<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 21, 1995)
$1,250,000,000
HOUSEHOLD FINANCE CORPORATION
$750,000,000 6.40% NOTES DUE JUNE 17, 2008
$500,000,000 FLOATING RATE NOTES DUE JUNE 17, 2005
------------------------
The $750,000,000 6.40% Notes due June 17, 2008 (the "Fixed Rate Notes") and
the $500,000,000 Floating Rate Notes due June 17, 2005 (the "Floating Rate
Notes" and, together with the Fixed Rate Notes, the "Notes") are being offered
by Household Finance Corporation ("HFC" or the "Company"). Interest on the Fixed
Rate Notes is payable semi-annually in arrears on June 17 and December 17 of
each year beginning December 17, 1998. Interest on the Floating Rate Notes is
payable quarterly on March 17, June 17, September 17 and December 17 of each
year beginning September 17, 1998. The interest rate for the Floating Rate Notes
in effect for the Floating Rate Interest Period (as defined herein) commencing
on each Interest Reset Date (as defined herein) will be LIBOR (as defined
herein) plus .30%. The Notes may not be redeemed by the Company prior to
maturity, except as described herein under certain circumstances relating to the
obligation to pay Additional Amounts (as defined herein), and are not entitled
to any mandatory redemption or sinking fund payments. See "Description of Notes"
herein and "Description of Debt Securities" in the accompanying Prospectus.
(continued on next page)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Fixed Rate Note................... 99.665% .45% 99.215%
Total................................. $747,487,500 $3,375,000 $744,112,500
Per Floating Rate Note................ 99.828% .25% 99.578%
Total................................. $499,140,000 $1,250,000 $497,890,000
</TABLE>
- -------------------------
(1) Plus accrued interest, if any, from June 17, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $1,250,000.
------------------------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued by the Company and accepted by the Underwriters and subject to
certain other conditions. The Underwriters reserve the right to reject orders in
whole or in part. It is expected that delivery of the Notes will be made through
the book-entry facilities of the Depositary, Cedel Bank and Euroclear on or
about June 17, 1998.
------------------------
6.40% Notes due June 17, 2008
MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
ABN AMRO CHASE SECURITIES INC. CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO. SG SALOMON SMITH BARNEY
Floating Rate Notes due June 17, 2005
MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
ABN AMRO BARCLAYS CAPITAL CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANK PARIBAS
SALOMON SMITH BARNEY
The activities of the Underwriters in connection with this offering are led
jointly by Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley
& Co. Incorporated.
------------------------
The date of this Prospectus Supplement is June 11, 1998.
<PAGE> 2
(continued from cover page)
Ownership of the Notes will be maintained in book-entry form by or through
the Depositary (as hereinafter defined). Interests in the Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
the Depositary and its participants, including U.S. Depositaries for Cedel Bank
and Euroclear (each, as hereinafter defined). Beneficial owners of the Notes
will not have the right to receive registered physical certificates evidencing
their ownership except under the limited circumstances described herein.
Settlement for the Notes will be made in immediately available funds. The Notes
will trade in the Depositary's Same-Day Funds Settlement System and secondary
market trading activity for the Notes will therefore settle in immediately
available funds. All payments of principal and interest on the Notes will be
made by the Company in immediately available funds so long as the Notes are
maintained in book-entry form. Beneficial interests in the Notes may be
acquired, or subsequently transferred, only in denominations of $1,000 and
integral multiples thereof.
The Notes are offered globally for sale in those jurisdictions in the
United States, Canada, Europe, Asia and elsewhere where it is lawful to make
such offers. See "Underwriting."
Application has been made to list the Notes on the Luxembourg Stock
Exchange.
------------------------
This Prospectus Supplement and the accompanying Prospectus include
particulars given in compliance with the rules governing the listing of
securities on the Luxembourg Stock Exchange for the purpose of giving
information with regard to the Company. The Company accepts responsibility for
the information contained in this Prospectus Supplement and the accompanying
Prospectus and confirms, having made all reasonable inquiries, that to the best
of its knowledge and belief there are no other facts the omission of which would
make any statement herein or in the Prospectus misleading in any material
respect.
The Representatives (as defined herein) may engage in transactions that
stabilize, maintain or otherwise affect the price of the Notes. Such
transactions may include stabilizing, purchasing Notes to cover syndicate short
positions and the imposition of penalty bids. For a description of these
activities see "Underwriting".
The distribution of this Prospectus Supplement and Prospectus and the
offering of the Notes in certain jurisdictions may be restricted by law. Persons
into whose possession this Prospectus Supplement and the Prospectus come should
inform themselves about and observe any such restrictions. This Prospectus
Supplement and the Prospectus do not constitute, and may not be used in
connection with, an offer or solicitation by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such offer or solicitation. See "Underwriting."
No underwriter, dealer, salesperson or other individual has been authorized
to give any information or to make any representations other than those
contained in this Prospectus Supplement or the Prospectus in connection with the
offer made by this Prospectus Supplement and the Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or by the Underwriters. Neither the delivery of this
Prospectus Supplement and the Prospectus nor any sale made hereunder and
thereunder shall under any circumstances create an implication that there has
been no change in the affairs of the Company since the date hereof. This
Prospectus Supplement and the Prospectus do not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
References herein to "$" and "dollars" are to the currency of the United
States.
S-2
<PAGE> 3
AVAILABLE INFORMATION
HFC is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 14th Floor, Seven World
Trade Center, Suite 1300, New York, New York 10048, or through the Web site
maintained by the Commission at (http//www.sec.gov). Copies of such material can
also be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
certain debt securities of HFC are listed on the New York Stock Exchange, and
reports and other material concerning HFC can be inspected at the offices of
such Exchange at 20 Broad Street, New York, New York 10005. Although HFC is not
required to send an annual report to its security holders, HFC will, upon
request, send to any Holder of a Note a copy of its latest Annual Report on Form
10-K, as filed with the Commission, which contains financial information that
has been examined and reported upon, with an opinion expressed, by independent
certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission (File No. 1-75)
pursuant to the Exchange Act and are incorporated herein by reference and made a
part of this Prospectus Supplement and the accompanying Prospectus:
(a) HFC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) HFC's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998; and
(c) HFC's Current Reports on Form 8-K dated February 12, 1998, April
7, 1998 and June 2, 1998.
All documents filed by HFC with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
Supplement and prior to the termination of the offering of the Notes shall be
deemed to be incorporated herein by reference and made a part of this Prospectus
Supplement and the accompanying Prospectus from the respective dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus Supplement and the accompanying
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus Supplement and the accompanying
Prospectus.
HFC will provide without charge to each person (including any beneficial
owner), on the written or oral request of any such person, a copy of any or all
documents incorporated herein by reference (other than exhibits to such
documents). Requests should be directed to: Household Finance Corporation, 2700
Sanders Road, Prospect Heights, Illinois 60070, Attention: Office of the
Secretary, Telephone: 847-564-5000. In addition, such documents are also
available free of charge at the office of Banque Internationale a Luxembourg
societe anonyme, 69, route d'Esch, L-2953 Luxembourg.
S-3
<PAGE> 4
HOUSEHOLD FINANCE CORPORATION
HFC was incorporated in Delaware in 1925, as successor to an enterprise
which traces its origin through the same ownership to an office established in
1878. The address of its principal executive office is 2700 Sanders Road,
Prospect Heights, Illinois 60070 (telephone 847-564-5000). HFC is a subsidiary
of Household International, Inc.
HFC and its subsidiaries offer a diversified range of financial services.
The principal product of HFC's consumer financial services business is the
making of cash loans, including home equity loans secured by first and second
mortgages, auto finance loans and unsecured credit advances (including revolving
and closed-end personal loans) to middle-income consumers in the United States.
Loans are made through branch lending offices and through direct marketing
efforts. HFC also seeks to acquire portfolios of open-end and closed-end,
secured and unsecured loans.
HFC, through banking subsidiaries, offers both VISA* and MasterCard* credit
cards to residents throughout the United States.
Through its subsidiaries, HFC also purchases and services revolving charge
card accounts originated by merchants. These accounts result from consumer
purchases of goods and services from the originating merchant. Closed-end sales
contracts are also directly originated by an HFC subsidiary.
Where applicable laws permit, HFC offers credit life and credit accident,
health and disability insurance to its customers. Such insurance is generally
written directly by, or reinsured with, one of HFC's insurance affiliates.
RECENT DEVELOPMENTS
On April 7, 1998, Household International, Inc., the parent of the Company,
announced that it had reached a merger agreement with Beneficial Corporation
("Beneficial") under which Beneficial will become a wholly-owned subsidiary of
Household International, Inc. It is expected that following the merger the
common stock of Beneficial and substantially all the consolidated assets of
Beneficial will be contributed to HFC. Additional information concerning the
merger, including financial statements of Beneficial and pro forma financial
information, is included in the Company's Form 8-K dated June 2, 1998, which is
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference."
USE OF PROCEEDS
HFC will apply the net proceeds from the sale of the Notes to its general
funds to be used in its financial services business, including the funding of
investments in, or extensions of credit to, affiliates of HFC. Pending such
applications, the net proceeds will be used initially to reduce outstanding
commercial paper of HFC. The proceeds of such commercial paper are used in
connection with HFC's financial services business.
- ---------------
* VISA and MasterCard are registered trademarks of VISA USA, Inc. and MasterCard
International Incorporated, respectively.
S-4
<PAGE> 5
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for HFC and subsidiaries for the
periods indicated below was as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------ ------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HFC and subsidiaries -- calculated on
income from continuing operations...... 1.73 1.56 1.76 1.59 1.50 1.54 1.61
</TABLE>
For purposes of calculating the ratio, earnings consist of income from
continuing operations to which has been added income taxes and fixed charges.
Fixed charges consist of interest on all indebtedness and one-third of rental
expense (approximate portion representing interest).
CAPITALIZATION OF HFC
The following table sets forth the unaudited consolidated capitalization of
HFC at March 31, 1998. The table should be read in conjunction with HFC's
consolidated financial statements and notes thereto included in the documents
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference". All amounts are stated in millions of U.S. dollars. Since March 31,
1998 there has been no material change in the consolidated capitalization of
HFC.
<TABLE>
<CAPTION>
MARCH 31,
1998
-----------
(UNAUDITED)
<S> <C>
Commercial paper, bank and other borrowings................. $ 5,966.4
Senior and senior subordinated debt (with original
maturities over one year)(1).............................. 13,456.0
---------
Total debt.................................................. 19,422.4
---------
Common shareholder's equity:
Common stock, $1.00 par value, 1,000 shares authorized,
issued and outstanding, and additional paid-in
capital(2)............................................. 2,256.3
Retained earnings......................................... 2,042.4
Foreign currency translation adjustments.................. (8.2)
Unrealized gain on investments, net....................... 7.5
---------
Total common shareholder's equity......................... 4,298.0
---------
Total capitalization........................................ $23,720.4
=========
</TABLE>
- -------------------------
(1) This table does not reflect the issuance of the Notes offered hereby.
(2) All of HFC's authorized common stock is owned by Household International,
Inc.
S-5
<PAGE> 6
SELECTED FINANCIAL INFORMATION OF HFC
The financial information which is set forth below as of and for the two
years ended December 31, 1997 has been derived from the consolidated financial
statements and notes thereto of HFC and its subsidiaries which have been audited
by Arthur Andersen LLP, independent certified public accountants. The financial
information which is set forth below as of March 31, 1998 and for the three
months ended March 31, 1998 and 1997 are unaudited and should be read in
conjunction with HFC's Quarterly Report on Form 10-Q for the quarter 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
consolidated financial information of HFC and its subsidiaries presented below
is qualified in its entirety by the detailed information and financial
statements included in the documents referred to under "Incorporation of Certain
Documents by Reference". All amounts are stated in millions of U.S. dollars.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
---------------- --------------------
1998 1997 1997 1996
------ ------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Finance income....................................... $573.4 $501.6 $2,131.3 $1,927.9
Other interest income................................ 5.7 5.0 22.1 35.9
Interest expense..................................... 276.6 233.2 998.5 911.1
------ ------ -------- --------
Net interest margin.................................. 302.5 273.4 1,154.9 1,052.7
Provision for credit losses on owned receivables..... 208.8 233.5 801.1 522.8
------ ------ -------- --------
Net interest margin after provision for credit
losses............................................. 93.7 39.9 353.8 529.9
------ ------ -------- --------
Securitization income................................ 281.8 228.8 994.2 720.1
Insurance revenues................................... 46.4 41.9 175.1 167.9
Investment income.................................... 26.9 25.3 109.0 145.2
Fee income........................................... 78.0 54.7 335.7 178.4
Other income......................................... 13.6 69.3 144.1 69.8
------ ------ -------- --------
Total other revenues................................. 446.7 420.0 1,758.1 1,281.4
------ ------ -------- --------
Salaries and fringe benefits......................... 123.5 107.6 479.5 392.8
Other operating expenses............................. 126.9 138.5 537.8 543.8
Amortization of acquired intangibles and goodwill.... 41.2 33.1 143.4 121.1
Policyholders' benefits.............................. 41.6 42.1 165.5 204.0
------ ------ -------- --------
Total costs and expenses............................. 333.2 321.3 1,326.2 1,261.7
------ ------ -------- --------
Income before income taxes........................... 207.2 138.6 785.7 549.6
Income taxes......................................... 70.2 49.5 272.3 180.6
------ ------ -------- --------
Net income........................................... $137.0 $ 89.1 $ 513.4 $ 369.0
====== ====== ======== ========
</TABLE>
S-6
<PAGE> 7
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, AT DECEMBER 31,
----------- ----------------------
1998 1997 1996
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash..................................................... $ 369.3 $ 291.4 $ 228.5
Investment securities.................................... 1,673.5 1,723.8 1,720.0
Receivables, net......................................... 19,804.3 17,677.8 16,391.7
Advances to parent company and affiliates................ 67.5 10.5 --
Acquired intangibles and goodwill, net................... 1,877.4 1,734.2 938.2
Properties and equipment, net............................ 204.4 235.5 268.7
Real estate owned........................................ 113.0 102.3 112.1
Other assets............................................. 1,487.3 1,159.2 928.2
--------- --------- ---------
Total assets............................................. $25,596.7 $22,934.7 $20,587.4
========= ========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Commercial paper, bank and other borrowings.............. $ 5,966.4 $ 4,962.0 $ 5,223.5
Senior and senior subordinated debt (with original
maturities over one year).............................. 13,456.0 12,022.0 10,648.3
--------- --------- ---------
Total debt............................................... 19,422.4 16,984.0 15,871.8
Insurance policy and claim reserves...................... 937.4 1,057.1 1,021.7
Borrowings from parent company and affiliates............ -- -- 7.6
Other liabilities........................................ 938.9 862.2 993.5
--------- --------- ---------
Total liabilities........................................ 21,298.7 18,903.3 17,894.6
Preferred stock.......................................... -- -- 100.0
Common shareholder's equity.............................. 4,298.0 4,031.4 2,592.8
--------- --------- ---------
Total liabilities and shareholder's equity............... $25,596.7 $22,934.7 $20,587.4
========= ========= =========
</TABLE>
S-7
<PAGE> 8
DESCRIPTION OF NOTES
GENERAL
The following description of the terms of the $750,000,000 6.40% Notes due
June 17, 2008 (the "Fixed Rate Notes") and the $500,000,000 Floating Rate Notes
due June 17, 2005 (the "Floating Rate Notes" and, together with the Fixed Rate
Notes, the "Notes") offered hereby (referred to in the Prospectus as the
"Offered Debt Securities") supplements, insofar as such description relates to
the Notes, the description of the Debt Securities set forth in the Prospectus,
to which description reference is hereby made. The Notes are part of the Debt
Securities registered by the Company with the Securities and Exchange Commission
to be issued on terms to be determined at the time of sale. The Notes constitute
senior unsecured debt of the Company and will rank on a parity with all other
senior unsecured debt of the Company and prior to all subordinated debt. The
Fixed Rate Notes and the Floating Rate Notes are each to be issued as a separate
series of Senior Debt Securities under an Indenture dated as of April 1, 1995
(the "Indenture"), between the Company and The First National Bank of Chicago,
as Trustee, which is more fully described in the accompanying Prospectus under
"Description of Debt Securities -- Senior Debt Securities".
The Notes are not subject to redemption by the Company prior to maturity
unless certain events occur involving U.S. taxation. See "Description of
Notes -- Redemption for Tax Reasons".
The Notes will be issued in denominations of $1,000 and integral multiples
thereof. The Fixed Rate Notes will mature on June 17, 2008. The Floating Rate
Notes will mature on June 17, 2005. At maturity, the amount due and payable on
the Notes will be equal to 100% of their principal amount outstanding, together
with interest accrued but unpaid thereon to such maturity date.
Any Notes issued in definitive form will be issued only in fully registered
form, without coupons, in denominations of $1,000 and in integral multiples
thereof, in the amount of each holder's registered holdings. Any Notes so issued
will be registered in such names, and in such denominations, as the Depositary
shall request. Such Notes may be presented for registration of transfer or
exchange at the office of the Trustee in The City of New York and principal
thereof and interest thereon will be payable at such office of the Trustee,
provided that interest thereon may be paid by check mailed to the registered
holders of the definitive Notes. In the event definitive Notes are issued, the
holders thereof will be able to receive payments thereon and effect transfers
thereof at the offices of Banque Internationale a Luxembourg or its successor as
paying agent in Luxembourg with respect to the Notes.
The Company has appointed Banque Internationale a Luxembourg as a paying
agent and transfer agent in Luxembourg with respect to the Notes, and as long as
the Notes are listed in the Luxembourg Stock Exchange, the Company will maintain
a paying agent and transfer agent in Luxembourg and any change in the Luxembourg
paying agent and transfer agent will be published in Luxembourg. See
"Description of Notes -- Notices".
INTEREST ON FIXED RATE NOTES
Interest on the Fixed Rate Notes will accrue from and including June 17,
1998 at the rate of 6.40% per annum and will be payable semiannually on June 17
and December 17, beginning December 17, 1998, to the persons in whose names the
Fixed Rate Notes are registered at the close of business on the preceding June 2
or December 2, respectively, except that interest payable at maturity shall be
paid to the same persons to whom principal of the Notes is payable. In the event
any principal of or interest on the Fixed Rate Notes is due on a day other than
a Business Day (as defined below), the related payment of principal or interest
will be made on the next succeeding Business Day as if made on the date such
payment was due, and no interest will accrue on the amount so payable for the
period from and after the date such principal or interest is due, as the case
may be. "Business Day" with respect to any place of payment means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in such place of payment are authorized or obligated by law or
executive order to close. The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
S-8
<PAGE> 9
INTEREST ON FLOATING RATE NOTES
Interest Payment Dates. Interest on the Floating Rate Notes will be
payable quarterly on each March 17, June 17, September 17 and December 17,
commencing September 17, 1998 (each a "Floating Rate Interest Payment Date").
Interest payable on each Floating Rate Interest Payment Date will include
interest accrued from and including June 17, 1998 or from and including the most
recent Floating Rate Interest Payment Date to which interest has been paid or
duly provided for to but excluding the next Floating Rate Interest Payment Date.
Interest payable prior to maturity will be payable to the persons in whose name
the Floating Rate Notes are registered at the close of business on the fifteenth
calendar day preceding a Floating Rate Interest Payment Date. The interest
payment at maturity will include interest accrued to but excluding the maturity
date of the Floating Rate Notes and will be payable to the person to whom
principal is payable. If a Floating Rate Interest Payment Date is not a Business
Day (as defined above under "Description of Notes -- Interest on Fixed Rate
Notes"), such Floating Rate Interest Payment Date shall be postponed to the next
succeeding Business Day unless such day falls in the next calendar month, in
which case such Floating Rate Interest Payment Date shall be the immediately
preceeding day that is a Business Day.
"Floating Rate Interest Period" shall mean the period beginning on and
including June 17, 1998 to but excluding the first Floating Rate Interest
Payment Date and each successive period from and including a Floating Rate
Interest Payment Date to but excluding the next Floating Rate Interest Payment
Date. Interest shall be computed on the basis of the actual number of days in
the applicable Floating Rate Interest Period divided by 360.
"Interest Reset Date" means the first day of any Floating Rate Interest
Period.
The "Spread" for each Floating Rate Interest Period will be .30%.
Interest Rate. The per annum rate of interest for each Floating Rate
Interest Period will be (i) LIBOR (as defined herein) on the second London
Business Day preceding the Interest Reset Date for such Floating Rate Interest
Period (the "Interest Determination Date") plus (ii) the Spread. "LIBOR" for
each Floating Rate Interest Period will be determined by the Company in
accordance with the following provisions:
(i) On each Interest Determination Date, the Company will ascertain
the offered rate for three-month deposits in U.S. dollars in the London
interbank market, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London time) on such Interest Determination Date.
(ii) If such rate does not appear on the Telerate Page 3750, or the
Telerate Page 3750 is unavailable, the Company will request four major
banks in the London interbank market (the "Reference Banks") to provide the
Company with their offered quotation (expressed as a rate per annum) for
three-month deposits in U.S. dollars to leading banks in the London
interbank market, in a principal amount equal to an amount of not less than
$1 million that is representative for a single transaction in such market
at such time, at approximately 11:00 a.m. (London time) on the Interest
Determination Date. If at least two such quotations are provided, LIBOR in
respect of that Interest Determination Date will be the arithmetic mean of
such quotations.
(iii) If less than two of the Reference Banks provide the Company with
such offered quotations, LIBOR in respect of that Interest Determination
Date will be the arithmetic mean of the rates quoted by three major banks
in The City of New York selected by the Company at approximately 11:00
a.m., New York City time, on that Interest Determination Date for
three-month loans in U.S. dollars to leading European banks, in a principal
amount equal to an amount of not less than $1 million that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the Company
are not quoting as mentioned in this sentence, LIBOR will be LIBOR in
effect on such Interest Determination Date.
"London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
"Telerate Page 3750" means the display designated as page "3750" on Dow
Jones Markets Limited (or such other page as may replace the 3750 page on that
service or such other service or services as may be
S-9
<PAGE> 10
nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. dollar deposits).
DEPOSITARY
Upon issuance, all Fixed Rate Notes will be represented by one or more
fully registered global notes ("Global Notes") and all Floating Rate Notes will
be represented by one or more fully registered Global Notes. Each such Global
Note will be deposited with, or on behalf of, The Depository Trust Company or
any successor thereto ("DTC" or the "Depositary"), as Depositary, and registered
in the name of Cede & Co. (DTC's partnership nominee). Unless and until it is
exchanged in whole or in part for Notes in definitive form, no Global Note may
be transferred except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor. Investors may elect
to hold interests in the Global Notes through either the Depositary (in the
United States) or Cedel Bank, societe anonyme ("Cedel Bank"), or Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear"), if they are participants in such systems, or indirectly through
organizations which are participants in such systems. Cedel Bank and Euroclear
will hold interests on behalf of their participants through customers'
securities accounts in Cedel Bank's and Euroclear's names on the books of their
respective depositaries, which in turn will hold such interests in customers'
securities accounts in the depositaries' names on the books of the Depositary.
Citibank, N.A. will act as depositary for Cedel Bank and The Chase Manhattan
Bank will act as depositary for Euroclear (in such capacities, the "U.S.
Depositaries").
So long as the Depositary, or its nominee, is a registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be
considered the sole owner or Holder of the Notes represented by such Global Note
for all purposes under the Indenture. Except as provided below, the actual owner
of the Notes represented by a Global Note (the "Beneficial Owner") will not be
entitled to have the Notes represented by such Global Notes registered in their
names, will not receive or be entitled to receive physical delivery of the Notes
in definitive form and will not be considered the owners or Holders thereof
under the Indenture, including for purposes of receiving any reports delivered
by the Company or the Trustee pursuant to the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the procedures
of the Depositary and, if such person is not a participant of the Depositary (a
"Participant"), on the procedures of the Participant through which such person
owns its interest, to exercise any rights of a Holder under the Indenture. The
Company understands that under existing industry practices, in the event that
the Company requests any action of Holders or that an owner of a beneficial
interest which a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the Participants holding the relevant beneficial
interests to give or take such action, and such Participants would authorize
Beneficial Owners owning through such Participants to give or take such action
or would otherwise act upon the instructions of Beneficial Owners. Conveyance of
notices and other communications by the Depositary to Participants, by
Participants to Indirect Participants, as defined below, and by Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
If (x) the Depositary is at any time unwilling or unable to continue as
Depositary and a successor depositary is not appointed by the Company within 90
days, (y) the Company executes and delivers to the Trustee a Company Order to
the effect that the Global Notes shall be exchangeable or (z) an Event of
Default (as defined in the Prospectus) has occurred and is continuing with
respect to the Notes, the Global Notes will be exchangeable for Notes in
definitive form of like tenor and of an equal aggregate principal amount, in
denominations of $1,000 and integral multiples thereof. Such definitive Notes
shall be registered in such name or names as the Depositary shall instruct the
Trustee. It is expected that such instructions may be based upon directions
received by the Depositary from Participants with respect to ownership of
beneficial interests in such Global Notes.
The following is based on information furnished by DTC:
DTC will act as securities depositary for the Notes. The Notes will be
issued as fully registered notes registered in the name of Cede & Co. (DTC's
partnership nominee). One or more fully registered Global
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Notes will be issued for the Notes in the aggregate principal amount of such
issue, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its Participants deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants of DTC ("Direct Participants") include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct Participants and by The
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to DTC's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Notes under DTC's system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each Beneficial Owner is in turn to be recorded on the
records of Direct Participants and Indirect Participants. Beneficial Owners will
not receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
Participants or Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Notes are
to be accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Notes, except as provided above.
To facilitate subsequent transfers, all Notes deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
Notes with DTC and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Notes. DTC's records reflect only the identity of the Direct Participants to
whose accounts such Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Notes are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Principal, Additional Amounts, if any, and/or interest payments on the
Notes will be made in immediately available funds to DTC. DTC's practice is to
credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depositary's records
unless DTC has reason to believe that it will not receive payment on such date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such Participant and not of DTC, the Trustee or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, Additional Amounts, if any,
and/or interest to DTC is the responsibility of the Company or the Trustee,
disbursement of such
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payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to the Notes at any time by giving reasonable notice to the Company or
Trustee. Under such circumstances, in the event that a successor securities
depositary is not obtained, Note certificates are required to be printed and
delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Note certificates will be printed and delivered.
Cedel Bank advises that it is incorporated under the laws of Luxembourg as
a professional depositary. Cedel Bank holds securities for its participating
organizations ("Cedel Participants") and facilitates the clearance and
settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Cedel Bank provides
to Cedel Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel Bank interfaces with domestic
markets in several countries. As a professional depositary, Cedel Bank is
subject to regulation by the Luxembourg Monetary Institute. Cedel Participants
are recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the Underwriters. Indirect
access to Cedel Bank is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant either directly or indirectly.
Distributions with respect to the Notes held beneficially through Cedel
Bank will be credited to cash accounts of Cedel Participants in accordance with
its rules and procedures, to the extent received by the U.S. Depositary for
Cedel Bank.
Euroclear advises that it was created in 1968 to hold securities for
participants of Euroclear ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euro-clear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the Underwriters.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
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Distributions with respect to Notes held beneficially through Euroclear
will be credited to the cash accounts of Euroclear Participants in accordance
with the Terms and Conditions, to the extent received by the U.S. Depositary for
Euroclear.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the Notes will be made in immediately available
funds. Secondary market trading between DTC Participants will occur in the
ordinary way in accordance with the Depositary's rules and will be settled in
immediately available funds using the Depositary's Same-Day Funds Settlement
System. Secondary market trading between Cedel Participants and/or Euroclear
Participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Cedel Bank and Euroclear and will be settled
using the procedures applicable to conventional eurobonds in immediately
available funds.
Cross-market transfers between persons holding directly or indirectly
through the Depositary on the one hand, and directly or indirectly through Cedel
or Euroclear Participants, on the other, will be effected in the Depositary in
accordance with the Depositary rules on behalf of the relevant European
international clearing system by its U.S. Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its U.S.
Depositary to take action to effect final settlement on its behalf by delivering
or receiving Notes in the Depositary, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
the Depositary. Cedel Participants and Euroclear Participants may not deliver
instructions directly to the Depositary.
Because of time-zone differences, credits of Notes received in Cedel Bank
or Euroclear as a result of a transaction with a DTC Participant will be made
during subsequent securities settlement processing and will be credited the
business day following the Depositary settlement date. Such credits or any
transactions in such Notes settled during such processing will be reported to
the relevant Euroclear or Cedel Participants on such business day. Cash received
in Cedel Bank or Euroclear as a result of sales of Notes by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the Depositary settlement date but will be available in the
relevant Cedel Bank or Euroclear cash account only as of the business day
following settlement in the Depositary.
Although the Depositary, Cedel Bank and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Notes among
participants of the Depositary, Cedel Bank and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
NOTICES
Notices to holders of the Notes will be sent by mail to the registered
holders and will be published, whether the Notes are in global or definitive
form, and so long as the Notes are listed on the Luxembourg Stock Exchange, in a
daily newspaper of general circulation in Luxembourg. It is expected that
publication will be made in Luxembourg in the Luxemburger Wort. Any such notice
shall be deemed to have been given on the date of such publication or, if
published more than once, on the date of the first such publication. So long as
the Notes are listed on the Luxembourg Stock Exchange, any change in the
Luxembourg Paying Agent and Transfer Agent will be published in Luxembourg in
the manner set forth above.
FURTHER ISSUES
The Company may from time to time, without notice to or the consent of the
registered holders of the Notes, create and issue further notes ranking pari
passu with the Notes in all respects (or in all respects except for the payment
of interest accruing prior to the issue date of such further Notes or except for
the first payment of interest following the issue date of such further Notes)
and so that such further Notes may be consolidated and form a single series with
the Notes and have the same terms as to status, redemption or otherwise as the
Notes.
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PAYMENT OF ADDITIONAL AMOUNTS
The Company will, subject to the exceptions and limitations set forth
below, pay as additional interest on the Notes, such additional amounts
("Additional Amounts") as are necessary in order that the net payment by the
Company or a paying agent of the principal of and interest on the Notes to a
holder who is a non-United States person (as defined below), after deduction for
any present or future tax, assessment or other governmental charge of the United
States or a political subdivision or taxing authority thereof or therein,
imposed by withholding with respect to the payment, will not be less than the
amount provided in the Notes to be then due and payable; provided, however, that
the foregoing obligation to pay Additional Amounts shall not apply:
(1) to any tax, assessment or other governmental charge that is
imposed or withheld solely by reason of the holder, or a fiduciary,
settlor, beneficiary, member or shareholder of the holder if the holder is
an estate, trust, partnership or corporation, or a person holding a power
over an estate or trust administered by a fiduciary holder, being
considered as:
(a) being or having been present or engaged in a trade or business
in the United States or having had a permanent establishment in the
United States;
(b) having a current or former relationship with the United States,
including a relationship as a citizen or resident thereof;
(c) being or having been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled foreign
corporation with respect to the United States or a corporation that has
accumulated earnings to avoid United States federal income tax;
(d) being or having been a "10-percent shareholder" of the Company
as defined in section 871(h)(3) of the United States Internal Revenue
Code or any successor provision; or
(e) being a bank receiving payments on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of its
trade or business;
(2) to any holder that is not the sole beneficial owner of the Note,
or a portion thereof, or that is a fiduciary or partnership, but only to
the extent that a beneficiary or settlor with respect to the fiduciary, a
beneficial owner or member of the partnership would not have been entitled
to the payment of an additional amount had the beneficiary, settlor,
beneficial owner or member received directly its beneficial or distributive
share of the payment;
(3) to any tax, assessment or other governmental charge that is
imposed or withheld solely by reason of the failure of the holder or any
other person to comply with certification, identification or information
reporting requirements concerning the nationality, residence, identity or
connection with the United States of the holder or beneficial owner of such
Note, if compliance is required by statute, by regulation of the United
States Treasury Department or by an applicable income tax treaty to which
the United States is a party as a precondition to exemption from such tax,
assessment or other governmental charge;
(4) to any tax, assessment or other governmental charge that is
imposed otherwise than by withholding by the Company or a paying agent from
the payment;
(5) to any tax, assessment or other governmental charge that is
imposed or withheld solely by reason of a change in law, regulation, or
administrative or judicial interpretation that becomes effective more than
15 days after the payment becomes due or is duly provided for, whichever
occurs later;
(6) to any estate, inheritance, gift, sales, excise, transfer, wealth
or personal property tax or similar tax, assessment or other governmental
charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of or interest
on any Note, if such payment can be made without such withholding by any
other paying agent; or
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(8) in the case of any combination of items (1), (2), (3), (4), (5),
(6) and (7).
The Notes are subject in all cases to any tax, fiscal or other law or
regulation or administrative or judicial interpretation applicable thereto.
Except as specifically provided under this heading "Payment of Additional
Amounts" and under the heading "Description of Notes -- Redemption for Tax
Reasons", the Company shall not be required to make any payment with respect to
any tax, assessment or other governmental charge imposed by any government or a
political subdivision or taxing authority thereof or therein.
As used under this heading "Payment of Additional Amounts" and under the
headings "Description of Notes -- Redemption for Tax Reasons", "Certain United
States Tax Documentation Requirements" and "United States Taxation of Non-United
States Persons" the term "United States" means the United States of America
(including the States and the District of Columbia) and its territories, its
possessions and other areas subject to its jurisdiction, "United States person"
means any individual who is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof (other than a
partnership that is not treated as a United States person under any applicable
Treasury regulations), any estate the income of which is subject to United
States federal income taxation regardless of its source, or any trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. Notwithstanding the
preceding sentence, to the extent provided in the Treasury regulations, certain
trusts in existence on August 20, 1996, and treated as United States persons
prior to such date that elect to continue to be treated as United States persons
will also be a United States person. "Non-United States person" means a person
who is not a United States person.
REDEMPTION FOR TAX REASONS
If, as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States (or any
political subdivision or taxing authority thereof or therein), or any change in,
or amendments to, an official position regarding the application or
interpretation of such laws, regulations or rulings, which change or amendment
is announced or becomes effective on or after the date of this Prospectus
Supplement, the Company becomes or, based upon a written opinion of independent
counsel selected by the Company, will become obligated to pay Additional Amounts
as described herein under the heading "Description of Notes -- Payment of
Additional Amounts", then the Company may, at its option redeem, as a whole, but
not in part, the Notes on not less than 30 nor more than 60 days prior notice,
at a redemption price equal to 100% of their principal amount, together with
interest accrued but unpaid thereon to the date fixed for redemption.
CERTAIN UNITED STATES TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of a Note will generally be subject to the withholding
of United States federal income tax at rates up to 31% unless one of the
following steps is taken to obtain an exemption from or reduction of the tax:
Exemption for Non-United States persons (IRS Form W-8). A beneficial owner
of a Note that is a non-United States person (other than certain persons that
are related to the Company through stock ownership as described in clauses (x)
(a) and (b) of Paragraph (i) under "United States Taxation of Non-United States
Persons -- Income and Estate Tax") can obtain an exemption from the withholding
of tax by providing a properly completed IRS Form W-8 (Certificate of Foreign
Status). Copies of IRS Form W-8 may be obtained from the Luxembourg listing
agent.
Exemption for Non-United States persons with effectively connected income
(IRS Form 4224). A beneficial owner of a Note that is a non-United States
person, including a non-United States corporation or bank with a United States
branch, that conducts a trade or business in the United States with which
interest income on a Note is effectively connected, can obtain an exemption from
the withholding of tax by providing a properly completed IRS Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States).
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Exemption or reduced rate for Non-United States persons entitled to the
benefits of a treaty (IRS Form 1001). A beneficial owner of a Note that is a
non-United States person entitled to the benefits of an income tax treaty to
which the United States is a party can obtain an exemption from or reduction of
the withholding of tax (depending on the terms of the treaty) by providing a
properly completed IRS Form 1001 (Ownership, Exemption or Reduced Rate
Certificate).
Exemption for United States Persons (IRS Form W-9). A beneficial owner of
a Note that is a United States person can obtain a complete exemption from the
withholding of tax by providing a properly completed IRS Form W-9 (Request for
Taxpayer Identification Number and Certification).
United States federal income tax reporting procedure. A beneficial owner
of a Note, or, in the case of IRS Forms 1001 and 4224, its agent, is required to
submit the appropriate IRS Form under applicable procedures to the person
through which the owner directly holds the Note. For example, if the beneficial
owner is listed directly on the books of Euroclear or Cedel Bank as the holder
of the Note, the IRS Form must be provided to Euroclear or Cedel Bank, as the
case may be. Each other person through which a Note is held must submit, on
behalf of the beneficial owner, the IRS Form (or in certain cases a copy
thereof) under applicable procedures to the person through which it holds the
Note, until the IRS Form is received by the United States person who would
otherwise be required to withhold United States federal income tax from interest
on the Note. For example, in the case of Notes held through Euroclear or Cedel
Bank, the IRS Form (or a copy thereof) must be received by the U.S. Depositary
of such clearing agency. Applicable procedures include additional certification
requirements, described in clause (x)(c)(B) of paragraph (i) under "United
States Taxation of Non-United States Persons -- Income and Estate Tax", if a
beneficial owner of the Note provides an IRS Form W-8 to a securities clearing
organization, bank or other financial institution that holds the Note on its
behalf.
Regulations recently issued by the IRS, which are currently proposed to
become effective for payments made after December 31, 1999, make certain
modifications to the certification procedures applicable to non-United States
persons. Prospective investors should consult their tax advisors regarding the
certification requirements for non-United States persons.
EACH HOLDER OF A NOTE SHOULD BE AWARE THAT IF IT DOES NOT PROPERLY PROVIDE
THE REQUIRED IRS FORM, OR IF THE IRS FORM (OR, IF PERMISSIBLE, A COPY OF SUCH
FORM) IS NOT PROPERLY TRANSMITTED TO AND RECEIVED BY THE UNITED STATES PERSON
OTHERWISE REQUIRED TO WITHHOLD UNITED STATES FEDERAL INCOME TAX, INTEREST ON THE
NOTE MAY BE SUBJECT TO WITHHOLDING AND THE HOLDER (INCLUDING THE BENEFICIAL
OWNER) WILL NOT BE ENTITLED TO ANY ADDITIONAL AMOUNTS FROM THE COMPANY DESCRIBED
UNDER THE HEADING "DESCRIPTION OF NOTES -- PAYMENT OF ADDITIONAL AMOUNTS" WITH
RESPECT TO SUCH WITHHOLDING. SUCH WITHHOLDING, HOWEVER, MAY IN CERTAIN
CIRCUMSTANCES BE ALLOWED AS A REFUND OR AS A CREDIT AGAINST SUCH HOLDER'S UNITED
STATES FEDERAL INCOME TAX. THE FOREGOING DOES NOT DEAL WITH ALL ASPECTS OF
FEDERAL INCOME TAX WITHHOLDING THAT MAY BE RELEVANT TO NON-UNITED STATES HOLDERS
OF THE NOTES. INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR
SPECIFIC ADVICE CONCERNING THE OWNERSHIP AND DISPOSITION OF NOTES.
UNITED STATES TAXATION OF NON-UNITED STATES PERSONS
INCOME AND ESTATE TAX
In the opinion of Sidley & Austin, special tax counsel to the Company,
under United States federal tax law as of the date of this Prospectus
Supplement, and subject to the discussion of backup withholding below:
(i) payments of principal and interest on a Note that is beneficially
owned by a non-United States person will not be subject to the withholding
of United States federal income tax; provided, that in the case of
interest, (x)(a) the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote, (b) the beneficial
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owner is not a controlled foreign corporation that is related to the
Company through stock ownership, and (c) either (A) the beneficial owner of
the Note certifies to the person otherwise required to withhold United
States federal income tax from such interest, under penalties of perjury,
that it is not a United States person and provides its name and address or
(B) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the Note certifies to the
person otherwise required to withhold United States federal income tax from
such interest, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy
thereof; (y) the beneficial owner is entitled to the benefits of an income
tax treaty under which the interest is exempt from the withholding of
United States federal income tax and the beneficial owner of the Note or
such owner's agent provides an IRS Form 1001 claiming the exemption; or (z)
the beneficial owner conducts a trade or business in the United States to
which the interest is effectively connected and the beneficial owner of the
Note or such owner's agent provides an IRS Form 4224; provided that in each
such case, the relevant certification or IRS Form is delivered pursuant to
applicable procedures and is properly transmitted to the person otherwise
required to withhold United States federal income tax, and none of the
persons receiving the relevant certification or IRS Form has actual
knowledge that the certification or any statement on the IRS Form is false;
(ii) a non-United States person will not be subject to United States
federal income tax on any gain realized on the sale, exchange or redemption
of a Note unless the gain is effectively connected with the beneficial
owner's trade or business in the United States or, in the case of an
individual, the holder is present in the United States for 183 days or more
in the taxable year in which the sale, exchange or redemption occurs and
certain other conditions are met; and
(iii) a Note owned by an Individual who at the time of death is not a
citizen or resident of the United States will not be subject to United
States federal estate tax as a result of such individual's death if the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote and the income on the Note would not have been effectively connected
with a U.S. trade or business of the individual.
Interest on a Note that is effectively connected with the conduct of a
trade or business in the United States by a holder of a Note who is a non-United
States person, although exempt from the withholding of United States income tax,
may be subject to United States income tax as if such interest was earned by a
United States person.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of
principal and interest made on a Note and the proceeds of the sale of a Note
within the United States to non-corporate holders of the Notes, and "backup
withholding" at a rate of 31% will apply to such payments if the holder fails to
provide an accurate taxpayer identification number in the manner required or to
report all interest and dividends required to be shown on its federal income tax
returns.
Information reporting on IRS Form 1099 and backup withholding will not
apply to payments made by the Company or a paying agent to a non-United States
person on a Note if, in the case of interest, the IRS Form described in clause
(y) or (z) in paragraph (i) under "Income and Estate Tax" has been provided
under applicable procedures, or, in the case of interest or principal, the
certification described in clause (x)(c) in paragraph (i) under "Income and
Estate Tax" and a certification that the beneficial owner satisfies certain
other conditions have been supplied under applicable procedures, provided that
the payor does not have actual knowledge that the certifications are incorrect.
Payments of the proceeds from the sale of a Note made to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding, except that if the broker is a United States person, a
controlled foreign corporation for United States tax purposes or a foreign
person 50% or more of whose gross income is effectively connected with a United
States trade or business for a specified three-year period, information
reporting may apply to such payments. Payments of the proceeds from the sale of
a Note to or through the United States office of a broker are subject to
information reporting and backup withholding
S-17
<PAGE> 18
unless the holder or beneficial owner certifies that it is a non-United States
person and that it satisfies certain other conditions or otherwise establishes
an exemption from information reporting and backup withholding.
Regulations recently issued by the IRS, which are currently proposed to
become effective for payments made after December 31, 1999, make certain
modifications to the certification procedures applicable to non-United States
persons. Prospective investors should consult their tax advisors regarding the
certification requirements for non-United States persons.
Backup withholding is not a separate tax, but is allowed as a refund or
credit against the holder's United States federal income tax, provided the
necessary information is furnished to the Internal Revenue Service.
Interest on a Note that is beneficially owned by a non-United States person
will be reported annually on IRS Form 1042S, which must be filed with the
Internal Revenue Service and furnished to such beneficial owner.
S-18
<PAGE> 19
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated are
acting as representatives (the "Representatives"), have each severally agreed,
subject to the terms and conditions of the Underwriting Agreement dated June 11,
1998 and Pricing Agreements dated June 11, 1998, to purchase from the Company
the principal amount of Fixed Rate Notes and Floating Rate Notes, respectively,
set forth opposite their respective names. The Underwriters for the Fixed Rate
Notes and the Underwriters for the Floating Rate Notes are committed to purchase
all of the Fixed Rate Notes and the Floating Rate Notes, respectively, if any of
such Notes are purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF FIXED RATE
NOTES
UNDERWRITERS ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $300,000,000
Morgan Stanley & Co. Incorporated........................... 300,000,000
ABN AMRO Bank N.V. ......................................... 25,000,000
Chase Securities Inc........................................ 25,000,000
Credit Suisse First Boston Corporation...................... 25,000,000
J.P. Morgan Securities Inc.................................. 25,000,000
Societe Generale............................................ 25,000,000
Salomon Brothers Inc........................................ 25,000,000
------------
Total.......................................... $750,000,000
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF FLOATING RATE
NOTES
UNDERWRITERS ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $199,000,000
Morgan Stanley & Co. Incorporated........................... 199,000,000
ABN AMRO Bank N.V. ......................................... 17,000,000
Barclays Bank PLC........................................... 17,000,000
Credit Suisse First Boston Corporation...................... 17,000,000
Deutsche Bank AG London..................................... 17,000,000
Paribas..................................................... 17,000,000
Salomon Brothers Inc........................................ 17,000,000
------------
Total.......................................... $500,000,000
============
</TABLE>
The Representatives have advised the Company that they propose initially to
offer all or part of the Fixed Rate Notes and Floating Rate Notes directly to
the public at the respective offering prices set forth on the cover page of this
Prospectus Supplement and to certain dealers at such prices less a concession
not in excess of .3% of the principal amount of the Fixed Rate Notes and .15% of
the principal amount of the Floating Rate Notes. The Underwriters for the Fixed
Rate Notes and the Underwriters for the Floating Rate Notes may allow, and such
dealers may reallow, a discount not in excess of .25% of the principal amount of
the Fixed Rate Notes and .125% of the principal amount of the Floating Rate
Notes, respectively, to certain other dealers. After the initial public
offering, the public offering price and concession may be changed.
Certain of the Underwriters and their affiliates engage in transactions
with, and perform services for, the Company in the ordinary course of business
and have engaged, and may in the future engage, in commercial banking and
investment banking transactions with the Company.
S-19
<PAGE> 20
The Representatives are permitted to engage in certain transactions that
stabilize the prices of the Notes. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the prices of the
Notes.
If the Underwriters create a short position in the Fixed Rate Notes or
Floating Rate Notes in connection with the offering, i.e., if they sell more
Fixed Rate Notes or Floating Rate Notes than are set forth on the cover page of
this Prospectus Supplement, the Underwriters may reduce that short position by
purchasing such Notes in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters for the Fixed Rate
Notes or the Underwriters for the Floating Rate Notes purchase Fixed Rate Notes
or Floating Rate Notes, respectively, in the open market to reduce such
Underwriters' short position or to stabilize the price of such Notes, they may
reclaim the amount of the selling concession from such Underwriters and selling
group members who sold those Notes as part of the offering.
In general, the purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Company not the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Fixed Rate Notes or the Floating
Rate Notes. In addition, neither the Company nor the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Notes are offered for sale in those jurisdictions in the United States,
Canada, Europe, Asia and elsewhere where it is lawful to make such offers.
Each of the Underwriters has represented and agreed that it has not and
will not offer, sell or deliver any of the Notes directly or indirectly, or
distribute this Prospectus Supplement or the Prospectus or any other offering
material relating to the Notes, in or from any jurisdiction except under
circumstances that will result in compliance with the applicable laws and
regulations thereof and that will not impose any obligations on the Company
except as set forth in the Underwriting Agreement.
In particular, each Underwriter has represented and agreed that:
(i) it has not offered or sold and will not offer or sell any Notes to
persons in the United Kingdom prior to the expiry of the period of six
months from the issue date of the Notes except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their businesses or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;
(ii) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue
of the Notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 (as amended) or is a person to whom such document may otherwise
lawfully be issued or passed on;
(iii) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 with respect to anything done by it in
relation to any Notes in, from or otherwise involving the United Kingdom;
(iv) it will not offer or sell any Notes directly or indirectly in
Japan or to, or for the benefit of any Japanese person or to others, for
re-offering or re-sale directly or indirectly in Japan or to any Japanese
person except under circumstances which will result in compliance with all
applicable laws, regulations and guidelines promulgated by the relevant
governmental and regulatory authorities in effect at the
S-20
<PAGE> 21
relevant time. For purposes of this paragraph, "Japanese person" shall mean
any person resident in Japan, including any corporation or other entity
organized under the laws of Japan;
(v) it is aware of the fact that no German selling prospectus
(Verkaufsprospekt) has been or will be published in respect of the sale of
the Notes and that it will comply with the Securities Selling Prospectus
Act (the "Act") of the Federal Republic of Germany
(Wertpapier-Verkaufsprospektgesetz). In particular, each Underwriter has
undertaken not to engage in public offering (offentliche Anbieten) in the
Federal Republic of Germany with respect to any Notes otherwise than in
accordance with the Act and any other act replacing or supplementing the
Act and all other applicable laws and regulations; and
(vi) the Notes are being issued and sold outside the Republic of
France and that, in connection with their initial distribution, it has not
offered or sold and will not offer or sell, directly or indirectly, any
Notes to the public in the Republic of France, and that it has not
distributed and will not distribute or cause to be distributed to the
public in the Republic of France the Prospectus Supplement, the Prospectus
or any other offering material relating to the Notes.
Although application has been made to list the Fixed Rate Notes and the
Floating Rate Notes on the Luxembourg Stock Exchange, each of the Fixed Rate
Notes and the Floating Rate Notes are a new issue of securities with no
established trading market. No assurance can be given as to the liquidity of, or
the trading markets for, the Notes. Purchasers of the Notes may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the issue price set forth on the cover
page hereof. The Company has been advised by the Underwriters for the Fixed Rate
Notes and the Underwriters for the Floating Rate Notes that they intend to make
a market in the Fixed Rate Notes and the Floating Rate Notes, respectively, but
they are not obligated to do so and may discontinue such market-making at any
time without notice.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
of such liabilities.
It is expected that delivery of the Notes will be made against payment
therefor on or about June 17, 1998, which is the fourth business day following
the date of this Prospectus Supplement (such settlement cycle being herein
referred to as "T+4"). Purchasers of Notes should note that the ability to
settle secondary market trades of the Notes effected on the date of pricing and
the succeeding business days may be affected by the T+4 settlement.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Company prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of the Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be made
in accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Notes.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the Company and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such Notes without the benefit of a
prospectus qualified under such securities laws or an offering memorandum (ii)
where required by law, that such purchaser is purchasing as principal and not as
agent, (iii) if in Quebec, such purchaser shall be deemed to
S-21
<PAGE> 22
have agreed that all documents relating to such purchase be in English only, and
(iv) such purchaser has reviewed the terms above under "Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada on the Company
or such persons. All or a substantial portion of the assets of the Company and
such persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against the Company or such persons in Canada or
to enforce a judgment obtained in Canadian courts against the Company or such
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Notes to whom the Securities Act (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any Notes acquired
by such purchaser pursuant to this offering. Such report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR No. 95/17,
a copy of which may be obtained from the Company. Only one such report must be
filed in respect of Notes acquired on the same date and under the same
prospectus exemption.
LEGAL OPINIONS
The legality of the Notes will be passed upon for HFC by John W. Blenke,
Vice President -- Corporate Law and Assistant Secretary for Household
International, Inc., the parent of HFC. Sidley & Austin, Chicago, Illinois has
acted as special tax counsel to HFC in connection with tax matters related to
the issuance of the Notes. Certain legal matters will be passed upon for the
Underwriters by McDermott, Will & Emery, Chicago, Illinois. Mr. Blenke is a
full-time employee and an officer of Household International, Inc. and owns, and
holds options to purchase, shares of Common Stock of Household International,
Inc.
EXPERTS
The consolidated financial statements and schedules of HFC and its
subsidiaries incorporated by reference in this Prospectus Supplement, to the
extent and for the periods indicated in its reports, have been audited by Arthur
Andersen LLP, independent public accountants, and are incorporated by reference
herein in reliance upon the authority of said firm as experts in giving said
reports.
The financial statements of Beneficial incorporated in this Prospectus
Supplement by reference from HFC's Current Report on Form 8-K filed on June 2,
1998 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.
GENERAL INFORMATION
Application has been made to list the Notes on the Luxembourg Stock
Exchange. In connection with the listing application, the Certificate of
Incorporation and the By-Laws of the Company and a legal notice relating to the
issuance of the Notes have been deposited prior to listing with Greffier en Chef
du Tribunal d'Arrondissement de et a Luxembourg, where copies thereof may be
obtained upon request. Copies of the
S-22
<PAGE> 23
above documents together with this Prospectus Supplement, the accompanying
Prospectus, the Indenture and the Company's current Annual Report on Form 10-K,
Quarterly Report on Form 10-Q and Current Reports on Form 8-K, as well as all
such future Reports, so long as any of the Notes are outstanding, will be made
available for inspection at the main office of Banque International a
Luxembourg, in Luxembourg. Banque International a Luxembourg will act as
intermediary between the Luxembourg Stock Exchange and the Company and the
holders of the Notes. In addition, copies of the above Reports of the Company
may be obtained free of charge at such office.
Other than as disclosed or contemplated herein or in the documents
incorporated herein by reference, there has been no material adverse change in
the financial position of the Company since March 31, 1998.
The Independent Accountants of the Company are Arthur Andersen LLP,
Chicago, Illinois.
Other than as disclosed or contemplated in the documents incorporated
herein by reference, neither the Company nor any of its subsidiaries is involved
in litigation, arbitration, or administrative proceedings relating to claims or
amounts that are material in the context of the issue of the Notes and the
Company is not aware of any such litigation, arbitration, or administrative
proceedings pending or threatened.
Resolutions relating to the issue and sale of the Notes were adopted by the
Board of Directors of the Company on June 11, 1998.
The Notes, the Indenture and the Underwriting Agreement are governed by,
and shall be construed in accordance with, the laws of the State of Illinois,
United States of America, applicable to agreements made and to be performed
wholly within such jurisdiction.
The Fixed Rate Notes and the Floating Rate Notes have been assigned
Euroclear and Cedel Common Code Nos. 8833966 and 8834008, respectively,
International Security Identification Numbers (ISIN) US441812 FY58 and US441812
FZ24, respectively and CUSIP Nos. 441812 FY5 and 441812 FZ2, respectively.
S-23
<PAGE> 24
HOUSEHOLD FINANCE CORPORATION
DEBT SECURITIES
AND
WARRANTS TO PURCHASE DEBT SECURITIES
Household Finance ("HFC" or the "Company") from time to time may offer one
or more series of its debt securities ("Debt Securities") and warrants
("Warrants") to purchase Debt Securities (the Debt Securities and Warrants being
hereinafter collectively called "Securities") having an aggregate initial
offering price of up to $3,000,000,000, or the equivalent thereof if any of the
Securities are denominated in a foreign currency or a foreign currency unit. The
Debt Securities will be offered as separate series in amounts, at prices and on
terms to be determined at the time of sale and to be set forth in supplements to
this Prospectus. The Debt Securities and Warrants may be sold for U.S. dollars,
foreign currencies or foreign currency units, and the principal of and any
interest on the Debt Securities may be payable in U.S. dollars, foreign
currencies or foreign currency units. The specific designation and
classification as senior or senior subordinated debt securities of HFC,
aggregate principal amount, the currency or currency unit for which the
Securities may be purchased, the currency or currency unit in which the
principal and any interest is payable, the rate (or method of calculation) and
time of payment of any interest, authorized denominations, maturity, offering
price, any redemption terms or other specific terms of the Securities in respect
of which this Prospectus is being delivered are set forth in one or more
supplements to this Prospectus ("Prospectus Supplement"). With regard to the
Warrants, if any, in respect of which this Prospectus is being delivered, the
Prospectus Supplement sets forth a description of the Debt Securities for which
each Warrant is exercisable and the offering price, if any, exercise price,
duration, detachability and other terms of the Warrants.
HFC may sell Securities through underwriting syndicates led by one or more
managing underwriters or through one or more underwriting firms acting alone, to
or through dealers, acting as principals for their own account or as agents, and
also may sell Securities directly to other purchasers. See "Plan of
Distribution". The names of any underwriters or agents involved in the sale of
the Securities in respect to which this Prospectus is being delivered and their
compensation are set forth in the Prospectus Supplement.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER 21, 1995.
<PAGE> 25
AVAILABLE INFORMATION
HFC is subject to the informational requirements of the Securities Exchange
Act of 1934 and in accordance therewith files reports and other information with
the Securities and Exchange Commission (the "Commission"). Such reports and
other information can be inspected and copied at the public reference facilities
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
certain debt securities of HFC are listed on the New York Stock Exchange, and
reports and other material concerning HFC can be inspected at the offices of
such Exchange at 20 Broad Street, New York, New York 10005. Although HFC is not
required to send an annual report to its security holders, HFC will, upon
request, send to any security holder a copy of its latest Annual Report on Form
10-K, as filed with the Commission, which contains financial information that
has been examined and reported upon, with an opinion expressed, by independent
certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission (File No. 1-75)
pursuant to the Securities Exchange Act of 1934 and are incorporated herein by
reference and made a part of this Prospectus:
(a) HFC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
(b) HFC's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, June 30, 1995 and September 30, 1995; and
(c) HFC's Current Reports on Form 8-K dated February 21, 1995, August
9, 1995 and October 1, 1995.
All documents filed by HFC with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to the date
of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated herein by reference and made a
part of this Prospectus from the respective dates of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
HFC WILL PROVIDE WITHOUT CHARGE TO EACH PERSON (INCLUDING ANY BENEFICIAL
OWNER) TO WHOM THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS). REQUESTS SHOULD BE DIRECTED TO:
HOUSEHOLD FINANCE CORPORATION
2700 SANDERS ROAD
PROSPECT HEIGHTS, ILLINOIS 60070
ATTENTION: OFFICE OF THE SECRETARY
TELEPHONE: 708-564-5000
2
<PAGE> 26
HOUSEHOLD FINANCE CORPORATION
HFC was incorporated in Delaware in 1925, as successor to an enterprise
which traces its origin through the same ownership to an office established in
1878. The address of its principal executive office is 2700 Sanders Road,
Prospect Heights, Illinois 60070 (telephone 708-564-5000). HFC is a subsidiary
of Household International, Inc. ("Household International" or the "parent
company").
HFC and its subsidiaries offer a diversified range of financial services.
The principal product of HFC's consumer financial services business is the
making of cash loans, including home equity loans secured by first and second
mortgages and unsecured credit advances (including revolving and closed-end
personal loans) to middle-income consumers in the United States. Loans are made
through branch lending offices and through direct marketing efforts. HFC also
seeks to acquire portfolios of open-end and closed-end, secured and unsecured
loans.
HFC, through banking subsidiaries, offers both VISA* and MasterCard* credit
cards to residents throughout the United States.
Household Retail Services is the revolving credit card merchant
participation business of HFC. This business provides sales financing for
consumer goods and purchases and originates and services merchants' private
label revolving charge accounts.
In conjunction with its consumer finance operations and where applicable
laws permit, HFC makes available to customers credit life, credit accident and
health, and household contents insurance.
HFC, through its subsidiary, Household Commercial Financial Services, Inc.,
also is engaged in commercial finance, involving leveraged leases,
privately-placed, limited-term preferred stocks and selected commercial
financing of equipment or property.
USE OF PROCEEDS
Unless otherwise indicated in the Prospectus Supplement, HFC will apply the
net proceeds from the sale of the Securities to its general funds to be used in
its financial services business, including the funding of investments in, or
extensions of credit to, affiliates of HFC. Pending such applications, the net
proceeds will be used initially to reduce outstanding commercial paper of HFC.
The proceeds of such commercial paper are used in connection with HFC's
financial services business.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for HFC and subsidiaries for the
periods indicated below was as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- ------------------------------------
1995 1994 1994 1993 1992 199L 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
HFC and subsidiaries -- calculated on
income from continuing operations..... 1.44 1.58 1.54 1.61 1.49 1.20 1.32
</TABLE>
For purposes of calculating the ratio, earnings consist of income from
continuing operations to which has been added income taxes and fixed charges of
subsidiaries. Fixed charges consist of interest on all indebtedness and
one-third rentals (approximate portion representing interest).
- ---------------
* VISA and MasterCard are registered trademarks of VISA USA, Inc. and MasterCard
International
Incorporated, respectively.
3
<PAGE> 27
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate. The particular terms of the Debt Securities offered by any
Prospectus Supplement (the "Offered Debt Securities") and the extent to which
such general terms and provisions may apply to the Offered Debt Securities will
be described in the Prospectus Supplement relating to such Offered Debt
Securities.
GENERAL
Offered Debt Securities will constitute either senior or senior
subordinated unsecured debt of HFC and will be issued under one of the
indentures specified elsewhere herein (the "Indentures"). The Indentures, or
forms thereof, and the Standard Provisions (as defined herein) have been filed
as exhibits to HFC's Registration Statement which registers the Securities with
the Commission. The following summaries do not purport to be complete and, where
particular provisions of an Indenture or the Standard Provisions are referred
to, such provisions, including definitions of certain terms, are incorporated by
reference as part of such summaries, which are qualified in their entirety by
such reference.
The Indentures provide that Debt Securities may be issued thereunder from
time to time in one or more series and do not limit the aggregate principal
amount of the Debt Securities except as may be otherwise provided with respect
to any particular series of Offered Debt Securities.
Unless otherwise indicated in the Prospectus Supplement with respect to any
particular series of Offered Debt Securities, the Debt Securities will be issued
in registered form without coupons, will be exchangeable for authorized
denominations, and will be transferable at any time or from time to time. No
charge will be made to the holder for any such exchange or registration of
transfer except for any tax or governmental charge incident thereto. The Debt
Securities of any series may be issued in whole or in part in the form of one or
more global securities that will be deposited with, or on behalf of, a
depositary. See "Book-Entry System" below.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms and other
information to the extent applicable with respect to the Offered Debt
Securities: (1) the title of the Offered Debt Securities and whether such
Offered Debt Securities will be senior or senior subordinated debt of HFC; (2)
any limit on the aggregate principal amount of the Offered Debt Securities; (3)
the price (expressed as a percentage of the aggregate principal amount thereof)
HFC will be paid for the Offered Debt Securities and the initial offering price,
if any, at which the Offered Debt Securities will be offered to the public; (4)
the currency, currencies or currency units for which the Offered Debt Securities
may be purchased and the currency, currencies or currency units in which the
principal of and any interest on such Offered Debt Securities may be payable;
(5) the date or dates on which the Offered Debt Securities will mature; (6) the
rate or rates (which may be fixed or variable) per annum at which the Offered
Debt Securities will bear interest, if any; (7) the date from which such
interest, if any, on the Offered Debt Securities will accrue, the dates on which
such interest, if any, will be payable, the date on which payment of such
interest, if any, will commence, and the Regular Record Dates for such Interest
Payment Dates, if any; (8) the dates, if any, on which and the price or prices
at which the Offered Debt Securities will, pursuant to any mandatory sinking
fund provisions, or may, pursuant to any optional sinking fund or to any
purchase fund provisions, be redeemed by HFC, and the other detailed terms and
provisions of such sinking and/or purchase funds; (9) the date, if any, after
which and the price or prices at which the Offered Debt Securities may, pursuant
to any optional redemption provisions, be redeemed at the option of HFC or of
the holder thereof and the other detailed terms and provisions of such optional
redemption; (10) the denominations in which the Offered Debt Securities are
authorized to be issued; (11) the securities exchange, if any, on which the Debt
Securities will be listed; and (12) additional provisions, if any, with respect
to the Offered Debt Securities.
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or any interest on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such issue of
4
<PAGE> 28
Debt Securities and such currencies or currency units will be set forth in a
Prospectus Supplement relating thereto.
Debt Securities may be issued as Original Issue Discount Securities to be
offered and sold at a discount below their stated principal amount. "Original
Issue Discount Securities" means any Debt Securities that provide for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof upon the occurrence of an Event of
Default and the continuation thereof. As used in the following summary of
certain terms of the Debt Securities, the term "principal amount" means, in the
case of any Original Issue Discount Security, the amount that would then be due
and payable upon acceleration of the maturity thereof, as specified in such Debt
Security.
BOOK-ENTRY SYSTEM
If so indicated in the Prospectus Supplement with respect to any series of
Offered Debt Securities, such Offered Debt Securities will be represented by one
or more global securities (the "Global Security"). The Global Security will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of a nominee of the Depositary. Except under
circumstances described below, such Offered Debt Securities will not be issuable
in definitive form.
The Depositary has advised the Company and any underwriters, dealers or
agents named in the applicable Prospectus Supplement as follows: the Depositary
is a limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. The Depositary was created to hold securities of its participants
and to facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations, some of which (and/or their representatives) own the
Depositary. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies, that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
Upon the issuance of the Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of participants with
the respective principal amounts of the Offered Debt Securities represented by
the Global Security. Ownership of beneficial interests in the Global Security
will be limited to persons that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in the Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary or its nominee (with respect to interests of participants) and
on the records of participants (with respect to interests of persons other than
participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
the Global Security.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Offered Debt Securities represented
by the Global Security for all purposes under the Indenture. Except as provided
below, owners of beneficial interests in the Global Security will not be
entitled to have Offered Debt Securities represented by the Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Offered Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Principal and interest payments on Offered Debt Securities registered in
the name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security.
None of the Company, the Trustee, any paying agent or the registrar for the
Offered Debt Securities will have any responsibility or liability for any aspect
of the records relating to or payments made on
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account of beneficial interests in the Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
The Company expects that the Depositary for the Offered Debt Securities or
its nominee, upon receipt of any payment of principal or interest, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Security as shown on the records of the Depositary or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
the Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name", and
will be the responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within 90
days, the Company will issue Offered Debt Securities in definitive form in
exchange for the entire Global Security. In addition, the Company may at any
time and in its sole discretion determine not to have the Offered Debt
Securities represented by the Global Security and, in such event, will issue
Offered Debt Securities in definitive form in exchange for the entire Global
Security. In any such instance, an owner of a beneficial interest in the Global
Security will be entitled to physical delivery in definitive form of Offered
Debt Securities represented by the Global Security equal in principal amount to
such beneficial interest and to have such Offered Debt Securities registered in
its name. Offered Debt Securities so issued in definitive form will be issued as
registered Offered Debt Securities in denominations of $1,000 and integral
multiples thereof, unless otherwise specified by the Company.
SAME-DAY SETTLEMENT AND PAYMENT
If so indicated in the Prospectus Supplement with respect to any series of
Offered Debt Securities, settlement for such Offered Debt Securities will be
made by the underwriters, dealers or agents in immediately available funds and
all payments of principal and interest thereon will be made by the Company in
immediately available funds. Secondary trading in long-term notes and debentures
of corporate issuers is generally settled in clearing-house or next-day funds.
In contrast Offered Debt Securities subject to settlement in immediately
available funds will trade in the Depositary's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in the Offered Debt
Securities will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Offered
Debt Securities.
SENIOR DEBT SECURITIES
The trustees for the indentures under which Offered Debt Securities
constituting senior debt of HFC (the "Senior Debt Securities") will be issued
shall be either First Trust of Illinois, National Association (successor in
interest to Bank of America Illinois, formerly known as Continental Bank,
National Association), The Bank of New York (successor in interest to
NationsBank of Tennessee), State Street Bank and Trust Company (successor in
interest to The First National Bank of Boston), The First National Bank of
Chicago, or such other entity which may be specified in the Prospectus
Supplement (collectively, the "Senior Trustees"). Each particular series of
Senior Debt Securities will be issued under the Indenture specified in the
Prospectus Supplement between HFC and a Senior Trustee, which will incorporate
the terms and provisions of the Standard Multiple-Series Indenture Provisions
for Senior Debt Securities dated as of June 1, 1992 (the "Standard Provisions").
The above noted indentures are collectively called the "Indentures for Senior
Debt Securities" herein. Senior Debt Securities will rank on a parity with all
unsecured debt of HFC, and prior to all subordinated debt.
Principal of and interest, if any, on Senior Debt Securities will be
payable at the office or agency of HFC specified in the Prospectus Supplement,
depending on the Senior Trustee; provided, however, that payment of interest may
be made at the option of HFC by check or draft mailed to the person entitled
thereto.
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Covenant Against Creation of Pledges or Liens
All Senior Debt Securities issued under the Indentures for Senior Debt
Securities will be unsecured. HFC covenants that, with the exceptions listed
below, it will not issue, assume or guarantee any indebtedness for borrowed
money secured by a mortgage, security interest, pledge or lien ("security
interest") of or upon any of its property, now owned or hereafter acquired,
unless the Senior Debt Securities then outstanding are, by supplemental
indenture, effectively secured by such security interest equally and ratably
with all other indebtedness secured thereby for so long as such other
indebtedness shall be so secured. The term "indebtedness for borrowed money"
does not include any guarantee, cash deposit or other recourse obligation in
connection with the sale, securitization or discount by HFC of finance or
accounts receivables. trade acceptances. or other paper arising in the ordinary
course of its business.
The foregoing covenant does not apply to (a) security interests to secure
the payment of the purchase price of property, shares of capital stock, or
indebtedness acquired by HFC or the cost of construction or improvement of such
property or the refinancing of all or any part of such secured indebtedness,
provided that such security interests do not apply to any other property, shares
of capital stock, or indebtedness of HFC; (b) security interests on property,
shares of capital stock, or indebtedness existing at the time of acquisition by
HFC; (c) security interests on property of a corporation which security
interests exist at the time such corporation merges or consolidates with or into
HFC or which security interests exist at the time of the sale or transfer of all
or substantially all of the assets of such corporation to HFC; (d) security
interests to secure any indebtedness of HFC to a subsidiary; (e) security
interests in property of HFC in favor of the United States of America or any
state or agency or instrumentality thereof, or in favor of any other country or
political subdivision, to secure partial, progress, advance, or other payments
pursuant to any contract or statute or to secure any indebtedness incurred or
guaranteed for the purpose of financing all or any part of the purchase price or
the cost of construction of the property subject to such security interests; (f)
security interests on properties financed through tax-exempt municipal
obligations; provided that such security interests are limited to the property
so financed; (g) security interests existing on the date of execution of the
applicable Indenture; and (b) any extension, renewal, refunding, or replacement
(or successive extensions, renewals, refundings, or replacements), in whole or
in part, of any security interest referred to in the foregoing clauses (a)
through (g) inclusive; provided, however, that the principal amount of
indebtedness secured in such extension, renewal, refunding, or replacement does
not exceed the principal amount of indebtedness secured at the time by such
security interest; provided, further, that such extension, renewal, refunding,
or replacement of such security interest is limited to all or part of the
property subject to such security interest so extended, renewed, refunded, or
replaced.
Notwithstanding the foregoing, HFC may, without equally and ratably
securing the Senior Debt Securities, issue, assume, or guarantee indebtedness
secured by a security interest not excepted pursuant to clauses (a) through (b)
above if the aggregate amount of such indebtedness, together with all other
indebtedness of, or guaranteed by, HFC existing at such time and secured by
security interests not so excepted, does not at the time exceed 10% of HFC's
Consolidated Net Worth (as defined). In addition, an arrangement with any person
providing for the leasing by HFC of any property, which property has been or is
to be sold or transferred by HFC to such person with the intention that such
property be leased back to HFC, shall not be deemed to create any indebtedness
secured by a security interest if the obligation in respect to such lease would
not be included as a liability on a consolidated balance sheet of HFC. The
holders of not less than a majority in principal amount of the Debt Securities
at the time outstanding under an Indenture, on behalf of the holders of all of
the Debt Securities issued under such Indenture, may waive compliance with the
foregoing covenant. (Standard Provisions -- Section 3.08)
Concerning the Trustees
HFC maintains a banking relationship with each of the Senior Trustees or
affiliates thereof and certain of the Senior Trustees are also trustees under
other indentures of HFC under which outstanding senior or subordinated unsecured
debt securities of HFC have been issued. The Senior Trustees or affiliates
thereof may also have other financial relations with HFC and other corporations
affiliated with HFC.
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SENIOR SUBORDINATED DEBT SECURITIES
Offered Debt Securities which will constitute senior subordinated unsecured
debt of HFC (the "Senior Subordinated Debt Securities") will be issued under (i)
an Indenture dated as of May 15, 1989, between HFC and BankAmerica National
Trust Company, successor to BankAmerica Trust Company of New York, as Trustee,
or (ii) an Indenture dated as of March 15, 1990, between HFC and Harris Trust
and Savings Bank, as Trustee (the "Indentures for Senior Subordinated Debt
Securities").
Unless a different place is specified in the Prospectus Supplement,
principal and interest, if any, on Senior Subordinated Debt Securities will be
payable at the office or agency of HFC in New York, New York, with respect to
the Indenture with BankAmerica National Trust Company; or in Chicago, Illinois,
with respect to the Indenture with Harris Trust and Savings Bank; provided,
however, that payment of interest may be made at the option of HFC by check or
draft mailed to the person entitled thereto.
Subordination
Senior Subordinated Debt Securities are subordinate and junior in right of
payment to all indebtedness for borrowed money of HFC, whenever outstanding,
which is not by its terms subordinate and junior to other indebtedness of HFC,
such indebtedness of HFC to which the Senior Subordinated Debt Securities are
subordinate and junior being hereinafter called "senior indebtedness." At
September 30, 1995, the aggregate amount of the outstanding senior indebtedness
of HFC was approximately $12.0 billion. HFC is not directly limited in its
ability to issue additional senior indebtedness.
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to HFC or to its creditors, as such, or to its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of HFC, whether or not involving insolvency or
bankruptcy, then the holders of senior indebtedness shall be entitled to receive
payment in full of all principal and interest on all senior indebtedness before
the holders of the Senior Subordinated Debt Securities are entitled to receive
any payment on account of principal or interest upon the Senior Subordinated
Debt Securities, and to that end (but subject to the power of a court of
competent jurisdiction to make other equitable provision reflecting the rights
conferred in the Indentures for Senior Subordinated Debt Securities upon the
senior indebtedness and the holders thereof with respect to the subordinated
indebtedness represented by the Senior Subordinated Debt Securities and the
holders thereof by a lawful plan of reorganization under applicable bankruptcy
law) the holders of senior indebtedness shall be entitled to receive for
application in payment thereof any payment or distribution of any kind or
character, whether in cash or property or securities, which may be payable or
deliverable in any such proceedings in respect of the Senior Subordinated Debt
Securities, except securities which are subordinate and junior in right of
payment to the payment of all senior indebtedness then outstanding.
In the event that any Senior Subordinated Debt Security is declared or
becomes due and payable before its expressed maturity because of the occurrence
of a default under the Indentures for Senior Subordinated Debt Securities (under
circumstances when the provisions of the foregoing paragraph shall not be
applicable), the holders of the senior indebtedness outstanding at the time such
Senior Subordinated Debt Security so becomes due and payable because of such
occurrence of such default shall be entitled to receive payment in full of all
principal and interest on all senior indebtedness before the holders of the
Senior Subordinated Debt Securities are entitled to receive any payment on
account of the principal or interest upon the Senior Subordinated Debt
Securities.
Without limiting the foregoing, no payment of principal, premium or
interest shall be made upon the Senior Subordinated Debt Securities during the
continuance of any default in the making of any required payment under any
sinking fund or analogous fund created for the benefit of any senior
indebtedness or any other default in the payment of principal of, or interest
on, any senior indebtedness then outstanding, whether by lapse of time, by
declaration, by call or notice of prepayment or otherwise. (Indentures for
Senior Subordinated Debt Securities -- Section 12.01)
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Liens
HFC will not create, assume, incur or suffer to exist any mortgage, pledge
or other lien on any of the property or assets of HFC whether now owned or
hereafter acquired for the purpose of securing any senior subordinated
indebtedness or junior subordinated indebtedness, as defined. (Indentures for
Senior Subordinated Debt Securities -- Section 3.08)
Concerning the Trustees
BankAmerica National Trust Company and Harris Trust and Savings Bank are
trustees under other indentures of HFC under which certain of HFC's outstanding
senior subordinated debt securities have been issued. HFC maintains banking
relationships with Harris Trust and Savings Bank and an affiliate of BankAmerica
National Trust Company. These trustees, or affiliates thereof, also have other
financial relations with HFC and other corporations affiliated with HFC.
SATISFACTION, DISCHARGE, AND DEFEASANCE OF THE INDENTURES AND DEBT SECURITIES
If there is deposited irrevocably with the Trustee as trust funds for the
benefit of the holders of Debt Securities of a particular series an amount, in
money or the equivalent in securities of the United States or securities the
principal of and interest on which is fully guaranteed by the United States,
sufficient to pay the principal, premium, if any, and interest, if any, on such
series of Debt Securities on the dates such payments are due in accordance with
the terms of such series of Debt Securities through their maturity, and if HFC
has paid or caused to be paid all other sums payable by it under the applicable
Indenture with respect to such series, then HFC will be deemed to have satisfied
and discharged the entire indebtedness represented by such series of Debt
Securities and all of the obligations of HFC under such Indenture with respect
to such series, except as otherwise provided in such Indenture. In the event of
any such defeasance, holders of such Debt Securities would be able to look only
to such trust funds for payment of principal, premium, if any, and interest, if
any, on their Debt Securities. (Standard Provisions, Indentures for Senior
Subordinated Debt Securities -- Section 6.03)
For federal income tax purposes, any such defeasance may be treated as a
taxable exchange of the related Debt Securities for an issue of obligations of
the trust or a direct interest in the cash and securities held in the trust. In
that case holders of such Debt Securities would recognize gain or loss as if the
trust obligations or the cash or securities deposited, as the case may be, had
actually been received by them in exchange for their Debt Securities. Such
holders thereafter would be required to include in income a share of the income,
gain or loss of the trust. The amount so required to be included in income could
be a different amount than would be includable in the absence of defeasance.
Prospective investors are urged to consult their own tax advisors as to the
specific consequences to them of defeasance.
MODIFICATION OF INDENTURES
Each Indenture provides that the holders of not less than a majority in
principal amount of each series of Debt Securities at the time outstanding under
such Indenture may enter into supplemental indentures for the purpose of
amending, in any manner, provisions of the Indenture or of any supplemental
indenture or modifying the rights of holders of such series of Debt Securities.
However, no such supplemental indenture, without the consent of the holder of
each outstanding Debt Security affected thereby, shall, among other things, (i)
change the maturity of the principal of, or any installment of interest on any
Debt Security, or reduce the principal amount thereof or the interest thereon or
any premium payable upon the redemption thereof, or (ii) reduce the aforesaid
percentage of the Debt Securities, the consent of the holders of which is
required for the execution of any such supplemental indenture or for any waiver
of compliance with any covenant or condition in such Indenture. (Standard
Provisions, Indentures for Senior Subordinated Debt Securities -- Section 11.02)
Each Indenture may be amended or supplemented without the consent of any
holder of Debt Securities under certain circumstances, including (i) to cure any
ambiguity, defect or inconsistency in the Indenture, any supplemental indenture,
or in the Debt Securities of any series; (ii) to evidence the succession of
another
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corporation to the Company and to provide for the assumption of all the
obligations of the Company under the Debt Securities and the Indenture by such
corporation; (iii) to provide for uncertificated Debt Securities in addition to
certificated Debt Securities; (iv) to make any change that does not adversely
affect the rights of holders of Debt Securities issued thereunder; (v) to
provide for a new series of Debt Securities; or (vi) to add to rights of holders
of Debt Securities or add additional Events of Default. (Standard Provisions,
Indentures for Senior Subordinated Debt Securities -- Section 11.01)
SUCCESSOR ENTITY
The Company may not consolidate with or merge into, or transfer, sell or
lease its properties and assets as, or substantially as, an entirety to another
entity unless the successor entity is a corporation incorporated within the
United States and, after giving effect thereto, no default under the Indenture
shall have occurred and be continuing. Thereafter, except in the case of a
lease, all obligations of the Company under the Indenture terminate. (Standard
Provisions, Indentures for Senior Subordinated Debt Securities -- Sections 10.01
and 10.02)
EVENTS OF DEFAULT
Each Indenture defines the following as Events of Default with respect to
any series of Debt Securities: default for 30 days in the payment of any
interest upon any Debt Security of such series issued under such Indenture;
default in the payment of any principal of or premium on any such Debt Security;
default for 30 days in the deposit of any sinking fund or similar payment for
such series of Debt Securities; default for 60 days after notice in the
performance of any other covenant in the Indenture; certain defaults for 30 days
after notice in the payment of principal or interest, or in the performance of
other covenants, with respect to borrowed money under another indenture in which
the Trustee for such Debt Securities is trustee which results in the principal
amount of such indebtedness becoming due and payable prior to maturity, which
acceleration has not been rescinded or annulled; and certain events of
bankruptcy, insolvency or reorganization. HFC is required to file with each
Trustee annually a certificate as to the absence of certain defaults under the
Indenture. (Standard Provisions, Indentures for Senior Subordinated Debt
Securities -- Sections 7.01 and 3.05)
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, either the Trustee or the holders of
not less than 25% in principal amount of the outstanding Debt Securities of such
series by notice as provided in the Indenture may declare the principal amount
of all the Debt Securities of such series to be due and payable immediately. At
any time after a declaration of acceleration with respect to Debt Securities of
any series has been made, but before a judgment or decree for payment of money
has been obtained by the Trustee, the holders of not less than a majority in
principal amount of outstanding Debt Securities of such series may, under
certain circumstances, rescind or annul such declaration of acceleration.
(Standard Provisions, Indentures for Senior Subordinated Debt Securities --
Section 7.02)
The holders of not less than a majority in principal amount of the
outstanding Debt Securities of each series may, on behalf of all holders of Debt
Securities of such series, waive any past default under the Indenture and its
consequences with respect to Debt Securities of such series, except a default
(a) in the payment of principal of (or premium, if any) or interest, if any, on
any Debt Securities of such series, or (b) in respect of a covenant or provision
of the Indenture which cannot be modified or amended without the consent of the
holder of each outstanding Debt Security of such series affected. (Standard
Provisions, Indentures for Senior Subordinated Debt Securities -- Section 7.13)
Each Indenture provides that the Trustee thereunder may withhold notice to
holders of Debt Securities of any default, except in payment of the principal of
(or premium, if any) or interest, if any, on any Debt Security issued under such
Indenture or in the payment of any sinking fund or similar payment, if it
considers it in the interest of holders of Debt Securities to do so. (Standard
Provisions, Indentures for Senior Subordinated Debt Securities -- Section 8.02)
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Holders of Debt Securities may not enforce an Indenture except as provided
therein. (Standard Provisions, Indentures for Senior Subordinated Debt
Securities -- Section 7.07) Each Indenture provides that the holders of a
majority in principal amount of the outstanding debt securities issued under
such Indenture have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee. (Standard Provisions, Indentures for Senior
Subordinated Debt Securities -- Section 7.12) The Trustee will not be required
to comply with any request or direction of holders of Debt Securities pursuant
to the Indenture unless offered indemnity against costs and liabilities which
might be incurred by the Trustee as a result of such compliance. (Standard
Provisions, Indentures for Senior Subordinated Debt Securities -- Section
8.03(e))
DESCRIPTION OF WARRANTS
HFC may issue, together with any Debt Securities offered by any Prospectus
Supplement or separately, Warrants for the purchase of other Debt Securities.
The Warrants are to be issued under warrant agreements (each a "Warrant
Agreement") to be entered into between HFC and a bank or trust company, as
warrant agent ("Warrant Agent"), all as set forth in the Prospectus Supplement
relating to the particular issue of Warrants ("Offered Warrants"). A copy of the
forms of Warrant Agreement, including the form of warrant certificates
representing the Warrants ("Warrant Certificates"), reflecting the alternative
provisions to be included in the Warrant Agreements that will be entered into
with respect to particular offerings of Warrants, is filed as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Warrant Agreement and the Warrant Certificates do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all the
provisions of the Warrant Agreement and the Warrant certificates, respectively,
including the definitions therein of certain terms.
GENERAL
The Prospectus Supplement describes the terms of the Offered Warrants, the
Warrant Agreement relating to the Offered Warrants and the Warrant Certificates
representing the Offered Warrants, including the following: (1) the designation,
aggregate principal amount, and terms of the Debt Securities purchasable upon
exercise of the Offered Warrants; (2) the designation and terms of any related
Debt Securities with which the Offered Warrants are issued and the number of
Offered Warrants issued with each such Debt Security; (3) the date, if any, on
and after which the Offered Warrants and the related Offered Debt Securities
will be separately transferable; (4) the principal amount of Debt Securities
purchasable upon exercise of one Offered Warrant and the price at which such
principal amount of Debt Securities may be purchased upon such exercise; (5) the
date on which the right to exercise the Offered Warrants shall commence and the
date ("Expiration Date") on which such right shall expire; (6) whether the
Warrants represented by the Warrant Certificates will be issued in registered or
bearer form, and if registered, where they may be transferred and registered;
and (7) any other terms of the Offered Warrants.
Warrant Certificates will be exchangeable on the terms specified in the
Prospectus Supplement for new Warrant Certificates of different denominations,
and Warrants may be exercised at the corporate trust office of the Warrant Agent
or any other office indicated in the Prospectus Supplement. Prior to the
exercise of their Warrants, holders of Warrants will not have any of the rights
of Holders of the Debt Securities purchasable upon such exercise and will not be
entitled to payments of principal of, premium, if any, or interest, if any, on
the Debt Securities purchasable upon such exercise.
EXERCISE OF WARRANTS
Each Offered Warrant will entitle the holder to purchase such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement relating
to the Offered Warrants by payment of such exercise price in full in the manner
specified in the Prospectus Supplement. Offered Warrants may be exercised at any
time up to the close of business on the Expiration Date set forth in the
Prospectus Supplement relating to the Offered Warrants. After the close of
business on the Expiration Date, unexercised Warrants will become void.
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Upon receipt of payment of the exercise price and the Warrant Certificate
properly completed and duly executed at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement, HFC
will, as soon as practicable, forward the Debt Securities purchasable upon such
exercise. If less than all of the Warrants represented by such Warrant
Certificate are exercised, a new Warrant Certificate will be issued for the
remaining amount of Warrants.
PLAN OF DISTRIBUTION
HFC may sell the Securities in any of three ways: (i) through underwriters
or dealers; (ii) directly to a limited number of purchasers or to a single
purchaser; or (iii) through agents. The Prospectus Supplement sets forth the
terms of the offering of the Offered Debt Securities and any Offered Warrants
(collectively, the "Offered Securities"), including the name or names of any
underwriters, dealers or agents, the purchase price of the Offered Securities
and the proceeds to HFC from such sale, any underwriting discounts and other
items constituting underwriters' compensation and any discounts and commissions
allowed or paid to dealers. Any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers may be changed from time
to time.
If the Offered Securities are sold through underwriters, the Prospectus
Supplement relating thereto describes the nature of the obligation of the
underwriters to take and pay for the Offered Securities. The Offered Securities
may be offered to the public either through underwriting syndicates represented
by one or more managing underwriters or directly by one or more underwriting
firms acting alone. The underwriter or underwriters with respect to a particular
underwritten offering of Offered Securities are named in the Prospectus
Supplement relating to such offering, and, if an underwriting syndicate is used,
the managing underwriter or underwriters are set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement,
the obligations of the underwriters to purchase the Offered Securities will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all the Offered Securities if any are purchased.
The Offered Securities may be sold directly by HFC or through agents
designated by HFC from time to time. Any agent involved in the offer or sale of
the Offered Securities in respect of which this Prospectus is delivered is
named, and any commissions payable by HFC to such agent are set forth, in the
Prospectus Supplement relating thereto.
Underwriters and agents who participate in the distribution of the Offered
Securities may be entitled under agreements which may be entered into with HFC
to indemnification by HFC against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
which the underwriters or agents may be required to make in respect thereof.
If so indicated in the Prospectus Supplement, HFC will authorize
underwriters, dealers or other persons acting as HFC's agents to solicit offers
by certain institutions to purchase Offered Securities from HFC pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
HFC. The obligations of any purchaser under any such contract will not be
subject to any conditions except that (i) the purchase of the Offered Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject, and (ii) if the Offered
Securities are also being sold to underwriters, HFC shall have sold to such
underwriters the Offered Securities not sold for delayed delivery. The
underwriters, dealers and such other persons will not have any responsibility in
respect of the validity or performance of such contracts.
There can be no assurance that a secondary market will be created for the
Offered Securities or, if it is created, that it will continue.
12
<PAGE> 36
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") that are
subject to ERISA and on persons who are fiduciaries with respect to such Plans.
In accordance with the ERISA's general fiduciary requirements, a fiduciary with
respect to any such Plan who is considering the purchase of Offered Securities
on behalf of such Plan should determine whether such purchase is permitted under
the governing Plan documents and is prudent and appropriate for the Plan in view
of its overall investment policy and the composition and diversification of its
portfolio. Other provisions of ERISA and Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code") prohibit certain transactions between a
Plan and persons who have certain specified relationships to the Plan ("parties
in interest" within the meaning of ERISA or "disqualified persons" within the
meaning of Section 4975 of the Code). Thus, a Plan fiduciary considering the
purchase of Offered Securities should consider whether such a purchase might
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code.
HFC may be considered a "party in interest" or a "disqualified person" with
respect to many Plans that are subject to ERISA. The purchase of Offered
Securities by a Plan that is subject to the fiduciary responsibility provisions
of ERISA or the prohibited transaction provisions of Section 4975 of the Code
(including individual retirement accounts and other plans described in Section
4975(c)(1) of the Code) and with respect to which the Company is a party in
interest or a disqualified person may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Offered
Securities are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment finds) or PTCE 90-1 (an exemption for
certain transactions involving insurance company pooled separate accounts). ANY
PENSION OR OTHER EMPLOYEE BENEFIT PLAN PROPOSING TO ACQUIRE ANY OFFERED
SECURITIES SHOULD CONSULT WITH ITS COUNSEL.
13
<PAGE> 37
PRINCIPAL OFFICE OF THE COMPANY
2700 Sanders Road
Prospect Heights, Illinois 60070
TRUSTEE AND REGISTRAR
The First National Bank of Chicago
Mail Suite 0126
One First National Plaza
Chicago, Illinois 60670
LUXEMBOURG PAYING AGENT/TRANSFER AGENT
Banque Internationale
a Luxembourg societe anonyme
69, route d'Esch
L-2953 Luxembourg
LISTING AGENT
Banque Internationale
a Luxembourg societe anonyme
69, route d'Esch
L-2953 Luxembourg
LEGAL ADVISERS
<TABLE>
<S> <C>
To the Company To the Underwriters
as to United States Law as to United States Law
John W. Blenke, Esq. McDermott, Will & Emery
2700 Sanders Road 227 W. Monroe Street
Prospect Heights, Illinois 60070 Chicago, Illinois 60606
</TABLE>
To the Company
as to United States Tax Law
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
AUDITORS TO THE COMPANY
Arthur Andersen LLP
33 West Monroe Street
Chicago, Illinois 60603
<PAGE> 38
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OR AN OFFER TO BUY, ANY OF THE NOTES IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Available Information...................... S-3
Incorporation of Certain Documents by
Reference................................ S-3
Household Finance Corporation.............. S-4
Recent Developments........................ S-4
Use of Proceeds............................ S-4
Ratio of Earnings to Fixed Charges......... S-5
Capitalization of HFC...................... S-5
Selected Financial Information of HFC...... S-6
Description of Notes....................... S-8
Certain United States Tax Documentation
Requirements............................. S-15
United States Taxation of Non-United States
Persons.................................. S-16
Underwriting............................... S-19
Notice to Canadian Residents............... S-21
Legal Opinions............................. S-22
Experts.................................... S-22
General Information........................ S-22
PROSPECTUS
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
Household Finance Corporation.............. 3
Use of Proceeds............................ 3
Ratio of Earnings to Fixed Charges......... 3
Description of Debt Securities............. 4
Description of Warrants.................... 11
Plan of Distribution....................... 12
ERISA Matters.............................. 13
</TABLE>
======================================================
======================================================
$1,250,000,000
HOUSEHOLD
FINANCE
CORPORATION
$750,000,000
6.40% NOTES
DUE JUNE 17, 2008
$500,000,000
FLOATING RATE NOTES
DUE JUNE 17, 2005
-----------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
JUNE 11, 1998
======================================================
