------ ------
Net interest margin..... 920.7 996.5 1,097.4 1,214.5 1,272.3 320.7 339.2
Provision for credit
losses(1).............. 171.8 198.7 280.2 398.8 485.3 93.1 139.8
-------- -------- -------- -------- -------- ------ ------
Net interest margin
after provision for
credit losses.......... 748.9 797.8 817.2 815.7 787.0 227.6 199.4
-------- -------- -------- -------- -------- ------ ------
Securitization income... 23.7 63.7 123.6 192.3 237.8 35.5 41.5
Insurance premiums...... 116.5 143.7 152.7 168.7 177.8 45.9 45.0
Investment income....... 54.3 61.3 67.8 80.2 56.6 14.9 13.3
Fee income.............. 53.5 83.6 101.0 116.2 189.8 44.0 51.8
RAL income.............. 70.0 59.2 (14.9) 140.9 105.7 86.1 58.0
Gain on Canadian
disposal............... -- -- -- -- -- -- 189.4
Other income............ 85.6 55.8 54.4 46.3 60.7 10.8 14.9
-------- -------- -------- -------- -------- ------ ------
Total other revenues.... 403.6 467.3 484.6 744.6 828.4 237.2 413.9
-------- -------- -------- -------- -------- ------ ------
Salaries and fringe
benefits............... 327.1 350.7 384.6 412.6 434.9 105.1 111.0
Occupancy............... 69.5 72.5 75.8 78.1 80.7 19.8 20.7
Other marketing
expenses............... 40.8 47.1 58.2 77.1 111.9 32.9 21.9
Other servicing and
administrative
expenses............... 89.1 111.0 131.8 155.0 177.1 43.5 48.8
Insurance benefits...... 75.9 86.5 80.4 82.8 71.1 22.8 15.9
Provision for loss on
German disposal........ -- -- -- -- 58.8 -- --
Provision for credit
losses on German
liquidating loan
portfolio.............. -- 38.0 15.0 -- -- -- --
Provision for
restructuring.......... -- -- 9.8 -- -- -- --
Other................... 234.9 233.2 275.8 296.2 307.6 78.3 81.7
-------- -------- -------- -------- -------- ------ ------
Total costs and
expenses............... 837.3 939.0 1,031.4 1,101.8 1,242.1 302.4 300.0
-------- -------- -------- -------- -------- ------ ------
Income before income
taxes(2)............... 315.2 326.1 270.4 458.5 373.3 162.4 313.3
Income taxes............ 129.2 148.4 119.9 177.5 119.6 61.7 125.8
-------- -------- -------- -------- -------- ------ ------
Income before
extraordinary loss..... 186.0 177.7 150.5 281.0 253.7 100.7 187.5
Extraordinary loss...... (2.8) -- -- -- -- -- --
-------- -------- -------- -------- -------- ------ ------
Net income(2)........... $ 183.2 $ 177.7 $ 150.5 $ 281.0 $ 253.7 $100.7 $187.5
======== ======== ======== ======== ======== ====== ======
PER COMMON SHARE DATA
Earnings per share
before extraordinary
loss:
Basic.................. $ 3.49 $ 3.33 $ 2.77 $ 5.19 $ 4.68 $ 1.85 $ 3.49
Diluted................ $ 3.43 $ 3.26 $ 2.71 $ 5.05 $ 4.54 $ 1.80 $ 3.34
Dividends declared...... $ 1.43 $ 1.62 $ 1.80 $ 1.98 $ 2.18 $ .52 $ .57
Average common shares
outstanding............ 52.8 53.0 53.7 54.6 54.7 55.3 55.7
Book value.............. $ 22.78 $ 24.34 $ 25.80 $ 28.79 $ 30.53 $29.68 $34.44
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL CORPORATION AND SUBSIDIARIES
(DOLLARS IN MILLIONS)
---------------------------------------------------------------------------
AT OR FOR THE
THREE MONTHS ENDED
AT OR FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets:
Owned................. $12,916.9 $14,376.6 $15,737.3 $16,931.2 $17,645.1 $17,013.3 $16,618.0
Managed............... 13,109.4 15,007.0 16,850.8 19,120.2 20,294.6 18,975.2 18,966.7
Managed receivables:
Real estate secured... $ 6,900.1 $ 7,489.9 $ 7,750.1 $ 8,256.5 $ 8,818.0 $ 8,296.6 $ 8,754.3
Personal unsecured.... 2,275.2 2,485.9 2,756.1 2,982.9 3,262.4 2,962.8 3,080.8
Credit cards.......... 1,242.6 2,061.7 3,084.0 4,595.8 4,685.4 4,376.2 4,200.6
Sales finance
contracts............ 696.5 810.4 836.6 926.3 994.3 897.1 962.0
Commercial............ 96.8 105.1 102.9 99.5 182.8 201.9 182.9
--------- --------- --------- --------- --------- --------- ---------
Total managed
receivables............ 11,211.2 12,953.0 14,529.7 16,861.0 17,942.9 16,734.6 17,180.6
Receivables serviced
with limited recourse
(all real estate
secured)............... (192.5) (630.4) (1,113.5) (2,324.8) (2,912.7) (2,137.6) (2,629.8)
--------- --------- --------- --------- --------- --------- ---------
Total owned receivables. $11,018.7 $12,322.6 $13,416.2 $14,536.2 $15,030.2 $14,597.0 $14,550.8
========= ========= ========= ========= ========= ========= =========
Deposits................ $ 616.2 $ 654.4 $ 642.5 $ 635.0 $ 555.3 $ 575.4 $ 509.7
Total other debt........ 9,689.2 10,798.7 11,816.4 12,800.4 13,472.3 12,727.5 12,598.3
Preferred stock......... 115.0 114.9 114.8 114.8 114.8 114.8 114.8
Common shareholders'
equity................. 1,197.2 1,285.4 1,388.2 1,580.0 1,657.5 1,634.0 1,933.2
SELECTED FINANCIAL
RATIOS
Return on average
shareholders' equity... 14.76% 12.89% 10.33% 17.38% 14.42% 23.33% 40.02%
Return on average
assets................. 1.54 1.33 1.03 1.76 1.49 2.35 4.26
Total shareholders'
equity as a % of owned
assets................. 10.16 9.74 9.55 10.01 10.04 10.28 12.32
Total shareholders'
equity as a % of
managed assets......... 10.01 9.33 8.92 8.86 8.73 9.22 10.80
Managed net interest
margin (average
managed)............... 9.60 9.58 9.67 9.69 9.79 9.74 10.04
Net chargeoff ratio (net
to average, owned
basis)................. 1.42 1.28 1.64 2.26 2.85 2.56 3.26
Efficiency ratio........ 57.8 56.6 58.6 52.3 53.5 50.5 37.9
Common dividends to net
income................. 40.39 47.27 62.79 37.47 45.53 27.71 16.37
</TABLE>
- --------
(1) 1995 and 1994 do not reflect $15.0 million (.12% of average monthly
balances) and $38.0 million (.33% of average monthly balances),
respectively, of credit losses related to the German liquidating loan
portfolio, which has been shown separately.
(2) 1997 reflects a $27.8 million after-tax ($.51 per share) provision for
loss on disposal of Beneficial's German consumer banking subsidiary and
$18.7 million ($.34 per share) of after-tax special items relating to
additional legal reserves, a writedown of certain real estate investments
and costs associated with Beneficial's reengineering efforts. Income
before income taxes includes a provision for credit losses related to the
German liquidating loan portfolio of $15.0 million ($.28 per share) in
1995 and $38.0 million ($.72 per share) in 1994, and a $5.9 million after-
tax ($.11 per share) provision for restructuring in 1995. The first
quarter of 1998 includes a $118.5 million after-tax ($2.13 per share) gain
on disposal of Beneficial's Canadian consumer finance subsidiary which was
partially offset by a $7.7 million ($.14 per share) addition to the tax
reserves for certain outstanding tax issues. In addition, the first
quarter of 1998 includes an earnings decline in the tax refund
anticipation loan business of $16.5 million after-tax compared to the
first quarter of 1997, reflecting certain limited measures taken by the
Internal Revenue Service to delay payment on the returns of selected
taxpayers claiming an earned income tax credit.
74
<PAGE>
SUPERVISION AND REGULATION OF HOUSEHOLD AND BENEFICIAL
As consumer finance lenders, Household and Beneficial operate in a highly
regulated environment. Both are subject to laws relating to, among other
things, discrimination in extending credit, use of credit reports, disclosure
of credit terms and costs of credit and correction of billing errors. Consumer
branch lending is also subject to certain laws and regulations that limit
operations in certain jurisdictions. For example, limitations may be placed on
the amount of interest or fees that a loan may bear, the amount that may be
borrowed or the types of actions that may be taken to collect or foreclose
upon delinquent loans. Household's and Beneficial's consumer branch lending
offices are generally licensed in those jurisdictions in which they operate.
Such licenses have limited terms but are renewable, and are revocable for
cause. Private label operations are conducted through state-licensed companies
and credit card banks.
The banking subsidiaries of both Household and Beneficial are subject to
regulation, supervision and periodic examination by certain federal agencies.
Regulations limit general investment authorities and the ability to acquire
financial institutions, pay dividends and to enter transactions with
affiliates. Regulations also govern minimum capital and liquidity levels and
permissible activities and investments of subsidiaries of each regulated bank.
Beneficial is a bank holding company and Household is a savings and loan
holding company. As holding companies under the respective federal statutes,
both Beneficial and Household are subject to reporting and other regulations
of certain federal agencies. Both Beneficial and Household have agreements to
maintain capital of their respective savings banks at certain specified
levels.
Household's and Beneficial's insurance businesses are subject to regulation
in the jurisdictions in which they operate. Regulations govern, among other
things, the types of insurance that may be sold, policy reserve requirements,
permissible investments, premiums charged, limitations on dividends payable by
an insurance company and standards for dealings with affiliates.
Operations of the international subsidiaries of Household and Beneficial are
subject to regulation in the respective countries in which business is
conducted. Household's Canadian operations are subject to federal and
provincial regulation of various aspects of operations, including disclosure
of contractual terms, collection practices and the rights of creditors. The UK
subsidiaries of Household and Beneficial are authorized to do business under
the Banking Act of 1987 and are consequently subject to supervision by the
Bank of England. The UK subsidiaries are also subject to licensing under the
Consumer Credit Act of 1974.
HOUSEHOLD CAPITAL STOCK
GENERAL
The following description of the capital stock of Household is qualified in
its entirety by reference to its Restated Certificate of Incorporation, as
amended (the "Household Charter"), which has been filed with and is available
from the offices of the Commission as referred to under "AVAILABLE
INFORMATION."
On March 10, 1998, the Household Board approved (subject to stockholder
approval of an increase in the number of authorized shares) a 3-for-1 stock
split effected in the form of a stock dividend and paid on June 1, 1998. On
May 13, 1998, Household's stockholders approved an amendment to the Household
Charter, which increased the number of authorized shares of Household Common
Stock from 250,000,000 to 750,000,000. On March 10, 1998 the Household Board
also
75
<PAGE>
approved an increase in the annual dividend to be paid on shares of Household
Common Stock to $1.80 per share (on a pre-split basis). The increase was
effective with the dividend paid on April 15, 1998 to stockholders of record
as of the close of business March 31, 1998.
The Household Charter authorizes the issuance of 758,155,004 shares of
capital stock of which 8,155,004 shares are designated preferred stock,
without par value ("Household Preferred Stock"), and 750,000,000 shares of
Household Common Stock. Although 8,155,004 shares of preferred stock are
authorized, 3,454,635 shares are reserved in the Household Charter for a
series of convertible preferred stock that was issued in 1981, all of which
shares have been converted to Household Common Stock, redeemed or repurchased
by Household. As of May 28, 1998, of the remaining 4,700,369 authorized shares
of preferred stock, 900,000 shares were issued and outstanding or reserved for
issuance as follows: 50,000 shares of 8 1/4% Cumulative Preferred Stock,
Series 1992-A ("Household 1992 Preferred") and 100,000 shares of 7.35%
Cumulative Preferred Stock, Series 1993-A ("Household 1993 Preferred") were
issued and outstanding and 750,000 shares of Series A Junior Participating
Preferred Stock ("Household Junior Preferred") were reserved for issuance. As
of May 28, 1998, 322,004,763 shares of Household Common Stock were issued and
outstanding (as adjusted for Household's 3-for-1 stock split effected in the
form of a stock dividend and paid on June 1, 1998). All outstanding shares of
Household Common Stock and Household Preferred Stock are fully paid and non-
assessable.
HOUSEHOLD PREFERRED STOCK
The Household Preferred Stock may be issued from time to time in one or more
series as authorized by the Household Board or a duly authorized committee of
the Household Board. The Household Board 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 Household Preferred Stock ("Household Preferred
Shares") and to determine the particular designations, powers, preferences and
relative, participating, optional or other special rights (other than voting
rights which will be fixed by the Household Board) and qualifications,
limitations or restrictions of the Household Preferred Shares. The following
description sets forth certain general terms and provisions of the Household
Preferred Stock.
Dividends. Holders of shares of Household Preferred Stock are entitled to
receive, when and as declared by the Household Board 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 Household Charter or applicable Certificate of Designation,
Preferences and Rights of Household for each series of Household Preferred
Stock, before any dividends may be declared or paid or set apart for payment
upon Household Common Stock. No dividend may be declared or paid on any series
of Household Preferred Stock unless at the same time a dividend in like
proportion to the respectively designated dividend rates will be declared or
paid on each other series of Household Preferred Stock then issued and
outstanding ranking prior to or on a parity with such particular series with
respect to the payment of dividends. Dividends may be either cumulative or
non-cumulative.
Liquidation Preference. In the event of dissolution, liquidation or winding
up of Household, whether voluntary or involuntary, holders of Household
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 Household, after payment to
Household's creditors but in preference to the holders of the Household Common
Stock. The Household Charter provides that a consolidation, merger or sale by
Household of its assets as an entirety or substantially as an entirety will
not be deemed to be a liquidation, dissolution or winding up of Household.
Redemption. No Household Preferred Stock or Household Common Stock may be
purchased by Household if any dividends on any shares of Household Preferred
Stock are in arrears, and no Household Preferred Stock may be redeemed in such
case unless all shares of issued and outstanding
76
<PAGE>
Household Preferred Stock are redeemed, except as set forth in the Certificate
of Designation, Preferences and Rights of the Household 5% Preferred Stock,
Household $4.50 Preferred Stock and the Household $4.30 Preferred Stock each
to be issued to holders of the Other Beneficial Preferred Stock in connection
with the Merger.
Voting Rights. Voting rights of the holders of Household Preferred Stock are
non-cumulative. Holders of Household Preferred Stock have such voting rights
as are set forth in the Household Charter or applicable Certificate of
Designation, Preferences and Rights of Household or as otherwise provided for
by law.
The Household Charter provides that, without the vote or consent of the
holders of at least two-thirds of the outstanding shares of all series of
Household Preferred Stock (except for a series of Household Preferred Stock in
which the right is expressly withheld) voting as a single class, Household 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 Household Preferred Stock of any series if the cumulative dividends
payable on shares of any series of outstanding Household Preferred Stock are
in arrears; (iii) adopt any amendment to the Household Charter which adversely
alters the preferences, powers and special rights of the Household 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 Household Preferred Stock, then only the vote or consent of the
outstanding shares of all series of the Household Preferred Stock so affected,
voting as one class, will be required; or (iv) increase the authorized amount
of the Household Preferred Stock, or create or issue any class of stock
ranking prior to or on a parity with the Household 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 Household
Preferred Stock (except for a series of Household Preferred Stock in which the
right is expressly withheld) will be entitled to elect one-third of the
members of the Household Board out of the number fixed by Household's Bylaws
in the event Household fails to declare and pay any four quarterly cumulative
dividends, whether consecutive or not, on any series of the Household
Preferred Stock and will 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 Household Board will
continue until all unpaid dividends upon all series of the Household Preferred
Stock will have been paid in full.
Under current provisions of the DGCL, the holders of issued and outstanding
Household Preferred Stock are entitled to vote as a class upon a proposed
amendment to the Household Charter (whether or not entitled to vote thereon by
the Household Charter), with the consent of a majority of said class being
required to increase or decrease the aggregate number of authorized shares of
Household Preferred Stock, increase or decrease the par value of shares of
Household Preferred Stock, or alter or change the powers, preferences or
special rights of the Household 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 Household Preferred Stock as to affect
them adversely, but would not affect the entire class of Household 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 Household Preferred Stock have no preemptive
rights to purchase any securities of Household.
DESCRIPTION OF AUTHORIZED SERIES OF HOUSEHOLD PREFERRED STOCK
The following summary descriptions of the authorized series of Household
Preferred Stock are qualified in their entirety by reference to the Household
Charter (including the respective Certificates of Designation, Preferences and
Rights of Household relating to such series).
77
<PAGE>
HOUSEHOLD 1992 PREFERRED AND HOUSEHOLD 1993 PREFERRED
General. The Household 1992 Preferred and Household 1993 Preferred rank on a
parity as to the payment of dividends and distribution of assets of Household
upon the voluntary or involuntary liquidation, dissolution, or winding up of
Household.
Household 1992 Preferred. Holders of the Household 1992 Preferred are
entitled to receive quarterly cumulative dividends at an annual rate of $82.50
per share. All dividends on the Household 1992 Preferred have been paid to
date. In the event of the liquidation, dissolution or winding up of Household,
whether voluntary or involuntary, holders of the Household 1992 Preferred are
entitled to receive $1,000 per share plus accrued and unpaid dividends. The
Household 1992 Preferred is not redeemable prior to October 15, 2002. The
Household 1992 Preferred is redeemable, at the option of Household, 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 Household 1992
Preferred is not entitled to the benefits of any sinking fund.
Household 1993 Preferred. Holders of the Household 1993 Preferred are
entitled to receive quarterly cumulative dividends at an annual rate of $73.50
per share. All dividends on the Household 1993 Preferred have been paid to
date. In the event of the liquidation, dissolution or winding up of Household,
whether voluntary or involuntary, holders of the Household 1993 Preferred are
entitled to receive $1,000 per share plus accrued and unpaid dividends. The
Household 1993 Preferred is not redeemable prior to October 15, 1998. The
Household 1993 Preferred is redeemable, at the option of Household, 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 Household 1993
Preferred is not entitled to the benefits of any sinking fund.
Voting Rights. The Household 1992 Preferred and Household 1993 Preferred
have the right, voting as a class with each other and any other series of
Household 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 Household
Board at the meeting of stockholders called for such purpose after six
quarterly cumulative dividends on such Preferred Stock, whether consecutive or
not, will be in arrears. The right of such holders of Household Preferred
Stock to elect said members to the Household Board will continue until such
time as all dividends accrued on such stock will have been paid in full, at
which time such right will terminate.
On any item with respect to which the holders of the Household 1992
Preferred and Household 1993 Preferred are entitled to vote, such holders will
be entitled to one vote for each share held.
Conversion Rights. The holders of the Household 1992 Preferred and Household
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 Household.
HOUSEHOLD 5% PREFERRED STOCK, HOUSEHOLD $4.50 PREFERRED STOCK AND HOUSEHOLD
$4.30 PREFERRED STOCK
The shares of Household 5% Preferred Stock, Household $4.50 Preferred Stock
and Household $4.30 Preferred Stock, as described below, will be substantially
similar to the shares of Beneficial 5% Preferred Stock, Beneficial $4.50
Preferred Stock and Beneficial $4.30 Preferred Stock, respectively, except
that all will be entitled to one vote per share. The shares of Household 5%
Preferred Stock, Household $4.50 Preferred Stock and Household $4.30 Preferred
Stock will rank on parity with each other and the shares of Household 1992
Preferred Stock and Household 1993 Preferred Stock as to dividends and upon
liquidation. Upon consummation of the Merger, each share of Beneficial 5%
Preferred Stock, Beneficial $4.50 Preferred Stock and Beneficial $4.30
Preferred Stock will be
78
<PAGE>
converted into the right to receive one share of Household 5% Preferred Stock,
Household $4.50 Preferred Stock and Household $4.30 Preferred Stock,
respectively. See "THE MERGER--Exchange of Certificates; Fractional Shares."
The forms of Certificate of Designations, Preferences and Rights setting forth
the rights, the designations and preferences of the Household 5% Preferred
Stock, Household $4.50 Preferred Stock and Household $4.30 Preferred Stock are
set forth as exhibits to the Registration Statement, and the following summary
of the terms of the Household 5% Preferred Stock, Household $4.50 Preferred
Stock and Household $4.30 Preferred Stock is qualified in its entirety by
reference to such exhibits. See "AVAILABLE INFORMATION."
Dividends. The holders of Household 5% Preferred Stock and Household $4.50
Preferred Stock, in preference to the holders of Household Common Stock, will
be entitled to receive, as and when declared by the Household Board, dividends
at the rate of 5% per share each year and $4.50 per share each year,
respectively, payable semi-annually on the last days of June and December in
each year. The holders of Household $4.30 Preferred Stock, in preference to
the holders of Household Common Stock, will be entitled to receive, as and
when declared by the Household Board, dividends at $4.30 per share each year,
payable semi-annually on the last days of March and September in each year.
Such preferential dividends will accrue from the first day of the semi-annual
dividend period in which such shares will be issued, and will be cumulative so
that if dividends in respect of any dividend period at the rate of 5% per
share each year, $4.50 per share each year and $4.30 per share each year, as
the case may be, will not have been paid upon or declared and set apart for
the Household 5% Preferred Stock, Household $4.50 Preferred Stock or Household
$4.30 Preferred Stock, as the case may be, the deficiency will be fully paid
or declared and set apart before any dividend will be paid upon or declared or
set apart for the Household Common Stock. Preferential dividends on the
Household 5% Preferred Stock, Household $4.50 Preferred Stock or Household
$4.30 Preferred Stock, as the case may be, will be deemed to accrue from day
to day. A dividend period will begin on the day following each dividend
payment date set forth above and end on the next succeeding dividend payment
date.
Liquidation Preference. The Household 5% Preferred Stock, Household $4.50
Preferred Stock and Household $4.30 Preferred Stock will be preferred as to
assets over the Household Common Stock, so that in the event of the voluntary
or involuntary liquidation, dissolution or winding up of Household the holders
of Household 5% Preferred Stock, Household $4.50 Preferred Stock and Household
$4.30 Preferred Stock will be entitled to have set apart for them, or to be
paid, out of the assets of Household before any distribution is made to or set
apart for the holders of Household Common Stock an amount in cash equal to and
in no event more than $50.00 per share, $100 per share and $100 per share,
respectively, plus a sum equal to accrued and unpaid dividend thereon, whether
or not earned or declared.
Optional Redemption. (a) At the option of Household, by vote of the
Household Board, the Household 5% Preferred Stock, Household $4.50 Preferred
Stock and Household $4.30 Preferred Stock may be redeemed as a whole or in
part at any time or from time to time at a redemption price equal to $50.00
per share, $103 per share, $100 per share, plus an amount equal to accrued and
unpaid dividends thereon to the date fixed for redemption, whether or not
earned or declared, and no more. If less than all of the outstanding shares of
Household 5% Preferred Stock, Household $4.50 Preferred Stock or Household
$4.30 Preferred Stock, as the case may be, are to be redeemed the shares to be
redeemed will be determined by lot in such usual manner and subject to such
regulations as the Household Board in its sole discretion will prescribe.
(b) At least 30 days prior to the date fixed for the redemption of shares of
the Household 5% Preferred Stock, Household $4.50 Preferred Stock or Household
$4.30 Preferred Stock, as the case may be, a written notice will be mailed to
each holder of record of shares of Household 5% Preferred Stock, Household
$4.50 Preferred Stock or Household $4.30 Preferred Stock, as the case may be,
to be redeemed in a postage prepaid envelope addressed to such holder at his
post office address as
79
<PAGE>
shown on the records of Household, notifying such holder of the election of
Household to redeem such shares, stating the date fixed for redemption thereof
(hereinafter referred to as the redemption date), and calling upon such holder
to surrender to Household on the redemption date at the place designated in
such notice his certificate or certificates representing the number of shares
specified in such notice of redemption.
(c) On or after the redemption date each holder of shares of Household 5%
Preferred Stock, Household $4.50 Preferred Stock or Household $4.30 Preferred
Stock, as the case may be, to be redeemed will present and surrender his
certificate or certificates for such shares to Household at the place
designated in such notice and thereupon the redemption price of such shares
will be paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate will be canceled.
(d) In case less than all the shares represented by any such certificate are
redeemed a new certificate will be issued representing the unredeemed shares.
(e) From and after the redemption date (unless default will be made by
Household in payment of the redemption price) all dividends on the shares of
Household 5% Preferred Stock, Household $4.50 Preferred Stock or Household
$4.30 Preferred Stock, as the case may be, designated for redemption in such
notice will cease to accrue, and all rights of the holders thereof as
stockholders of Household, except the right to receive the redemption price
thereof upon the surrender of certificates representing the same, will cease
and determine and such shares will not thereafter be transferred (except with
the consent of Household) on the books of Household, and such shares will not
be deemed to be outstanding for any purpose whatsoever.
(f) At its election Household prior to the redemption date may deposit the
redemption price of the shares of Household 5% Preferred Stock, Household
$4.50 Preferred Stock or Household $4.30 Preferred Stock, as the case may be,
so called for redemption in trust for the holders thereof with a bank or trust
company (having a capital and surplus of not less than $1,000,000) in the City
of Wilmington, Delaware or in the Borough of Manhattan, City and State of New
York or in any other city in which Household at the time will maintain a
transfer agency with respect to such stock, in which case such redemption
notice will state the date of such deposit, will specify the office of such
bank or trust company as the place of payment of the redemption price, and
will call upon such holders to surrender the certificates representing such
shares at such place on or after the date fixed in such redemption notice
(which will not be later than the redemption date) against payment of the
redemption price. From and after the making of such deposit, the shares of
Household 5% Preferred Stock, Household $4.50 Preferred Stock or Household
$4.30 Preferred Stock, as the case may be, so designated for redemption will
not be deemed to be outstanding for any purpose whatsoever, and the rights of
the holders of such shares will be limited to the right to receive the
redemption price of such shares, without interest, upon surrender of the
certificates representing the same to Household at the office of such bank or
trust company.
(g) Any moneys so deposited which will remain unclaimed by the holders of
such Household 5% Preferred Stock, Household $4.50 Preferred Stock or
Household $4.30 Preferred Stock, as the case may be, at the end of six years
after the redemption date will be returned by such bank or trust company to
Household after which the holders of the Household 5% Preferred Stock,
Household $4.50 Preferred Stock or Household $4.30 Preferred Stock, as the
case may be, will have no further interest in such moneys.
Voting Rights. (a) Each share of Household 5% Preferred Stock, Household
$4.50 Preferred Stock and Household $4.30 Preferred Stock will be entitled to
one vote on each matter submitted to a vote of the stockholders Household and
will vote as a single class with the stockholders of Household. In addition,
in case at any time three or more full semi-annual dividends (whether
consecutive or not) on
80
<PAGE>
the Household 5% Preferred Stock, Household $4.50 Preferred Stock or Household
$4.30 Preferred Stock, as the case may be, will be in arrears, then during the
period commencing with such time and ending with the time when all arrears in
dividends on the Household 5% Preferred Stock, Household $4.50 Preferred Stock
or Household $4.30 Preferred Stock, as the case may be, will have been paid
and the full dividend on the Household 5% Preferred Stock, Household $4.50
Preferred Stock or Household $4.30 Preferred Stock, as the case may be, for
the then current semi-annual dividend period will have been declared and paid
or set aside for payment, at any meeting of the stockholders of Household held
for the election of directors during that period, the holders of the Household
5% Preferred Stock, Household $4.50 Preferred Stock or Household $4.30
Preferred Stock, as the case may be, present in person or represented by proxy
at said meeting will be entitled, as a class, to the exclusion of the holders
of all other classes of stock of Household, to elect two directors of
Household, each share of Household 5% Preferred Stock, Household $4.50
Preferred Stock or Household $4.30 Preferred Stock, as the case may be,
entitling the holder thereof to one vote.
(b) Any director who will have been elected by holders of Household 5%
Preferred Stock, Household $4.50 Preferred Stock or Household $4.30 Preferred
Stock, as the case may be, or by any director so elected as herein
contemplated, may be removed at any time during such period, either for or
without cause, by, and only by, the affirmative votes of the holders of record
of a majority of the outstanding shares of Household 5% Preferred Stock,
Household $4.50 Preferred Stock or Household $4.30 Preferred Stock, as the
case may be, given at a special meeting of such stockholders called for the
purpose, and any vacancy thereby created may be filled during such period by
the holders of Household 5% Preferred Stock, Household $4.50 Preferred Stock
or Household $4.30 Preferred Stock, as the case may be, present in person or
represented by proxy at such meeting. Any director to be elected by the
Household Board to replace a director elected by holders of Household 5%
Preferred Stock, Household $4.50 Preferred Stock or Household $4.30 Preferred
Stock, as the case may be, or elected by a director as in this sentence
provided will be elected by the remaining director theretofore elected by the
holders of Household 5% Preferred Stock, Household $4.50 Preferred Stock or
Household $4.30 Preferred Stock, as the case may be. At the end of such voting
period the holders of Household 5% Preferred Stock, Household $4.50 Preferred
Stock or Household $4.30 Preferred Stock, as the case may be, will be
automatically divested of all voting power vested in them as described in this
paragraph (b) but subject always to the subsequent vesting hereunder of voting
power in the holders of Household 5% Preferred Stock, Household $4.50
Preferred Stock or Household $4.30 Preferred Stock, as the case may be, in the
event of any similar default or defaults thereafter.
(c) While any of the Household 5% Preferred Stock, Household $4.50 Preferred
Stock or Household $4.30 Preferred Stock remains outstanding, Household shall
not alter or change the preferences, special rights or powers of such series
so as to adversely affect the holders of such series without the affirmative
consent of the holders of at least two-thirds ( 2/3rds) of the aggregate
number of shares of such series then outstanding.
HOUSEHOLD JUNIOR PREFERRED
Issuance. Currently, there are no shares of Household Junior Preferred
issued or outstanding. Household Rights to purchase shares or fractions
thereof of the Household Junior Preferred have been distributed to holders of
Household Common Stock. Each Household Right entitles the registered holder to
purchase from Household one three-thousandth of a share of the Household
Junior Preferred at a price of $100 per one three-thousandth of a share, as
adjusted for Household's 3-for-1 stock split effected in the form of a stock
dividend and paid on June 1, 1998 and subject to further adjustment in the
event of any future dividend of shares of Household Common Stock or any
subdivision, combination, reclassification or change of the Household Common
Stock. The designation and terms of the Household Rights are set forth in a
Rights Agreement ("Household Rights Agreement") between Household 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 Household 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
81
<PAGE>
persons acquired 15% or more of the outstanding shares of Household Common
Stock 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
Household Common Stock. The Household Rights will expire on July 31, 2006,
unless the expiration date is extended or the Household Rights are earlier
redeemed or exchanged by Household, in each case, as described below.
In the event that Household 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 Household Rights Agreement provides
that each holder of a Household Right will receive, upon the payment of the
then current exercise price of the Household 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
Household Right. In the event that any person or group of affiliated or
associated persons acquires beneficial ownership of 15% or more of Household
Common Stock, proper provision will be made so that each holder of a Household
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 shares of Household Common Stock having a market value of
two times the exercise price of the Right.
At any time prior to the 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 Household Common Stock,
Household may redeem the Household Rights in whole, but not in part, at a
price of $.0033 per Right (as adjusted for Household's stock split)
("Redemption Price"). The redemption of the Household Rights may be made
effective at such time on such basis with such conditions as the Household, in
its sole discretion, may establish. Immediately upon the action of the
Household Board electing to redeem the Household Rights, the right to exercise
the Household Rights will terminate and the only right of the holders of
Household Rights will be to receive the Redemption Price.
Dividends. The holders of the Household Junior Preferred will be entitled to
receive, when, as and if declared by the Household Board 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, 3,000 times (as
adjusted for Household's stock split) the aggregate per share amount of all
cash dividends and 3,000 times (as adjusted for Household's stock split) the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Household
Common Stock or a subdivision, combination or reclassification thereof,
declared on Household Common Stock since the immediately preceding quarterly
dividend payment date or the date of the first issuance of the Household
Junior Preferred if the first dividend date has not yet occurred. In the event
Household will at any time declare or pay any future dividend on Household
Common Stock payable in shares of Household Common Stock, or effect a
subdivision, combination or reclassification of the outstanding shares of
Household Common Stock into a greater or lesser number of shares of Household
Common Stock, then in each such case the amount of dividends to which holders
of Household Junior Preferred are entitled to will be adjusted.
Dividends will begin to accrue and be cumulative on the Household Junior
Preferred from the dividend date next preceding the date of issue unless that
date of issue is prior to the 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 Household Junior Preferred in an amount less than the total
amount of such dividends at the time accrued and payable on such shares will
be allocated pro rata on a share-by-share basis among all such shares at the
time outstanding.
Conversion, Sinking Fund Redemption. The Household Junior Preferred will not
have any rights to convert to any other security issued by Household and such
shares are not redeemable at the option of Household. In addition, there is no
sinking fund for the Household Junior Preferred.
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<PAGE>
Voting Rights. The Household Junior Preferred generally votes together with
Household Common Stock as one class. Each share of Household Junior Preferred
is entitled to 3,000 votes (as adjusted for Household's stock split) on all
matters submitted to a vote of the Household Stockholders. In the event
Household declares or pays any dividend on its Household Common Stock payable
in shares of Household Common Stock, or subdivides, combines or reclassifies
its shares of Household Common Stock into a greater or less number of shares
of Household Common Stock, then the number of votes per share of the Household
Junior Preferred will be adjusted. Additionally, the Household Junior
Preferred will have the right (as described under "HOUSEHOLD CAPITAL STOCK--
Preferred Stock--Voting Rights") to vote, together with all other outstanding
series of Household Preferred Stock for which such voting right has not been
expressly withheld, to elect directors in the event dividends on any series of
Household Preferred Stock are in arrears. In addition, the Household Charter
will not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Household Junior Preferred so as
to affect the Household Junior Preferred adversely without the affirmative
vote of the holders of two-thirds or more of the outstanding shares of
Household Junior Preferred, voting together as a single class. The Certificate
of Designation, Preferences and Rights of the Household Junior Preferred
expressly withholds all other special voting rights to which holders of
Household Preferred Stock are entitled, except for voting rights otherwise
provided by law.
Liquidation Preference. No distribution will be made on any shares of stock
ranking junior to the Household Junior Preferred upon any voluntary
liquidation, dissolution or winding up of Household unless the holders of the
Household Junior Preferred have received the greater of (i) $3,000 per share
plus accrued and unpaid dividends or (ii) 3,000 times the aggregate amount to
be distributed per share to holders of Household Common Stock (each as
adjusted for Household's stock split). This liquidation amount will be further
adjusted in the event Household declares a stock split of Household Common
Stock or pays any dividend on Household Common Stock payable in shares of
Household Common Stock, or effects a subdivision, combination or
reclassification of Household Common Stock into a greater or lesser number of
shares. In the event the assets of Household are insufficient to satisfy the
liquidation preference of the Household Junior Preferred, the Household Junior
Preferred will share ratably with each series of Household Preferred Stock
ranking on a parity (as to dividends or liquidation) with the Household Junior
Preferred.
In the event of any merger, consolidation or other transaction in which
shares of Household Common Stock are exchanged, each share of Household Junior
Preferred Stock will be entitled to receive 3,000 times (as adjusted for
Household's stock split) the amount received per share of Household Common
Stock. These rights are protected by customary anti-dilution provisions.
HOUSEHOLD COMMON STOCK
Holders of Household Common Stock are entitled to receive dividends out of
any funds legally available for that purpose as and if declared by the
Household Board, subject to the prior dividend rights of Household Preferred
Stock.
Subject to certain voting rights of the Household Preferred Stock described
elsewhere herein, the holders of shares of Household Common Stock are entitled
to vote at all meetings of the stockholders and are entitled to one vote for
each share of Household Common Stock held.
The issued and outstanding shares of Household Common Stock are fully paid
and non-assessable. The holders of Household Common Stock are not entitled to
preemptive rights or conversion or redemption rights. The Household 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
Household, holders of Household Common Stock will be entitled to receive, pro
rata, after satisfaction in full of the prior rights of creditors and holders
of Household Preferred Stock, all of the remaining assets of Household
available for distribution.
83
<PAGE>
HOUSEHOLD PREFERRED SHARE PURCHASE RIGHTS
In July 1996, Household entered into the Household Rights Agreement. The
Household 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 Household. The Household Rights Agreement also
enhances the bargaining position of the Household Board in negotiating on
behalf of stockholders with potential acquirors of Household. The Household
Rights Agreement provides that attached to each share of Household Common
Stock is one right to purchase from Household one three-thousandth of a share
of Household Junior Preferred at a price of $100 per one three-thousandth of a
share, as adjusted for Household's stock split and subject to further
adjustment. See "--Household Junior Preferred."
DIVIDENDS
Household 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
Household 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 to participate in the
assets of any subsidiary upon the latter's liquidation or recapitalization
will be subject to the prior claims of the subsidiary's creditors, except to
the extent that Household may itself be a creditor with recognized claims
against the subsidiary. Nevertheless, there are no restrictions that currently
materially limit Household's ability to make payments to its creditors or to
pay dividends on the Household Preferred Stock or Household Common Stock at
current levels nor are there any restrictions which Household reasonably
believes are likely to limit materially such payments in the future.
SPECIAL CHARTER PROVISIONS
The Household Charter contains provisions, in accordance with Section
102(b)(7) of DGCL, eliminating the personal liability of a director to
Household 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 Household
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 DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
DISSENTERS' RIGHTS
Neither the stockholders of Household nor the stockholders of Beneficial
will have appraisal rights under the DGCL, or any other statute, with respect
to the Merger.
LEGAL OPINION
The legality of the Household Stock to be issued in connection with the
Merger will be passed upon by John W. Blenke, Vice President--Corporate Law
and Assistant Secretary for Household. As of the date of this Joint Proxy
Statement-Prospectus, Mr. Blenke is a full-time employee and an officer of
Household and owns and holds options to purchase shares of Household Common
Stock.
84
<PAGE>
EXPERTS
The consolidated financial statements of Household incorporated in this
Joint Proxy Statement-Prospectus by reference to the Household Annual Report
on Form 10-K for the year ended December 31, 1997, have been audited by Arthur
Andersen LLP, independent accountants as indicated in their reports with
respect thereto, and are included in reliance upon the authority of said firm
as experts in giving said reports.
The consolidated financial statements and the related financial statement
schedule incorporated in this Joint Proxy Statement-Prospectus by reference
from the Beneficial Annual Report on Form 10-K for the year ended December 31,
1997 and amended by Amendment No. 1 on Form 10-K/A have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
Representatives of Arthur Andersen LLP are expected to be present at the
Household Special Meeting, and representatives of Deloitte & Touche LLP are
expected to be present at the Beneficial Special Meeting. In each case, such
representatives will have the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders of Household may submit proposals to be considered for
shareholder action at the 1999 Annual Meeting of Stockholders of Household if
they do so in accordance with applicable regulations of the Commission. Any
such proposals must be submitted to the Secretary of Household no later than
November 28, 1998, in order to be considered for inclusion in the Household
1999 proxy materials.
In view of the pendency of the Merger, Beneficial has postponed its 1998
Annual Meeting of Stockholders. Beneficial will hold a 1998 Annual Meeting of
Stockholders only if the Merger is not consummated for any reason. In the
event that such a meeting is held, any proposals of stockholders intended to
be presented at the 1998 Annual Meeting must be received by the Secretary of
Beneficial at a reasonable time before the mailing of Beneficial's proxy
materials for such annual meeting in order to be considered for inclusion in
such proxy materials.
OTHER MATTERS
Other than administrative matters in connection with the conduct of the
meeting, no other matters that will be in order at the Special Meetings other
than as described in this Joint Proxy Statement-Prospectus. If any other
matters shall properly come before either Special Meeting or any adjournments
or postponements thereof and be voted upon, the enclosed proxies will be
deemed to confer discretionary authority on the individuals named as proxies
therein to vote the shares represented by such proxies as to any such matters.
The persons named as proxies intend to vote or not to vote in accordance with
the recommendation of the respective managements of Beneficial and Household.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information
and explanatory notes are presented to show the impact on the historical
financial position and results of operations of Household of the Merger under
the "pooling of interests" method of accounting. The unaudited pro forma
condensed combined financial information combines the historical financial
information of Household and Beneficial at March 31, 1998, for the three
months ended March 31, 1998 and 1997, and for each of the three years ended
December 31, 1997. All Household share information has been adjusted for
Household's 3-for-1 stock split effected in the form of a stock dividend and
paid on June 1, 1998.
The pro forma condensed combined financial information for the three months
ended March 31, 1998 and 1997 and for each of the three years ended December
31, 1997 is based on and derived from, and should be read in conjunction with,
(a) the historical consolidated financial statements and the related notes
thereto of Household, and (b) the historical consolidated financial statements
and the related notes thereto of Beneficial, which are incorporated by
reference herein. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
86
<PAGE>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT MARCH 31, 1998
(UNAUDITED)
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HOUSEHOLD BENEFICIAL ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash....................... $ 195.1 $ 224.6 $ 419.7
Investment securities...... 2,625.5 903.4 3,528.9
Receivables, net........... 25,672.1 13,996.5 39,668.6
Acquired intangibles and
goodwill, net............. 1,894.7 50.6 1,945.3
Properties and equipment,
net....................... 279.6 233.0 $(127.0)(c) 385.6
Real estate owned.......... 139.6 75.1 214.7
Other assets............... 2,090.3 1,134.8 (159.0)(c) 3,066.1
--------- --------- ------- ---------
Total assets........... $32,896.9 $16,618.0 $(286.0) $49,228.9
========= ========= ======= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Debt:
Deposits................. $ 1,881.6 $ 509.7 $ 2,391.3
Commercial paper, bank
and other borrowings.... 6,769.0 3,935.6 10,704.6
Senior and senior subor-
dinated debt (with orig-
inal maturities over one
year)................... 16,297.1 8,662.7 24,959.8
--------- --------- ---------
Total debt............. 24,947.7 13,108.0 38,055.7
Insurance policy and claim
reserves.................. 1,140.5 569.2 1,709.7
Other liabilities.......... 1,646.4 892.8 $ 465.0 (c) 3,004.2
--------- --------- ------- ---------
Total liabilities...... 27,734.6 14,570.0 465.0 42,769.6
Company obligated
mandatorily redeemable
preferred securities of
subsidiary trusts (b)..... 375.0 375.0
Preferred stock............ 150.0 114.8 (0.3)(a) 264.5
Common shareholders'
equity:
Common stock............. 373.0 (d) 54.4 1.4 (a) 428.8
Additional paid-in capi-
tal..................... 1,283.5 (d) 349.7 (1.1)(a) 1,632.1
Retained earnings........ 3,701.3 1,551.4 (751.0)(c) 4,501.7
Foreign currency transla-
tion adjustments........ (129.1) (27.4) (156.5)
Unrealized gain on in-
vestments, net.......... 7.6 5.1 12.7
Less common stock in
treasury................ (599.0) (599.0)
--------- --------- ------- ---------
Total common
shareholders' equity.. 4,637.3 1,933.2 (750.7) 5,819.8
--------- --------- ------- ---------
Total liabilities and
shareholders' equity.. $32,896.9 $16,618.0 $(286.0) $49,228.9
========= ========= ======= =========
</TABLE>
- --------
(a) The pro forma amount (including the deemed conversion of the Beneficial
Convertible Preferred Stock at the time of the Merger) assumes 167,262,834
shares of Household Common Stock are issued in the Merger, based on the
exchange ratio of 3.0666 shares of Household Common Stock for each share
of Beneficial Common Stock outstanding as of March 31, 1998 (after giving
effect to the deemed conversion of all outstanding shares of Beneficial
Convertible Preferred Stock). The actual number of shares of Household
Common Stock to be issued will be determined at the time the Merger is
consummated, based upon the number of shares of Beneficial Common Stock
and Beneficial Convertible Preferred Stock then outstanding.
(b) The sole assets of the three trusts are Junior Subordinated Deferrable
Interest Notes issued by Household in March 1998, June 1996 and June 1995,
bearing interest at 7.25, 8.70 and 8.25 percent, respectively, with
principal balances of $206.2, $103.1 and $77.3 million, respectively, and
due December 31, 2037, June 30, 2036 and June 30, 2025, respectively.
(c) Reflects the effect of the Merger and integration costs. See Note 2.
(d) Common stock and additional paid-in capital for Household have been
adjusted for Household's 3-for-1 stock split effected in the form of a
stock dividend and paid on June 1, 1998.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
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<PAGE>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HOUSEHOLD BENEFICIAL PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
Finance and other interest income............... $783.6 $562.8 $1,346.4
Interest expense................................ 388.6 223.6 612.2
------ ------ --------
Net interest margin............................. 395.0 339.2 734.2
Provision for credit losses on owned
receivables.................................... 261.5 139.8 401.3
------ ------ --------
Net interest margin after provision for credit
losses......................................... 133.5 199.4 332.9
------ ------ --------
Total other revenues............................ 596.2 413.9 1,010.1
------ ------ --------
Total costs and expenses........................ 476.7 300.0 776.7
------ ------ --------
Income before income taxes...................... 253.0 313.3 566.3
Income taxes.................................... 82.7 125.8 208.5
------ ------ --------
Net income...................................... $170.3 $187.5 $ 357.8
====== ====== ========
Net income...................................... $170.3 $187.5 $ 357.8
Preferred dividends............................. (2.9) (1.3) (4.2)
------ ------ --------
Earnings available to common shareholders....... $167.4 $186.2 $ 353.6
====== ====== ========
Basic weighted average common shares
outstanding.................................... 321.7 53.4 485.5
====== ====== ========
Diluted weighted average common shares
outstanding.................................... 326.2 55.7 497.0
====== ====== ========
Basic earnings per common share (a)............. $ 0.52 $ 3.49 $ 0.73
====== ====== ========
Diluted earnings per common share (a)........... $ 0.51 $ 3.34 $ 0.71
====== ====== ========
</TABLE>
- --------
(a) The calculation of basic and diluted earnings per common share for the pro
forma financial statements uses the applicable weighted average number of
outstanding shares of Household Common Stock and Beneficial Common Stock
adjusted to equivalent shares of Household Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
88
<PAGE>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HOUSEHOLD BENEFICIAL PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
Finance and other interest income............... $759.9 $535.4 $1,295.3
Interest expense................................ 365.1 214.7 579.8
------ ------ --------
Net interest margin............................. 394.8 320.7 715.5
Provision for credit losses on owned
receivables.................................... 293.4 93.1 386.5
------ ------ --------
Net interest margin after provision for credit
losses......................................... 101.4 227.6 329.0
------ ------ --------
Total other revenues............................ 575.8 237.2 813.0
------ ------ --------
Total costs and expenses........................ 476.6 302.4 779.0
------ ------ --------
Income before income taxes...................... 200.6 162.4 363.0
Income taxes.................................... 69.1 61.7 130.8
------ ------ --------
Net income...................................... $131.5 $100.7 $ 232.2
====== ====== ========
Net income...................................... $131.5 $100.7 $ 232.2
Preferred dividends............................. (3.2) (1.3) (4.5)
------ ------ --------
Earnings available to common shareholders....... $128.3 $ 99.4 $ 227.7
====== ====== ========
Basic weighted average common shares
outstanding.................................... 291.6 53.6 456.0
====== ====== ========
Diluted weighted average common shares
outstanding.................................... 295.9 55.3 465.5
====== ====== ========
Basic earnings per common share (a)............. $ 0.44 $ 1.85 $ 0.50
====== ====== ========
Diluted earnings per common share (a)........... $ 0.43 $ 1.80 $ 0.49
====== ====== ========
</TABLE>
- --------
(a) The calculation of basic and diluted earnings per common share for the pro
forma financial statements uses the applicable weighted average number of
outstanding shares of Household Common Stock and Beneficial Common Stock
adjusted to equivalent shares of Household Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
89
<PAGE>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HOUSEHOLD BENEFICIAL PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
Finance and other interest income............... $3,094.0 $2,127.3 $5,221.3
Interest expense................................ 1,503.4 855.0 2,358.4
-------- -------- --------
Net interest margin............................. 1,590.6 1,272.3 2,862.9
Provision for credit losses on owned
receivables.................................... 1,042.0 485.3 1,527.3
-------- -------- --------
Net interest margin after provision for credit
losses......................................... 548.6 787.0 1,335.6
-------- -------- --------
Total other revenues............................ 2,409.1 828.4 3,237.5
-------- -------- --------
Total costs and expenses........................ 1,928.5 1,183.3 3,111.8
-------- -------- --------
Provision for loss on German disposal........... -- 58.8 58.8
-------- -------- --------
Income before income taxes...................... 1,029.2 373.3 1,402.5
Income taxes.................................... 342.6 119.6 462.2
-------- -------- --------
Net income...................................... $ 686.6 $ 253.7 $ 940.3
======== ======== ========
Net income...................................... $ 686.6 $ 253.7 $ 940.3
Preferred dividends............................. (11.8) (5.2) (17.0)
-------- -------- --------
Earnings available to common shareholders....... $ 674.8 $ 248.5 $ 923.3
======== ======== ========
Basic weighted average common shares
outstanding.................................... 307.1 53.0 469.6
======== ======== ========
Diluted weighted average common shares
outstanding.................................... 311.4 54.7 479.1
======== ======== ========
Basic earnings per common share (a)............. $ 2.20 $ 4.68 $ 1.97
======== ======== ========
Diluted earnings per common share (a)........... $ 2.17 $ 4.54 $ 1.93
======== ======== ========
</TABLE>
- --------
(a) The calculation of basic and diluted earnings per common share for the pro
forma financial statements uses the applicable weighted average number of
outstanding shares of Household Common Stock and Beneficial Common Stock
adjusted to equivalent shares of Household Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial Information.
90
<PAGE>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HOUSEHOLD BENEFICIAL PRO FORMA
--------- ---------- ---------
<S> <C> <C> <C>
Finance and other interest income............... $3,030.5 $2,027.3 $5,057.8
Interest expense................................ 1,520.6 812.8 2,333.4
-------- -------- --------
Net interest margin............................. 1,509.9 1,214.5 2,724.4
Provision for credit losses on owned
receivables.................................... 759.6 398.8 1,158.4
-------- -------- --------
Net interest margin after provision for credit
losses......................................... 750.3 815.7 1,566.0
-------- -------- --------
Total other revenues............................ 2,028.3 744.6 2,772.9
-------- -------- --------
Total costs and expenses........................ 1,956.3 1,101.8 3,058.1
-------- -------- --------
Income before income taxes...................... 822.3 458.5 1,280.8
Income taxes.................................... 283.7 177.5 461.2
-------- -------- --------
Net income...................................... $ 538.6 $ 281.0 $ 819.6
======== ======== ========
Net income...................................... $ 538.6 $ 281.0 $ 819.6
Preferred dividends............................. (16.7) (5.2) (21.9)
-------- -------- --------
Earnings available to common shareholders....... $ 521.9 $ 275.8 $ 797.7
======== ======== ========
Basic weighted average common shares
outstanding.................................... 291.2 53.1 454.0
======== ======== ========
Diluted weighted average common shares
outstanding.................................... 294.9 54.6 462.3
======== ======== ========
Basic earnings per common share (a)............. $ 1.79 $ 5.19 $ 1.76
======== ======== ========
Diluted earnings per common share (a)........... $ 1.77 $ 5.05 $ 1.73
======== ======== ========
</TABLE>
- --------
(a) The calculation of basic and diluted earnings per common share for the pro
forma financial statements uses the applicable weighted average number of
outstanding shares of Household Common Stock and Beneficial Common Stock
adjusted to equivalent shares of Household Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial
Information.
91
<PAGE>
HOUSEHOLD INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO
HOUSEHOLD BENEFICIAL FORMA
--------- ---------- --------
<S> <C> <C> <C>
Finance and other interest income............... $3,002.2 $1,913.6 $4,915.8
Interest expense................................ 1,557.1 816.2 2,373.3
-------- -------- --------
Net interest margin............................. 1,445.1 1,097.4 2,542.5
Provision for credit losses on owned
receivables.................................... 761.3 280.2 1,041.5
-------- -------- --------
Net interest margin after provision for credit
losses......................................... 683.8 817.2 1,501.0
-------- -------- --------
Total other revenues............................ 2,142.2 484.6 2,626.8
-------- -------- --------
Total costs and expenses........................ 2,072.3 1,006.6 3,078.9
-------- -------- --------
Provision for restructuring and other........... -- 24.8 24.8
-------- -------- --------
Income before income taxes...................... 753.7 270.4 1,024.1
Income taxes.................................... 300.5 119.9 420.4
-------- -------- --------
Net income...................................... $ 453.2 $ 150.5 $ 603.7
======== ======== ========
Net income...................................... $ 453.2 $ 150.5 $ 603.7
Preferred dividends............................. (26.4) (5.2) (31.6)
-------- -------- --------
Earnings available to common shareholders....... $ 426.8 $ 145.3 $ 572.1
======== ======== ========
Basic weighted average common shares
outstanding.................................... 292.4 52.5 453.4
======== ======== ========
Diluted weighted average common shares
outstanding.................................... 297.3 53.7 462.0
======== ======== ========
Basic earnings per common share (a)............. $ 1.46 $ 2.77 $ 1.26
======== ======== ========
Diluted earnings per common share (a)........... $ 1.44 $ 2.71 $ 1.24
======== ======== ========
</TABLE>
- --------
(a) The calculation of basic and diluted earnings per common share for the pro
forma financial statements uses the applicable weighted average number of
outstanding shares of Household Common Stock and Beneficial Common Stock
adjusted to equivalent shares of Household Common Stock.
See Notes to the Unaudited Pro Forma Condensed Combined Financial
Information.
92
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial information reflects
the Merger using the "pooling of interests" method of accounting and is based
on the historical consolidated financial statements of Household and
Beneficial. The Unaudited Pro Forma Condensed Combined Balance Sheet assumes
that the Merger was consummated on March 31, 1998. The Unaudited Pro Forma
Condensed Combined Statements of Income give effect to the Merger as if it
occurred on January 1, 1995.
The pro forma adjustments represent management's best estimate based on
available information at this time. Actual adjustments may differ from those
reflected in the unaudited pro forma condensed combined financial information.
Household and Beneficial are still in the process of reviewing their
respective accounting policies relative to those followed by the other entity.
As a result of this review, it might be necessary to restate certain amounts
in Household's or Beneficial's financial statements to conform to those
accounting policies that are most appropriate. At this time, it is not
expected that conformance of such accounting policies will have a material
impact on the pro forma condensed combined financial statements.
All share information has been adjusted for Household's 3-for-1 stock split
effected in the form of a stock dividend and paid on June 1, 1998.
Certain amounts in the historical financial statements of Beneficial have
been reclassified to conform with Household's historical financial statement
presentation.
The unaudited pro forma condensed combined financial information should be
read in conjunction with the historical consolidated financial statements and
the related notes thereto of each of Household and Beneficial incorporated by
reference herein.
NOTE 2. MERGER AND INTEGRATION RELATED COSTS
In connection with the Merger, Household intends to merge corporate
functions, sell Beneficial's commercial bank business, sell or combine
overlapping branches, sell or merge Beneficial's mortgage operations into
Household's, close Beneficial's UK headquarters and merge Beneficial's UK
operations into Household's existing UK business.
Household expects to incur pre-tax Merger and integration related costs of
approximately $1 billion ($751 million after-tax). These costs include
approximately $284 million in lease exit costs, $161 million in fixed asset
write-offs related to closed facilities, $240 million in severance and change
in control payments, $140 million in asset writedowns to reflect modified
business plans, $66 million in investment banking fees, $34 million in legal
and other expenses, and $75 million in prepayment premiums related to debt.
The estimated Merger and integration related costs include approximately
$286 million in non-cash charges. Cash payments of approximately $714 million
will be funded through Household's existing operations and commercial paper
and other borrowings. In addition, Household expects to receive tax benefits
of approximately $249 million. Substantially all of the cash payments are
expected to be made by the end of 1998.
93
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION--(CONTINUED)
These amounts, including the related tax effect, have been reflected in the
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1998 and
are not reflected in the Unaudited Pro Forma Condensed Combined Statements of
Income as they are not expected to have a continuing impact on the combined
company.
NOTE 3. OPERATING COSTS SAVINGS
The combined company expects to achieve substantial annual pre-tax cost
savings of approximately $450 million (approximately $300 million after-tax)
through the elimination of redundant staff functions and corporate overhead,
consolidation of product lines, data processing and back office functions, and
the elimination of certain duplicate or excess office facilities. Based on
Household management's current estimates, approximately 90% of the operating
cost savings are expected to be achieved on a run-rate basis by the end of
1999 (which estimates as to timing and amount have been modestly refined since
the public announcement of the Merger and the time that the analyses were
performed by Household's and Beneficial's financial advisors in connection
with their respective fairness opinions). These savings should continue to
benefit the combined company in future years. No adjustment has been included
in the unaudited pro forma financial information for the anticipated operating
cost savings. There can be no assurance that the anticipated cost savings will
be in the expected amounts or at the times anticipated. See "CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION."
NOTE 4. SHAREHOLDERS' EQUITY
In connection with the Merger, Household will exchange 3.0666 shares of
Household Common Stock for each share of Beneficial Common Stock. Beneficial
had 54,543,414 shares of common stock outstanding (assuming conversion of the
Beneficial Convertible Preferred Stock) as of March 31, 1998. Treasury stock
of Beneficial is included as a deduction from common stock and additional
paid-in capital and is not presented separately within shareholders' equity.
Pro forma combined retained earnings reflect the adjustments for anticipated
Merger and integration costs as described above.
94
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C>
Acquisition Transaction................................................... 57
Ad Hoc Committee.......................................................... 26
Agreement................................................................. cover
Antitrust Division........................................................ 62
Associates................................................................ 40
Average Closing Price..................................................... 9
Bank Merger............................................................... 60
Beneficial................................................................ cover
Beneficial $4.30 Preferred Stock.......................................... cover
Beneficial $4.50 Preferred Stock.......................................... cover
Beneficial 5% Preferred Stock............................................. cover
Beneficial Board.......................................................... 7
Beneficial Certificates................................................... 43
Beneficial Charter........................................................ 23
Beneficial Common Stock................................................... cover
Beneficial Comparable Companies........................................... 39
Beneficial Convertible Preferred Stock.................................... cover
Beneficial Financial Advisors............................................. 7
Beneficial Option......................................................... 10
Beneficial Option Shares.................................................. 56
Beneficial Record Date.................................................... 6
Beneficial Right.......................................................... cover
Beneficial Rights Agreement............................................... cover
Beneficial Rule 145 Affiliates............................................ 63
Beneficial Special Meeting................................................ cover
Beneficial Stockholder Approval........................................... 6
Beneficial Stock Option Agreement......................................... 10
Beneficial Stock Option Plans............................................. 25
Beneficial Stock Options.................................................. 25
BHC Act................................................................... 60
BNL Canada................................................................ 37
BNL Germany............................................................... 37
broker non-votes.......................................................... 20
Capital One............................................................... 40
CIT....................................................................... 40
Closing Tax Opinion....................................................... 50
Code...................................................................... 7
Commission................................................................ 1
Comparable Companies...................................................... 33
Continuation Period....................................................... 54
CRA....................................................................... 61
CSE....................................................................... 12
Determination Date........................................................ 9
DGCL...................................................................... 11
Distribution Date......................................................... 81
Effective Date............................................................ 8
Effective Time............................................................ cover
EPS....................................................................... 35
Exchange Act.............................................................. 1
</TABLE>
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C>
Exchange Fund............................................................. 43
Exchange Ratio............................................................ cover
Exercise Termination Event................................................ 58
FCO....................................................................... 62
Filing Tax Opinion........................................................ 51
FINOVA.................................................................... 40
Foundation................................................................ 55
FTC....................................................................... 62
GAAP...................................................................... 9
Goldman Sachs............................................................. 7
Harris.................................................................... 20
HOLA...................................................................... 60
Holder.................................................................... 57
Household................................................................. cover
Household $4.30 Preferred Stock........................................... cover
Household $4.50 Preferred Stock........................................... cover
Household 1992 Preferred.................................................. 76
Household 1993 Preferred.................................................. 76
Household 5% Preferred Stock.............................................. cover
Household Board........................................................... 7
Household Charter......................................................... 75
Household Common Stock.................................................... cover
Household Common Stockholders............................................. 4
Household Junior Preferred................................................ 76
Household Matter.......................................................... 5
Household Option.......................................................... 10
Household Option Shares................................................... 56
Household Preferred Shares................................................ 76
Household Preferred Stock................................................. 76
Household Proposal........................................................ 27
Household Record Date..................................................... 5
Household Rights Agreement................................................ 81
Household Special Meeting................................................. cover
Household Stock........................................................... cover
Household Stockholder Approval............................................ 5
Household Stock Option Agreement.......................................... 10
HRS....................................................................... 67
HSR Act................................................................... 62
IBES...................................................................... 28
Initial Triggering Event.................................................. 57
Injunction................................................................ 47
IRS....................................................................... 51
Issuer.................................................................... 56
Issuer Common Stock....................................................... 56
Issuer Option............................................................. 56
Issuer Option Repurchase Price............................................ 58
Issuer Option Share Repurchase Price...................................... 58
Issuer Option Shares...................................................... 56
Key Plan.................................................................. 54
</TABLE>
95
<PAGE>
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C>
LTM....................................................................... 40
market/offer price........................................................ 58
MBNA...................................................................... 40
Merger.................................................................... cover
Merger Consideration...................................................... 8
Merger Sub................................................................ cover
Merrill Lynch............................................................. 7
Merrill Lynch Opinion..................................................... 37
Morgan Stanley............................................................ 7
New Household Preferred Stock............................................. cover
New Option................................................................ 25
Notional Price............................................................ 38
Notional Total Profit..................................................... 59
NYSE...................................................................... cover
Optionee.................................................................. 56
Options................................................................... 10
Other Beneficial Preferred Stock.......................................... 23
OTS....................................................................... 60
Owner..................................................................... 58
P/E....................................................................... 40
Providian................................................................. 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C>
Redemption Price.......................................................... 82
Registration Statement.................................................... 1
Repurchase Event.......................................................... 59
Requisite Regulatory Approvals............................................ 60
Securities Act............................................................ 1
Selected Bank/Thrift Transactions......................................... 40
Selected Transactions..................................................... 40
Severance Agreement....................................................... 54
Special Meetings.......................................................... cover
Stock Option Agreements................................................... 10
Subsequent Triggering Event............................................... 58
Substitute Option......................................................... 59
Surviving Corporation..................................................... cover
Synergies................................................................. 36
Tax Opinions.............................................................. 51
Termination Event......................................................... 9
TFS....................................................................... 70
Total Profit.............................................................. 59
TRIP...................................................................... 20
UK........................................................................ 14
Voting Beneficial Stockholders............................................ 4
</TABLE>
96
<PAGE>
APPENDIX A
CONFORMED COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
HOUSEHOLD INTERNATIONAL, INC.,
HOUSEHOLD ACQUISITION CORPORATION II
AND
BENEFICIAL CORPORATION
DATED AS OF APRIL 7, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C>
Section 1.1 Definitions................................................. A-1
ARTICLE II
THE MERGER
Section 2.1 The Merger.................................................. A-6
Section 2.2 Closing..................................................... A-6
Section 2.3 Effective Time of the Merger................................ A-6
Section 2.4 Certificate of Incorporation................................ A-6
Section 2.5 By-Laws..................................................... A-6
Section 2.6 Directors................................................... A-6
Section 2.7 Officers.................................................... A-7
Section 2.8 Effects of the Merger....................................... A-7
Section 2.9 Tax Treatment............................................... A-7
Section 2.10 Accounting Treatment........................................ A-7
ARTICLE III
EFFECT ON CAPITAL STOCK
Section 3.1 Effect on Company Capital Stock............................. A-7
Section 3.2 Exchange of Certificates Representing Shares................ A-8
Section 3.3 Dividends, Etc.............................................. A-9
Section 3.4 No Fractional Shares........................................ A-10
Section 3.5 Termination of Exchange Fund................................ A-10
Section 3.6 Investment of Exchange Fund................................. A-10
Section 3.7 Closing of Company Transfer Books........................... A-10
Section 3.8 Employee Stock Options...................................... A-10
ARTICLE IV
DISCLOSURE SCHEDULES; STANDARDS FOR REPRESENTATIONS AND WARRANTIES
Section 4.1 Disclosure Schedules........................................ A-11
Section 4.2 Standards................................................... A-11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization................................................ A-12
Section 5.2 Capitalization.............................................. A-12
Section 5.3 Authority Relative to this Agreement........................ A-13
Section 5.4 Consents and Approvals; No Violations....................... A-13
Section 5.5 Reports and Financial Statements............................ A-14
Section 5.6 Absence of Certain Changes or Events........................ A-15
Section 5.7 Litigation.................................................. A-15
Section 5.8 Information in Disclosure Documents and Registration
Statement................................................................ A-16
Section 5.9 Compliance with Applicable Law.............................. A-16
Section 5.10 ERISA Compliance............................................ A-17
Section 5.11 Opinion of Financial Advisor................................ A-17
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 5.12 Vote Required.............................................. A-17
Section 5.13 Takeover Statutes, Etc..................................... A-17
Section 5.14 Agreements with Regulatory Agencies........................ A-18
Section 5.15 Taxes...................................................... A-18
Section 5.16 Accounting for the Merger.................................. A-18
Section 5.17 Brokers.................................................... A-19
Section 5.18 Interest Rate and Foreign Exchange Contracts............... A-19
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Section 6.1 Organization............................................... A-19
Section 6.2 Capitalization............................................. A-19
Section 6.3 Authority Relative to this Agreement....................... A-20
Section 6.4 Consents and Approvals; No Violations...................... A-20
Section 6.5 Reports and Financial Statements........................... A-21
Section 6.6 Absence of Certain Changes or Events....................... A-21
Section 6.7 Litigation................................................. A-22
Section 6.8 Information in Disclosure Documents and Registration
Statement............................................................... A-22
Section 6.9 Compliance with Applicable Law............................. A-22
Section 6.10 Brokers.................................................... A-22
Section 6.11 Ownership of Company Common Stock; Affiliates and
Associates.............................................................. A-23
Section 6.12 Agreements with Regulatory Agencies........................ A-23
Section 6.13 Vote Required.............................................. A-23
Section 6.14 Taxes...................................................... A-23
Section 6.15 Accounting for the Merger.................................. A-23
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 7.1 Conduct of Business by the Company......................... A-24
Section 7.2 Conduct of Business by Acquiror............................ A-25
Section 7.3 Other Actions.............................................. A-26
Section 7.4 Advice of Changes.......................................... A-26
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 No Solicitation............................................ A-26
Section 8.2 Preparation of the Registration Statement and the Merger
Proxy Statement; Company and Acquiror Stockholders Meetings. A-27
Section 8.3 Access and Information; Confidentiality.................... A-27
Section 8.4 Comfort Letters............................................ A-27
Section 8.5 Listing Application........................................ A-28
Section 8.6 Affiliates................................................. A-28
Section 8.7 Governmental Authorizations................................ A-28
Section 8.8 Employee Matters........................................... A-28
Section 8.9 Continuance of Existing Indemnification Rights............. A-30
Section 8.10 Expenses................................................... A-31
Section 8.11 Certain Other Matters...................................... A-31
Section 8.12 Beneficial Foundation; Certain Charitable Contributions.... A-31
Section 8.13 Public Announcements....................................... A-31
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 8.14 Reasonable Best Efforts...................................... A-32
Section 8.15 Regulatory Filings........................................... A-32
Section 8.16 Tax Treatment; Pooling of Interests.......................... A-32
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger... A-32
Section 9.2 Conditions to Obligations of Acquiror........................ A-33
Section 9.3 Conditions to Obligations of the Company..................... A-33
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination.................................................. A-34
Section 10.2 Effect of Termination........................................ A-36
Section 10.3 Amendment.................................................... A-36
Section 10.4 Extension; Waiver............................................ A-36
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Survival of Representations and Warranties................... A-37
Section 11.2 Notices...................................................... A-37
Section 11.3 Descriptive Headings......................................... A-37
Section 11.4 Entire Agreement; No Third-Party Beneficiary................. A-37
Section 11.5 Interpretation............................................... A-38
Section 11.6 Severability................................................. A-38
Section 11.7 Assignment................................................... A-38
Section 11.8 Governing Law................................................ A-38
Section 11.9 Specific Performance......................................... A-38
Section 11.10 Counterparts................................................. A-38
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 7, 1998 (this "Agreement"),
among Household International, Inc., a Delaware corporation ("Acquiror"),
Household Acquisition Corporation II, a Delaware corporation and a wholly
owned subsidiary of Acquiror ("HAC"), and Beneficial Corporation, a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Acquiror, HAC and the Company deem it
advisable and in the best interests of their respective companies and their
stockholders that HAC merge with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth herein, and such Boards of
Directors have approved the Merger;
WHEREAS, the Company and Acquiror desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger;
WHEREAS, in connection with the execution of this Agreement, the Company and
Acquiror will enter into a stock option agreement, with the Company, as
issuer, and Acquiror, as grantee (the "Company Stock Option Agreement"), in
the form attached hereto as Exhibit A; and
WHEREAS, in connection with the execution of this Agreement, Acquiror and
the Company will enter into a stock option agreement, with Acquiror, as
issuer, and the Company, as grantee (the "Acquiror Stock Option Agreement"),
in the form attached hereto as Exhibit B.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings, the definitions to be applicable to both
the singular and plural forms of each term defined to the extent that such
forms of such terms are used in this Agreement.
"Acquiror" shall have the meaning ascribed to it in the Preamble.
"Acquiror Common Stock" shall have the meaning ascribed to it in Section
3.1(a).
"Acquiror Disclosure Schedule" shall have the meaning ascribed to it in
Section 4.1.
"Acquiror Licenses" shall have the meaning ascribed to it in Section 6.9.
"Acquiror New Preferred Stock" shall have the meaning ascribed to it in
Section 3.1(c).
"Acquiror Preferred Stock" shall mean the preferred stock, without par
value, of Acquiror.
"Acquiror Ratio" shall have the meaning ascribed to it in Section 10.1(g).
"Acquiror Regulatory Agreement" shall have the meaning ascribed to it in
Section 6.12.
"Acquiror SEC Reports" shall have the meaning ascribed to it in Section
6.5(b).
"Acquiror Stock Option Agreement" shall have the meaning ascribed to it in
the Preamble.
A-1
<PAGE>
"Acquiror Stock Option Plans" shall have the meaning ascribed to it in
Section 6.2.
"Acquiror Stock Options" shall have the meaning ascribed to it in Section
6.2.
"Acquiror Stockholder Approval" shall have the meaning ascribed to it in
Section 6.3.
"Acquiror Stockholders Meeting" shall have the meaning ascribed to it in
Section 6.3.
"Acquisition Proposal" shall mean any proposal made by a third party, other
than the Acquiror, to acquire, directly or indirectly, (i) more than 10% of
the shares and/or voting power of the Company Common Stock then outstanding
pursuant to a merger, consolidation or other business combination, purchase of
shares, tender offer or exchange offer or similar transaction, including,
without limitation, any single or multi-step transaction or series of related
transactions or (ii) all or a substantial portion of the business or assets of
the Company and its subsidiaries.
"Affiliate" shall mean, as to any Person (as hereinafter defined), any other
Person which, directly or indirectly, is in control of, is controlled by, or
is under common control with, such Person. The term "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as applied to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or other
ownership interest, by contract or otherwise.
"Agreement" shall have the meaning ascribed to it in the Preamble.
"Average Closing Price" shall have the meaning ascribed to it in Section
10.1(g).
"Bank Merger Act" shall mean 12 U.S.C. (S) 1467a(S).
"BHC Act" shall mean the Bank Holding Company Act of 1956, as amended.
"Certificate of Incorporation" have the meaning ascribed to it in Section
2.4.
"Certificate of Merger" shall have the meaning ascribed to it in Section
2.3.
"Change in Bank Control Act" shall mean 12 U.S.C. (S) 1817(j).
"Claim" shall have the meaning ascribed to it in Section 8.9(a).
"Closing" shall have the meaning ascribed to it in Section 2.2.
"Closing Date" shall have the meaning ascribed to it in Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commonly Controlled Entity" shall have the meaning ascribed to it in
Section 5.10(a).
"Company" shall have the meaning ascribed to it in the Preamble.
"Company Common Stock" shall have the meaning ascribed to it in Section
3.1(a).
"Company Convertible Preferred Stock" shall mean the $5.50 Dividend
Cumulative Convertible Preferred Stock, without par value, of the Company.
"Company Disclosure Schedule" shall have the meaning ascribed to it in
Section 4.1.
"Company Employees" shall mean all current employees of the Company and its
subsidiaries as of the Effective Time.
A-2
<PAGE>
"Company Licenses" shall have the meaning ascribed to it in Section 5.9.
"Company Participating Preferred Stock" shall mean the Company's Series A
Participating Preferred Stock.
"Company Plans" shall have the meaning ascribed to it in Section 5.10(a).
"Company 5% Preferred Stock" shall mean the 5% Cumulative Preferred Stock,
par value $50.00 per share, of the Company.
"Company $4.50 Preferred Stock" shall mean the $4.50 Dividend Cumulative
Preferred Stock, par value $100.00 per share, of the Company.
"Company $4.30 Preferred Stock" shall mean the $4.30 Dividend Cumulative
Preferred Stock, without par value, of the Company.
"Company Right" shall have the meaning ascribed to it in Section 3.1(a).
"Company Rights Agreement" shall mean the Renewed Rights Agreement, dated as
of August 22, 1996, by and between the Company and First Chicago Trust Company
of New York, as Rights Agent.
"Company Rule 145 Affiliates" shall have the meaning ascribed to it in
Section 8.6.
"Company SEC Reports" shall have the meaning ascribed to it in Section
5.5(b).
"Company Stock Option Agreement" shall have the meaning ascribed to it in
the Preamble.
"Company Stock Option Plans" shall mean the Beneficial Corporation 1990 Non-
Qualified Stock Option Plan and the BenShares Equity Participation Plan.
"Company Stockholder Approval" shall have the meaning ascribed to it in
Section 5.3.
"Company Stockholders Meeting" shall have the meaning ascribed to it in
Section 5.3.
"Confidentiality Agreement" shall have the meaning ascribed to it in Section
8.3.
"Continuation Period" shall have the meaning ascribed to it in Section
8.8(b).
"Contract" shall have the meaning ascribed to it in Section 5.4.
"D&O Insurance" shall have the meaning ascribed to it in Section 8.9(c).
"Determination Date" shall have the meaning ascribed to it in Section
10.1(g).
"DGCL" shall mean the Delaware General Corporation Law.
"Direct Purchase Plan" shall mean the Beneficial Direct Investment Plan.
"DPC Shares" shall have the meaning ascribed to it in Section 3.1(d).
"Effective Time" shall have the meaning ascribed to it in Section 2.3.
"Employee Stock Options" shall mean all employee and non-employee Director
stock options issued pursuant to the Company Stock Option Plans.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" shall have the meaning ascribed to it in Section 5.10(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning ascribed to it in Section 3.2(a).
"Exchange Fund" shall have the meaning ascribed to it in Section 3.2(a).
"FDIC" shall have the meaning ascribed to it in Section 5.1(b).
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"Filed Acquiror SEC Reports" shall have the meaning ascribed to it in
Section 6.5(c).
"Filed Company SEC Reports" shall have the meaning ascribed to it in Section
5.5(c).
"Foreign Competition Laws" shall mean foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines, and other foreign Laws
that are designed or intended to prohibit, restrict or regulate actions having
the purpose or effect of monopolization, lessening of competition or restraint
of trade.
"Foundation" shall have the meaning ascribed to it in Section 8.12(a).
"GAAP" shall mean United States generally accepted accounting principles and
practices in effect from time to time as consistently applied.
"Goldman Sachs" shall mean Goldman Sachs & Co., one of the Company's
financial advisors.
"Governmental Entity" shall have the meaning ascribed to it in Section 5.4.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Indemnified Person" shall have the meaning ascribed to it in Section
8.9(a).
"Index Group" shall have the meaning ascribed to it in Section 10.1(g).
"Index Price" shall have the meaning ascribed to it in Section 10.1(g).
"Index Ratio" shall have the meaning ascribed to it in Section 10.1(g).
"Injunction" shall have the meaning ascribed to it in Section 9.1(d).
"Laws" shall mean any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order, judgment or decree, administrative order
or decree, administrative or judicial decision, and any other executive or
legislative proclamation.
"Liens" shall mean all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever.
"Material Adverse Effect" shall have the meaning ascribed to it in Section
4.2(b).
"Merger" shall have the meaning ascribed to it in the Recitals.
"Merger Proxy Statement" shall have the meaning ascribed to it in Section
5.4.
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"Merrill Lynch" shall mean Merrill Lynch & Co., one of the Company's
financial advisors.
"New Option" shall have the meaning ascribed to it in Section 3.8.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OCC" shall mean the United States Office of the Comptroller.
"Other Company Preferred Stock" shall mean, collectively, the Company 5%
Preferred Stock, the Company $4.50 Preferred Stock and the Company $4.30
Preferred Stock.
"OTS" shall mean the United States Office of Thrift Supervision.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean the Beneficial Corporation Pension Plan.
"Per Share Merger Consideration" shall have the meaning ascribed to it in
Section 3.1(a).
"Person" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization.
"Registration Statement" shall have the meaning ascribed to it in Section
5.4.
"Regulatory Agencies" shall have the meaning ascribed to it in Section
5.5(a).
"Regulatory Agreement" shall have the meaning ascribed to it in Section
5.14.
"Requisite Regulatory Approvals" shall have the meaning ascribed to it in
Section 5.4.
"Retired Employees" shall have the meaning ascribed to it in Section 8.8(b).
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Starting Date" shall have the meaning ascribed to it in Section 10.1(g).
"Starting Price" shall have the meaning ascribed to it in Section 10.1(g).
"subsidiary" shall mean, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party
or any other subsidiary of such party is a general partner or (ii) at least
50% of the securities or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization or at
least 50% of the value of the outstanding equity is directly or indirectly
owned or controlled by such party or by any one or more of its subsidiaries,
or by such party and one or more of its subsidiaries.
"Surviving Corporation" shall have the meaning ascribed to it in Section
2.1.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall mean (i)
any federal, state, local or foreign net income, gross income, receipts,
windfall profit, severance, property, production, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or add-on minimum, ad
valorem, transfer, stamp, or environmental tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, addition to tax or
additional amount imposed by any governmental authority; (ii) any liability of
Acquiror or any
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Acquiror subsidiary or the Company or any of its subsidiaries, as applicable,
for the payment of amounts with respect to payments of a type described in
clause (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group; and (iii) any liability for the payment of any
amounts as a result of being party to a tax sharing arrangement or as a result
of any express or implied obligation to indemnify any other entity or person
with respect to the payment of amounts of the type described in clause (i) or
clause (ii).
"Trust Account Shares" shall have the meaning ascribed to it in Section
3.1(d).
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions set
forth herein, and in accordance with the DGCL, at the Effective Time, HAC
shall be merged with and into the Company. Following the Effective Time, the
Company shall continue as the surviving corporation (the "Surviving
Corporation"), and the separate corporate existence of HAC shall cease. The
name of the Surviving Corporation shall be "Beneficial Corporation". Acquiror
may at any time change the method of effecting the combination with the
Company (including, without limitation, the provisions of this Article II) if
and to the extent it deems such change to be desirable, including, without
limitation, to provide for a merger of the Company into Acquiror; provided,
however, that no such change shall (i) alter or change the amount or kind of
Per Share Merger Consideration (as hereinafter defined) to be issued to
holders of Company Common Stock as provided for in this Agreement, (ii)
adversely affect the tax treatment of the Company's stockholders as a result
of receiving the Per Share Merger Consideration, or (iii) materially impede or
delay consummation of the transactions contemplated by this Agreement.
Section 2.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which (subject to satisfaction or waiver of the conditions set forth
in Article IX) shall be no later than the third NYSE trading day after
satisfaction or waiver of the conditions set forth in Section 9.1, at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022, unless another time, date or place is agreed to in
writing by the parties hereto.
Section 2.3 Effective Time of the Merger. The Merger shall become effective
on the date and at the time at which a properly executed certificate of merger
(the "Certificate of Merger") is duly filed with the Secretary of State of the
State of Delaware, or at such later date and time as may be specified therein.
The Certificate of Merger shall be filed as soon as practicable on or after
the Closing Date. When used in this Agreement, the term "Effective Time" shall
mean the time and date at which such Certificate of Merger is so filed or at
such later time as the parties shall designate therein.
Section 2.4 Certificate of Incorporation. From and after the Effective Time,
the certificate of incorporation of the Company as in effect immediately prior
to the Effective Time (the "Certificate of Incorporation") shall be the
certificate of incorporation of the Surviving Corporation until amended as
provided by Law and the terms thereof.
Section 2.5 By-Laws. The by-laws of HAC as in effect immediately prior to
the Effective Time shall be the by-laws of the Surviving Corporation until
amended as provided by Law, the Certificate of Incorporation of the Surviving
Corporation and the terms thereof.
Section 2.6 Directors. The directors of HAC immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation and
shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualify in the manner provided in the
Certificate of Incorporation and by-laws of the Surviving Corporation, or as
otherwise provided by Law.
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Section 2.7 Officers. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office from the Effective Time until their respective successors
are duly elected or appointed and qualify in the manner provided in the
Certificate of Incorporation and by-laws of the Surviving Corporation, or as
otherwise provided by Law.
Section 2.8 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 259 of the DGCL.
Section 2.9 Tax Treatment. It is intended that the Merger shall qualify as a
reorganization under Section 368(a) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for purposes of Section 368 of the Code.
Section 2.10 Accounting Treatment. It is intended that the Merger be
accounted for as a "pooling of interests" transaction under GAAP.
ARTICLE III
EFFECT ON CAPITAL STOCK
Section 3.1 Effect on Company Capital Stock. (a) At the Effective Time,
subject to Section 3.4 hereof, each share of the common stock, par value $.01
per share, of the Company (including each attached right (a "Company Right")
issued pursuant to the Company Rights Agreement) (the "Company Common Stock")
issued and outstanding immediately prior to the Effective Time (other than
shares of Company Common Stock to be cancelled pursuant to Section 3.1(d)
hereof) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive 1.0222 duly
authorized, validly issued, fully paid and nonassessable shares (the "Per
Share Merger Consideration") of the common stock, par value $1.00 per share,
of Acquiror ("Acquiror Common Stock"). All of the shares of Company Common
Stock converted into Acquiror Common Stock pursuant to this Article III shall
no longer be outstanding and shall automatically be cancelled and shall cease
to exist, and each certificate previously representing any such shares of
Company Common Stock shall thereafter only represent the right to receive (i)
the number of whole shares of Acquiror Common Stock and (ii) the cash in lieu
of fractional shares into which the shares of Company Common Stock represented
by such certificate have been converted pursuant to this Section 3.1(a) and
Section 3.4 hereof. Certificates previously representing shares of Company
Common Stock shall be exchanged for certificates representing whole shares of
Acquiror Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such certificates in accordance
with Section 3.2 hereof, without any interest thereon. If, between the date of
this Agreement and the Effective Time, the shares of Acquiror Common Stock
shall be changed into a different number or class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares
or readjustment, or a stock dividend thereon shall be declared with a record
date within said period, the Per Share Merger Consideration shall be adjusted
accordingly.
(b) At the Effective Time, subject to Section 3.4 hereof, each share of the
Company Convertible Preferred Stock issued and outstanding immediately prior
to the Effective Time (other than shares of Company Convertible Preferred
Stock to be cancelled pursuant to Section 3.1(d)) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive the number of shares of Acquiror Common Stock that a
holder of the number of shares of Company Common Stock into which such share
of Company Convertible Preferred Stock could have been converted immediately
prior to the Effective Time would have the right to receive pursuant to
Section 3.1(a) hereof. All of the shares of Company Convertible Preferred
Stock converted into Acquiror Common Stock pursuant to this Article III shall
no longer be outstanding and shall automatically be cancelled and shall cease
to exist, and each certificate previously representing any
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such shares of Company Convertible Preferred Stock shall thereafter only
represent the right to receive (i) the number of whole shares of Acquiror
Common Stock and (ii) the cash in lieu of fractional shares into which the
shares of Company Common Stock represented by such certificate have been
converted pursuant to this Section 3.1(b) and Section 3.4 hereof. Certificates
previously representing shares of Company Convertible Preferred Stock shall be
exchanged for certificates representing whole shares of Acquiror Common Stock
and cash in lieu of fractional shares issued in consideration therefor upon
the surrender of such certificates in accordance with Section 3.2 hereof,
without any interest thereon.
(c) At the Effective Time, each share of Other Company Preferred Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of Other Company Preferred Stock to be canceled pursuant to Section
3.1(d)), shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive one share of newly
created series of preferred stock of the Acquiror (the "Acquiror New Preferred
Stock") having terms substantially identical to those of the Other Company
Preferred Stock, except that each share of the Acquiror New Preferred Stock
shall entitle the holder thereof to one vote, voting together with the
Acquiror Common Stock and not as a separate class, on all matters brought
before the holders of the Acquiror Common Stock.
(d) At the Effective Time, all shares of Company Common Stock, Company
Convertible Preferred Stock and Other Company Preferred Stock that are owned
directly or indirectly by Acquiror or the Company or any of their respective
subsidiaries (other than shares of Company Common Stock, Company Convertible
Preferred Stock and Other Company Preferred Stock (x) held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held
in a fiduciary capacity for the benefit of third parties (any such shares,
whether held directly or indirectly by Acquiror, being referred to herein as
"Trust Account Shares") and (y) held by Acquiror or any of its subsidiaries in
respect of a debt previously contracted (any such shares of Company Common
Stock, Company Convertible Preferred Stock and Other Company Preferred Stock
which are similarly held being referred to herein as "DPC Shares")) shall be
cancelled and shall cease to exist and no stock of Acquiror or other
consideration shall be delivered in exchange therefor.
(e) At the Effective Time, each issued and outstanding share of capital
stock of HAC shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
Section 3.2 Exchange of Certificates Representing Shares. (a) As of the
Effective Time, Acquiror shall deposit, or shall cause to be deposited, with
an exchange agent selected by Acquiror and satisfactory to the Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
Stock, Company Convertible Preferred Stock and Other Company Preferred Stock,
for exchange in accordance with this Article III, (i) certificates
representing the number of shares of Acquiror Common Stock issuable in the
Merger, to be issued in respect of all shares of Company Common Stock and
Company Convertible Preferred Stock outstanding immediately prior to the
Effective Time and which are to be exchanged pursuant to the Merger (other
than shares to be cancelled pursuant to Section 3.1(d) hereof), (ii)
certificates representing the number of shares of Acquiror New Preferred Stock
issuable in the Merger, to be issued in respect of all shares of Other Company
Preferred Stock outstanding immediately prior to the Effective Time and which
are to be exchanged pursuant to the Merger (other than shares to be cancelled
pursuant to Section 3.1(d) hereof), and (iii) cash in an amount sufficient to
make any cash payment due under Section 3.4 hereof (such cash and certificates
for shares of Acquiror Common Stock and shares of Acquiror New Preferred Stock
being hereinafter referred to collectively as the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time, Acquiror
shall cause the Exchange Agent to mail (or deliver at its principal office) to
each holder of record of a certificate or certificates
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representing shares of Company Common Stock, Company Convertible Preferred
Stock or Other Company Preferred Stock, as the case may be, (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the certificates for shares of Company Common Stock, Company
Convertible Preferred Stock or Other Company Preferred Stock, as the case may
be, shall pass, only upon delivery of the certificates for such shares of
Company Common Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be, to the Exchange Agent and shall be in
such form and have such other provisions, including appropriate provisions
with respect to back-up withholding, as Acquiror may reasonably specify, and
(ii) instructions for use in effecting the surrender of the certificates for
shares of Company Common Stock, Company Convertible Preferred Stock or Other
Company Preferred Stock, as the case may be. Upon surrender of certificates
for shares of Company Common Stock, Company Convertible Preferred Stock or
Other Company Preferred Stock, as the case may be, for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder thereof
shall be entitled to receive in exchange therefor that portion of the Exchange
Fund which such holder has the right to receive pursuant to the provisions of
this Article III, after giving effect to any required withholding Tax, and the
certificates for shares of Company Common Stock, Company Convertible Preferred
Stock or Other Company Preferred Stock, as the case may be, so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on either
the stock or the cash portion of the Exchange Fund. In the event of any
transfer of ownership of shares of Company Common Stock, Company Convertible
Preferred Stock or Other Company Preferred Stock, as the case may be, which
has not been registered in the transfer records of the Company, certificates
representing the proper number of shares of Acquiror Common Stock or Acquiror
New Preferred Stock, if any, and a check in an amount equal to the proper
amount of the cash component, if any, of the Exchange Fund, will be issued to
the transferee of the certificate representing the transferred shares of
Company Common Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be, only upon presentation to the Exchange
Agent of a certificate or certificates representing such shares of Company
Common Stock, Company Convertible Preferred Stock or Other Company Preferred
Stock, as the case may be, accompanied by all documents required to evidence
and effect the prior transfer thereof and to evidence that any applicable
stock transfer Taxes associated with such transfer were paid.
Section 3.3 Dividends, Etc. No dividends that are declared on shares of
Acquiror Common Stock or Acquiror New Preferred Stock will be paid to persons
entitled to receive certificates representing shares of Acquiror Common Stock
or Acquiror New Preferred Stock, as the case may be, until such persons
surrender their certificates representing shares of Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred Stock, as the
case may be. Upon such surrender, there shall be paid to the person in whose
name the certificates representing such shares of Acquiror Common Stock or
Acquiror New Preferred Stock, as the case may be, shall be issued, any
dividends which shall have become payable with respect to such shares of
Acquiror Common Stock or Acquiror New Preferred Stock, as the case may be,
between the Effective Time and the time of such surrender. In no event shall
the person entitled to receive such dividends be entitled to receive interest
on such dividends. If any certificates for any shares of Acquiror Common Stock
or Acquiror New Preferred Stock, as the case may be, are to be issued in a
name other than that in which the certificate representing shares of Company
Common Stock, Company Convertible Preferred Stock or Other Company Preferred
Stock, as the case may be, surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the person requesting such exchange
shall pay to the Exchange Agent any transfer or other Taxes required by reason
of the issuance of certificates for such shares of Acquiror Common Stock or
Acquiror New Preferred Stock, as the case may be, in a name other than that of
the registered holder of the certificate surrendered or shall establish to the
satisfaction of the Exchange Agent that such Tax has been paid or is not
applicable. Notwithstanding the foregoing, (i) neither the Exchange Agent nor
any party hereto shall be liable to a holder of shares of Company Common
Stock, Company Convertible Preferred Stock or Other
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Company Preferred Stock, as the case may be, for any shares of Acquiror Common
Stock or Acquiror New Preferred Stock, as the case may be, or dividends
thereon, or in accordance with Section 3.4 hereof, any cash in lieu of
fractional share interests, in each case, delivered to a public official
pursuant to applicable escheat Laws and (ii) any shares of Acquiror Common
Stock or Acquiror New Preferred Stock held by the Exchange Agent prior to
surrender of certificates representing shares of Company Common Stock, Company
Convertible Preferred Stock or Other Company Preferred Stock, as the case may
be, shall not be deemed outstanding for quorum and voting purposes.
Section 3.4 No Fractional Shares. No certificates or scrip representing
fractional shares of Acquiror Common Stock shall be issued upon the surrender
for exchange of certificates representing shares of Company Common Stock or
Company Convertible Preferred Stock, as the case may be, pursuant to this
Article III and no dividend, stock split or other change in the capital
structure of Acquiror shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional shares of Acquiror
Common Stock, each holder of shares of Company Common Stock or Company
Convertible Preferred Stock, as the case may be, who would otherwise have been
entitled to a fraction of a share of Acquiror Common Stock upon surrender of
certificates for exchange pursuant to this Article III will be paid cash upon
such surrender in an amount equal to the product of such fraction multiplied
by the closing sale price of one share of Acquiror Common Stock on the NYSE on
the day of the Effective Time, or, if shares of Acquiror Common Stock are not
so traded on such day, the closing sale price of one such share on the next
preceding day on which such share was traded on the NYSE. For purposes of this
Section 3.4, shares of Company Common Stock or Company Convertible Preferred
Stock, as the case may be, of any holder represented by two or more
certificates may be aggregated, and in no event shall any holder be paid an
amount of cash in respect of more than one share of Acquiror Common Stock.
Section 3.5 Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred Stock, as the
case may be, for six months after the Effective Time shall be delivered to
Acquiror, upon demand, and any holders of Company Common Stock, Company
Convertible Preferred Stock or Other Company Preferred Stock, as the case may
be, who have not theretofore complied with this Article III shall thereafter
look only to Acquiror for payment of their claim for the shares of Acquiror
Common Stock or Acquiror New Preferred Stock, as the case may be, and cash and
dividends or other distributions, if any, pursuant to this Article III.
Section 3.6 Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Acquiror, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Acquiror.
Section 3.7 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares
of Company Common Stock, Company Convertible Preferred Stock or Other Company
Preferred Stock, as the case may be, shall thereafter be made. If, after the
Effective Time, certificates representing shares of Company Common Stock,
Company Convertible Preferred Stock or Other Company Preferred Stock, as the
case may be, are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates representing shares of Acquiror
Common Stock or shares of Acquiror New Preferred Stock, as applicable.
Section 3.8 Employee Stock Options. At the Effective Time, each of the
Employee Stock Options which is outstanding and unexercised at the Effective
Time shall be converted automatically into an option to purchase shares of
Acquiror Common Stock (the "New Option") in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the
Company Stock Option Plans governing the Employee Stock Options):
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(i) The number of shares of Acquiror Common Stock to be issued upon
exercise of the New Option shall be equal to the product of the number of
shares of Company Common Stock to be issued upon exercise of the original
option and the Per Share Merger Consideration; and
(ii) The exercise price per share of Acquiror Common Stock under the New
Option shall be equal to the aggregate exercise price of the original
option divided by the total number of full shares of Acquiror Common Stock
to be issued upon exercise of the New Option (as determined under paragraph
(i) immediately above); provided, however, that such exercise price shall
be rounded up to the nearest cent.
The duration and other terms of the New Option shall be the same as that of
the original option, except that all references to the Company shall be deemed
to be references to Acquiror. Acquiror shall file with the SEC a registration
statement on Form S-8 (or other appropriate form) or a post-effective
amendment to a previously filed registration statement as promptly as
practicable after the Effective Time for purposes of registering all shares of
Acquiror Common Stock issuable after the Effective Time upon exercise of the
Employee Stock Options, and shall have such registration statement or post-
effective amendment become effective and comply, to the extent applicable,
with state securities or blue sky Laws with respect thereto at the Effective
Time.
ARTICLE IV
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
Section 4.1 Disclosure Schedules. Prior to the execution and delivery of
this Agreement, the Company has delivered to Acquiror, and Acquiror has
delivered to the Company, a schedule (in the case of the Company, the "Company
Disclosure Schedule," and, in the case of Acquiror, the "Acquiror Disclosure
Schedule") setting forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception to one or more
of such party's representations or warranties contained in Article V, in the
case of the Company, or Article VI, in the case of Acquiror, or to one or more
of such party's covenants contained in Article VII; provided, however, that,
notwithstanding anything in this Agreement to the contrary, (a) no such item
is required to be set forth in the relevant Disclosure Schedule as an
exception to a representation or warranty if its absence would not result in
the related representation or warranty being deemed untrue or incorrect under
the standard established by Section 4.2, and (b) the mere inclusion of an item
in a Disclosure Schedule as an exception to a representation or warranty shall
not be deemed an admission by a party that such item represents a material
exception or material fact, event or circumstance or that such item has had or
would have a Material Adverse Effect (as defined herein) with respect to
either the Company or Acquiror, respectively.
Section 4.2 Standards. (a) No representation or warranty of the Company
contained in Article V or of Acquiror contained in Article VI shall be deemed
untrue or incorrect for any purpose under this Agreement, and no party hereto
shall be deemed to have breached a representation or warranty for any purpose
under this Agreement, in any case as a consequence of the existence or absence
of any fact, circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts, circumstances or
events inconsistent with any representations or warranties contained in
Article V, in the case of the Company, or Article VI, in the case of Acquiror,
has had or would reasonably be expected to have a Material Adverse Effect with
respect to the Company or Acquiror, respectively (disregarding for this
purpose any materiality qualification contained in such representations or
warranties).
(b) As used in this Agreement, the term "Material Adverse Effect" means,
with respect to Acquiror or the Company, as the case may be, a material
adverse effect on (i) the business, results of
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operations or financial condition of such party and its subsidiaries taken as
a whole, other than any such effect attributable to or resulting from (v) any
change resulting from the public announcement of the transactions contemplated
hereby, (w) any change in banking, insurance, consumer finance, thrift, fair
lending or similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (x) any change
in general economic conditions, in interest rates or in conditions affecting
the banking, insurance, consumer finance, or thrift industries generally, (y)
any action or omission of the Company or Acquiror or any subsidiary of either
of them taken with the express prior written consent of the other party
hereto, or (z) any expenses incurred by such party in connection with this
Agreement or the transactions contemplated hereby or (ii) the ability of such
party to perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Article IV, the Company represents and warrants to Acquiror as
follows:
Section 5.1 Organization. (a) The Company is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
The Company has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on the Company.
(b) The Company is duly registered as a bank holding company under the BHC
Act. Beneficial Savings Bank FSB is a federal savings bank chartered by the
OTS. Each of Beneficial National Bank and Beneficial National Bank USA is a
national bank chartered by the OCC. Each of the Company's other subsidiaries
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization. Each of the
Company's subsidiaries has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Company. The deposit accounts of the
Beneficial National Bank and Beneficial Savings Bank are insured by the
Federal Deposit Insurance Corporation (the "FDIC") to the fullest extent
permitted by Law, and all premiums and assessments required to be paid in
connection therewith have been paid when due, except where the failure to make
such payments when due would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company.
Section 5.2 Capitalization. The authorized capital stock of the Company
consists of (i) 160,000,000 shares of Company Common Stock, (ii) 585,730
shares of Company 5% Preferred Stock, (iii) 103,976 shares of Company $4.50
Preferred Stock, (iv) 1,069,204 shares of Company $4.30 Preferred Stock, (v)
1,164,077 shares of Company Convertible Preferred Stock, and (vi) 570,000
shares of Company Participating Preferred Stock. As of February 28, 1998, (i)
54,365,830 shares of Company Common Stock, (ii) 407,718 of Company 5%
Preferred Stock, (iii) 103,976 shares of Company $4.50 Preferred Stock, (iv)
836,585 shares of Company $4.30 Preferred Stock, (v) 16,414 shares of Company
Convertible Preferred Stock, and (vi) no shares of Company Participating
Preferred Stock were issued and outstanding. As of February 28, 1998, (i)
4,512,547 shares of Company Common Stock were reserved for issuance upon
exercise of Employee Stock Options
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outstanding under the Company Stock Option Plans, (ii) 147,726 shares of
Company Common Stock were reserved for issuance upon the conversion of shares
of Company Convertible Preferred Stock and (iii) no shares of Company Common
Stock were reserved for issuance under the dividend reinvestment provisions of
the Direct Purchase Plan. As of February 28, 1998, 2,507,471 shares of Company
Common Stock and 178,012 shares of Company 5% Preferred Stock were held as
treasury shares. All of the issued and outstanding shares of Company Common
Stock, Company Convertible Preferred Stock and Other Company Preferred Stock
are validly issued, fully paid and nonassessable and free of preemptive
rights. Except as set forth above, as of February 28, 1998, there were no
shares of capital stock of the Company issued or outstanding or any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Company to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock or
securities. Since February 28, 1998, no shares of capital stock of the Company
have been issued other than shares of Company Common Stock issued (i) upon the
exercise of options pursuant to the Company Stock Option Plans, (ii) upon the
conversion of shares of Company Convertible Preferred Stock and (iii) pursuant
to the dividend reinvestment provisions of the Direct Purchase Plan. There are
no notes, bonds, debentures or other indebtedness of the Company having the
right to vote (or convertible into or exchangeable for securities having the
right to vote) on any matters upon which stockholders of the Company may vote.
Section 5.3 Authority Relative to this Agreement. The Company has the
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company and, except for the
approval of this Agreement by the requisite vote of the Company's stockholders
(the "Company Stockholder Approval") at a special meeting of the Company's
stockholders duly called for the purpose of obtaining such approval (the
"Company Stockholders Meeting"), no other corporate action or proceeding on
the part of the Company is necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization and valid
execution and delivery by Acquiror, constitutes a valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or similar Laws
now or hereafter in effect relating to creditors' rights generally and general
principles of equity.
Section 5.4 Consents and Approvals; No Violations. (a) Except for (i) the
filing of applications and notices, as applicable, with the Federal Reserve
Board under the BHC Act and under HOLA, and/or with the OTS under HOLA or with
the OTS under the Bank Merger Act or the OCC under the Change in Bank Control
Act, as applicable, and the approval of such applications by the Federal
Reserve Board, OTS or OCC, as applicable, (ii) the filing of applications and
notices, as applicable, with the state regulatory authorities governing
consumer finance, mortgage lending and insurance in the states in which the
Company operates its business or the filing of applications and notices with
federal housing related authorities, and the approval of such applications by
such authorities, (iii) the filing of applications and notices, as applicable,
with the foreign governmental authorities regulating consumer finance,
mortgage lending and insurance in the foreign jurisdictions in which the
Company operates its business, including, without limitation, the Bank of
England and The Minister of Finance and the Department of Enterprise and
Employment (Insurance Division) of Ireland, and the approval of such
applications by such authorities, (iv) the filing of notification and report
forms with the United States Federal Trade Commission and the United States
Department of Justice under the HSR Act and the expiration or termination of
any applicable waiting period thereunder, (v) the filing of applications and
notices, as applicable, with foreign governmental authorities under the
Foreign Competition Laws, and the approval of such applications by such
authorities, if required, (vi) the filing with the SEC of a proxy statement in
definitive form relating to the meetings of the Company's
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stockholders and Acquiror's stockholders to be held in connection with this
Agreement and the transactions contemplated hereby (the "Merger Proxy
Statement") and the filing and declaration of effectiveness of the
registration statement on Form S-4 relating to the shares of Acquiror Common
Stock to be issued in the Merger in which the Merger Proxy Statement will be
included as a prospectus (the "Registration Statement"), (vii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL, (viii) the approval of the listing of the Acquiror
Common Stock to be issued in the Merger on the NYSE, and (ix) the consents of
third parties under the Contracts (as defined below) listed in Section
5.4(a)(ix) of the Company Disclosure Schedule, no notices to, consents or
approvals of, or filings or registrations with, any court, administrative
agency or commission or other governmental authority or instrumentality (each,
a "Governmental Entity") or with any self-regulatory authority or with any
third party are necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby, except for such notices, consents,
approvals, filings or registrations, the failure of which to be made or
obtained would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Company or on the ability of the
Acquiror, following the Effective Time, to conduct the business of the Company
as presently conducted. The notices, consents or approvals, filings or
registrations, and expirations or terminations of waiting periods referred in
clauses 5.4(a)(i) through 5.4(a)(v) are hereinafter referred to as the
"Requisite Regulatory Approvals". As of the date hereof, the Company knows of
no reason why all Requisite Regulatory Approvals should not be obtained.
(b) Neither the execution and delivery of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby, will
(i) conflict with or result in any breach of any provisions of the certificate
of incorporation or by-laws of the Company or the certificate of incorporation
or by-laws of any of the Company's subsidiaries; (ii) subject to the obtaining
the consents listed in Section 5.4(a)(ix) of the Company Disclosure Schedule
and except as set forth in Section 5.4(b)(ii) of the Company Disclosure
Schedule, result in a violation or breach of, or constitute (with or without
due notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation (collectively, "Contracts") to
which the Company or any of the Company's subsidiaries is a party or by which
any of them or any of their respective properties or assets may be bound;
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any Company License (as hereinafter defined); or (iv) subject
to giving the notices, making the filings or registrations or obtaining the
consents or approvals referred to in paragraph (a) above, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Company, any of the Company's subsidiaries or any of their respective
properties or assets, except, in the case of clauses (ii), (iii) and (iv), for
violations, breaches or defaults which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company or on the ability of the Acquiror, following the Effective Time, to
conduct the business of the Company as presently conducted.
Section 5.5 Reports and Financial Statements. (a) The Company and each of
its subsidiaries have timely filed all material reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1995, with (i) the
Federal Reserve Board, (ii) the FDIC, (iii) the OCC, (iv) the OTS, (v) any
state banking commissions, any other state regulatory authorities or any
comparable regulatory authorities in England or Ireland and (vi) any self-
regulatory organization (collectively, the "Regulatory Agencies"), and have
paid all material fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of the Company and its subsidiaries, and
except as listed in Section 5.5(a) of the Company Disclosure
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Schedule, no Regulatory Agency has initiated any proceeding or investigation
or, to the knowledge of the Company, threatened any investigation into the
business or operations of the Company or any of its subsidiaries since
December 31, 1995, except for such proceedings or investigations which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
(b) The Company has filed all material reports, forms, registrations,
schedules, statements and other documents required to be filed by it with the
SEC since December 31, 1995 (the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case
may be, and the applicable rules and regulations promulgated thereunder.
Except to the extent that information contained in any Company SEC Report has
been revised or superseded by a later filed Company SEC Report, none of the
Company SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) The consolidated financial statements of the Company included in the
Company SEC Reports filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Filed Company SEC
Reports") complied as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP (except, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
the unaudited statements, to normal year-end audit adjustments and to any
other adjustments described therein).
(d) Except for liabilities and obligations incurred in the ordinary course
of business consistent with past practice since the date of the most recent
consolidated balance sheet included in the Filed Company SEC Reports, neither
the Company nor any of its subsidiaries has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be recognized or disclosed on a consolidated balance sheet
of the Company and its consolidated subsidiaries or in the notes thereto.
Section 5.6 Absence of Certain Changes or Events. Except as set forth in the
Filed Company SEC Reports and as set forth in Section 5.6 of the Company
Disclosure Schedule, the business of the Company and its subsidiaries has been
conducted only in the ordinary course of business consistent with past
practice, and there has not been any event, change or development which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company, and, during the period from the
most recent consolidated balance sheet included in the Filed Company SEC
Reports through the date of this Agreement, neither the Company nor any of its
subsidiaries has taken any action that, if taken during the period from the
date of this Agreement through the Effective Time, would constitute a breach
of Section 7.1 hereof.
Section 5.7 Litigation. Except as set forth in the Filed Company SEC Reports
and as set forth in Section 5.7 of the Company Disclosure Schedule, as of the
date hereof, there is no suit, action, proceeding or regulatory investigation
pending or, to the knowledge of the Company, threatened against or affecting
the Company or any of its subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the Company,
nor is there any judgment, order, decree, statute, Law, ordinance, rule or
regulation of any Regulatory Agency or other Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries which, individually
or in the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect on the Company.
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Section 5.8 Information in Disclosure Documents and Registration Statement.
None of the information to be supplied by the Company for inclusion or
incorporation by reference in the Merger Proxy Statement or the Registration
Statement will, in the case of the Registration Statement, at the time it
becomes effective and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or, in the case of
the Merger Proxy Statement or any amendments thereof or supplements thereto,
at the time of the mailing of the Merger Proxy Statement and any amendments or
supplements thereto and at the time of the Company Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Merger Proxy Statement (except for such portions thereof
that relate only to Acquiror or its subsidiaries or Affiliates) will comply as
to form in all material respects with the provisions of the Exchange Act, and
the rules and regulations promulgated thereunder.
Section 5.9 Compliance with Applicable Law. The Company and its subsidiaries
have received such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate Governmental
Entities (the "Company Licenses") as are necessary to own or lease and operate
their respective properties and to conduct their respective businesses
substantially in the manner described in the Company SEC Reports and as
currently owned or leased and conducted, and all such Company Licenses are
valid and in full force and effect, except for any such Company Licenses which
the failure to have or to be in full force and effect would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company. The Company and its subsidiaries are in compliance with their
respective obligations under the Company Licenses, with only such exceptions
as, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on the Company. Except as disclosed in the Company
SEC Reports and as set forth in Section 5.9 of the Company Disclosure
Schedule, the Company and its subsidiaries are in compliance with all
judgments, orders, decrees, statutes, Laws, ordinances, rules and regulations
of any Governmental Entity applicable to them, except for such noncompliance
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Company.
Section 5.10 ERISA Compliance. (a) Section 5.10(a) of the Company Disclosure
Schedule sets forth a true and complete list of each employee benefit plan,
arrangement or agreement, including each employment, severance, compensation,
retention or similar agreement, that is maintained as of the date of this
Agreement (the "Company Plans") by the Company or any of its subsidiaries or
by any trade or business, whether or not incorporated (an "ERISA Affiliate"),
which, together with the Company, would be deemed a "single employer" within
the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for
the benefit of any current or former employee, officer, director or
independent contractor of the Company or any of its subsidiaries.
(b) The Company has heretofore made available to Acquiror true and complete
copies of each of the Company Plans and any material amendments and
modifications thereto and all other related documents, including, but not
limited to, (i) the actuarial report for such Company Plan (if applicable) for
each of the last two years, and (ii) the most recent determination letter from
the Internal Revenue Service (if applicable) for such Company Plan.
(c) Except as listed in Section 5.10(c) of the Company Disclosure Schedule,
(i) each of the Company Plans has been operated and administered in all
material respects in accordance with applicable Law, including, but not
limited to, ERISA and the Code, (ii) a favorable determination letter has been
issued by the Internal Revenue Service with respect to each of the Company
Plans intended to be "qualified" within the meaning of Section 401(a) of the
Code and there are no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any
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"qualified" Company Plan, (iii) with respect to each Company Plan that is
subject to Title IV of ERISA, the present value of accrued benefits under such
Company Plan, based upon actuarial assumptions used for funding purposes in
the most recent actuarial valuation report prepared by the Company Plan's
actuary with respect to such Company Plan, did not, as of the date of such
valuation report, exceed the then current value of the assets of such Company
Plan allocable to such accrued benefits and, since the last valuation date of
each such Company Plan, no such Company Plan has been amended to increase the
benefits thereunder, (iv) no Company Plan provides medical benefits (whether
or not insured) with respect to current or former employees of the Company or
any of its subsidiaries beyond their retirement or other termination of
service, other than coverage mandated by applicable Law or benefits the full
cost of which is borne by the current or former employee (or his beneficiary),
(v) no liability under Title IV of ERISA or Section 412 of the Code has been
incurred (directly or indirectly) by the Company, any of its subsidiaries or
any ERISA Affiliate that has not been satisfied in full, and no condition
exists that presents a material risk to the Company, any of its subsidiaries
or any ERISA Affiliate of incurring a material liability thereunder, (vi) no
Company Plan is a "multiemployer pension plan," as such term is defined in
Section 3(37) of ERISA, or a plan described in Section 4063 of ERISA, (vii)
all contributions or other amounts payable by the Company, any of its
subsidiaries or any ERISA Affiliate as of the Effective Time with respect to
each Company Plan in respect of current or prior plan years will have been
paid or accrued in accordance with GAAP and Section 412 of the Code, (viii)
neither the Company, any of its subsidiaries nor any ERISA Affiliate has
engaged in a transaction in connection with which the Company, its
subsidiaries or any ERISA Affiliate would be subject to either a material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to
the best knowledge of the Company, there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of
or against any of the Company Plans or any trusts related thereto and no
Company Plan is presently under audit or examination (or any notice thereof).
(d) Except as listed in Section 5.10(d) of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (either alone or in conjunction with
any other event) (i) result in any payment (including, without limitation,
severance, "excess parachute payment" within the meaning of Section 280G of
the Code, forgiveness of indebtedness or otherwise) becoming due to any
officer, director or employee of the Company or any of its subsidiaries under
any Company Plan or otherwise, (ii) increase any benefits payable under any
Company Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits.
Section 5.11 Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinions of Goldman Sachs and Merrill Lynch, each
dated the date hereof, to the effect that the Per Share Merger Consideration
is fair to the holders of shares of Company Common Stock from a financial
point of view.
Section 5.12 Vote Required. The Company Stockholder Approval at the Company
Stockholders Meeting will require the affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Company Common
Stock, Company $4.30 Preferred Stock and Company Convertible Preferred Stock,
voting together as a single class. The Company Stockholder Approval is the
only vote of the holders of any class or series of the Company's capital stock
necessary to approve and adopt this Agreement, and approve the transactions
contemplated hereby.
Section 5.13 Takeover Statutes, Etc. The Board of Directors of the Company
has approved the terms of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement, and such approval is
sufficient to render inapplicable to the Merger and the other transactions
contemplated by this Agreement the provisions of Section 203 of the DGCL. To
the best of the Company's knowledge, no other state takeover statute or
similar statute or regulation applies or purports to apply to the Merger, this
Agreement or any of the transactions contemplated thereby. This
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Agreement has been approved by the Board of Directors of the Company for
purposes of Article VIII of the Company's Restated Certificate of
Incorporation. The Company has taken all action necessary or appropriate so
that the execution of this Agreement and the consummation of the transactions
contemplated hereby do not and will not result in the ability of any person to
exercise any Company Rights (as defined in the Company Rights Agreement) under
the Company Rights Agreement or enable or require the Rights to separate from
the shares of Company Common Stock to which they are attached or to be
triggered or become exercisable.
Section 5.14 Agreements with Regulatory Agencies. Except as set forth in
Section 5.14 of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is subject to any cease-and-desist or other order issued
by, or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient
of any extraordinary supervisory letter from, or has adopted any board
resolutions at the request of (each, whether or not listed in Section 5.14 of
the Company Disclosure Schedule, a "Regulatory Agreement"), any Regulatory
Agency or other Governmental Entity that restricts the conduct of its business
or that in any manner relates to its capital adequacy, its credit policies,
its management or its business, except for any Regulatory Agreements that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company or on the Acquiror's ability to conduct
the business of the Company as presently conducted. None of the Company or any
of its subsidiaries has been advised by any Regulatory Agency or other
Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement, except for any such proposed Regulatory Agreements that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company.
Section 5.15 Taxes. (a) Each of the Company and its subsidiaries has filed
all material Tax returns or reports required to be filed by it and all such
returns and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such failures
to file, to be complete or correct or to have extensions granted that remain
in effect, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Company. The Company and each of its
subsidiaries have paid (or the Company has paid on its behalf) all Taxes shown
as due on such returns, and, the most recent financial statements contained in
the Filed Company SEC Reports reflect an adequate reserve in accordance with
GAAP for all Taxes payable by the Company and its subsidiaries for all taxable
periods and portions thereof accrued through the date of such financial
statements.
(b) Except as set forth in Section 5.15(b) of the Company Disclosure
Schedule, no deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on the Company. The federal income tax returns of the Company and each of its
subsidiaries consolidated in such returns for tax years through 1988 have
closed by virtue of the applicable statute of limitations.
(c) Neither the Company nor any of its subsidiaries has taken any action or
knows of any fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(d) Except as set forth in Section 5.15(d) of the Company Disclosure
Schedule, the Company and its subsidiaries are not a party to any Tax sharing
or Tax indemnity agreements (other than agreements between or among the
Company and its subsidiaries).
Section 5.16 Accounting for the Merger. The Company has no reason to believe
that the Merger will fail to qualify for pooling-of-interests treatment under
GAAP and applicable SEC regulations.
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Section 5.17 Brokers. No broker, investment banker or other person, other
than Goldman Sachs and Merrill Lynch, the fees and expenses of which will be
paid by the Company (as reflected in agreements between Goldman Sachs and
Merrill Lynch and the Company), is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Section 5.18 Interest Rate and Foreign Exchange Contracts. All interest rate
swaps, caps, floors and option agreements and other interest rate risk
management arrangements and foreign exchange contracts to hedge its
investments in foreign subsidiaries, whether entered into for the account of
the Company or one of its subsidiaries, were entered into in the ordinary
course of business and, to the Company's knowledge, in accordance with prudent
business practice and applicable rules, regulations and policies of any
Governmental Entity and with counterparties believed to be financially
responsible at the time, and are valid and binding obligations of the Company
or one of its subsidiaries enforceable in accordance with their terms (except
as may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the availability
of equitable remedies), and are in full force and effect. The Company and each
of its subsidiaries have duly performed in all material respects all of their
material obligations thereunder to the extent that such obligations to perform
have accrued, and, to the Company's knowledge, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Subject to Article IV, Acquiror represents and warrants to the Company as
follows:
Section 6.1 Organization. (a) Acquiror is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware
and has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted. Acquiror is duly licensed or qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
make such licensing or qualification necessary, except where the failure to be
so qualified would not have a Material Adverse Effect on Acquiror.
(b) Each of Acquiror's subsidiaries, including HAC, is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation. Each subsidiary of Acquiror, including HAC, has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so qualified would not have a
Material Adverse Effect on Acquiror.
Section 6.2 Capitalization. The authorized capital stock of Acquiror
consists of 250,000,000 shares of Acquiror Common Stock, and 8,155,044 shares
of Acquiror Preferred Stock. As of April 2, 1998, (i) 107,319,277 shares of
Acquiror Common Stock were issued and outstanding; (ii) 4,072,145 shares of
Acquiror Common Stock were issuable upon exercise of employee and non-employee
stock options (the "Acquiror Stock Options") outstanding under all stock
option plans of Acquiror (the "Acquiror Stock Option Plans"); and (iii)
3,754,635 shares of Acquiror Preferred Stock were issued and outstanding. As
of April 2, 1998, 17,011,848 shares of Acquiror Common Stock were held as
treasury shares. All of the issued and outstanding shares of Acquiror Common
Stock are validly issued, fully paid and nonassessable and free of preemptive
rights. All of the shares of Acquiror Common Stock issuable as consideration
in the Merger at the Effective Time in accordance with this Agreement will be,
when so issued, duly authorized, validly issued, fully paid and nonassessable
and free of
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preemptive rights. Except as set forth above, as of April 2, 1998, there were
no shares of capital stock of Acquiror issued or outstanding or any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Acquiror to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock or
securities. There are no notes, bonds, debentures or other indebtedness of
Acquiror having the right to vote (or convertible into or exchangeable for
securities having the right to vote) on any matters upon which stockholders of
Acquiror may vote. The authorized capital stock of HAC consists of 1,000
shares of common stock, par value $.01 per share, all of which are validly
issued, fully paid and nonassessable, and are owned by Acquiror free and clear
of any Lien.
Section 6.3 Authority Relative to this Agreement. Each of Acquiror and HAC
has the corporate power and authority to enter into this Agreement and to
perform its respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of Acquiror and HAC and the consummation by each of Acquiror and HAC
of the transactions contemplated hereby have been duly authorized by the Board
of Directors of each of Acquiror and HAC and by Acquiror as the sole
stockholder of HAC. Except for the approval of this Agreement by the requisite
vote of Acquiror's stockholders (the "Acquiror Stockholder Approval") at a
special meeting of Acquiror's stockholders duly called for the purpose of
obtaining such approval (the "Acquiror Stockholders Meeting"), no other
corporate action or proceeding on the part of Acquiror or HAC is necessary to
authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Acquiror and HAC
and, assuming the due authorization and valid execution and delivery by the
Company, constitutes a valid and binding agreement of each of Acquiror and
HAC, enforceable against each of Acquiror and HAC in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereafter in effect relating to creditors' rights
generally and general principles of equity.
Section 6.4 Consents and Approvals; No Violations. (a) Except for (i) the
notices, consents or approvals, and filings or registrations, required to
obtain the Requisite Regulatory Approvals, (ii) the filing with the SEC of the
Merger Proxy Statement and the filing and declaration of effectiveness of the
Registration Statement, (iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (iv) such filings and approvals
as are required to be made or obtained under the securities or "Blue Sky" Laws
of various states in connection with the issuance of the shares of Acquiror
Common Stock pursuant to this Agreement, (v) the approval of the listing of
the Acquiror Common Stock to be issued in the Merger on the NYSE, and (vi) the
consents of third parties under the Contracts listed in Section 6.4(a)(vi) of
the Acquiror Disclosure Schedule, no notices to, consents or approvals of, or
filings or registrations with any Governmental Entity or with any self
regulatory authority or with any third party are necessary in connection with
the execution and delivery by each of Acquiror and HAC of this Agreement and
the consummation by each of Acquiror and HAC of the transactions contemplated
hereby, except for such notices, consents, approvals, filings or
registrations, the failure of which to be made or obtained would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Acquiror. As of the date hereof, Acquiror knows of no
reason why all Requisite Regulatory Approvals will not be obtained.
(b) Except as listed in Section 6.4(b) of the Acquiror Disclosure Schedule,
neither the execution and delivery of this Agreement by either Acquiror or
HAC, nor the consummation by Acquiror or HAC of the transactions contemplated
hereby, will (i) conflict with or result in any violation of or breach of any
provisions of the certificate of incorporation or by-laws of Acquiror or the
certificate of incorporation or by-laws of any of Acquiror's subsidiaries,
including HAC; (ii) subject to obtaining the consents listed in Section
6.4(a)(vi) of the Acquiror Disclosure Schedule, result in a violation or
breach of, or constitute (with or without due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
Contract to which Acquiror or any of Acquiror's subsidiaries, including HAC,
is a party or by which any of them or any of
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their respective properties or assets may be bound; (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any Acquiror License (as hereinafter defined); or (iv) subject
to giving the notices, making the filings or registrations or obtaining the
consents or approvals referred to in paragraph (a) above, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Acquiror,
any of Acquiror's subsidiaries, including HAC, or any of their respective
properties or assets, except, in the case of clauses (ii), (iii) and (iv), for
violations, breaches or defaults which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Acquiror.
Section 6.5 Reports and Financial Statements. (a) Acquiror and each of its
subsidiaries have timely filed all material reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since December 31, 1995 with all
Regulatory Agencies, and have paid all material fees and assessments due and
payable in connection therewith. Except for normal examinations conducted by a
Regulatory Agency in the regular course of the business of Acquiror and its
subsidiaries, and except as listed in Section 6.5 of the Acquiror Disclosure
Schedule, no Regulatory Agency has initiated any proceeding or investigation
or, to the knowledge of Acquiror, threatened any investigation into the
business or operations of Acquiror or any of its subsidiaries since December
31, 1995, except for such proceedings or investigations which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Acquiror.
(b) Acquiror and each of its subsidiaries have timely filed all material
reports, forms, registrations, schedules, statements and other documents
required to be filed by it with the SEC since December 31, 1995 (the "Acquiror
SEC Reports"). As of their respective dates, the Acquiror SEC Reports complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the applicable rules and regulations
promulgated thereunder. Except to the extent that information contained in any
Acquiror SEC Report has been revised or superseded by a later filed Acquiror
SEC Report, none of the Acquiror SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) The consolidated financial statements of Acquiror included in the
Acquiror SEC Reports filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Filed Acquiror SEC
Reports") complied as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP (except, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly present the consolidated
financial position of Acquiror and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
the unaudited statements, to normal year-end audit adjustments and to any
other adjustments described therein).
(d) Except as set forth in the Filed Acquiror SEC Reports, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the Filed Acquiror SEC Reports, neither Acquiror nor
any of its subsidiaries has any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP
to be recognized or disclosed on a consolidated balance sheet of Acquiror and
its consolidated subsidiaries or in the notes thereto.
Section 6.6 Absence of Certain Changes or Events. Except as set forth in the
Filed Acquiror SEC Reports, the business of Acquiror and its subsidiaries has
been conducted only in the ordinary
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course of business consistent with past practice, and there has not been any
event, change or development which, individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse Effect on Acquiror,
and, during the period from the most recent consolidated balance sheet
included in the Filed Acquiror SEC Reports through the date of this Agreement,
neither Acquiror nor any of its subsidiaries has taken any action that, if
taken during the period from the date of this Agreement through the Effective
Time, would constitute a breach of Section 7.2 hereof.
Section 6.7 Litigation. Except as set forth in the Filed Acquiror SEC
Reports, and as set forth in Section 6.7 of the Acquiror Disclosure Schedule,
as of the date hereof, there is no suit, action, proceeding or regulatory
investigation pending or, to the knowledge of Acquiror, threatened against or
affecting Acquiror or any of its subsidiaries that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Acquiror, nor is there any judgment, order, decree, statute, Law, ordinance,
rule or regulation of any Regulatory Agency or Governmental Entity or
arbitrator outstanding against Acquiror or any of its subsidiaries which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on Acquiror.
Section 6.8 Information in Disclosure Documents and Registration Statement.
None of the information to be supplied by Acquiror for inclusion or
incorporation by reference in the Registration Statement or the Merger Proxy
Statement will, in the case of the Registration Statement, at the time it
becomes effective and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or, in the case of
the Merger Proxy Statement or any amendments thereof or supplements thereto,
at the time of the mailing of the Merger Proxy Statement and any amendments or
supplements thereto and at the time of the Company Stockholders Meeting and
the Acquiror Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Merger Proxy
Statement (except for such portions thereof that relate only to the Company or
its subsidiaries or Affiliates) and the Registration Statement will comply as
to form in all material respects with the provisions of the Exchange Act and
the Securities Act, respectively, and the rules and regulations promulgated
thereunder.
Section 6.9 Compliance with Applicable Law. Acquiror and its subsidiaries
have received such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate Governmental
Entities (the "Acquiror Licenses") as are necessary to own or lease and
operate their respective properties and to conduct their respective businesses
substantially in the manner described in the Acquiror SEC Reports and as
currently owned or leased and conducted, and all such Acquiror Licenses are
valid and in full force and effect, except for any such Acquiror Licenses
which the failure to have or to be in full force and effect would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Acquiror. Acquiror and its subsidiaries are in compliance in
all material respects with their respective obligations under Acquiror
Licenses, with only such exceptions as, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
Acquiror. Except as disclosed in the Filed Acquiror SEC Reports, Acquiror and
its subsidiaries are in compliance with all judgments, orders, decrees,
statutes, Laws, ordinances, rules and regulations of any Governmental Entity
applicable to them, except for such noncompliance which, individually or in
the aggregate, would not, individually or in the aggregate have a Material
Adverse Effect on Acquiror.
Section 6.10 Brokers. No broker, investment banker or other person, other
than Morgan Stanley & Co. Incorporated, the fees and expenses of which will be
paid by Acquiror (as reflected in an agreement between Morgan Stanley & Co.
Incorporated and Acquiror), is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Acquiror.
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Section 6.11 Ownership of Company Common Stock; Affiliates and Associates.
Neither Acquiror nor any of its affiliates or associates (as such terms are
defined under the Exchange Act) (i) beneficially owns, directly or indirectly,
or (ii) is a party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of capital
stock of the Company (other than Trust Account Shares and DPC Shares).
Section 6.12 Agreements with Regulatory Agencies. Except as listed in
Section 6.12 of the Acquiror Disclosure Schedule or as disclosed in Acquiror's
Annual Report on Form 10-K for the year ended December 31, 1996, neither
Acquiror nor any of its subsidiaries is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by,
or is a recipient of any extraordinary supervisory letter from, or has adopted
any board resolutions at the request of (each, whether or not set forth in
Section 6.12 of the Acquiror Disclosure Schedule, an "Acquiror Regulatory
Agreement"), any Regulatory Agency or other Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, except for any
Acquiror Regulatory Agreements that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Acquiror, nor has Acquiror or any of its subsidiaries been advised by any
Regulatory Agency or other Governmental Entity that it is considering issuing
or requesting any Acquiror Regulatory Agreement, except for any such proposed
Acquiror Regulatory Agreements that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Acquiror.
Section 6.13 Vote Required. The Acquiror Stockholder Approval at the
Acquiror Stockholders Meeting will require the affirmative vote of the holders
of a majority of the votes cast, provided that the total number of votes cast
represents over 50% of the total number of outstanding shares of Acquiror
Common Stock. The Acquiror Stockholder Approval is the only vote of the
holders of any class or series of Acquiror's capital stock necessary to
approve and adopt this Agreement, and approve the transactions contemplated
hereby.
Section 6.14 Taxes. (a) Each of Acquiror and its subsidiaries has filed all
material Tax returns or reports required to be filed by it and all such
returns and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such failures
to file, to be complete or correct or to have extensions granted that remain
in effect, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Acquiror. Acquiror and each of its
subsidiaries have paid (or Acquiror has paid on its behalf) all Taxes shown as
due on such returns, and the most recent financial statements contained in the
Filed Acquiror SEC Reports reflect an adequate reserve in accordance with GAAP
for all Taxes payable by Acquiror and its subsidiaries for all taxable periods
and portions thereof accrued through the date of such financial statements.
(b) No deficiencies for any Taxes have been proposed, asserted or assessed
against Acquiror or any of its subsidiaries that are not adequately reserved
for, except for deficiencies that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Acquiror. The
federal income tax returns of Acquiror and each of its subsidiaries
consolidated in such returns for tax years through 1988 have closed by virtue
of the applicable statute of limitations.
(c) Neither Acquiror nor any of its subsidiaries has taken any action or
knows of any fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
Section 6.15 Accounting for the Merger. Acquiror has no reason to believe
that the Merger will fail to qualify for pooling-of-interests treatment under
GAAP and applicable SEC regulations.
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ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 7.1 Conduct of Business by the Company. (a) During the period from
the date of this Agreement to the Effective Time, the Company shall, and shall
cause its subsidiaries to, carry on the business of the Company and its
subsidiaries in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and in compliance in all material respects
with all applicable Laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact the current business
organizations of the Company and its subsidiaries, use reasonable efforts to
keep available the services of the current officers and other key employees of
the Company and its subsidiaries and preserve its relationships with those
persons having business dealings with the Company and its subsidiaries to the
end that the goodwill and ongoing businesses of the Company and its
subsidiaries shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, the Company agrees as to itself and its subsidiaries
that:
(i) Dividends. The Company and its subsidiaries shall not (x) declare,
set aside or pay any distributions (whether in cash, stock or property)
with respect to its capital stock (other than normal quarterly dividends on
the Company Common Stock and the Company Preferred Stock and dividends from
a wholly owned subsidiary of the Company to the Company or another wholly
owned subsidiary of the Company), (y) split, combine, or reclassify any of
the Company's capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares
of its capital stock or (z) repurchase, redeem or call any of its equity
securities.
(ii) Issuance of Securities. Except as set forth in Section 7.1(a)(ii) of
the Company Disclosure Schedule, the Company and its subsidiaries shall not
issue, deliver, sell, pledge or otherwise encumber any shares of capital
stock of the Company or any of its subsidiaries, any other voting
securities or any securities convertible into, or any options, warrants,
stock appreciation rights or rights to acquire, any such shares, voting
securities or convertible securities (other than the issuance of Company
Common Stock (i) upon the exercise of Employee Stock Options, (ii) upon the
conversion of Company Convertible Preferred Stock and (iii) pursuant to the
dividend reinvestment provisions of the Direct Purchase Plan (in each case
outstanding on the date of this Agreement and/or in accordance with their
present terms).
(iii) Governing Documents. The Company shall not amend its certificate of
incorporation or by-laws, nor shall it permit any subsidiary of the Company
to amend its certificate of incorporation, by-laws or other comparable
organizational documents.
(iv) No Acquisitions. Except as set forth in Section 7.1(a)(iv) of the
Company Disclosure Schedule and other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings
and the acquisition from time to time of receivables in the ordinary course
of business consistent with past practice, the Company and its subsidiaries
shall not acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets that, individually or in the aggregate,
are material to the Company and its subsidiaries.
(v) No Dispositions. Except as set forth in Section 7.1(a)(v) of the
Company Disclosure Schedule and other than activities in the ordinary
course of business consistent with past practice, the Company and its
subsidiaries shall not sell, lease, license or otherwise encumber or
subject to any Lien or otherwise dispose of any of the properties or assets
of the Company and its subsidiaries.
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(vi) Indebtedness. Except as set forth in Section 7.1(a)(vi) of the
Company Disclosure Schedule and other than in the ordinary course of
business consistent with past practice, the Company and its subsidiaries
shall not (x) incur any indebtedness or (y) make any advances or capital
contributions to, or investments in, any other Person, other than to
officers and employees of the Company and its subsidiaries for travel,
business or relocation expenses in the ordinary course of business.
(vii) Capital Expenditures. Except as set forth in Section 7.1(a)(vii) of
the Company Disclosure Schedule, the Company and its subsidiaries shall not
make or agree to make any capital expenditure or capital expenditures
relating to a single project in excess of $1,000,000 without the prior
written consent of Acquiror.
(viii) Tax Matters. The Company and its subsidiaries shall not make any
Tax election or settle or compromise any material income Tax liability,
except in respect of ongoing matters or in the ordinary course of business
consistent with past practice and in prior consultation with Acquiror.
(ix) Contracts. Except as set forth in Section 7.1(a)(ix) of the Company
Disclosure Schedule, the Company and its subsidiaries shall not enter into
any material Contracts, except in the ordinary course of business
consistent with past practice and in prior consultation with Acquiror. The
Company and its subsidiaries shall not modify or amend in any material
respect or terminate any material Contract to which the Company or any of
its subsidiaries is a party or waive, release or assign any material rights
or claims thereunder.
(x) Employee Matters. Except as required by Law or in the ordinary course
of business consistent with past practice or in accordance with this
Agreement, and the Company will not, nor will it permit any of its
subsidiaries to, (a) increase the compensation of any of its employees, (b)
enter into any Contract with any of its employees regarding his or her
employment, compensation or benefits, or (c) adopt any plan, arrangement or
policy which would become a Company Plan or amend any Company Plan to the
extent such adoption or amendment would create or increase any material
liability or obligation on the part of the Company or its subsidiaries.
(xi) Approvals. The Company and its subsidiaries shall not take any
action or enter into any agreement that could reasonably be expected to
materially jeopardize or delay the receipt of any Requisite Regulatory
Approval.
(xii) Accounting Policies and Procedures. The Company and its
subsidiaries shall not make any change to their accounting methods,
principles or practices, except as may be required by GAAP or Regulation S-
X promulgated by the SEC.
(xiii) Liens. The Company shall not, and shall not permit any of its
subsidiaries to, create, incur, suffer to exist or assume any material Lien
on any of their material assets.
(xiv) Claims. The Company and its subsidiaries shall not settle any
material claim, action or proceeding involving money damages or waive or
release any material rights or claims.
(xv) Interest Rate and Foreign Exchange. The Company and its subsidiaries
shall not materially restructure or materially change its gap position,
through purchases, sales, hedges, swaps, caps or collars or otherwise or
the manner in which any current hedges are classified or reported.
(xvi) No Agreements. The Company shall not agree to commit to do any of
the foregoing.
Section 7.2 Conduct of Business by Acquiror. During the period from the date
of this Agreement to the Effective Time, Acquiror agrees as to itself and its
subsidiaries that:
(i) Dividends. Except as set forth in Section 7.2(i) of the Acquiror
Disclosure Schedule, Acquiror and its subsidiaries shall not (x) declare,
set aside or pay any distributions (whether in cash, stock or property)
with respect to its capital stock (other than normal quarterly dividends on
the Acquiror Common Stock and the Acquiror Preferred Stock and dividends
from a wholly owned
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subsidiary of Acquiror to Acquiror or another wholly owned subsidiary of
Acquiror), (y) split, combine, or reclassify any of Acquiror's capital
stock, or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock.
(ii) Approvals. Acquiror and its subsidiaries shall not take any action
or enter into any agreement that could reasonably be expected to jeopardize
or delay the receipt of any Requisite Regulatory Approval.
(iii) Accounting Policies and Procedures. Acquiror and its subsidiaries
shall not make any change to their accounting methods, principles or
practices, except as may be required by GAAP or Regulation S-X promulgated
by the SEC.
(iv) No Agreements. Acquiror shall not agree or commit to any of the
foregoing.
Section 7.3 Other Actions. During the period from the date hereof to the
Effective Time, the Company and Acquiror shall not, and shall not permit any
of their respective subsidiaries to, take any action that would, or that could
reasonably be expected to, result in any of the conditions to the Merger set
forth in Article IX hereof not being satisfied.
Section 7.4 Advice of Changes. The Company and Acquiror shall promptly
advise the other party orally and in writing of (a) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (b) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (c) any change or
event (i) having, or which, insofar as can reasonably be foreseen, would have,
in the case of Acquiror, a Material Adverse Effect on Acquiror, and, in the
case of the Company, a Material Adverse Effect on the Company, or (ii) which
has resulted, or which, insofar as can reasonably be foreseen, would result,
in any of the conditions set forth in Article IX not being satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 No Solicitation. The Company shall not, and shall use its
reasonable best efforts to cause its officers, directors and employees, and
investment bankers, attorneys, accountants and other agents retained by it,
not to, initiate, solicit or encourage, directly or indirectly, any inquiries
relating to, or the making of any Acquisition Proposal, or engage in
negotiations or discussions with, or furnish any information to, any third
party relating to an Acquisition Proposal. Notwithstanding the foregoing, the
Company and the Board of Directors of the Company (a) may participate in
discussions or negotiations (including, as a part thereof, making any
counterproposal) with, or furnish information to, any third party with respect
to any Acquisition Proposal if the Company's Board of Directors determines in
good faith, after consultation with its counsel, that the failure to
participate in such discussions or negotiations or to furnish such information
may constitute a breach of its fiduciary duties under, or otherwise violate,
applicable Law, and (b) shall be permitted to (i) take and disclose to the
Company's stockholders a position with respect to an Acquisition Proposal or
amend or withdraw such position or its position with respect to the Merger, or
(ii) make disclosure to the Company's stockholders, in each case, if the
Company's Board of Directors determines in good faith, after consultation with
its counsel, that the failure to take such action may constitute a breach of
its fiduciary duties under, or otherwise violate, applicable Law. The Company
shall promptly (within 24 hours) advise the Acquiror of its receipt of any
Acquisition Proposal, or any inquiry that may lead to an Acquisition Proposal,
including the substance thereof and the identity of the person making such
Acquisition Proposal or inquiry.
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Section 8.2 Preparation of the Registration Statement and the Merger Proxy
Statement; Company and Acquiror Stockholders Meetings. (a) As soon as
reasonably practicable following the date of this Agreement, Acquiror and the
Company shall prepare and file with the SEC the Merger Proxy Statement and
Acquiror shall prepare and file with the SEC the Registration Statement, in
which the Merger Proxy Statement will be included as a prospectus (including
the financial statements and pro forma financial information required to be
set forth therein). Each of Acquiror and the Company shall use all reasonable
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. Each of Acquiror
and the Company will use all reasonable efforts to cause the Merger Proxy
Statement to be mailed to its respective stockholders as promptly as
practicable after it has been cleared by the SEC. Each of Acquiror and the
Company shall also take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable state
securities Laws in connection with the issuance of Acquiror Common Stock in
connection with the Merger. The Company shall furnish all information
concerning the Company, its subsidiaries and the holders of the Company Common
Stock, and Acquiror shall furnish all information concerning Acquiror and its
subsidiaries, in each case, as may be reasonably requested in connection with
any such action.
(b) Each of Acquiror and the Company will, as soon as practicable following
the date of this Agreement, duly call, give notice of, convene and hold the
Acquiror Stockholders Meeting and the Company Stockholders Meeting,
respectively, for the purpose of obtaining the Acquiror Stockholder Approval
and the Company Stockholder Approval. Each of Acquiror and the Company will,
through its Board of Directors, subject in the case of the Company to its
fiduciary duties, recommend to its respective stockholders the approval and
adoption of this Agreement and the transactions contemplated thereby. Acquiror
and the Company will coordinate and cooperate with respect to the foregoing
matters, with a view towards, among other things, holding the respective
meetings of each party's stockholders on the same day.
Section 8.3 Access and Information; Confidentiality. The Company and
Acquiror shall each afford to the other and to the other's financial advisors,
legal counsel, accountants, consultants and other representatives full access
at all reasonable times throughout the period prior to the Effective Time to
all of its books, records, properties, plants and personnel and, during such
period, each shall furnish promptly to the other (a) a copy of each report,
schedule and other document filed or received by it pursuant to the
requirements of federal or state securities, banking or insurance Laws, and
(b) all other information as such other party may reasonably request, provided
that no investigation pursuant to this Section 8.3 shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Each party and their
respective affiliates, representatives and agents shall hold in confidence all
nonpublic information in accordance with the terms of the Confidentiality
Agreement (the "Confidentiality Agreement") between Acquiror and the Company
dated February 18, 1998, until such time as such information is otherwise
publicly available and, if this Agreement is terminated, each party will
deliver to the other all documents, work papers and other material (including
copies) obtained by such party or on its behalf from the other party as a
result of this Agreement or in connection herewith, whether so obtained before
or after the execution hereof.
Section 8.4 Comfort Letters. (a) The Company shall use its reasonable
efforts to cause to be delivered to Acquiror "comfort" letters of Deloitte &
Touche LLP, the Company's independent public accountants, dated the date on
which the Registration Statement shall become effective and as of the Closing
Date, and addressed to Acquiror and the Company, in form and substance
reasonably satisfactory to Acquiror and as is reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
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(b) Acquiror shall use its reasonable best efforts to cause to be delivered
to the Company "comfort" letters of Arthur Andersen LLP, Acquiror's
independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the Closing Date, and addressed to
the Company and Acquiror, in form and substance reasonably satisfactory to the
Company and as is reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with transactions
such as those contemplated by this Agreement.
Section 8.5 Listing Application. Acquiror shall prepare and submit to the
NYSE a listing application covering the shares of Acquiror Common Stock and
Acquiror New Preferred Stock to be issued in connection with the Merger, and
shall use its reasonable efforts to obtain, prior to the Effective Time,
approval for the listing of such shares of Acquiror Common Stock, subject to
official notice of issuance.
Section 8.6 Affiliates. Prior to mailing the Merger Proxy Statement, the
Company shall use its reasonable efforts to cause to be prepared and delivered
to Acquiror a list (reasonably satisfactory to counsel for Acquiror)
identifying each Person who, at the time of the Company Stockholders Meeting,
may be deemed to be an "affiliate" of the Company, as such term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act and for purposes
of qualifying the Merger for "pooling of interests" accounting treatment (the
"Company Rule 145 Affiliates"). The Company shall use its reasonable efforts
to cause each Person who is identified as a Company Rule 145 Affiliate in such
list to deliver to Acquiror on or prior to mailing the Merger Proxy Statement
a written agreement, in customary form, that such Company Rule 145 Affiliate
will not (i) sell, pledge, transfer or otherwise dispose of, or in any other
way reduce such Company Rule 145 Affiliate's risk relative to, any shares of
Acquiror Common Stock issued to such Company Rule 145 Affiliate in connection
with the Merger, except pursuant to an effective registration statement or in
compliance with such Rule 145 or another exemption from the registration
requirements of the Securities Act, or (ii) sell or in any other way reduce
such Rule 145 Affiliate's risk relative to any shares of Acquiror Common Stock
received in the Merger (within the meaning of Section 201.01 of the SEC's
Financial Reporting Release No. 1) during the period commencing 30 days prior
to the Effective Time and ending at such time as the financial results
(including combined sales and net income) covering at least 30 days of post-
Merger operations have been published (which publication Acquiror shall cause
to occur within 15 days after the end of the first full calendar month
following the month in which the Effective Time occurs), except as permitted
by Staff Accounting Bulletin No. 76 issued by the SEC.
Section 8.7 Governmental Authorizations. The Company and Acquiror shall
cooperate with each other and use their reasonable efforts to promptly prepare
and file all necessary documentation, to effect all applications, notices,
petitions and filings, and to obtain as promptly as practicable all Requisite
Regulatory Approvals. The Company and Acquiror shall have the right to review
in advance, and to the extent practicable each will consult the other on, in
each case, subject to applicable Laws relating to the exchange of information,
all the information relating to the Company or Acquiror, as the case may be,
and any of their respective subsidiaries, which appears in any filing made
with, or written materials submitted to, any third parties or any Regulatory
Agencies and Governmental Entities in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to
the obtaining of all consents of third parties and the Requisite Regulatory
Approvals necessary or advisable to consummate the transactions contemplated
by this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
Section 8.8 Employee Matters. (a) Employee Benefits. From and after the
Effective Time, Acquiror shall either continue the Company Plans or provide to
Company Employees retired employees of the Company and its subsidiaries, and
individuals who are receiving (or eligible to receive as of the date hereof)
benefits by virtue of their relationship to a deceased employee
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(collectively, the "Retired Employees") the same employee benefits, at the
same level, as Acquiror provides to similarly situated employees of Acquiror
and its subsidiaries and provide Company Employees with the same incentive
opportunities as similarly situated employees of Acquiror. Notwithstanding the
foregoing, the Acquiror shall continue the incentive programs and other
benefit arrangements which are listed in Section 8.8(a) of the Company
Disclosure Schedule on substantially the same terms and conditions as are in
effect at the Effective Time, until December 31, 1998. For a period of two
years following the Effective Time (the "Continuation Period"), any Company
Employee in the United States who is involuntarily terminated, other than for
cause, who by the conclusion of such period would have accumulated sufficient
age and service credit to become eligible to retire early under the Pension
Plan, shall be entitled to elect to remain employed, in leave status, until
such time as that eligibility has been attained. If following the Effective
Time, the health benefits provided by the Acquiror to similarly situated
retired employees are not substantially equivalent to those provided to the
Retired Employees under the Company Plans, then the Acquiror shall continue
the Company Plans, as to such Retired Employee health benefits, for a period
of two years following the Effective Time. If following the Effective Time,
the health benefits, including covered benefits (assuming waiver of all pre-
existing condition limitations as provided for below) provided to similarly
situated employees are not substantially equivalent to those provided to
Company Employees under the Company Plans, the Acquiror shall continue the
Company Plans providing such health benefits for a period of one year
following the Effective Time. With respect to each employee benefit plan
maintained by Acquiror following the Effective Time (including, without
limitation, plans or policies providing severance benefits and vacation
entitlement), service with the Company and its subsidiaries shall be treated
as service with Acquiror for all purposes, other than for purposes of benefit
accrual under any qualified retirement plans; provided, however, that such
service shall not be recognized to the extent that such recognition would
result in a duplication of benefits. Such service shall also apply for
purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition limitations.
Company Employees shall be given credit for amounts paid under a corresponding
benefit plan during the same period for purposes of applying deductibles,
copayments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the benefit plan maintained by
Acquiror.
(b) Severance. Without limiting the generality of the first sentence of
paragraph (a) of this Section 8.8, Acquiror shall provide to each individual
who is an employee of the Company or any of its subsidiaries in the United
States immediately prior to the Effective Time and whose employment is
involuntarily terminated other than for cause or non-performance during the
Continuation Period, severance benefits no less favorable to such individual
than the severance pay plan described in Section 8.8(b) of the Company
Disclosure Schedule. During the Continuation Period, if the continuing
employment of any of the Company Employees is not at the same or higher salary
or wages, and on substantially the same terms and conditions (subject to
paragraph (a) of this Section 8.8), including but not limited to reasonable
geographic proximity to a Company Employee's employment location as of the
date hereof, and any such Company Employee declines to continue employment on
that basis, the termination of such Company Employee's employment shall be an
involuntary termination, other than for cause, for purposes of the Company
Plans.
(c) Outplacement Services. During the Continuation Period, Acquiror shall
provide to employees of the Company and its subsidiaries whose employment is
terminated during the Continuation Period under circumstances entitling the
employee to severance benefits under paragraph (b) of this Section 8.8 or
under any applicable employment or severance agreement then in effect,
outplacement services appropriate to the employee's position, as determined by
reasonable competitive practices.
(d) Compensation Contracts. Acquiror shall assume and honor the obligations
of the Company and its subsidiaries under all employment, severance,
consulting, retirement and other compensation contracts, arrangements,
commitments or understandings, in accordance with their terms, as disclosed
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in Section 8.8(d) of the Company Disclosure Schedule. Acquiror hereby
acknowledges that the Merger will constitute a "Change in Control" in
accordance with the provisions of the Company Plans listed in Section 5.10(d)
of the Company Disclosure Schedule. Acquiror agrees, after consummation of the
Merger, to pay all amounts provided under such Company Plans and agreements as
a result of a change in control of the Company, as applicable, in accordance
with their respective terms, and to honor all rights, privileges and
modifications to or with respect to any such Company Plans or agreements which
become effective as a result of such change in control.
(e) The Company shall take all actions necessary to amend the terms of the
Company Stock Option Plans to eliminate the cash settlement of options granted
thereunder as a result of or in connection with the Merger and to provide that
any such right shall be settled in stock with a fair market value equal to the
cash that would otherwise have been payable thereunder. The Company will use
all reasonable efforts to obtain the consent of certain holders of options
granted under the Company Stock Option Plans to the foregoing treatment of
such cash settlement right.
Section 8.9 Continuance of Existing Indemnification Rights. (a) For six
years after the Effective Time, Acquiror shall indemnify, defend and hold
harmless any Person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, a director or officer of
the Company (an "Indemnified Person") against all losses, claims, damages,
liabilities, costs and expenses (including attorneys' fees and expenses),
judgments, fines, losses and amounts paid in settlement in connection with any
actual or threatened action, suit, claim, proceeding or investigation (each, a
"Claim") to the extent that any such Claim is based on, or arises out of: (i)
the fact that such Indemnified Person is or was a director or officer of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise; or (ii) this Agreement or any of the transactions
contemplated hereby, in each case, to the extent that any such Claim pertains
to any matter or fact arising, existing or occurring prior to or at the
Effective Time, regardless of whether such Claim is asserted or claimed prior
to, at or after the Effective Time, to the full extent permitted under the
DGCL, the Company's certificate of incorporation or by-laws or any
indemnification agreement in effect at the date hereof, including provisions
relating to advancement of expenses incurred in the defense of any such Claim;
provided, however, that neither Acquiror nor the Surviving Corporation shall
be required to indemnify any Indemnified Person in connection with any
proceeding (or portion thereof) involving any Claim initiated by such
Indemnified Person unless the initiation of such proceeding (or portion
thereof) was authorized by the Board of Directors of the Company or unless
such proceeding is brought by an Indemnified Person to enforce rights under
this Section 8.9. Without limiting the generality of the preceding sentence,
in the event any Indemnified Person becomes involved in any Claim, after the
Effective Time, Acquiror shall, or shall cause the Surviving Corporation to,
periodically advance to such Indemnified Person its legal and other expenses
(including the cost of any investigation and preparation incurred in
connection therewith), subject to the providing by such Indemnified Person of
an undertaking to reimburse all amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Person is not entitled thereto.
(b) Acquiror and the Company agree that all rights to indemnification, and
all limitations with respect thereto, existing in favor of any Indemnified
Person, as provided in the Company's certificate of incorporation or by-laws
and any indemnification agreement in effect at the date hereof, shall survive
the Merger and shall continue in full force and effect, without any amendment
thereto, for a period of six years from the Effective Time, to the extent such
rights and limitations are consistent with the DGCL; provided, however, that
in the event any Claim is asserted or made within such six-year period, all
such rights, liabilities and limitations in respect of any such Claim shall
continue until disposition thereof; provided further, that any determination
required to be made with respect to whether an Indemnified Person's conduct
complies with the standards set forth under the DGCL, the Company's
certificate of incorporation or by-laws or any such agreement, as the case may
be, shall be made by
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independent legal counsel selected by such Indemnified Person and reasonably
acceptable to Acquiror; and provided further, that nothing in this Section 8.9
shall impair any rights or obligations of any current or former director or
officer of the Company.
(c) Acquiror shall maintain the Company's existing directors' and officers'
liability insurance policy ("D&O Insurance") for a period of not less than six
years after the Effective Time; provided, however, that Acquiror may
substitute therefor policies of substantially similar coverage and amounts
containing terms no less advantageous to such former directors or officers;
provided further, that if the existing D&O Insurance expires or is cancelled
during such period, Acquiror or the Surviving Corporation shall use its best
efforts to obtain substantially similar D&O Insurance; and provided further,
that neither Acquiror nor the Surviving Corporation shall be required to pay
an annual premium for D&O Insurance in excess of 200% of the last annual
premium paid prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount.
(d) The provisions of this Section 8.9 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Person, his or her heirs and
his or her personal representatives.
Section 8.10 Expenses. Whether or not the Merger is consummated, all costs
and expenses (including transfer Taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
Section 8.11 Certain Other Matters. Acquiror hereby agrees to honor all of
its obligations and commitments contained in each of the letters, dated April
6, 1998, addressed to Mr. Finn M.W. Caspersen, the Chairman and Chief
Executive Officer of the Company, from William F. Aldinger, the Chairman and
Chief Executive Officer of Acquiror, including, without limitation, Acquiror's
obligations and commitments contained therein to (i) retain certain management
personnel of the Company, (ii) name certain current directors of the Company
to Acquiror's Board of Directors, (iii) continue the use of the "Beneficial"
name and (iv) continue the use of certain of the Company's facilities.
Section 8.12 Beneficial Foundation; Certain Charitable Contributions. (a)
The Company represents and warrants to Acquiror, and Acquiror acknowledges and
agrees, that the Beneficial Foundation, Inc. (the "Foundation"), a not-for-
profit corporation created and funded under the laws of the State of Delaware
in 1951 by certain senior officers of the Company, is a separate entity
independent of the Company, and Acquiror shall not have, nor shall Acquiror
acquire as a result of the transactions contemplated by this Agreement, any
ownership interest or rights in the Foundation and its operation or
management, nor shall Acquiror have any right to designate future officers or
directors of the Foundation, or grants by the Foundation. The Company further
represents and warrants to Acquiror that it has been advised that the
Foundation will change its name to a name not containing the word "Beneficial"
or any variant thereof at or about the Effective Time.
(b) Acquiror agrees to honor and to cause the Company to honor the Company's
obligations to pay in a timely fashion all currently outstanding charitable
pledges of the Company and its subsidiaries to the extent they remain unpaid
at the Effective Time, and to fund by transfers to the Foundation all multi-
year scholarships awarded by the Foundation to children of employees of the
Company and its subsidiaries outstanding at the Effective Time, up to a
combined maximum of $3,000,000.
Section 8.13 Public Announcements. Acquiror and the Company shall consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable Law or by
existing obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall
be in the form heretofore agreed to by the parties.
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Section 8.14 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto agrees to
use its reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement. The parties will execute
any additional instruments necessary to consummate the transactions
contemplated hereby. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take
all such necessary action.
Section 8.15 Regulatory Filings. (a) Without limiting the generality of
Section 8.7 or 8.18 hereof, the Company and Acquiror shall (i) take promptly
all actions necessary to make the filings required of the Company, Acquiror or
any of their affiliates in order to obtain any Requisite Regulatory Approval,
(ii) comply at the earliest practicable date with any request for information
or documentary material received by the Company, Acquiror or any of their
respective Affiliates from any Regulatory Agency and (iii) cooperate with each
other in connection with any such filing and with resolving any investigation
or other inquiry concerning the transactions contemplated by this Agreement
commenced by any Regulatory Agency.
(b) In furtherance and not in limitation of the covenants of the Company and
Acquiror contained in Section 8.7 and Section 8.15(a) hereof, each of the
Company and Acquiror shall use its reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the Merger or any other
transactions contemplated by this Agreement under any applicable Law. If any
administrative, judicial or legislative action or proceeding is instituted (or
threatened to be instituted) challenging the Merger or any other transaction
contemplated by this Agreement as violative of any applicable Law, each of the
Company and Acquiror shall cooperate and use its reasonable best efforts
vigorously to contest and resist any such action or proceeding, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) that is in effect
and that restricts, prevents or prohibits consummation of the Merger or any
other transaction contemplated by this Agreement.
(c) Each of the Company and Acquiror shall promptly inform the other of any
material communication received by such party or any of its Affiliates from
any Regulatory Agency regarding any of the transactions contemplated hereby.
Each of the Company and Acquiror shall advise the other promptly of any
understandings, undertakings or agreements which such party or any of its
Affiliates proposes to make or enter into with any Regulatory Agency in
connection with the transactions contemplated hereby.
Section 8.16 Tax Treatment; Pooling of Interests. Each of the Company and
Acquiror shall use its respective best efforts to (a) cause the Merger to be
accounted for as a "pooling of interests" transaction under GAAP, (b) cause
the Merger to qualify as a reorganization under Section 368(a) of the Code and
(c) obtain the opinions of counsel referred to in Sections 9.2(c) and 9.3(c).
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction or waiver, to the extent permitted by Law, at or prior to the
Effective Time, of the following conditions:
(a) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act and no
stop order suspending the
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effectiveness of the Registration Statement shall be in effect and no
proceeding for such purpose shall be pending before or threatened by the
SEC.
(b) Listing of Shares. The shares of Acquiror Common Stock which shall be
issued to the stockholders of the Company shall have been approved for
listing on the NYSE, subject to official notice of issuance.
(c) Stockholder Approval. Each of the Acquiror Stockholder Approval and
the Company Stockholder Approval shall have been obtained in accordance
with applicable Law.
(d) No Injunctions or Restraints; Illegality. No preliminary or permanent
injunction or other order by any federal or state court in the United
States of competent jurisdiction ("Injunction") which prohibits the
consummation of the Merger shall have been issued and remain in effect. No
statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger.
(e) Regulatory Approvals. All Requisite Regulatory Approvals listed in
Section 9.1(e) of the Company Disclosure Schedule shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired.
(f) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
Section 9.2 Conditions to Obligations of Acquiror. The obligation of
Acquiror to effect the Merger is also subject to the satisfaction or waiver by
Acquiror at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. Subject to Section 4.2, the
representations and warranties of the Company set forth in this Agreement
shall be true and correct as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date.
Acquiror shall have received a certificate signed on behalf of the Company
by an executive officer of the Company to the foregoing effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Acquiror
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(c) Federal Tax Opinion. Acquiror shall have received an opinion of
Wachtell, Lipton, Rosen & Katz, tax counsel to Acquiror, in form and
substance reasonably satisfactory to Acquiror, dated as of the date of the
Effective Time, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
as of the Effective Time, substantially to the effect that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the
Code. In rendering such opinion, such tax counsel shall be entitled to rely
upon representations and covenants of officers of Acquiror and the Company
substantially in the form of Exhibits C and D hereto.
(d) Pooling of Interests. Acquiror shall have received a letter from each
of Arthur Andersen LLP and Deloitte & Touche LLP, each addressed to
Acquiror and dated the Closing Date, in form and substance reasonably
acceptable to Acquiror, confirming that the transactions contemplated by
this Agreement, if consummated, can properly be accounted for as a pooling-
of-interests business combination in accordance with GAAP and the criteria
of Accounting Principles Board Opinion No. 16 and the regulations of the
Securities and Exchange Commission.
Section 9.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
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(a) Representations and Warranties. Subject to Section 4.2, the
representations and warranties of Acquiror set forth in this Agreement
shall be true and correct as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date. The
Company shall have received a certificate signed on behalf of Acquiror by
an executive officer of Acquiror to the foregoing effect.
(b) Performance of Obligations of Acquiror. Acquiror shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Acquiror by an executive
officer of Acquiror to such effect.
(c) Federal Tax Opinion. The Company shall have received an opinion from
Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to the Company, in
form and substance reasonably satisfactory to the Company, dated as of the
date of the Effective Time, on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state
of facts existing as of the Effective Time, substantially to the effect
that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion, such tax counsel
shall be entitled to rely upon representations and covenants of officers of
Acquiror and the Company substantially in the form of Exhibits C and D
hereto.
(d) Pooling of Interests. The Company shall have received copies of the
letters from Arthur Andersen LLP and Deloitte & Touche LLP referred to in
Section 9.2(d) hereof.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual consent of the Company and Acquiror;
(b) by either Acquiror or the Company (i) 60 days after the date on which
any request or application for a Requisite Regulatory Approval listed in
Section 9.1(e) of the Company Disclosure Schedule shall have been denied or
withdrawn at the request or recommendation of the Governmental Entity which
must grant such Requisite Regulatory Approval, unless within the 60-day
period following such denial or withdrawal a petition for rehearing or an
amended application has been filed with the applicable Governmental Entity;
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 10.1(b)(i) if such denial or request or
recommendation for withdrawal shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein or (ii) if any Governmental
Entity of competent jurisdiction shall have issued a final nonappealable
order enjoining or otherwise prohibiting the Merger;
(c) by either Acquiror or the Company if the Merger shall not have been
consummated on or before December 31, 1998, unless the failure of the
Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(d) by either Acquiror or the Company (provided that the terminating
party shall not be in material breach of any of its obligations under
Section 8.3), if the Company Stockholder Approval or the Acquiror
Stockholder Approval shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of such stockholders or
at any adjournment or postponement thereof;
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(e) by either Acquiror or the Company (provided that the terminating
party is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), if there shall have been a
material breach of any of the representations, warranties, covenants or
agreements set forth in this Agreement on the part of the other party,
which breach is not cured within thirty days following written notice to
the party committing such breach, or which breach, by its nature, cannot be
cured prior to the Closing Date; provided, however, that neither party
shall have the right to terminate this Agreement pursuant to this Section
10.1(e) unless the breach, together with all other such breaches, would
entitle the non-breaching party not to consummate the transactions
contemplated hereby under Sections 9.2(a) and (b) (in the case of a breach
by the Company) or Sections 9.3(a) and (b) (in the case of a breach by
Acquiror);
(f) by the Company, by written notice to Acquiror at least two days prior
to the anticipated Closing Date that the Company is unwilling to accept the
Per Share Merger Consideration calculated in accordance with Section
3.1(a), in the event that (i) the Average Closing Price shall be less than
the product of 0.80 and the Starting Price, or (ii) both of the following
conditions are satisfied:
(x) the Average Closing Price shall be less than the product of 0.85
and the Starting Price; and
(y) (i) the number obtained by dividing the Average Closing Price by
the Starting Price (such number being referred to herein as the
"Acquiror Ratio") shall be less than (ii) the number obtained by
dividing the Index Price on the Determination Date by the Index Price
on the Starting Date and subtracting 0.15 from such quotient (such
number being referred to herein as the "Index Ratio");
subject to the following four sentences. If the Company elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall
give prompt written notice to Acquiror, which notice shall specify which of
clause (i) or (ii) is applicable (or, if both would be applicable, which
clause is being invoked); provided that such notice of election to terminate
may be withdrawn at any time within the aforementioned two-day period. No
right of termination shall arise under this Section 10.1(g) if Acquiror shall
have given written notice to the Company at any time within 24 hours of its
receipt of the Company's written notice of termination that Acquiror elects
(x), in the case of a termination invoked under clause (i), to adjust the Per
Share Merger Consideration to equal a number equal to a quotient (rounded to
the nearest one-ten-thousandth), the numerator of which is the product of
0.80, the Starting Price and the Per Share Merger Consideration (as then in
effect), and the denominator of which is the Average Closing Price, or (y) to
adjust the Per Share Merger Consideration to equal the lesser of (A) a number
equal to a quotient (rounded to the nearest one-ten-thousandth), the numerator
of which is the product of 0.85, the Starting Price and the Per Share Merger
Consideration (as then in effect), and the denominator of which is the Average
Closing Price, and (B) a number equal to a quotient (rounded to the nearest
one-ten-thousandth), the numerator of which is the Index Ratio multiplied by
the Per Share Merger Consideration (as then in effect), and the denominator of
which is the Acquiror Ratio. If Acquiror makes an election contemplated by
either of the two preceding sentences, within such 24-hour period, it shall
give prompt written notice to the Company of such election and the revised Per
Share Merger Consideration, whereupon no termination shall have occurred
pursuant to this Section 10.1(g) and this Agreement shall remain in effect in
accordance with its terms (except as the Per Share Merger Consideration shall
have been so modified), and any references in this Agreement to "Per Share
Merger Consideration" shall thereafter be deemed to refer to the Per Share
Merger Consideration as adjusted pursuant to this Section 10.1(g). For
purposes of this Section 10.1(g), the following terms shall have the meanings
indicated:
"Average Closing Price" means the average of the last reported sale
prices per share of Acquiror Common Stock as reported on the NYSE (as
reported in The Wall Street Journal or, if not reported therein, in another
mutually agreed upon authoritative source) for the 10 consecutive trading
days on the NYSE ending at the close of trading on the Determination Date.
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"Index Group" means the group of companies included in the S&P Financials
Index, but excluding Acquiror and the Company, the common stock of all of
which shall be publicly traded and as to which there shall not have been,
since the Starting Date and before the Determination Date, an announcement
of a proposal for such company to be acquired or for such company to
acquire another company or companies in transactions with a value exceeding
25% of the acquiror's market capitalization as of the Starting Date. In the
event that the common stock of any such company ceases to be publicly
traded or any such announcement is made with respect to any such company,
such company will be removed from the Index Group, and the weights assigned
to the remaining companies included in the Index Group will be
appropriately adjusted for purposes of determining the Index Price.
"Determination Date" shall mean the date that is three days prior to the
anticipated Closing Date.
"Index Price" on a given date shall mean the weighted average of the
closing prices of the companies comprising the Index Group.
"Starting Date" shall mean the last full day on which the NYSE was open
for trading prior to the execution of this Agreement.
"Starting Price" shall mean the last reported sale price per share of
Acquiror Common Stock on the Starting Date, as reported by NYSE (as
reported in The Wall Street Journal or, if not reported therein, in another
mutually agreed upon authoritative source).
If any company belonging to the Index Group or Acquiror declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or
Acquiror shall be appropriately adjusted for the purposes of applying this
Section 10.1(g).
Section 10.2 Effect of Termination. In the event of termination of this
Agreement by either Acquiror or the Company as provided in Section 10.1, this
Agreement shall forthwith become void and have no effect except that (i) the
last sentence of Section 8.3 and this Section 10.2 shall survive any
termination of this Agreement and (ii) that notwithstanding anything to the
contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.
Section 10.3 Amendment. Subject to compliance with applicable Law, this
Agreement may be amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with the Merger by the stockholders of
either the Company or Acquiror; provided, however, that after any approval of
the transactions contemplated by this Agreement by the Company's stockholders,
there may not be, without further approval of such stockholders, any amendment
of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to the Company's stockholders hereunder other
than as contemplated by this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 10.4 Extension; Waiver. At any time prior to the Effective Time,
each of the parties hereto, by action taken or authorized by its Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions of the other party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
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<PAGE>
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Survival of Representations and Warranties. No representations
or warranties contained herein shall survive beyond the Effective Time. This
Section 11.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
Section 11.2 Notices. All notices or other communications hereunder shall be
deemed to have been duly given and made if in writing and if delivered
personally or if sent by registered or certified mail (return receipt
requested), or by a national courier service (providing proof of delivery) or
by telecopier (with confirmation of receipt), to the person at the address set
forth below, or such other address as may be designated in writing hereafter,
in the same manner, by such person:
(a) If to Acquiror, to:
Household International, Inc.
2700 Sanders Road
Prospect Heights, IL 60070
Attention: Senior Vice President and General Counsel
Facsimile: (847) 205-7452
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Andrew Brownstein, Esq.
Facsimile: (212) 403-2000
(b) if to the Company, to:
Beneficial Corporation
One Christina Center
301 N. Walnut Street
Wilmington, DE 19801
Attention: General Counsel
Facsimile: (302) 425-2512
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
Wilmington, DE 19801
Attention: Richard L. Easton, Esq.
Facsimile: (302) 651-3001
Any such notification shall be deemed delivered (i) upon receipt, if delivered
personally, (ii) three business days after deposit in the mails, if sent by
registered or certified mail, (iii) on the next business day, if sent by
national courier service for the next business day delivery, or (iv) the
business day received, if sent by telecopier.
Section 11.3 Descriptive Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.4 Entire Agreement; No Third-Party Beneficiary. This Agreement
(including the Exhibits, Disclosure Schedules and other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
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<PAGE>
oral, among the parties or any of them, with respect to the subject matter
hereof; and (b) except for the provisions of Section 8.9 hereof, is not
intended to confer upon any other person other than the signatories to this
Agreement any rights or remedies hereunder or thereunder.
Section 11.5 Interpretation. When a reference is made in this Agreement to
an Article, Section or Annex, such reference shall be to an Article or Section
of, or an Annex to, this Agreement unless otherwise indicated. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The words
"hereof", "herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
All terms defined in this Agreement shall have the defined meanings used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns and,
in the case of an individual, to his heirs and estate, as applicable.
Section 11.6 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby. Upon any such determination, the
parties shall negotiate in good faith in an effort to agree upon a suitable
and equitable substitute provision to effect the original intent of the
parties.
Section 11.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or
in part, by operation of Law or otherwise by any of the parties without the
prior written consent of the other parties. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
Section 11.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without giving
effect to the provisions thereof relating to conflicts of Law.
Section 11.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were
not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at Law or in equity.
Section 11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
Household International, Inc.
/s/ William F. Aldinger
By: _________________________________
Name: William F. Aldinger
Title: Chairman and Chief
Executive Officer
Household Acquisition Corporation II
/s/ John W. Blenke
By: _________________________________
Name: John W. Blenke
Title: Vice President and
Secretary
Beneficial Corporation
/s/ Finn M.W. Caspersen
By: _________________________________
Name: Finn M.W. Caspersen
Title: Chairman and Chief
Executive Officer
A-39
<PAGE>
APPENDIX B
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK
10036
(212) 761-4000
April 6, 1998
Board of Directors
Household International, Inc.
2700 Sanders Road
Prospect Heights, IL 60070
Members of the Board of Directors:
We understand that Beneficial Corporation ("Beneficial" or the "Company")
and Household International, Inc. ("Household") propose to enter into an
Agreement and Plan of Merger, substantially in the form of the draft dated
April 6, 1998 (the "Merger Agreement"), which provides, among other things,
for the merger (the "Merger") of Beneficial with and into Household. Pursuant
to the Merger, each outstanding share of common stock, par value $.01 per
share (the "Beneficial Common Stock") of Beneficial, other than shares held in
treasury or held by Household or any affiliate of Household, will be converted
into the right to receive 1.0222 shares (the "Exchange Ratio") of common
stock, par value $1.00 per share, of Household (the "Household Common Stock").
The terms and conditions of the Merger are more fully set forth in the Merger
Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to Household.
For purpose of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and Household;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company and Household, prepared by the
managements of the Company and Household, respectively;
(iii) analyzed certain financial projections prepared by the managements
of the Company and Household, respectively;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the Company;
(v) reviewed the pro forma impact of the Merger on Household's earnings
per share, consolidated capitalization and financial ratios;
(vi) reviewed the reported prices and trading activity for the Company
Common Stock and the Household Common Stock;
(vii) compared the financial performance of the Company and Household and
the prices and trading activity of the Company Common Stock and the
Household Common Stock with that of certain other comparable publicly-
traded companies and their securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(ix) participated in discussions and negotiations among representatives
of the Company and Household and their financial and legal advisors;
(x) reviewed with the management of Household their estimates of certain
strategic, financial and operational benefits of the Merger to Household;
(xi) reviewed the draft Merger Agreement and certain related documents;
and
(xii) performed such other analyses as we have deemed appropriate.
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MORGAN STANLEY
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial projections, including
estimates of the strategic, financial and other benefits anticipated from the
Merger, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of the Company and Household. In addition, we have
assumed that the Merger will be consummated in accordance with the terms set
forth in the Merger Agreement, including, among other things, that the Merger
will be accounted for as a "pooling of interests" business combination in
accordance with U.S. Generally Accepted Accounting Principles and will be
treated as a tax-free reorganization and/or exchange, each pursuant to the
Internal Revenue Code of 1986. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information
made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Household in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Household and the Company and
have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of Household and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in the
entirety in any filing made by the Company in respect to the transaction with
the Securities and Exchange Commission. In addition, this opinion does not in
any manner address the prices at which the Household Common Stock will trade
following consummation of the Merger, and we express no opinion or
recommendation as to how the shareholders of Household should vote at the
shareholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to Household.
Very truly yours,
Morgan Stanley & Co. Incorporated
/s/ Gary S. Barancik
By: _________________________________
Gary S. Barancik
Managing Director
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<PAGE>
LOGO
LOGO
APPENDIX C
April 7, 1998
Board of Directors
Beneficial Corporation
100 Beneficial Center
Peapack, NJ 07977
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $.01
per share (the "Shares"), of Beneficial Corporation (the "Company") of the
exchange ratio of 1.0222 shares of common stock, par value $1.00 per share
("Household Common Stock"), of Household International, Inc. ("Household") to
be received for each Share (the "Exchange Ratio") pursuant to the Agreement and
Plan of Merger dated as of April 7, 1998 by and among Household, Household
Acquisition Corp., a wholly owned subsidiary of Household, and the Company (the
"Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services
to the Company from time to time, including advisory services to the Company in
connection with the sale of its Canadian subsidiary and the proposed sale of
its German subsidiary ("BNL Germany"), having participated as a co-manager on
the Company's September 1997 asset securitization and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We have also acted as principal in the
purchase of certain assets owned by BNL Germany. We also have provided certain
investment banking services to Household from time to time including acting as
a lead or co-manager on various asset securitizations and various debt
financings and as a co-manager of the June 1997 secondary offering of Household
common stock, and may provide investment banking services to Household in the
future. Goldman, Sachs & Co. provides a full range of financial advisory and
security services and, in the course of its normal trading activities, may from
time to time effect transactions and hold securities, including derivative
securities of the Company or Household, for its own account and for the
accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company and Household for the five years ended December 31, 1997; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company and Household; certain other communications from the Company and
Household to their respective stockholders; certain internal financial analyses
and forecasts for the
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<PAGE>
Company and Household prepared by their respective managements including
forecasts of certain cost savings and revenue enhancements (the "Synergies")
resulting from the Merger prepared by the management of Household and reviewed
by the management of the Company. We also have held discussions with members
of the senior management of the Company and Household regarding the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement and the past and current business operations, financial
condition and future prospects of their respective companies. In addition, we
have reviewed the reported price and trading activity for the Shares and the
Household Common Stock, compared certain financial and stock market
information for the Company and Household with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations including certain
transactions in the consumer finance industry and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed, with your consent, that the financial forecasts of Household,
including, without limitation, the Synergies, have been reasonably prepared on
a basis reflecting the best currently available judgments and estimates of
Household and that such forecasts will be realized in the amounts and at the
times contemplated thereby. We are not experts in the evaluation of loan
portfolios for purposes of assessing the adequacy of allowances for losses
with respect thereto and have assumed, with your consent, that such allowances
for each of the Company and Household are in the aggregate adequate to cover
such losses. In addition, we have not reviewed individual credit files nor
have we made an independent evaluation or appraisal of the assets and
liabilities of the Company or Household or any of their subsidiaries and we
have not been furnished with any such evaluation or appraisal. We have assumed
that the transaction contemplated by the Agreement will be accounted for as a
pooling of interests for accounting purposes. Our advisory services and the
opinion expressed herein are provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated by the Agreement and such opinion does not
constitute a recommendation as to how any holder of Shares should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of
view to the holders of Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
Goldman, Sachs & Co.
C-2
<PAGE>
APPENDIX D
Investment Banking
Group
Merrill Lynch & Co.,
Inc.
World Financial
Center
North Tower
New York, New York
10281-1325
LOGO 212 449 1000
April 16, 1998
Board of Directors
Beneficial Corporation
100 Beneficial Center
Peapack, NJ 07977
Members of the Board of Directors:
Beneficial Corporation (the "Company"), Household International, Inc. (the
"Acquiror") and Household Acquisition Corporation II, a newly formed, wholly-
owned subsidiary of the Acquiror (the "Acquisition Sub"), have entered into an
Agreement and Plan of Merger, dated as of April 7, 1998 (the "Agreement"),
pursuant to which the Acquisition Sub will be merged with and into the Company
in a transaction (the "Merger") in which (i) each outstanding share of the
Company's common stock (including each attached right issued pursuant to the
Company Rights Agreement (as defined in the Agreement)), par value $.01 per
share (the "Company Shares"), will be converted into the right to receive
1.0222 shares (the "Exchange Ratio") of the common stock of the Acquiror, par
value $1.00 per share (the "Acquiror Shares"), (ii) each share of the
Company's $5.50 Dividend Cumulative Convertible Preferred Stock, without par
value (the "Company Convertible Preferred Stock"), will be converted into the
right to receive the number of Acquiror Shares that a holder of the number of
Company Shares into which such share of Company Convertible Preferred Stock
could have been converted immediately prior to the Merger would have the right
to receive pursuant to clause (i) of this paragraph, and (iii) each share of
the Company's 5% Cumulative Preferred Stock, par value $50.00 per share, $4.50
Dividend Cumulative Preferred Stock, par value $100.00 per share, and $4.30
Dividend Cumulative Preferred Stock, without par value (collectively, the
"Company Preferred Stock"), will be converted into the right to receive one
share of newly created preferred stock of the Acquiror with terms
substantially identical to those of the Company Preferred Stock. In connection
with the Merger, the parties also have entered into agreements pursuant to
which the Company granted to the Acquiror and the Acquiror granted to the
Company reciprocal options to acquire 19.9% of their respective common stock.
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders of the Company Shares, other than the
Acquiror and its affiliates.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and the Acquiror that we deemed to be
relevant;
(2) Reviewed certain information, including certain internal financial
analyses and forecasts for the Company and the Acquiror prepared by their
respective managements, including forecasts of certain cost savings and
revenue enhancements (the "Expected Synergies") resulting from the Merger
prepared by the management of the Acquiror and reviewed by the management
of the Company;
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<PAGE>
LOGO
(3) Conducted discussions with members of senior management of the
Company and the Acquiror concerning the matters described in clauses 1 and
2 above, as well as their respective businesses and prospects before and
after giving effect to the Merger and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror
and compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions that we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken ann independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Acquiror. In addition, we have not assumed
any obligation to conduct any physical inspection of the properties or
facilities of the Company or the Acquiror. With respect to the financial
forecast information and the Expected Synergies furnished to or discussed with
us by the Company or the Acquiror, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's or the Acquiror's management as to (i) the expected
future financial performance of the Company or the Acquiror, as the case may
be, and (ii) the Expected Synergies. We have further assumed that the Merger
will be accounted for as a pooling of interests under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In
addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. We are currently, and have in the past, provided
financial advisory and financing services to the Company and the Acquiror
and/or its or their affiliates and may continue to do so and have received, and
may receive, fees for the rendering of such services. In addition, in the
ordinary course of our business, we may actively trade the Company Shares and
other securities of
D-2
<PAGE>
LOGO
the Company, as well as the Acquiror Shares and other securities of the
Acquiror, for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation
to any shareholder as to how such shareholder should vote on the proposed
Merger or any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares or the Acquiror Shares will trade following the announcement or
consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of April 7, 1998, the Exchange Ratio is fair from a financial point of view to
the holders of the Company Shares, other than the Acquiror and its affiliates.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
D-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware (the "DGCL") (Section
102) allows a corporation to eliminate the personal liability of directors of
a corporation to the corporation or to any of its stockholders for monetary
damage for a breach of his/her fiduciary duty as a director, except in the
case where the director breached his/her duty of loyalty, failed to act in
good faith, engaged in intentional misconduct or knowingly violated a law,
authorized the payment of a dividend or approved a stock repurchase in
violation of Delaware corporate law or obtained an improper personal benefit.
The Restated Certificate of Incorporation, as amended, of the Registrant
contains a provision which eliminates directors' personal liability as set
forth above.
The DGCL (Section 145) gives Delaware corporations broad powers to indemnify
their present and former directors and officers and those of affiliated
corporations against expenses incurred in the defense of any lawsuit to which
they are made parties by reason of being or having been such directors or
officers, subject to specified conditions and exclusions; gives a director or
officer who successfully defends an action the right to be so indemnified; and
authorizes the corporation to buy directors' and officers' liability
insurance. Such indemnification is not exclusive of any other right to which
those indemnified may be entitled under any bylaw, agreement, vote of
stockholders or otherwise.
The Registrant's Restated Certificate of Incorporation, as amended, provides
for indemnification to the fullest extent authorized by Section 145 of the
DGCL for directors, officers and employees of the Registrant and also to
persons who are serving at the request of the Registrant as directors,
officers or employees of other corporations (including subsidiaries). This
right of indemnification is not exclusive of any other right which any person
may acquire under any statute, bylaw, agreement, contract, vote of
stockholders or otherwise.
As permitted by the DGCL, the Registrant has purchased liability policies
which indemnify its officers and directors against loss arising from claims by
reason of their legal liability for acts as officers or directors subject to
limitations and conditions as set forth in the policies.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S> <C>
2.01 Agreement and Plan of Merger, dated as of April 7, 1998,
among the Registrant, Household Acquisition Corporation II
and Beneficial Corporation (included as Appendix A to the
Joint Proxy Statement-Prospectus). The Registrant agrees
to furnish supplementally a copy of any omitted schedule
to the Commission upon request.
4.01 Standard Multiple-Series Indenture Provisions for Senior
Debt Securities of Household Finance Corporation dated as
of June 1, 1992 (incorporated by reference to Exhibit 4(b)
to the Registration Statement on Form S-3 of Household Fi-
nance Corporation, No. 33-44854).
4.02 Indenture dated as of December 1, 1993 for Senior Debt Se-
curities between Household Finance Corporation and The
Chase Manhattan Bank (National Association), as Trustee
(incorporated by reference to Exhibit 4(b) to the Regis-
tration Statement on Form S-3 of Household Finance Corpo-
ration, No. 33-5561).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S> <C>
4.03 The principal amount of debt outstanding under each other
instrument defining the rights of holds of the Regis-
trant's long-term senior and senior subordinated debt does
not exceed 10 percent of the Registrant's total assets.
Household agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of each instrument defin-
ing the rights of holders of the Registrant's long-term
senior and senior subordinated debt.
4.04 Form of Certificate of Designation, Preferences and Rights
of Household International, Inc. 5% Cumulative Preferred
Stock.
4.05 Form of Certificate of Designation, Preferences and Rights
of Household International, Inc. $4.30 Cumulative Pre-
ferred Stock.
4.06 Form of Certificate of Designation, Preferences and Rights
of Household International, Inc. $4.50 Cumulative Pre-
ferred Stock.
5.01 Opinion of John W. Blenke, Vice President--Corporate Law
and Assistant Secretary of the Registrant, as to the le-
gality of the securities being registered.
8.01 Opinion of Wachtell, Lipton, Rosen & Katz as to certain
U.S. federal income tax matters.
10.01 Stock Option Agreement, dated April 7, 1998, between the
Registrant and Beneficial Corporation.
10.02 Stock Option Agreement, dated April 7, 1998, between Bene-
ficial Corporation and the Registrant.
23.01 Consent of John W. Blenke, Esq. (included in Exhibit
5.01).
23.02 Consent of Morgan Stanley & Co. Incorporated.
23.03 Consent of Goldman, Sachs & Co.
23.04 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorpo-
rated
23.05 Consent of Arthur Andersen, LLP.
23.06 Consent of Deloitte & Touche LLP.
23.07 Consent of Wachtell, Lipton, Rosen & Katz (included in Ex-
hibit 8.01).
24.01 Powers of attorney (included on signature page).
99.01 Form of Proxy of the Registrant.
99.02 Forms of Proxy of Beneficial Corporation.
99.03 Consent of Finn M.W. Caspersen to being named as about to
become a director of the Registrant.
99.04 Consent of Robert C. Clark to being named as about to be-
come a director of the Registrant.
99.05 Consent of James H. Gilliam, Jr. to being named as about
to become a director of the Registrant.
99.06 Consent of David J. Farris to being named as about to be-
come a director of the Registrant.
</TABLE>
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
That for purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
That every prospectus: (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of
responding to the request.
To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement
when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF PROSPECT HEIGHTS, AND
STATE OF ILLINOIS, ON THE 1ST DAY OF JUNE, 1998.
Household International, Inc.
/s/ William F. Aldinger
By___________________________________
William F. Aldinger
Chairman and Chief Executive
Officer
Each person whose signature appears below constitutes and appoints J.W.
Blenke, L.S. Mattenson and P.D. Schwartz and each or any of them (with full
power to act alone), as his/her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him/her in his/her
name, place and stead, in any and all capacities, to sign and file, with the
Securities and Exchange Commission, any and all amendments (including post-
effective amendments) to the Registration Statement, granting unto each such
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying
and confirming all that such attorney-in-fact and agent or their substitutes
may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED AND ON THE 1ST DAY OF JUNE, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ William F. Aldinger Chairman, Chief Executive Officer and
___________________________________________ Director (as Principal Executive Officer)
(William F. Aldinger)
/s/ Robert J. Darnall Director
___________________________________________
(Robert J. Darnall)
/s/ Gary G. Dillon Director
___________________________________________
(Gary G. Dillon)
/s/ John A. Edwardson Director
___________________________________________
(John A. Edwardson)
/s/ Mary Johnston Evans Director
___________________________________________
(Mary Johnston Evans)
/s/ Dudley Fishburn Director
___________________________________________
(Dudley Fishburn)
/s/ Cyrus F. Freidheim, Jr. Director
___________________________________________
(Cyrus F. Freidheim, Jr.)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Louis E. Levy Director
___________________________________________
(Louis E. Levy)
/s/ George A. Lorch Director
___________________________________________
(George A. Lorch)
/s/ John D. Nichols Director
___________________________________________
(John D. Nichols)
/s/ James B. Pitblado Director
___________________________________________
(James B. Pitblado)
/s/ S. Jay Stewart Director
___________________________________________
(S. Jay Stewart)
/s/ Louis W. Sullivan, M.D. Director
___________________________________________
(Louis W. Sullivan, M.D.)
/s/ David A. Schoenholz Executive Vice President--Chief Financial
___________________________________________ Officer (as Principal Accounting and
(David A. Schoenholz) Financial Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT DESCRIPTION
------- --------------------
<C> <S>
2.01 Agreement and Plan of Merger, dated as of April 7, 1998, among the
Registrant, Household Acquisition Corporation II and Beneficial Cor-
poration (included as Appendix A to the Joint Proxy Statement-Pro-
spectus). The Registrant agrees to furnish supplementally a copy of
any omitted schedule to the Commission upon request.
4.01 Standard Multiple-Series Indenture Provisions for Senior Debt Secu-
rities of Household Finance Corporation dated as of June 1, 1992
(incorporated by reference to Exhibit 4(b) to the Registration
Statement on Form S-3 of Household Finance Corporation, No. 33-
44854).
4.02 Indenture dated as of December 1, 1993 for Senior Debt Securities
between Household Finance Corporation and The Chase Manhattan Bank
(National Association), as Trustee (incorporated by reference to Ex-
hibit 4(b) to the Registration Statement on Form S-3 of Household
Finance Corporation, No. 33-5561).
4.03 The principal amount of debt outstanding under each other instrument
defining the rights of holds of the Registrant's long-term senior
and senior subordinated debt does not exceed 10 percent of the Reg-
istrant's total assets. Household agrees to furnish to the Securi-
ties and Exchange Commission, upon request, a copy of each instru-
ment defining the rights of holders of the Registrant's long-term
senior and senior subordinated debt.
4.04 Form of Certificate of Designation, Preferences and Rights of House-
hold International, Inc. 5% Cumulative Preferred Stock.
4.05 Form of Certificate of Designation, Preferences and Rights of House-
hold International, Inc. $4.30 Cumulative Preferred Stock.
4.06 Form of Certificate of Designation, Preferences and Rights of House-
hold International, Inc. $4.50 Cumulative Preferred Stock.
5.01 Opinion of John W. Blenke, Vice President--Corporate Law and Assis-
tant Secretary of the Registrant, as to the legality of the securi-
ties being registered.
8.01 Opinion of Wachtell, Lipton, Rosen & Katz as to certain U.S. federal
income tax matters.
10.01 Stock Option Agreement, dated April 7, 1998, between the Registrant
and Beneficial Corporation.
10.02 Stock Option Agreement, dated April 7, 1998, between Beneficial Cor-
poration and the Registrant.
23.01 Consent of John W. Blenke, Esq. (included in Exhibit 5.01).
23.02 Consent of Morgan Stanley & Co. Incorporated.
23.03 Consent of Goldman, Sachs & Co.
23.04 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
23.05 Consent of Arthur Andersen, LLP.
23.06 Consent of Deloitte & Touche LLP.
23.07 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit
8.01).
24.01 Powers of attorney (included on signature page).
99.01 Form of Proxy of the Registrant.
99.02 Forms of Proxy of Beneficial Corporation.
99.03 Consent of Finn M.W. Caspersen to being named as about to become a
director of the Registrant.
99.04 Consent of Robert C. Clark to being named as about to become a di-
rector of the Registrant.
99.05 Consent of James H. Gilliam, Jr. to being named as about to become a
director of the Registrant.
99.06 Consent of David J. Farris to being named as about to become a di-
rector of the Registrant.
</TABLE>
II-6
<PAGE>
Exhibit 4.04
FORM OF HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
5% Cumulative Preferred Stock
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that the
following resolution was duly adopted by the Board of Directors of the
Corporation pursuant to authority conferred upon the Board of Directors by the
provisions of the Restated Certificate of Incorporation, as amended, of the
Corporation, and in accordance with Section 141(c) of the General Corporation
Law of the State of Delaware.
1. The Board of Directors has on May 13, 1998 adopted the following
resolution:
"RESOLVED, that the issue of a series of Preferred Stock of the Corporation
is hereby authorized and the designation, preferences and privileges, relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof, in addition to those set forth in the
Restated Certificate of Incorporation, as amended, of the Corporation, are
hereby fixed as follows:
5% Cumulative Preferred Stock
(1) Number of Shares and Designation. 407,718 shares of Preferred
Stock, without par value of the Corporation are hereby constituted as a
series of Preferred Stock, without par value and designated as 5%
Cumulative Preferred Stock (hereinafter called the "5% Preferred Stock").
(2) Dividends. The holders of shares of the 5% Preferred Stock shall
be entitled to receive cash dividends, when and as declared by the Board of
Directors of the Corporation, out of assets legally available for such
purpose, at the rate determined as provided below. Such dividends shall be
cumulative from the date of original issue of such shares and shall be
payable semi-annually in arrears, when and as declared by the Board of
Directors of the Corporation, on the last day of June and December in each
year to holders of record, in each case, on the last business day of the
calendar month next preceding the dividend payment date (and the semi-
annual dividend periods shall commence on the first day following each
dividend payment date and end on the next succeeding dividend payment
date).
<PAGE>
Dividends on the 5% Preferred Stock for semi-annual dividend periods
will be payable at the rate of 5% per annum from the date of original
issue. The amount of dividends payable on each share of 5% Preferred Stock
for each full semi-annual dividend period shall be computed by dividing the
dividend rate by two and applying the dividend rate to each outstanding
share.
(3) Liquidation Preference. The amount to which shares of 5% Preferred
Stock shall be entitled upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, shall be $50.00 per share,
plus an amount equal to all accrued and unpaid dividends, if any, thereon
to the date fixed for payment, whether or not earned or declared, and no
more. Such amount to be set apart from holders or paid to holders out of
the assets of the Corporation before any distribution is made to or set
apart for holders of the Corporation's Common Stock.
(4) Redemption. (a) The shares of the 5% Preferred Stock shall be
subject to redemption in whole or in part at the option of the Corporation,
by vote of the Board of Directors, at $50.00 per share, plus an amount
equal to all accrued and unpaid dividends, if any, thereon to the date
fixed for redemption, whether or not earned or declared, and no more. If
less than all of the outstanding shares of 5% Preferred Stock are to be
redeemed, the shares to be redeemed shall be determined by lot in such
usual manner and subject to such regulations as the Board of Directors in
its sole discretion shall prescribe.
(b) At least 30 days prior to the date fixed for the redemption
of shares of the 5% Preferred Stock, a written notice shall be mailed to
each holder of record of shares of 5% Preferred Stock to be redeemed in a
postage prepaid envelope addressed to such holder at his post office
address as shown on the records of the Corporation, notifying such holder
of the election of the Corporation to redeem such shares stating the date
fixed for redemption thereof (the "redemption date"), and calling upon such
holder to surrender to the Corporation on the redemption date at the place
designated in such notice his certificate or certificates representing the
number of shares specified in such notice of redemption.
(c) On or after the redemption date each holder of shares of 5%
Preferred Stock to be redeemed shall present and surrender his certificate
or certificates for such shares to the Corporation at the place designated
in such notice and thereupon the redemption price of such shares shall be
paid to or on the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled.
-2-
<PAGE>
(d) In case less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares.
(e) From and after the redemption date (unless default shall be
made by the Corporation in payment of the redemption price) all dividends
on the shares of 5% Preferred Stock designated for redemption in such
notice shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price thereof upon the surrender of certificates representing the same,
shall cease and determine and such shares shall not thereafter be
transferred (except with the consent of the Corporation) on the books of
the Corporation, and such shares shall not be deemed to be outstanding for
any purpose whatsoever.
(f) At its election, prior to the redemption date, the
Corporation may deposit the redemption price of the shares of 5% Preferred
Stock called for redemption in trust for the holders thereof with a bank or
trust company (having a capital and surplus of not less than $1,000,000) in
the City of Chicago, Illinois or in the Borough of Manhattan, City and
State of New York or in any other city in which the Corporation at the time
shall maintain a transfer agency with respect to such stock, in which case
such redemption notice shall state the date of such deposit, shall specify
the office of such bank or trust company as the place of payment of the
redemption price, and shall call upon such holders to surrender the
certificates representing such shares at such place on or after the date
fixed in such redemption notice (which shall not be later than the
redemption date) against payment of the redemption price. From and after
the making of such deposit, the shares of 5% Preferred Stock so designated
for redemption shall not be deemed to be outstanding for any purpose
whatsoever, and the rights of the holders of such shares shall be limited
to the right to receive the redemption price of such shares without
interest, upon surrender of the certificates representing the same to the
Corporation at said office of such bank or trust company.
(g) Any moneys so deposited which shall remain unclaimed by the
holders of such 5% Preferred Stock at the end of six years after the
redemption date shall be returned by such bank or trust company to the
Corporation after which the holders of the 5% Preferred Stock shall have no
further interest in such moneys.
(5) Shares to be Retired. All shares of 5% Preferred Stock purchased
or redeemed by the Corporation shall be retired and cancelled and shall be
restored to the status of
-3-
<PAGE>
authorized but unissued shares of the class of Preferred Stock without par
value, without designation as to series, and may thereafter be issued, but
not as shares of 5% Preferred Stock.
(6) Conversion or Exchange. The holders of shares of 5% Preferred
Stock shall not have any rights herein to convert such shares into or
exchange such shares for shares of any other series of any class or classes
of capital stock (or any other security) of the Corporation.
(7) Voting Rights. (a) Each holder of 5% Preferred Stock shall be
entitled to one vote for each share held on each matter submitted to a vote
of stockholders of the Corporation and, except as otherwise herein or by
law provided, the 5% Preferred Stock, the Common Stock of the Corporation,
and any other capital stock of the Corporation at the time entitled
thereto, shall vote together as one class, except that while the holders of
5% Preferred Stock, voting as a class, are entitled to elect two directors
as hereinafter provided, they shall not be entitled to participate with the
Common Stock (or any other capital stock as stated above) in the election
of any other directors.
(b) In case at any time three or more full semi-annual dividends
(whether consecutive or not) on the 5% Preferred Stock shall be in arrears,
then during the period (the "Class Voting Period") commencing with such
time and ending with the time when all arrears in dividends on the 5%
Preferred Stock shall have been paid and the full dividend on the 5%
Preferred Stock for the then current semi-annual dividend period shall have
been declared and paid or set aside for payment, at any meeting of the
stockholders of the Corporation held for the election of directors during
the Class Voting Period, the holders of 5% Preferred Stock represented in
person or by proxy at said meeting shall be entitled, as a class, to the
exclusion of the holders of all other classes of stock of the Corporation,
to elect two directors of the Corporation, each share of 5% Preferred Stock
entitling the holder thereof to one vote.
(c) Any director who shall have been elected by holders of 5%
Preferred Stock or by any director so elected as herein contemplated, may
be removed at any time during a Class Voting Period, either for or without
cause, by, and only by, the affirmative votes of the holders of record of a
majority of the outstanding shares of 5% Preferred Stock given at a special
meeting of such stockholders called for the purpose, and any vacancy
thereby created may be filled during such Class Voting Period by the
holders of 5% Preferred Stock present in person or represented by
-4-
<PAGE>
proxy at such meeting. Any director to be elected by the Board of Directors
of the Corporation to replace a director elected by holders of 5% Preferred
Stock or elected by a director as provided for in this sentence shall be
elected by the remaining director previously elected by the holders of 5%
Preferred Stock. At the end of the Class Voting Period the holders of 5%
Preferred Stock shall be automatically divested of all voting power vested
in them under this resolution but subject always to the subsequent vesting
hereunder of voting power in the holders of 5% Preferred Stock in the event
of any similar default or defaults thereafter.
(8) Ranking. The 5% Preferred Stock shall rank on a parity with the
Corporation's 8-1/4% Cumulative Preferred Stock, Series 1992-A, 7.35%
Cumulative Preferred Stock, Series 1993-A, $4.50 Cumulative Preferred Stock
and $4.30 Cumulative Preferred Stock as to payment of dividends and
distribution of assets upon liquidation, dissolution, or winding up,
whether voluntary or involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred Stock as to
payment of dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or involuntary, and prior to
any other series of stock authorized to be issued by the Corporation which
ranks junior to the Corporation's 8-1/4% Cumulative Preferred Stock, Series
1992-A, 7.35% Cumulative Preferred Stock, Series 1993-A, $4.50 Cumulative
Preferred Stock and $4.30 Cumulative Preferred Stock as to payment of
dividends and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary.
(9) Amendment. While any 5% Preferred Stock is outstanding the
Corporation shall not alter or change the preferences, special rights or
powers of the 5% Preferred Stock so as to adversely affect the 5% Preferred
Stock without the affirmative consent (given in writing or at a meeting
duly called for that purpose) of the holders of at least two-thirds
(2/3rds) of the aggregate number of shares of 5% Preferred Stock then
outstanding.
"FURTHER RESOLVED, that the Chairman, President, or any Vice President,
together with the Secretary or an Assistant Secretary, of the Corporation are
hereby authorized and directed to execute, acknowledge, file with the Delaware
Secretary of State, and record in New Castle County, Delaware, a Certificate of
Designation, Preferences and Rights of the 5% Preferred Stock when such officers
of the Corporation shall in their sole discretion consider such action to be
necessary or advisable; and
"FURTHER RESOLVED, that the form of certificates for the 5% Preferred Stock
which form of certificate has been presented to this meeting, and a copy of
which the Secretary or an Assistant Secretary is instructed to mark for
identification and file with the corporate records, is hereby approved, the
facsimile signatures of the officers of the Corporation contained on the
certificates are adopted as the valid and binding signatures of the officers so
signing, and the proper corporate officers are authorized on behalf of and under
the corporate seal of the
-5-
<PAGE>
Corporation to execute and deliver the said certificates in substantially the
form presented with such changes therein as may be approved by the officers
executing the same, execution thereof to be conclusive evidence of such
approval; and
"FURTHER RESOLVED, that application be made to the New York Stock Exchange,
Inc. (the "Exchange") for listing of the 5% Preferred Stock upon official notice
of issuance of the 5% Preferred Stock and that Messrs. J. W. Blenke, P. R. Shay
and P. D. Schwartz or any counsel designated by any of the foregoing
individuals, be and each hereby are authorized and designated by the Corporation
to appear before the Exchange in furtherance of the listing of said 5% Preferred
Stock, including authority to file or make any such changes in the said
applications or any agreements relevant thereto and to execute any and all
documents on behalf of the Corporation as may be necessary or desirable to
conform with the requirements for listing; and
"FURTHER RESOLVED, that the officers of the Corporation, or any counsel
designated thereby, are hereby severally authorized to execute on behalf of the
Corporation and file with appropriate authorities such applications, statements,
certificates, consents, and other documents as may be necessary for the
registration or qualification of the 5% Preferred Stock under the securities
laws of the states of the United States in which such securities are required to
be registered or qualified, and any actions having previously been taken are
hereby authorized, approved and ratified; and
"FURTHER RESOLVED, that Harris Trust and Savings Bank ("Harris Bank") is
hereby appointed as transfer agent and registrar for the 5% Preferred Stock upon
such terms as the officers of the Corporation consider necessary or advisable;
and
"FURTHER RESOLVED, that for the purpose of the original issue of the shares
of 5% Preferred Stock, Harris Bank, as the Corporation's transfer agent and
registrar, is authorized and directed to issue and is authorized to register and
deliver certificates representing an aggregate of up to 407,718 shares of 5%
Preferred Stock of the Corporation all in accordance with instructions from the
officers of the Corporation; and
"FURTHER RESOLVED, that the 5% Preferred Stock shall be without par value;
and
"FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed on behalf of the Corporation to take and cause to be
taken all action necessary or desirable to carry out the terms, implications and
intent of these resolutions, and to consummate the transactions contemplated
therein."
-6-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation, Preferences and Rights to be signed by David A. Schoenholz,
Executive Vice President and Chief Financial Officer of the Corporation, and
attested by Patrick D. Schwartz, Associate General Counsel and Assistant
Secretary, this ____ day of ___________________, 1998.
HOUSEHOLD INTERNATIONAL, INC.
By:
----------------------------------
David A. Schoenholz
Executive Vice President-
Chief Financial Officer
Attest:
- -----------------------------
Patrick D. Schwartz
Associate General Counsel and
Assistant Secretary
-7-
<PAGE>
Exhibit 4.05
FORM OF HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
$4.30 Cumulative Preferred Stock
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that the
following resolution was duly adopted by the Board of Directors of the
Corporation pursuant to authority conferred upon the Board of Directors by the
provisions of the Restated Certificate of Incorporation, as amended, of the
Corporation, and in accordance with Section 141(c) of the General Corporation
Law of the State of Delaware.
1. The Board of Directors has on May 13, 1998 adopted the following
resolution:
"RESOLVED, that the issue of a series of Preferred Stock of the Corporation
is hereby authorized and the designation, preferences and privileges, relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof, in addition to those set forth in the
Restated Certificate of Incorporation, as amended, of the Corporation, are
hereby fixed as follows:
$4.30 Cumulative Preferred Stock
(1) Number of Shares and Designation. 836,585 shares of Preferred
Stock, without par value of the Corporation are hereby constituted as a
series of Preferred Stock, without par value and designated as $4.30
Cumulative Preferred Stock (hereinafter called the "$4.30 Preferred
Stock").
(2) Dividends. The holders of shares of the $4.30 Preferred Stock
shall be entitled to receive cash dividends, when and as declared by the
Board of Directors of the Corporation, out of assets legally available for
such purpose, at the rate determined as provided below. Such dividends
shall be cumulative from the date of original issue of such shares and
shall be payable semi-annually in arrears, when and as declared by the
Board of Directors of the Corporation, on the last day of March and
September in each year to holders of record, in each case, on the last
business day of the calendar month next preceding the dividend payment date
(and the semi-annual dividend periods shall commence on the first day
following each dividend payment date and end on the next succeeding
dividend payment date).
<PAGE>
Dividends on the $4.30 Preferred Stock for semi-annual dividend
periods will be payable at the rate of $4.30 per annum from the date of
original issue. The amount of dividends payable on each share of $4.30
Preferred Stock for each full semi-annual dividend period shall be computed
by dividing the dividend rate by two and applying the dividend rate to each
outstanding share.
(3) Liquidation Preference. The amount to which shares of $4.30
Preferred Stock shall be entitled upon liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, shall be $100.00
per share, plus an amount equal to all accrued and unpaid dividends, if
any, thereon to the date fixed for payment, whether or not earned or
declared, and no more. Such amount to be set apart from holders or paid to
holders out of the assets of the Corporation before any distribution is
made to or set apart for holders of the Corporation's Common Stock.
(4) Redemption. (a) The shares of the $4.30 Preferred Stock shall be
subject to redemption in whole or in part at the option of the Corporation,
by vote of the Board of Directors, at $100.00 per share, plus an amount
equal to all accrued and unpaid dividends, if any, thereon to the date
fixed for redemption, whether or not earned or declared, and no more. If
less than all of the outstanding shares of $4.30 Preferred Stock are to be
redeemed, the shares to be redeemed shall be determined by lot in such
usual manner and subject to such regulations as the Board of Directors in
its sole discretion shall prescribe.
(b) At least 30 days prior to the date fixed for the redemption
of shares of the $4.30 Preferred Stock, a written notice shall be mailed to
each holder of record of shares of $4.30 Preferred Stock to be redeemed in
a postage prepaid envelope addressed to such holder at his post office
address as shown on the records of the Corporation, notifying such holder
of the election of the Corporation to redeem such shares stating the date
fixed for redemption thereof (the "redemption date"), and calling upon such
holder to surrender to the Corporation on the redemption date at the place
designated in such notice his certificate or certificates representing the
number of shares specified in such notice of redemption.
(c) On or after the redemption date each holder of shares of
$4.30 Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the
-2-
<PAGE>
owner thereof and each surrendered certificate shall be canceled.
(d) In case less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares.
(e) From and after the redemption date (unless default shall be
made by the Corporation in payment of the redemption price) all dividends
on the shares of $4.30 Preferred Stock designated for redemption in such
notice shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price thereof upon the surrender of certificates representing the same,
shall cease and determine and such shares shall not thereafter be
transferred (except with the consent of the Corporation) on the books of
the Corporation, and such shares shall not be deemed to be outstanding for
any purpose whatsoever.
(f) At its election, prior to the redemption date, the
Corporation may deposit the redemption price of the shares of $4.30
Preferred Stock called for redemption in trust for the holders thereof with
a bank or trust company (having a capital and surplus of not less than
$1,000,000) in the City of Chicago, Illinois or in the Borough of
Manhattan, City and State of New York or in any other city in which the
Corporation at the time shall maintain a transfer agency with respect to
such stock, in which case such redemption notice shall state the date of
such deposit, shall specify the office of such bank or trust company as the
place of payment of the redemption price, and shall call upon such holders
to surrender the certificates representing such shares at such place on or
after the date fixed in such redemption notice (which shall not be later
than the redemption date) against payment of the redemption price. From and
after the making of such deposit, the shares of $4.30 Preferred Stock so
designated for redemption shall not be deemed to be outstanding for any
purpose whatsoever, and the rights of the holders of such shares shall be
limited to the right to receive the redemption price of such shares without
interest, upon surrender of the certificates representing the same to the
Corporation at said office of such bank or trust company.
(g) Any moneys so deposited which shall remain unclaimed by the
holders of such $4.30 Preferred Stock at the end of six years after the
redemption date shall be returned by such bank or trust company to the
Corporation after which the holders of the $4.30 Preferred Stock shall have
no further interest in such moneys.
-3-
<PAGE>
(5) Shares to be Retired. All shares of $4.30 Preferred Stock
purchased or redeemed by the Corporation shall be retired and cancelled and
shall be restored to the status of authorized but unissued shares of the
class of Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of $4.30 Preferred
Stock.
(6) Conversion or Exchange. The holders of shares of $4.30 Preferred
Stock shall not have any rights herein to convert such shares into or
exchange such shares for shares of any other series of any class or classes
of capital stock (or any other security) of the Corporation.
(7) Voting Rights. (a) Each holder of $4.30 Preferred Stock shall be
entitled to one vote for each share held on each matter submitted to a vote
of stockholders of the Corporation and, except as otherwise herein or by
law provided, the $4.30 Preferred Stock, the Common Stock of the
Corporation, and any other capital stock of the Corporation at the time
entitled thereto, shall vote together as one class, except that while the
holders of $4.30 Preferred Stock, voting as a class, are entitled to elect
two directors as hereinafter provided, they shall not be entitled to
participate with the Common Stock (or any other capital stock as stated
above) in the election of any other directors.
(b) In case at any time three or more full semi-annual dividends
(whether consecutive or not) on the $4.30 Preferred Stock shall be in
arrears, then during the period (the "Class Voting Period") commencing with
such time and ending with the time when all arrears in dividends on the
$4.30 Preferred Stock shall have been paid and the full dividend on the
$4.30 Preferred Stock for the then current semi-annual dividend period
shall have been declared and paid or set aside for payment, at any meeting
of the stockholders of the Corporation held for the election of directors
during the Class Voting Period, the holders of $4.30 Preferred Stock
represented in person or by proxy at said meeting shall be entitled, as a
class, to the exclusion of the holders of all other classes of stock of the
Corporation, to elect two directors of the Corporation, each share of $4.30
Preferred Stock entitling the holder thereof to one vote.
(c) Any director who shall have been elected by holders of $4.30
Preferred Stock or by any director so elected as herein contemplated, may
be removed at any time during a Class Voting Period, either for or without
cause, by, and only by, the affirmative votes of the holders of record of a
majority of the outstanding shares of $4.30
-4-
<PAGE>
Preferred Stock given at a special meeting of such stockholders called for
the purpose, and any vacancy thereby created may be filled during such
Class Voting Period by the holders of $4.30 Preferred Stock present in
person or represented by proxy at such meeting. Any director to be
elected by the Board of Directors of the Corporation to replace a director
elected by holders of $4.30 Preferred Stock or elected by a director as
provided for in this sentence shall be elected by the remaining director
previously elected by the holders of $4.30 Preferred Stock. At the end of
the Class Voting Period the holders of $4.30 Preferred Stock shall be
automatically divested of all voting power vested in them under this
resolution but subject always to the subsequent vesting hereunder of voting
power in the holders of $4.30 Preferred Stock in the event of any similar
default or defaults thereafter.
(8) Ranking. The $4.30 Preferred Stock shall rank on a parity with the
Corporation's 8-1/4% Cumulative Preferred Stock, Series 1992-A, 7.35%
Cumulative Preferred Stock, Series 1993-A, $4.50 Cumulative Preferred Stock
and 5% Cumulative Preferred Stock as to payment of dividends and
distribution of assets upon liquidation, dissolution, or winding up,
whether voluntary or involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred Stock as to
payment of dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or involuntary, and prior to
any other series of stock authorized to be issued by the Corporation which
ranks junior to the Corporation's 8-1/4% Cumulative Preferred Stock, Series
1992-A, 7.35% Cumulative Preferred Stock, Series 1993-A, $4.50 Cumulative
Preferred Stock and 5% Cumulative Preferred Stock as to payment of
dividends and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary.
(9) Amendment. While any of the $4.30 Preferred Stock is outstanding
the Corporation shall not alter or change the preferences, special rights or
powers of the $4.30 Preferred Stock so as to adversely affect the $4.30
Preferred Stock without the affirmative consent (given in writing or at a
meeting duly called for that purpose) of the holders of at least two-thirds
(2/3rds) of the aggregate number of shares of $4.30 Preferred Stock then
outstanding.
"FURTHER RESOLVED, that the Chairman, President, or any Vice President,
together with the Secretary or an Assistant Secretary, of the Corporation are
hereby authorized and directed to execute, acknowledge, file with the Delaware
Secretary of State, and record in New Castle County, Delaware, a Certificate of
Designation, Preferences and Rights of the $4.30 Preferred Stock when such
officers of the Corporation shall in their sole discretion consider such action
to be necessary or advisable; and
"FURTHER RESOLVED, that the form of certificates for the $4.30 Preferred
Stock which form of certificate has been presented to this meeting, and a copy
of which the Secretary or an Assistant Secretary is instructed to mark for
identification
-5-
<PAGE>
and file with the corporate records, is hereby approved, the facsimile
signatures of the officers of the Corporation contained on the certificates are
adopted as the valid and binding signatures of the officers so signing, and the
proper corporate officers are authorized on behalf of and under the corporate
seal of the Corporation to execute and deliver the said certificates in
substantially the form presented with such changes therein as may be approved by
the officers executing the same, execution thereof to be conclusive evidence of
such approval; and
"FURTHER RESOLVED, that application be made to the New York Stock Exchange,
Inc. (the "Exchange") for listing of the $4.30 Preferred Stock upon official
notice of issuance of the $4.30 Preferred Stock and that Messrs. J. W. Blenke,
P. R. Shay and P. D. Schwartz or any counsel designated by any of the foregoing
individuals, be and each hereby are authorized and designated by the Corporation
to appear before the Exchange in furtherance of the listing of said $4.30
Preferred Stock, including authority to file or make any such changes in the
said applications or any agreements relevant thereto and to execute any and all
documents on behalf of the Corporation as may be necessary or desirable to
conform with the requirements for listing; and
"FURTHER RESOLVED, that the officers of the Corporation, or any counsel
designated thereby, are hereby severally authorized to execute on behalf of the
Corporation and file with appropriate authorities such applications, statements,
certificates, consents, and other documents as may be necessary for the
registration or qualification of the $4.30 Preferred Stock under the securities
laws of the states of the United States in which such securities are required to
be registered or qualified, and any actions having previously been taken are
hereby authorized, approved and ratified; and
"FURTHER RESOLVED, that Harris Trust and Savings Bank ("Harris Bank") is
hereby appointed as transfer agent and registrar for the $4.30 Preferred Stock
upon such terms as the officers of the Corporation consider necessary or
advisable; and
"FURTHER RESOLVED, that for the purpose of the original issue of the shares
of $4.30 Preferred Stock, Harris Bank, as the Corporation's transfer agent and
registrar, is authorized and directed to issue and is authorized to register and
deliver certificates representing an aggregate of up to 836,585 shares of $4.30
Preferred Stock of the Corporation all in accordance with instructions from the
officers of the Corporation; and
"FURTHER RESOLVED, that the $4.30 Preferred Stock shall be without par
value; and
"FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed on behalf of the Corporation to
-6-
<PAGE>
take and cause to be taken all action necessary or desirable to carry out the
terms, implications and intent of these resolutions, and to consummate the
transactions contemplated therein."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation, Preferences and Rights to be signed by David A. Schoenholz,
Executive Vice President and Chief Financial Officer of the Corporation, and
attested by Patrick D. Schwartz, Associate General Counsel and Assistant
Secretary, this ____ day of ___________________, 1998.
HOUSEHOLD INTERNATIONAL, INC.
By: __________________________
David A. Schoenholz
Executive Vice President-
Chief Financial Officer
Attest:
_____________________________
Patrick D. Schwartz
Associate General Counsel and
Assistant Secretary
-7-
<PAGE>
Exhibit 4.06
FORM OF HOUSEHOLD INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
$4.50 Cumulative Preferred Stock
(Without Par Value)
HOUSEHOLD INTERNATIONAL, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that the
following resolution was duly adopted by the Board of Directors of the
Corporation pursuant to authority conferred upon the Board of Directors by the
provisions of the Restated Certificate of Incorporation, as amended, of the
Corporation, and in accordance with Section 141(c) of the General Corporation
Law of the State of Delaware.
1. The Board of Directors has on May 13, 1998 adopted the following
resolution:
"RESOLVED, that the issue of a series of Preferred Stock of the Corporation
is hereby authorized and the designation, preferences and privileges, relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof, in addition to those set forth in the
Restated Certificate of Incorporation, as amended, of the Corporation, are
hereby fixed as follows:
$4.50 Cumulative Preferred Stock
(1) Number of Shares and Designation. 103,976 shares of Preferred
Stock, without par value of the Corporation are hereby constituted as a
series of Preferred Stock, without par value and designated as $4.50
Cumulative Preferred Stock (hereinafter called the "$4.50 Preferred
Stock").
(2) Dividends. The holders of shares of the $4.50 Preferred Stock
shall be entitled to receive cash dividends, when and as declared by the
Board of Directors of the Corporation, out of assets legally available for
such purpose, at the rate determined as provided below. Such dividends
shall be cumulative from the date of original issue of such shares and
shall be payable semi-annually in arrears, when and as declared by the
Board of Directors of the Corporation, on the last day of June and December
in each year to holders of record, in each case, on the last business day
of the calendar month next preceding the dividend payment date (and the
semi-annual dividend periods shall commence on the first day following each
dividend payment date and end on the next succeeding dividend payment
date).
<PAGE>
Dividends on the $4.50 Preferred Stock for semi-annual dividend
periods will be payable at the rate of $4.50 per annum from the date of
original issue. The amount of dividends payable on each share of $4.50
Preferred Stock for each full semi-annual dividend period shall be computed
by dividing the dividend rate by two and applying the dividend rate to each
outstanding share.
(3) Liquidation Preference. The amount to which shares of $4.50
Preferred Stock shall be entitled upon liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, shall be $100.00
per share, plus an amount equal to all accrued and unpaid dividends, if
any, thereon to the date fixed for payment, whether or not earned or
declared, and no more. Such amount to be set apart from holders or paid to
holders out of the assets of the Corporation before any distribution is
made to or set apart for holders of the Corporation's Common Stock.
(4) Redemption. (a) The shares of the $4.50 Preferred Stock shall be
subject to redemption in whole or in part at the option of the Corporation,
by vote of the Board of Directors, at $103.00 per share, plus an amount
equal to all accrued and unpaid dividends, if any, thereon to the date
fixed for redemption, whether or not earned or declared, and no more. If
less than all of the outstanding shares of $4.50 Preferred Stock are to be
redeemed, the shares to be redeemed shall be determined by lot in such
usual manner and subject to such regulations as the Board of Directors in
its sole discretion shall prescribe.
(b) At least 30 days prior to the date fixed for the redemption
of shares of the $4.50 Preferred Stock, a written notice shall be mailed to
each holder of record of shares of $4.50 Preferred Stock to be redeemed in
a postage prepaid envelope addressed to such holder at his post office
address as shown on the records of the Corporation, notifying such holder
of the election of the Corporation to redeem such shares stating the date
fixed for redemption thereof (the "redemption date"), and calling upon such
holder to surrender to the Corporation on the redemption date at the place
designated in such notice his certificate or certificates representing the
number of shares specified in such notice of redemption.
(c) On or after the redemption date each holder of shares of
$4.50 Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Corporation at the place
designated in such notice and thereupon the redemption price of such shares
shall be paid to or on the order of the person whose name appears on such
certificate or certificates as the
-2-
<PAGE>
owner thereof and each surrendered certificate shall be canceled.
(d) In case less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares.
(e) From and after the redemption date (unless default shall be
made by the Corporation in payment of the redemption price) all dividends
on the shares of $4.50 Preferred Stock designated for redemption in such
notice shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation, except the right to receive the redemption
price thereof upon the surrender of certificates representing the same,
shall cease and determine and such shares shall not thereafter be
transferred (except with the consent of the Corporation) on the books of
the Corporation, and such shares shall not be deemed to be outstanding for
any purpose whatsoever.
(f) At its election, prior to the redemption date, the
Corporation may deposit the redemption price of the shares of $4.50
Preferred Stock called for redemption in trust for the holders thereof with
a bank or trust company (having a capital and surplus of not less than
$1,000,000) in the City of Chicago, Illinois or in the Borough of
Manhattan, City and State of New York or in any other city in which the
Corporation at the time shall maintain a transfer agency with respect to
such stock, in which case such redemption notice shall state the date of
such deposit, shall specify the office of such bank or trust company as the
place of payment of the redemption price, and shall call upon such holders
to surrender the certificates representing such shares at such place on or
after the date fixed in such redemption notice (which shall not be later
than the redemption date) against payment of the redemption price. From and
after the making of such deposit, the shares of $4.50 Preferred Stock so
designated for redemption shall not be deemed to be outstanding for any
purpose whatsoever, and the rights of the holders of such shares shall be
limited to the right to receive the redemption price of such shares without
interest, upon surrender of the certificates representing the same to the
Corporation at said office of such bank or trust company.
(g) Any moneys so deposited which shall remain unclaimed by the
holders of such $4.50 Preferred Stock at the end of six years after the
redemption date shall be returned by such bank or trust company to the
Corporation after which the holders of the $4.50 Preferred Stock shall have
no further interest in such moneys.
-3-
<PAGE>
(5) Shares to be Retired. All shares of $4.50 Preferred Stock
purchased or redeemed by the Corporation shall be retired and cancelled and
shall be restored to the status of authorized but unissued shares of the
class of Preferred Stock without par value, without designation as to
series, and may thereafter be issued, but not as shares of $4.50 Preferred
Stock.
(6) Conversion or Exchange. The holders of shares of $4.50 Preferred
Stock shall not have any rights herein to convert such shares into or
exchange such shares for shares of any other series of any class or classes
of capital stock (or any other security) of the Corporation.
(7) Voting Rights. (a) Each holder of $4.50 Preferred Stock shall be
entitled to one vote for each share held on each matter submitted to a vote
of stockholders of the Corporation and, except as otherwise herein or by
law provided, the $4.50 Preferred Stock, the Common Stock of the
Corporation, and any other capital stock of the Corporation at the time
entitled thereto, shall vote together as one class, except that while the
holders of $4.50 Preferred Stock, voting as a class, are entitled to elect
two directors as hereinafter provided, they shall not be entitled to
participate with the Common Stock (or any other capital stock as stated
above) in the election of any other directors.
(b) In case at any time three or more full semi-annual dividends
(whether consecutive or not) on the $4.50 Preferred Stock shall be in
arrears, then during the period (the "Class Voting Period") commencing with
such time and ending with the time when all arrears in dividends on the
$4.50 Preferred Stock shall have been paid and the full dividend on the
$4.50 Preferred Stock for the then current semi-annual dividend period
shall have been declared and paid or set aside for payment, at any meeting
of the stockholders of the Corporation held for the election of directors
during the Class Voting Period, the holders of $4.50 Preferred Stock
represented in person or by proxy at said meeting shall be entitled, as a
class, to the exclusion of the holders of all other classes of stock of the
Corporation, to elect two directors of the Corporation, each share of $4.50
Preferred Stock entitling the holder thereof to one vote.
(c) Any director who shall have been elected by holders of $4.50
Preferred Stock or by any director so elected as herein contemplated, may
be removed at any time during a Class Voting Period, either for or without
cause, by, and only by, the affirmative votes of the holders of record of a
majority of the outstanding shares of $4.50
-4-
<PAGE>
Preferred Stock given at a special meeting of such stockholders called for
the purpose, and any vacancy thereby created may be filled during such
Class Voting Period by the holders of $4.50 Preferred Stock present in
person or represented by proxy at such meeting. Any director to be elected
by the Board of Directors of the Corporation to replace a director elected
by holders of $4.50 Preferred Stock or elected by a director as provided
for in this sentence shall be elected by the remaining director previously
elected by the holders of $4.50 Preferred Stock. At the end of the Class
Voting Period the holders of $4.50 Preferred Stock shall be automatically
divested of all voting power vested in them under this resolution but
subject always to the subsequent vesting hereunder of voting power in the
holders of $4.50 Preferred Stock in the event of any similar default or
defaults thereafter.
(8) Ranking. The $4.50 Preferred Stock shall rank on a parity with the
Corporation's 8-1/4% Cumulative Preferred Stock, Series 1992-A, 7.35%
Cumulative Preferred Stock, Series 1993-A, 5% Cumulative Preferred Stock
and $4.30 Cumulative Preferred Stock as to payment of dividends and
distribution of assets upon liquidation, dissolution, or winding up,
whether voluntary or involuntary, and shall rank prior to the Corporation's
Common Stock and Series A Junior Participating Preferred Stock as to
payment of dividends and distribution of assets upon liquidation,
dissolution, or winding up, whether voluntary or involuntary, and prior to
any other series of stock authorized to be issued by the Corporation which
ranks junior to the Corporation's 8-1/4% Cumulative Preferred Stock, Series
1992-A, 7.35% Cumulative Preferred Stock, Series 1993-A, 5% Cumulative
Preferred Stock and $4.30 Cumulative Preferred Stock as to payment of
dividends and distribution of assets upon liquidation, dissolution, or
winding up, whether voluntary or involuntary.
(9) Amendment. While any of the $4.50 Preferred Stock is outstanding
the Corporation shall not alter or change the preferences, special rights
or powers of the $4.50 Preferred Stock so as to adversely affect the $4.50
Preferred Stock without the affirmative consent (given in writing or at a
meeting duly called for that purpose) of the holders of at least two-thirds
(2/3rds) of the aggregate number of shares of $4.50 Preferred Stock then
outstanding.
"FURTHER RESOLVED, that the Chairman, President, or any Vice President,
together with the Secretary or an Assistant Secretary, of the Corporation are
hereby authorized and directed to execute, acknowledge, file with the Delaware
Secretary of State, and record in New Castle County, Delaware, a Certificate of
Designation, Preferences and Rights of the $4.50 Preferred Stock when such
officers of the Corporation shall in their sole discretion consider such action
to be necessary or advisable; and
"FURTHER RESOLVED, that the form of certificates for the $4.50 Preferred
Stock which form of certificate has been presented to this meeting, and a copy
of which the Secretary or an Assistant Secretary is instructed to mark for
identification
-5-
<PAGE>
and file with the corporate records, is hereby approved, the facsimile
signatures of the officers of the Corporation contained on the certificates are
adopted as the valid and binding signatures of the officers so signing, and the
proper corporate officers are authorized on behalf of and under the corporate
seal of the Corporation to execute and deliver the said certificates in
substantially the form presented with such changes therein as may be approved by
the officers executing the same, execution thereof to be conclusive evidence of
such approval; and
"FURTHER RESOLVED, that application be made to the New York Stock Exchange,
Inc. (the "Exchange") for listing of the $4.50 Preferred Stock upon official
notice of issuance of the $4.50 Preferred Stock and that Messrs. J. W. Blenke,
P. R. Shay and P. D. Schwartz or any counsel designated by any of the foregoing
individuals, be and each hereby are authorized and designated by the Corporation
to appear before the Exchange in furtherance of the listing of said $4.50
Preferred Stock, including authority to file or make any such changes in the
said applications or any agreements relevant thereto and to execute any and all
documents on behalf of the Corporation as may be necessary or desirable to
conform with the requirements for listing; and
"FURTHER RESOLVED, that the officers of the Corporation, or any counsel
designated thereby, are hereby severally authorized to execute on behalf of the
Corporation and file with appropriate authorities such applications, statements,
certificates, consents, and other documents as may be necessary for the
registration or qualification of the $4.50 Preferred Stock under the securities
laws of the states of the United States in which such securities are required to
be registered or qualified, and any actions having previously been taken are
hereby authorized, approved and ratified; and
"FURTHER RESOLVED, that Harris Trust and Savings Bank ("Harris Bank") is
hereby appointed as transfer agent and registrar for the $4.50 Preferred Stock
upon such terms as the officers of the Corporation consider necessary or
advisable; and
"FURTHER RESOLVED, that for the purpose of the original issue of the shares
of $4.50 Preferred Stock, Harris Bank, as the Corporation's transfer agent and
registrar, is authorized and directed to issue and is authorized to register and
deliver certificates representing an aggregate of up to 103,976 shares of $4.50
Preferred Stock of the Corporation all in accordance with instructions from the
officers of the Corporation; and
"FURTHER RESOLVED, that the $4.50 Preferred Stock shall be without par
value; and
"FURTHER RESOLVED, that the officers of the Corporation are hereby
authorized and directed on behalf of the Corporation to
-6-
<PAGE>
take and cause to be taken all action necessary or desirable to carry out the
terms, implications and intent of these resolutions, and to consummate the
transactions contemplated therein."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation, Preferences and Rights to be signed by David A. Schoenholz,
Executive Vice President and Chief Financial Officer of the Corporation, and
attested by Patrick D. Schwartz, Associate General Counsel and Assistant
Secretary, this ____ day of __________________, 1998.
HOUSEHOLD INTERNATIONAL, INC.
By:_________________________________
David A. Schoenholz
Executive Vice President-
Chief Financial Officer
Attest:
_____________________________
Patrick D. Schwartz
Associate General Counsel and
Assistant Secretary
-7-
<PAGE>
EXHIBIT 5.01
OPINION
[Letterhead of Household International, Inc.]
June 1, 1998
Household International, Inc.
2700 Sanders Road
Prospect Heights, IL 60070
RE: Household International, Inc. Registration Statement on Form S-4, for
approximately 167,362,654 shares of Common Stock, and 1,348,279 shares of
Preferred Stock
Gentlemen:
As Vice President-Corporate Law and Assistant Secretary of Household
International, Inc., a Delaware corporation ("Household"), I am familiar with
the proceedings in connection with Household's Registration Statement on Form
S-4 (which includes a joint proxy statement for Household and Beneficial
Corporation ("Beneficial")) pursuant to which approximately 167,362,654 shares
of common stock, par value $1.00 per share of Household (the "Common stock") and
1,348,279 shares of preferred stock, without par value of Household (the
"Preferred Stock") are being registered. The Preferred Stock will be issued in
three (3) series as follows: 407,718 shares of 5% Cumulative Preferred Stock;
103,976 shares of $4.50 Dividend Cumulative Preferred Stock; and 836,585 shares
of $4.30 Dividend Cumulative Preferred Stock. The Common Stock and Preferred
Stock will be issued to the stockholders of Beneficial pursuant to the terms and
conditions of the Agreement and Plan of Merger dated April 7, 1998 (the
"Agreement") among Household Acquisition Corporation II, Household and
Beneficial, a copy of which has been filed as an exhibit to the Registration
Statement.
Based upon my review of the records and documents of Household, I am of the
opinion that:
1. Household is a corporation duly incorporated and validly existing
under the laws of the State of Delaware.
2. When (i) the Registration Statement on Form S-4 filed by Household
with respect to the Common Stock and Preferred Stock shall have become
effective under the Securities Act of 1933, as amended, and (ii) the
terms and conditions set forth in the Agreement have been satisfied
<PAGE>
Household International, Inc.
June 1, 1998
Page 2
or waived and the merger described in the Agreement shall have been
consummated, then, when issued, the Common Stock and Preferred Stock
shall have been validly issued, fully paid and be non-assessable and
no personal liability for the debts of Household will attach to the
holders of the Common Stock and Preferred Stock under the laws of the
State of Delaware where Household is incorporated or the laws of the
State of Illinois where its principal place of business is located.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me under the heading "Legal Opinion" in any
Preliminary Prospectus, Prospectus or Joint Proxy Statement forming a part of
the Registration Statement. In giving said consent, I do not admit that I am in
the category of persons where consent is required under Section 7 of the Act or
the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ John W. Blenke
John W. Blenke
JWB/kmr
<PAGE>
Exhibit 8.01
TAX OPINION
[Letterhead of Wachtell, Lipton, Rosen & Katz]
June 1, 1998
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Ladies/Gentlemen:
We have acted as special counsel to Household International, Inc., a
Delaware corporation ("Household"), in connection with the proposed merger (the
"Merger") of Household Acquisition Corporation II, a Delaware corporation and
wholly-owned subsidiary of Household ("HAC"), with and into Beneficial
Corporation, a Delaware corporation ("Beneficial"), upon the terms and
conditions set forth in the Agreement and Plan of Merger, dated as of
April 7, 1998, by and among Household, HAC and Beneficial (the "Agreement"). At
your request, in connection with the filing of the Registration Statement on
Form S-4 filed with the Securities and Exchange Commission in connection with
the Merger (the "Registration Statement"), we are rendering our opinion
pursuant to Item 601(b)(8) of Regulation S-K.
For purposes of the opinion set forth below, we have relied, with the
consent of Household and HAC and the consent of Beneficial, upon the accuracy
and completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of Household and HAC and of
Beneficial, and have assumed that such statements and representations will be
complete and accurate as of the Effective Time. We have further assumed
<PAGE>
Household International, Inc.
June 1, 1998
Page 2
that all such statements and representations qualified by the best knowledge and
belief of Household, HAC or Beneficial will be complete and accurate as of the
Effective Time as though not so qualified. We have also relied upon the accuracy
of the Registration Statement and the Joint Proxy Statement-Prospectus included
therein (the "Proxy Statement"). Any capitalized term used and not defined
herein has the meaning given to it in the Proxy Statement or the appendices
thereto (including the Agreement).
We have also assumed that the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Proxy Statement.
Based upon and subject to the foregoing, it is our opinion that, for U.S.
federal income tax purposes, the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and that, accordingly:
(i) no gain or loss will be recognized by Household, Merger
Sub, or Beneficial as a result of the Merger;
(ii) no gain or loss will be recognized by the holders of
Beneficial Common Stock and Beneficial Convertible Preferred Stock who
exchange all of their Beneficial Common Stock and Beneficial
Convertible Preferred Stock solely for Household Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a
fractional share interest in Household Common Stock);
(iii) the aggregate tax basis of the Household Common Stock
received by holders of Beneficial Common Stock and Beneficial
Convertible Preferred Stock who exchange all of their Beneficial
Common Stock and Beneficial Convertible Preferred Stock solely for
Household Common Stock pursuant to the Merger will be the same as the
aggregate tax basis of the Beneficial Common Stock and Beneficial
Convertible Preferred Stock surrendered in exchange therefor (reduced
by any basis amount allocable to the fractional share interest in
Household Common Stock for which cash is received); and
(iv) the tax holding period of Household Common Stock received
in the Merger (including fractional share interests deemed received
and redeemed) will include the holder's holding period in the
Beneficial Common Stock or Beneficial Convertible Preferred Stock
surrendered in exchange therefor.
This opinion does not address U.S. federal income tax considerations
applicable to stockholders subject to special treatment under U.S. federal
income tax law (including, for example, non-U.S. persons, financial
institutions, dealers in securities, insurance companies or tax-exempt entities,
holders who acquired Beneficial Common Stock pursuant to the exercise of an
employee stock option or right or otherwise as compensation, and holders who
hold Beneficial Stock as part of a hedge, straddle or conversion transaction).
In addition, no opinion is expressed with respect to the tax consequences of
the Merger under applicable foreign, state or local laws.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "SUMMARY -- Certain U.S. Federal Income Tax
Consequences", under the caption "THE MERGER -- Certain U.S. Federal Income Tax
Consequences" and elsewhere in the Proxy Statement. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE>
Exhibit 10.01
Conformed Copy
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 7, 1998, between HOUSEHOLD INTERNATIONAL,
INC., a Delaware corporation ("Issuer"), and BENEFICIAL CORPORATION, a Delaware
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger
of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 21,356,536 fully
paid and nonassessable shares of Issuer's Common Stock, par value $1.00 per
share ("Common Stock"), at a price of $146.75 per share (the "Option Price");
provided, however, that in no event shall the number of shares of Common Stock
for which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of the Agreement, the number of
shares of Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
<PAGE>
2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole
or part, and from time to time, if, but only if, both an Initial Triggering
Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise Termination
Event (as hereinafter defined), provided that the Holder shall have sent the
written notice of such exercise (as provided in subsection (e) of this Section
2) within 90 days following such Subsequent Triggering Event. Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time (as
defined in the Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event; or (iii) the passage of
12 months after termination of the Merger Agreement if such terminations follows
the occurrence of an Initial Triggering Event (provided that if an Initial
Triggering Event continues or occurs beyond such termination and prior to the
passage of such 12 month period, the Exercise Termination event shall be 12
months from the expiration of the Last Triggering Event but in no event more
than 18 months after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any Acquisition
Transaction. For purposes of this Agreement, "Acquisition Transaction" shall
mean (w) a merger or consolidation, or any similar transaction, involving
Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation
S-X promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer, or (z) any
substantially similar transaction; provided, however, that in no event shall
any merger, consolidation, purchase or similar transaction involving only the
Issuer and one or more of its Subsidiaries or involving only any two or more
of such Subsidiaries, be deemed to be an Acquisition Transaction, provided
that any such transaction is not entered into in violation of the terms of
the Merger Agreement;
<PAGE>
(ii) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose, to
engage in an Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its intention to withdraw or
modify, in any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement in anticipation of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any Issuer
Subsidiary acting in a fiduciary capacity in the ordinary course of its
business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior written
consent, shall have filed an application or notice with the Federal Reserve
Board, or other federal or state bank regulatory authority, which application
or notice has been accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25% or more
of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) shall be 25%.
<PAGE>
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event of which it has notice
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to exercise
the Option.
(e) In the event the Holder is entitled to and wishes to exercise the Option,
it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon receipt by Issuer
of a written request therefor."
<PAGE>
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of exercise
of the Option provided for under subsection (e) of this Section 2 and the tender
of the applicable purchase price in immediately available funds, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
<PAGE>
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock that
are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares, distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Merger Agreement, or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
<PAGE>
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within 90 days of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a shelf registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
<PAGE>
7. (a) Immediately prior to the occurrence of a Repurchase Event (as defined
below), (i) following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the Option
from the Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 90 days of such occurrence (or such later
period as provided in Section 10), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated. The term "Market/Offer Price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm mutually
selected by the Holder or the Owner, as the case may be, on the one hand, and
the Issuer, on the other, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the Market/Offer
Price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm mutually selected by the Holder or
Owner, as the case may be, on the one hand, and the Issuer, on the other.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. Within
the latter to occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
<PAGE>
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
<PAGE>
8. (a) In the event that prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate with or merge into any person, other
than Grantee or one of its Subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, and (iii) the transferee of all or substantially all
of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
<PAGE>
(c) The Substitute Option shall have the same terms as the Option, provided,
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
<PAGE>
9. (a) At the request of the holder of the Substitute Option (the "Substitute
Option Holder"), the Substitute Option Issuer shall repurchase the Substitute
Option from the Substitute Option Holder at a price (the "Substitute Option
Repurchase Price") equal to (x) the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised plus (y) Grantee's reasonable out-
of-pocket expenses (to the extent not previously reimbursed), and at the request
of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
(x) the Highest Closing Price multiplied by the number of Substitute Shares so
designated plus (y) Grantee's reasonable Out-of-Pocket Expenses (to the extent
not previously reimbursed). The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
<PAGE>
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7
and 14 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
<PAGE>
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid, nonassessable, and
will be delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all of the
Rights or amending or terminating the Rights Agreement) so that the entering
into of this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
<PAGE>
13. (a) Notwithstanding anything to the contrary contained herein, in no
event shall Grantee's Total Profit (as defined below in Section 13(c) hereof)
exceed $240 million.
(b) Notwithstanding anything to the contrary contained herein, the Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below in Section 13(d) hereof) of
more than $240 million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section 7
hereof, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase
of Option Shares pursuant to Section 7 hereof, less (y) Grantee's purchase price
for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares shall be converted or exchanged) to any unaffiliated party, less
(y) Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party, and (v) any equivalent amount with respect to the Substitute
Option.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of such proposed exercise assuming
that the Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Issuer Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
14. Neither of the parties hereto may assign any of its rights or obligations
under this Option Agreement or the Option created hereunder to any other person,
without the express written consent of the other party, except that in the event
a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 90 days
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 15 days following the date
on which the Federal Reserve Board approves an application by Grantee under the
BHCA to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board.
<PAGE>
15. Each of Grantee and Issuer will use its best efforts to make all filings
with, and to obtain consents of, all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement, including without limitation making application to list the shares of
Common Stock issuable hereunder on the New York Stock Exchange upon official
notice of issuance and applying to the Federal Reserve Board under the BHCA for
approval to acquire the shares issuable hereunder, but Grantee shall not be
obligated to apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
16. The parties hereto acknowledge that damages would be an inadequate remedy
for a breach of this Agreement by either party hereto and that the obligations
of the parties hereto shall be enforceable by either party hereto through
injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications hereunder
shall be deemed to have been duly given when delivered in person, by cable,
telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
21. Except as otherwise expressly provided herein, each of the parties hereto
shall bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
<PAGE>
22. Except as otherwise expressly provided herein or in the Merger Agreement,
this Agreement contains the entire agreement between the parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors except as assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
Name: William F. Aldinger
Title: Chairman of the Board and Chief
Executive Officer
BENEFICIAL CORPORATION
By: /s/ Finn M.W. Caspersen
Name: Finn M.W. Caspersen
Title: Chairman of the Board and Chief
Executive Officer
<PAGE>
Exhibit 10.02
Conformed Copy
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 7, 1998, between BENEFICIAL CORPORATION,
a Delaware corporation ("Issuer"), and HOUSEHOLD INTERNATIONAL, INC., a Delaware
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger
of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to 10,818,800 fully
paid and nonassessable shares of Issuer's Common Stock, par value $.01 per share
("Common Stock"), at a price of $130.50 per share (the "Option Price");
provided, however, that in no event shall the number of shares of Common Stock
for which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of the Agreement, the number of
shares of Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
<PAGE>
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 90 days following such Subsequent Triggering Event. Each of
the following shall be an "Exercise Termination Event": (i) the Effective Time
(as defined in the Merger Agreement) of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event; or (iii) the
passage of 12 months after termination of the Merger Agreement if such
terminations follows the occurrence of an Initial Triggering Event (provided
that if an Initial Triggering Event continues or occurs beyond such termination
and prior to the passage of such 12 month period, the Exercise Termination event
shall be 12 months from the expiration of the Last Triggering Event but in no
event more than 18 months after such termination). The "Last Triggering Event"
shall mean the last Initial Triggering Event to expire. The term "Holder" shall
mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have
recommended that the stockholders of Issuer approve or accept any Acquisition
Transaction. For purposes of this Agreement, "Acquisition Transaction" shall
mean (w) a merger or consolidation, or any similar transaction, involving
Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation
S-X promulgated by the Securities and Exchange Commission (the "SEC")) of
Issuer, (x) a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer, or (z) any
substantially similar transaction; provided, however, that in no event shall
any merger, consolidation, purchase or similar transaction involving only the
Issuer and one or more of its Subsidiaries or involving only any two or more
of such Subsidiaries, be deemed to be an Acquisition Transaction, provided
that any such transaction is not entered into in violation of the terms of
the Merger Agreement;
<PAGE>
(ii) Issuer or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose, to
engage in an Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its intention to withdraw or
modify, in any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement in anticipation of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) shall be 25%.
<PAGE>
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event of which it has notice
(together, a "Triggering Event"), it being understood that the giving of such
notice by Issuer shall not be a condition to the right of the Holder to exercise
the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or any other regulatory
agency is required in connection with such purchase, the Holder shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon receipt by Issuer
of a written request therefor."
<PAGE>
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. Section 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
<PAGE>
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in, or distributions
in respect of, the Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares, distributions on or in respect of the Common Stock that would be
prohibited under the terms of the Merger Agreement, or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
<PAGE>
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
<PAGE>
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the Market/Offer Price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or such
later period as provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated. The term "Market/Offer Price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made, (ii) the price per share of
Common Stock to be paid by any third party pursuant to an agreement with Issuer,
(iii) the highest closing price for shares of Common Stock within the six-month
period immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm mutually
selected by the Holder or the Owner, as the case may be, on the one hand, and
the Issuer, on the other, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the Market/Offer
Price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm mutually selected by the Holder or
Owner, as the case may be, on the one hand, and the Issuer, on the other.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. Within
the latter to occur of (x) five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to the Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
<PAGE>
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
and/or the Owner, as appropriate, that portion of the Option Repurchase Price or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock obtained by multiplying the number of shares of Common Stock for
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
<PAGE>
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing
or surviving person, and (iii) the transferee of all or substantially all
of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined
in Section 7.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
<PAGE>
(c) The Substitute Option shall have the same terms as the Option, provided,
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by
a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
<PAGE>
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) Grantee's
reasonable out-of-pocket expenses (to the extent not previously reimbursed), and
at the request of the owner (the "Substitute Share Owner") of shares of
Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer
shall repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to (x) the Highest Closing Price multiplied by the
number of Substitute Shares so designated plus (y) Grantee's reasonable Out-of-
Pocket Expenses (to the extent not previously reimbursed). The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
<PAGE>
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day period for exercise of certain rights under Sections 2, 6, 7
and 14 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise.
<PAGE>
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and from
time to time issuable hereunder, and all such shares, upon issuance pursuant
hereto, will be duly authorized, validly issued, fully paid, nonassessable, and
will be delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all of the
Rights or amending or terminating the Rights Agreement) so that the entering
into of this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the Securities Act.
<PAGE>
13. (a) Notwithstanding anything to the contrary contained herein, in no
event shall Grantee's Total Profit (as defined below in Section 13(c) hereof)
exceed $240 million.
(b) Notwithstanding anything to the contrary contained herein, the Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below in Section 13(d)
hereof) of more than $240 million; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section 7
hereof, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase
of Option Shares pursuant to Section 7 hereof, less (y) Grantee's purchase price
for such Option Shares, (iii) (x) the net cash amounts received by Grantee
pursuant to the sale of Option Shares (or any other securities into which such
Option Shares shall be converted or exchanged) to any unaffiliated party, less
(y) Grantee's purchase price of such Option Shares, (iv) any amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party, and (v) any equivalent amount with respect to the Substitute
Option.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of such proposed exercise assuming
that the Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Issuer Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
14. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
<PAGE>
15. Each of Grantee and Issuer will use its best efforts to make all filings
with, and to obtain consents of, all third parties and governmental authorities
necessary to the consummation of the transactions contemplated by this
Agreement, including without limitation making application to list the shares of
Common Stock issuable hereunder on the New York Stock Exchange upon official
notice of issuance and applying to the Federal Reserve Board under the BHCA for
approval to acquire the shares issuable hereunder, but Grantee shall not be
obligated to apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if ever, as it deems
appropriate to do so.
16. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
21. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
<PAGE>
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
BENEFICIAL CORPORATION
By: /s/ Finn M.W. Casperson
Name: Finn M.W. Casperson
Title: Chairman of the Board and Chief
Executive Officer
HOUSEHOLD INTERNATIONAL, INC.
By: /s/ William F. Aldinger
Name: William F. Aldinger
Title: Chairman of the Board and Chief
Executive Officer
<PAGE>
Exhibit 23.02
[Letterhead of Morgan Stanley & Co. Incorporated]
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
June 1, 1998
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of
Household International, Inc. ("Household") on Form S-4, with respect to the
shares of Common Stock, par value $1.00 per share, and the shares of Preferred
Stock, without par value, of Household, of our opinion letter appearing as
Appendix B to the Proxy Statement-Prospectus which is part of the Registration
Statement, and to the references to our firm name therein. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder nor do we admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts" as
used in the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Gary S. Barancik
-----------------------------------
Gary S. Barancik
Managing Director
<PAGE>
Exhibit 23.03
CONSENT OF GOLDMAN, SACHS & CO.
[Letterhead of Goldman, Sachs & Co.]
June 1, 1998
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of
Household International, Inc. ("Household") on Form S-4, with respect to the
shares of Common Stock, par value $1.00 per share, and the shares of Preferred
Stock, without par value, of Household, of our opinion letter appearing as
Appendix C to the Proxy Statement-Prospectus which is part of the Registration
Statement, and to the references to our firm name therein. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder nor do we admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts" as
used in the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
By: /s/ Goldman, Sachs & Co.
-----------------------------------
GOLDMAN, SACHS & CO.
<PAGE>
Exhibit 23.04
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
[Letterhead of Merrill Lynch, Pierce, Fenner & Smith Incorporated]
June 1, 1998
We hereby consent to the use of our opinion letter dated April 16, 1998 to
the Board of Directors of Beneficial Corporation included as Appendix D to the
Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of Household Acquisition
Corporation II, a Delaware corporation and a wholly owned subsidiary of
Household International Inc., a Delaware corporation, with and into Beneficial
Corporation, a Delaware Corporation, and to the references to such opinion in
such Joint Proxy Statement/Prospectus. In giving such consent, we do not admit
that we come within the category of person whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, nor do we
admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules of the Securities and Exchange Commission
thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Merrill Lynch, Pierce, Fenner
& Smith INC
-------------------------------------
Investment Banking Group
<PAGE>
EXHIBIT 23.05
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
HOUSEHOLD INTERNATIONAL, INC.:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 to be filed with the
Securities and Exchange Commission on or about June 1, 1998, of our report
dated January 21, 1998, included in Household International, Inc.'s Form 10-K
for the year ended December 31, 1997, and to all references to our Firm included
in this registration statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
June 1, 1998
<PAGE>
Exhibit 23.06
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Household International, Inc. on Form S-4 of our report dated January 28, 1998,
appearing in the Annual Report on Form 10-K of Beneficial Corporation for the
year ended December 31, 1997 and amended by Amendment No. 1 on Form 10-K/A, and
to the reference to us under the heading "Experts" in the Joint Proxy Statement-
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
June 1, 1998
<PAGE>
EXHIBIT 99.01
FORM OF PROXY OF HOUSEHOLD INTERNATIONAL, INC.
[HOUSEHOLD LOGO]
1998
PROXY/VOTING INSTRUCTION CARD FOR THE SPECIAL MEETING OF STOCKHOLDERS OF
HOUSEHOLD INTERNATIONAL, INC.
TO BE HELD JUNE 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. J. Darnall, M. J. Evans and J. D. Nichols,
and each of them, true and lawful proxies, with full power of substitution, to
vote all shares of Common Stock of the undersigned, at the Special Meeting of
Stockholders of Household International, Inc., to be held June 30, 1998, and
at any adjournment thereof, upon the matters described in the Notice of Special
Meeting and Proxy Statement dated June 2, 1998, receipt of which is hereby
acknowledged, subject to any direction indicated on the reverse side of this
card, hereby revoking any proxy heretofore executed by the undersigned to vote
at said meeting.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
<PAGE>
HOUSEHOLD INTERNATIONAL
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS. SHARES
WILL BE SO VOTED UNLESS YOU OTHERWISE INDICATE.
<TABLE>
<S> <C>
For
1. Proposal to approve the issuance of shares of Common Stock, par value $1.00 per share, 0
of Household International, Inc. ("Household") pursuant to the Agreement and Against
Plan of Merger, dated as of April 7, 1998, among Household, Household 0
Acquisition Corporation II and Beneficial Corporation. Abstain
0
For
2. Proposal to adjourn the Household Special Meeting, if necessary, to allow for the 0
soliciting of additional proxies in the event that there are not sufficient votes Against
at the time of the Special Meeting to approve the foregoing proposal or for any such 0
other reason deemed appropriate. Abstain
0
</TABLE>
Date: __________________________________________
Please
Sign:
________________________________________________
Please
Sign:
________________________________________________
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
FOR JOINT ACCOUNTS BOTH OWNERS SHOULD SIGN. WHEN
SIGNING AS EXECUTOR, ADMINISTRATOR, ATTORNEY,
TRUSTEE OR GUARDIAN, ETC., PLEASE SIGN YOUR FULL
TITLE.
DETACH PROXY CARD HERE
To Our Stockholders:
It is important that your shares be represented at this Special Meeting of
Stockholders, no matter how many shares you own. Please complete and sign the
proxy provided above, detach it at the perforation, and mail it in the
enclosed postage-paid envelope addressed to Household International, c/o
Harris Trust and Savings Bank.
Your vote will be kept permanently confidential as described in the enclosed
Proxy Statement.
In order to reduce the number of duplicate mailings of proxy materials,
Household has consolidated on a single proxy/voting instruction card all of
your holdings in Household Common Stock registered under the identical name
and tax identification number, including ownership that may be attributed to
Household's Dividend Reinvestment & Common Stock Purchase Plan, our Employee
Stock Purchase Plan, and our 401(k) employee benefit plan, the Tax Reduction
Investment Plan ("TRIP"). The proxy also provides voting instructions for
shares of Household Common Stock held in TRIP as disclosed in the Proxy
Statement.
We look forward to receiving your voted proxy shortly!
<PAGE>
Exhibit 99.02
FORM OF PROXY OF BENEFICIAL CORPORATION
[Beneficial Logo]
Dear Stockholder,
You are cordially invited to attend our Special Meeting of Stockholders to
be held at 9:30 a.m. on Tuesday, June 30, 1998. The meeting will be held at the
office of the Company, One Christmas Centre, 301 North Walnut Street,
Wilmington, Delaware.
Please complete and return the enclosed proxy card whether or not you
expect to attend the meeting in person. Your participation is important to us.
Please vote at your earliest convenience.
Sincerely,
/s/ Finn M.W. Caspersen
Finn M.W. Caspersen
Chairman of the Board
<TABLE>
<CAPTION>
<S> <C> <C> <C>
------------------------------------- ------------------
- ------------------ Beneficial Corporation THIS PROXY IS SOLICITED ON BEHALF OF $5.50 Convertible
[BENEFICIAL LOGO] One Christina Centre THE BOARD OF DIRECTORS. IF NO DIREC- Preferred Proxy
- ------------------ 301 North Walnut Street TION IS MADE, THE PROXY WILL BE VOTED Voting Instruction
Wilmington, DE 19801 FOR PROPOSAL SET FORTH BELOW: Card
------------------------------------- ------------------
</TABLE>
Receipt of a copy of the Notice of the Special Meeting of Stockholders of the
Company to be held on June 30, 1998 and Joint Proxy Statement-Prospectus
relating to said meeting is hereby acknowledged.
*(Signature)_______________(L.S.) *(Signature)_______________(L.S.) Dated_______
*Please sign exactly as your name(s) appears on this proxy. Joint owners should
each sign. When signing in a representative capacity, please give title.
<PAGE>
The undersigned hereby appoints James H. Gilliam, Jr. and Scott A. Siebels, and
each of them, proxies, with full power of substitution, to represent and vote,
as designated below, at the Special Meeting of Stockholders of the Company on
June 30, 1998 including adjournments, the number of votes to which the
undersigned would be entitled, if personally present.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE PROPOSAL SET FORTH BELOW:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) To approve the Agreement and Plan of Merger,
dated as of April 7, 1998, among Beneficial Corporation,
Household International, Inc., and Household Acquisition
Corporation II, a wholly owned subsidiary of Household
International, Inc., providing for the merger of Household FOR AGAINST ABSTAIN
Acquisition Corporation II with and into Beneficial Corporation. [_] [_] [_]
</TABLE>
(2) In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
Please sign and date this proxy card on the reverse side and return it in the
enclosed envelope whether or not you expect to attend the meeting in person.
<PAGE>
FORM OF PROXY OF BENEFICIAL CORPORATION
[Beneficial Logo]
Dear Stockholder,
You are cordially invited to attend our Special Meeting of Stockholders to
be held at 9:30 a.m. on Tuesday, June 30, 1998. The meeting will be held at the
office of the Company, One Christmas Centre, 301 North Walnut Street,
Wilmington, Delaware.
Please complete and return the enclosed proxy card whether or not you
expect to attend the meeting in person. Your participation is important to us.
Please vote at your earliest convenience.
Sincerely,
/s/ Finn M.W. Caspersen
Finn M.W. Caspersen
Chairman of the Board
<TABLE>
<CAPTION>
<S> <C> <C> <C>
------------------------------------- ------------------
- ------------------ Beneficial Corporation THIS PROXY IS SOLICITED ON BEHALF OF Common and $4.30
[BENEFICIAL LOGO] One Christina Centre THE BOARD OF DIRECTORS. IF NO DIREC- Preferred Proxy
- ------------------ 301 North Walnut Street TION IS MADE, THE PROXY WILL BE VOTED Voting Instruction
Wilmington, DE 19801 FOR PROPOSAL SET FORTH BELOW: Card
------------------------------------- ------------------
</TABLE>
Receipt of a copy of the Notice of the Special Meeting of Stockholders of the
Company to be held on June 30, 1998 and Joint Proxy Statement-Prospectus
relating to said meeting is hereby acknowledged.
*(Signature)_______________(L.S.) *(Signature)_______________(L.S.) Dated_______
*Please sign exactly as your name(s) appears on this proxy. Joint owners should
each sign. When signing in a representative capacity, please give title.
The undersigned hereby appoints James H. Gilliam, Jr. and Scott A. Siebels, and
each of them, proxies, with full power of substitution, to represent and vote,
as designated below, at the Special Meeting of Stockholders of the Company on
June 30, 1998 including adjournments, the number of votes to which the
undersigned would be entitled, if personally present.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE PROPOSAL SET FORTH BELOW:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(1) To approve the Agreement and Plan of Merger,
dated as of April 7, 1998, among Beneficial Corporation,
Household International, Inc., and Household Acquisition
Corporation II, a wholly owned subsidiary of Household
International, Inc., providing for the merger of Household FOR AGAINST ABSTAIN
Acquisition Corporation II with and into Beneficial Corporation. [_] [_] [_]
</TABLE>
(2) In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
Please sign and date this proxy card on the reverse side and return it in the
enclosed envelope whether or not you expect to attend the meeting in person.
<PAGE>
Exhibit 99.03
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to his being named in the Joint Proxy Statement/
Prospectus forming a part of this Registration Statement as a person about to
become a director of Household International, Inc.
/s/ Finn M.W. Caspersen
Peapack, New Jersey
May 21, 1998
<PAGE>
Exhibit 99.04
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to his being named in the Joint Proxy Statement/
Prospectus forming a part of this Registration Statement as a person about to
become a director of Household International, Inc.
/s/ Robert C. Clark
Peapack, New Jersey
May 21, 1998
<PAGE>
Exhibit 99.05
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to his being named in the Joint Proxy Statement/
Prospectus forming a part of this Registration Statement as a person about to
become a director of Household International, Inc.
/s/ James H. Gilliam, Jr.
Peapack, New Jersey
May 21, 1998
<PAGE>
Exhibit 99.06
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 under the Securities Act of 1933, as amended, the
undersigned hereby consents to his being named in the Joint Proxy Statement/
Prospectus forming a part of this Registration Statement as a person about to
become a director of Household International, Inc.
/s/ David J. Farris
Peapack, New Jersey
May 21, 1998
