<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(2)
REGISTRATION NO. 333-72453
Prospectus Supplement
(To Prospectus dated March 3, 1999)
Household Finance Corporation
$1,000,000,000
6% Notes due May 1, 2004
Interest payable May 1 and November 1
Issue price: 99.978%
The Notes will mature on May 1, 2004. Interest will accrue from April 30,
1999. The Company will not have the right to redeem the Notes before their
maturity unless certain events occur involving United States taxation. The
Notes will be issued in minimum denominations of $1,000 increased in multiples
of $1,000.
Neither the Securities and Exchange Commission nor any state securities
commission nor the Luxembourg Stock Exchange has approved or disapproved of
the Notes or passed upon the adequacy or accuracy of this Prospectus
Supplement or the Prospectus. Any representation to the contrary is a criminal
offense.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Discounts and Proceeds to
Public Commissions the Company
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 99.978% .350% 99.628%
- -------------------------------------------------------------------------------------------------
Total $999,780,000 $3,500,000 $996,280,000
- -------------------------------------------------------------------------------------------------
</TABLE>
Application has been made to list the Notes on the Luxembourg Stock Exchange.
It is expected that delivery of the Notes will be made to investors on or
about April 30, 1999 only through The Depository Trust Company, the Euroclear
System or Cedel Bank.
Joint Bookrunners
J.P. Morgan & Co. Morgan Stanley Dean Witter
ABN AMRO Incorporated Chase Securities Inc.
Credit Suisse First Boston Deutsche Bank
Donaldson, Lufkin & Jenrette Merrill Lynch & Co.
Salomon Smith Barney Warburg Dillon Read LLC
April 23, 1999
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Use of Proceeds............................................................ S-3
Capitalization of HFC...................................................... S-3
Selected Financial Information of HFC...................................... S-4
Description of Notes....................................................... S-6
Underwriting............................................................... S-9
Notice to Canadian Residents............................................... S-11
Legal Opinions............................................................. S-11
Experts.................................................................... S-12
General Information........................................................ S-12
Prospectus
About This Prospectus...................................................... 2
Where You Can Find More Information........................................ 2
Special Note Regarding Forward-Looking Statements.......................... 2
Household Finance Corporation.............................................. 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Description of Debt Securities............................................. 4
Description of Warrants.................................................... 13
Certain United States Tax Documentation Requirements....................... 14
United States Taxation of Non-United States Persons........................ 16
Plan of Distribution....................................................... 18
ERISA Matters.............................................................. 18
Legal Opinions............................................................. 19
Experts.................................................................... 19
</TABLE>
----------------
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. The
Company has not authorized anyone to provide you with information different
from that contained in this Prospectus Supplement and the accompanying
Prospectus. The Company is offering to sell the Notes, and seeking offers to
buy the Notes, only in jurisdictions where offers and sales are permitted. The
information contained in this Prospectus Supplement and the accompanying
Prospectus is accurate only as of the date of this Prospectus Supplement and
the date of the accompanying Prospectus, regardless of the time of delivery of
this Prospectus Supplement or any sales of the Notes. In this Prospectus
Supplement and the accompanying Prospectus, the "Company" and "HFC" refer to
Household Finance Corporation.
----------------
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."
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.
S-2
<PAGE>
The underwriters 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."
References herein to "$" and "dollars" are to the currency of the United
States.
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 referred to under the heading "Where You Can Find More
Information" in the accompanying Prospectus (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.
USE OF PROCEEDS
HFC will apply the net proceeds (estimated to be approximately
$995,680,000) 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.
CAPITALIZATION OF HFC
The following table sets forth the consolidated capitalization of HFC at
December 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 "Where You Can Find More Information" in
the accompanying Prospectus. All amounts are stated in millions of U.S.
dollars. Since December 31, 1998 there has been no material change in the
consolidated capitalization of HFC.
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Commercial paper, bank and other borrowings....................... $ 7,143.1
Senior and senior subordinated debt (with original maturities over
one year) (1).................................................... 27,186.1
---------
Total debt........................................................ 34,329.2
---------
Common shareholder's equity:
Common stock, $1.00 par value, 1,000 shares authorized, issued
and outstanding, and additional paid-in capital (2)............ 2,960.3
Retained earnings............................................... 2,836.4
Accumulated other comprehensive income, net of tax.............. 13.7
---------
Total common shareholder's equity............................. 5,810.4
---------
Total capitalization........................................ $40,139.6
=========
</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.
S-3
<PAGE>
SELECTED FINANCIAL INFORMATION OF HFC
The financial information which is set forth below as of and for the two
years ended December 31, 1998 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. 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 "Where You Can Find
More Information" in the accompanying Prospectus. All amounts are stated in
millions of U.S. dollars.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------
1998 1997
-------- --------
<S> <C> <C>
Finance income............................................... $4,581.4 $4,205.1
Other interest income........................................ 36.5 35.1
Interest expense............................................. 1,995.5 1,853.5
-------- --------
Net interest margin.......................................... 2,622.4 2,386.7
Provision for credit losses on owned receivables............. 1,253.1 1,252.1
-------- --------
Net interest margin after provision for credit losses........ 1,369.3 1,134.6
-------- --------
Securitization income........................................ 1,058.5 1,232.0
Insurance revenues........................................... 352.9 352.9
Investment income............................................ 146.7 152.6
Fee income................................................... 498.7 514.8
Other income................................................. 239.2 310.5
Gain on sale of Beneficial Canada............................ 189.4 --
-------- --------
Total other revenues......................................... 2,485.4 2,562.8
-------- --------
Salaries and fringe benefits................................. 921.7 925.3
Other operating expenses..................................... 889.9 1,233.1
Amortization of acquired intangibles and goodwill............ 168.8 143.4
Policyholders' benefits...................................... 207.6 236.6
Merger and integration related costs......................... 1,000.0 --
-------- --------
Total costs and expenses..................................... 3,188.0 2,538.4
-------- --------
Income before income taxes................................... 666.7 1,159.0
Income taxes................................................. 361.8 391.9
-------- --------
Net income................................................... $ 304.9 $ 767.1
======== ========
</TABLE>
S-4
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
At December 31,
-------------------
1998 1997
--------- ---------
<S> <C> <C>
Assets
Cash....................................................... $ 428.4 $ 545.3
Investment securities...................................... 2,944.4 2,336.8
Receivables, net........................................... 34,283.2 32,152.5
Advances to parent company and affiliates.................. 494.0 10.5
Acquired intangibles and goodwill, net..................... 1,682.7 1,777.9
Properties and equipment, net.............................. 376.9 464.8
Real estate owned.......................................... 235.1 187.8
Other assets............................................... 1,918.3 1,973.3
--------- ---------
Total assets............................................. $42,363.0 $39,448.9
========= =========
Liabilities and Shareholder's Equity
Deposits................................................... -- $ 555.3
Commercial paper, bank and other borrowings................ $ 7,143.1 9,547.1
Senior and senior subordinated debt (with original
maturities over one year)................................. 27,186.1 20,909.2
--------- ---------
Total debt............................................... 34,329.2 31,011.6
Insurance policy and claim reserves........................ 1,076.2 1,182.3
Other liabilities.......................................... 1,147.2 1,451.3
--------- ---------
Total liabilities........................................ 36,552.6 33,645.2
Common shareholder's equity................................ 5,810.4 5,803.7
--------- ---------
Total liabilities and shareholder's equity............... $42,363.0 $39,448.9
========= =========
</TABLE>
S-5
<PAGE>
DESCRIPTION OF NOTES
General
The following description of the terms of the 6% Notes due May 1, 2004 (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 Notes are to be issued as a series of Senior Debt
Securities under an Indenture dated as of November 1, 1994 (the "Indenture"),
between the Company and The Bank of New York, 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 Notes will mature on May 1, 2004. 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 on 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
Interest on the Notes will accrue from and including April 30, 1999 at the
rate of 6% per annum and will be payable semiannually on May 1 and November 1,
beginning November 1, 1999, to the persons in whose names the Notes are
registered at the close of business on the preceding April 15 or October 15,
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 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.
Depositary
Upon issuance, all Notes will be represented by one or more fully
registered global notes ("Global Notes"). Each such Global Note will be
deposited with, or on behalf of, The Depository Trust Company or
S-6
<PAGE>
any successor thereto ("DTC" or the "Depositary"), as Depositary, and
registered in the name of Cede & Co. (DTC's partnership nominee). 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. See
"Description of Debt Securities--Book-Entry System" and "--Global Clearance
and Settlement Procedures" in the accompanying Prospectus.
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.
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 of 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
S-7
<PAGE>
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
(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 herein under the headings "Payment of Additional Amounts" and
"Description of Notes--Redemption for Tax Reasons", and in the accompanying
Prospectus under the headings "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.
S-8
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters") have severally agreed to
purchase, and the Company has agreed to sell to them severally, the respective
amount of the Notes set forth below opposite their names. In the Underwriting
Agreement, the Underwriters have agreed to purchase all the Notes if any Notes
are purchased.
<TABLE>
<CAPTION>
Principal
Amount of
Underwriter Notes
----------- --------------
<S> <C>
J.P. Morgan Securities Inc................................ $ 380,000,000
Morgan Stanley & Co. Incorporated......................... 380,000,000
ABN AMRO Incorporated..................................... 30,000,000
Chase Securities Inc...................................... 30,000,000
Credit Suisse First Boston Corporation.................... 30,000,000
Deutsche Bank AG London................................... 30,000,000
Donaldson Lufkin & Jenrette Securities Corporation........ 30,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................... 30,000,000
Salomon Smith Barney Inc.................................. 30,000,000
Warburg Dillon Read LLC................................... 30,000,000
--------------
Total................................................. $1,000,000,000
==============
</TABLE>
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Notes to the public initially at the public offering
price set forth on the cover page of this prospectus supplement and to certain
dealers at such price less a concession not in excess of .200% of the
principal amount of the Notes; that the Underwriters may allow, and such
dealers may reallow, a concession not in excess of .175% of such principal
amount on sales to certain other dealers; and that after the initial public
offering the public offering price and such concessions may be changed by the
Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
Each of the Underwriters and their respective affiliates have engaged, and
may in the future engage, in various investment banking and/or commercial
banking transactions with and perform various services for the Company in the
ordinary course of business.
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
offered, sold or delivered 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;
S-9
<PAGE>
(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 II(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 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-
Verkaufsprospektgeset:). 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 Notes on the Luxembourg
Stock Exchange, a listing may not be obtained. In addition, the Notes are a
new issue of securities with no established trading market. The Company has
been advised by the Underwriters that they intend to make a market in the
Notes, but that they are not obligated to do so and may discontinue such
market-making at any time without notice.
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 thereof.
In connection with the offering of the Notes, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may overallot in connection with the
offering of the Notes, creating a syndicate short position. In addition, the
Underwriters may bid for, and purchase, Notes in the open market to cover
syndicate shorts or to stabilize the price of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for
distributing the Notes in the offering of the Notes, if the syndicate
repurchases previously distributed Notes in syndicate covering transactions,
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Notes above independent market levels. The
Underwriters are not required to engage in any of these activities, and may
end any of them at any time.
Expenses associated with this offering, to be paid by the Company, are
estimated at $600,000.
It is expected that delivery of the Notes will be made against payment
therefor on or about April 30, 1999, which is the fifth business day following
the date of this prospectus supplement (such settlement cycle being herein
referred to as "T+5"). 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+5 settlement.
S-10
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distributions 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 the 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 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 provision 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 purchase 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. 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.
S-11
<PAGE>
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.
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 above documents together with this
Prospectus Supplement, the accompanying Prospectus, the Indenture, the form of
Underwriting Agreement and the Company's current Annual Report on Form 10-K.
Quarterly Reports 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 Internationale a
Luxembourg, in Luxembourg. Banque Internationale a Luxembourg will act as
intermediary between the Luxembourg Stock Exchange and the Company and the
holders of the Notes, as long as the Notes are represented by Global 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 December 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 April 23, 1999.
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 Notes have been assigned Euroclear and Cedel Common Code No. 009716556,
International Security Identification Number (ISIN) US441812GF50 and CUSIP No.
441812GF5.
S-12
<PAGE>
PRINCIPAL OFFICE OF THE COMPANY
2700 Sanders Road
Prospect Heights, Illinois 60070
TRUSTEE AND REGISTRAR
The Bank of New York
101 Barclay Street
New York, New York 10286
LUXEMBOURG PAYING AGENT/TRANSFER AGENT
Banque Internationale a Luxembourg S.A.
69, route d'Esch
L-2953 Luxembourg
LISTING AGENT
Banque Internationale a Luxembourg S. A.
69 route d'Esch
L-2953 Luxembourg
LEGAL ADVISERS
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
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>
Household Finance Corporation
$6,050,000,000
Debt Securities
and
Warrants to Purchase Debt Securities
----------------
Household Finance Corporation may sell at one or more times up to
$6,050,000,000 of its debt securities and warrants to purchase debt securities.
We will provide specific terms of the securities which we may offer at any time
in supplements to this prospectus. You should read this prospectus and any
supplement carefully before you invest.
----------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is
accurate or complete. Any representation
to the contrary is a criminal
offense.
----------------
The date of this Prospectus is March 3, 1999.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission ("SEC") utilizing a "shelf" registration
process. Under this process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $6,050,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we offer to sell
securities, we will provide a supplement to this prospectus that will contain
specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with the additional information described under the heading WHERE YOU
CAN FIND MORE INFORMATION. In this prospectus, the "Company" and "HFC" refer to
Household Finance Corporation.
WHERE YOU CAN FIND MORE INFORMATION
Household Finance Corporation files annual, quarterly and special reports
and other information with the SEC. You may read and copy any document filed by
HFC at the SEC's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. SEC filings are also available to
the public on the SEC's Internet web site at http:\\www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file with the SEC later
will automatically update and supersede this information. We incorporate by
reference the HFC documents listed below and any future filings made by HFC
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, until we sell all of the securities.
. Annual Report on Form 10-K for the year ended December 31, 1997;
. Quarterly Reports on Forms 10-Q for the quarters ended March 31, June 30
and September 30, 1998;
. Current Reports on Forms 8-K dated February 12, April 7, June 2, June 30,
September 1 and November 16, 1998 and January 29 and February 5, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at: Household Finance Corporation, Office of the Secretary,
Prospect Heights, Illinois 60070, Telephone (847) 564-5000.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different or additional information.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "Household Finance
Corporation" and elsewhere in this prospectus or in the information
incorporated by reference herein may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such information may involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements of HFC
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
2
<PAGE>
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. ("Household International").
HFC and its subsidiaries offer a diversified range of financial services.
The principal product of our consumer financial services business is the making
of cash loans, including home equity loans secured by first and second
mortgages, sales finance loans and other unsecured loans directly to consumers
in the United States. Loans are made through branch lending offices under the
brands "HFC" and "Beneficial", and through direct mail and telemarketing. We
also acquire portfolios of open-end and closed-end, secured and unsecured
loans.
We offer both MasterCard* and VISA* credit cards to residents throughout the
United States. We also purchase and service revolving charge card accounts
originated by merchants. These accounts result from consumer purchases of goods
and services from the originating merchant. We also directly originate closed-
end sales contracts.
A subsidiary of HFC also makes loans to non-prime borrowers for the purchase
of new and used vehicles. The loans are secured by the vehicles, which are
generally sold through franchised dealers.
Where applicable laws permit, we offer credit life and credit accident,
health and disability insurance to our customers. Such insurance is generally
written directly by, or reinsured with, one of our insurance affiliates.
On June 30, 1998, Household International completed the merger of Beneficial
Corporation ("Beneficial") with a subsidiary of Household International. Upon
completion of the Merger, substantially all of Beneficial's net assets were
contributed by Household International to HFC. The merger was accounted for as
a "pooling of interests" under generally accepted accounting principles and
accordingly, financial information of HFC incorporated by reference herein
includes the combined results of HFC and Beneficial.
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>
Year Ended December 31,
------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HFC and subsidiaries--calculated on income
from continuing operations............................ 1.32 1.61 1.57 1.41 1.51
</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). The December 31, 1998
ratio has been negatively impacted by one-time merger and integration related
costs associated with the merger of Household International and Beneficial.
Excluding the merger and integration related costs, the December 31, 1998 ratio
would have been 1.81.
- --------
* MasterCard and VISA are registered trademarks of MasterCard International
Incorporated and VISA USA, Inc., respectively.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
HFC may offer, from time to time, one or more series of unsecured senior
notes ("Debt Securities") and warrants ("Warrants") to purchase Debt Securities
(the Debt Securities and Warrants being hereafter collectively called the
"Securities"). The Securities offered pursuant to this prospectus may have an
aggregate offering price up to U.S. $6,050,000,000, or the equivalent thereof
if any of the Securities are denominated in a foreign currency or a foreign
currency unit.
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any supplement to this
prospectus ("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. Unless
otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities of each series will be issued 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 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
4
<PAGE>
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 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
Unless otherwise indicated in the Prospectus Supplement with respect to any
series of Offered Debt Securities, upon issuance, all 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 ("DTC" or the "Depositary") and registered in the name of Cede &
Co. (the Depositary's partnership nominee). Unless and until exchanged in whole
or in part for Offered Debt Securities in definitive form, no Global Security
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.
If so indicated in the Prospectus Supplement with respect to any series of
Offered Debt Securities, investors may elect to hold interests in Global
Securities 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. Unless otherwise indicated
in the applicable Prospectus Supplement, 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
Security, the Depositary or its nominee, as the case may be, will be considered
the sole owner or holder of Offered Debt Securities represented by such Global
Security for all purposes under the Indenture. Except as provided below, the
actual owners of Offered Debt Securities represented by a Global Security (the
"Beneficial Owner") will not be entitled to have the Offered Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of the Offered Debt Securities in
definitive form and will not be considered the owners or holders thereof under
the applicable Indenture, including for purposes of receiving any reports
delivered by the Company or the applicable Trustee pursuant to such Indenture.
Accordingly, each person owning a beneficial interest in a Global Security 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 applicable 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 an 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
5
<PAGE>
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 a Trustee a Company Order to the
effect that Global Securities shall be exchangeable or (z) an Event of Default
(as defined herein) has occurred and is continuing with respect to Offered Debt
Securities, the Global Securities will be exchangeable for Offered Debt
Securities in definitive form of like tenor and of an equal aggregate principal
amount, in denominations of $1,000 and integral multiples thereof. Such
definitive Offered Debt Securities shall be registered in such name or names as
the Depositary shall instruct the applicable 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
Securities.
The following is based on information furnished by DTC:
DTC will act as securities depositary for Offered Debt Securities. Offered
Debt Securities will be issued as fully registered notes registered in the name
of Cede & Co. (DTC's partnership nominee). One or more fully registered Global
Securities will be issued for the Offered Debt Securities 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 Offered Debt Securities under DTC's system must be made by or
through Direct Participants, which will receive a credit for Offered Debt
Securities 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 Offered Debt Securities 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 Offered Debt Securities, except as provided above.
To facilitate subsequent transfers, all Offered Debt Securities deposited
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of Offered Debt Securities 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 Offered Debt Securities. 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.
6
<PAGE>
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 Offered
Debt Securities. 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 Offered Debt Securities are credited on the applicable record
date (identified in a listing attached to the Omnibus Proxy).
Principal and/or interest payments on Offered Debt Securities 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, any Trustee or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and/or interest to DTC is the responsibility of the
Company or the applicable Trustee, disbursement of such 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 Offered Debt Securities at any time by giving reasonable notice to
the Company or the applicable Trustee. Under such circumstances, in the event
that a successor securities depositary is not obtained, Offered Debt Security
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,
Offered Debt Security 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, 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 Offered Debt Securities 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
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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.
Distributions with respect to Offered Debt Securities 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 Offered Debt Securities 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. If and to the extent the Prospectus Supplement with respect
to any series of Debt Securities indicates that investors may elect to hold
interests in Offered Debt Securities through Cedel Bank or Euroclear, 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 Offered Debt Securities 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 Offered Debt Securities
received in Cedel Bank or Euroclear as a result of a transaction with a DTC
Participant will be made during subsequent securities settlement
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processing and will be credited the business day following the Depositary
settlement date. Such credits or any transactions in Offered Debt Securities
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 Offered Debt Securities 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 Offered Debt
Securities 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.
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 U.S. Bank Trust National Association, The Bank of New York, The
First National Bank of Chicago, Harris Trust and Savings Bank, FMB Bank, 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.
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
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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 (h) any extension, renewal, refunding, or
replacement (or successive extensions, renewals, refundings, or replacements),
in whole or in part, of any security interest referred to in the foregoing
clauses (a) through (g) inclusive; provided, however, that the principal amount
of indebtedness secured in such extension, renewal, refunding, or replacement
does not exceed the principal amount of indebtedness secured at the time by
such security interest; 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 (h) 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.
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 an
Indenture dated as of March 15, 1990, between HFC and Harris Trust and Savings
Bank, as Trustee (the "Indenture 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 Chicago, Illinois; 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
December 31, 1998, the aggregate amount of the outstanding senior indebtedness
of HFC was approximately $27.2 billion, including the impact of the Beneficial
merger. 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
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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 Indenture 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. (Indenture for
Senior Subordinated Debt Securities--Section 12.01)
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. (Indenture for
Senior Subordinated Debt Securities--Section 3.08)
Concerning the Trustee
Harris Trust and Savings Bank is trustee under other indentures of HFC under
which certain of HFC's outstanding senior subordinated debt securities have
been issued and under which HFC senior debt securities may be issued. HFC
maintains banking relationships with Harris Trust and Savings Bank. Harris
Trust and Savings Bank, 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
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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--Section 6.03, Indenture 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--Section 11.02, Indenture 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 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--Section 11.01, Indenture 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
Provision--Section 10.02, Indenture 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
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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--Sections 3.05
and 7.01, Indenture for Senior Subordinated Debt Securities--Sections 3.05 and
7.01)
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--Section 7.02, Indenture 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--Section 7.13, Indenture 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--Section 8.02, Indenture for Senior Subordinated Debt Securities--
Section 8.02)
Holders of Debt Securities may not enforce an Indenture except as provided
therein. (Standard Provisions--Section 7.07, Indenture 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--Section
7.12, Indenture 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--Section 8.03(e), Indenture 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
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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.
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.
CERTAIN UNITED STATES TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of an Offered Debt Security 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 (current IRS Form W-8 or new IRS
Form W-8BEN). A beneficial owner of an Offered Debt Security that is a non-
United States person (other than certain persons that
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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) or IRS Form W-8BEN (Certificate of Foreign Status of Beneficial Owner
for United States Tax Withholding). Special rules may apply in the case of
foreign partnerships.
Exemption for Non-United States persons with effectively connected income
(current IRS Form 4224 or new IRS Form W-8ECI). A beneficial owner of an
Offered Debt Security 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 an Offered
Debt Security 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 or IRS Form W-8ECI (Certificate of
Foreign Person's Claim for Exemption From Withholding on Income Effectively
Connected With the Conduct of a Trade or Business in the United States).
Exemption or reduced rate for Non-United States persons entitled to the
benefits of a treaty (current IRS Form 1001 or new IRS Form W-8BEN). A
beneficial owner of an Offered Debt Security 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) or IRS Form W-8BEN
(Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding).
Exemption for United States persons (IRS Form W-9). A beneficial owner of an
Offered Debt Security 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
an Offered Debt Security, or, in situations currently addressed by IRS Forms
1001 and 4224, the beneficial owner or its agent, is required to submit the
appropriate IRS Form under applicable procedures to the person through which
the owner directly holds the Offered Debt Security. For example, if the
beneficial owner is listed directly on the books of Euroclear or Cedel Bank as
the holder of the Offered Debt Security, the IRS Form must be provided to
Euroclear or Cedel Bank, as the case may be. Each other person through which an
Offered Debt Security 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 Offered Debt Security, 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 Offered Debt
Security. For example, in the case of an Offered Debt Security 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) (d) (B) of
paragraph (i) under "United States Taxation of Non-United States Persons--
Income and Estate Tax", if a beneficial owner of the Offered Debt Security
provides an IRS Form W-8 to a securities clearing organization, bank or other
financial institution that holds the Offered Debt Security on its behalf.
Regulations recently issued by the IRS, which are generally proposed to
become effective for payments made after December 31, 1999, make certain
modifications to the certification procedures applicable to non-United States
persons, including replacing the current forms listed above with the new IRS
Form W-8 series listed above and providing special rules for foreign
partnerships. Withholding agents are authorized to use the new forms prior to
December 31, 1999. Prospective investors should consult their tax advisors
regarding the certification requirements for non-United States persons.
Each holder of an Offered Debt Security 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
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on the Offered Debt Security may be subject to withholding and the holder
(including the beneficial owner) will not be entitled to any additional amounts
from the Company as provided for in connection with any series of Offered Debt
Securities and as described in the applicable Prospectus Supplement 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 Offered Debt
Securities.
UNITED STATES TAXATION OF NON-UNITED STATES PERSONS
The following summary describes the principal United States federal income
and estate tax consequences applicable to beneficial owners of the Offered Debt
Securities who are non-United States persons. The following discussion may not
be applicable to a particular series of Offered Debt Securities depending on
the terms and conditions established for such Offered Debt Securities in the
Prospectus Supplement. Any special United States federal income and estate tax
consequences to non-United States persons (and, if necessary, to United States
persons) not described herein will be described in the Prospectus Supplement.
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, and subject to
the discussion of backup withholding below:
(i) payments of principal and interest on an Offered Debt Security 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 owner
is not a controlled foreign corporation that is related to the Company
through stock ownership, (c) the beneficial owner of the Offered Debt
Security is not a bank receiving interest on an Offered Debt Security as
described in Section 881 (c) (3) (A) of the Code and (d) either (A) the
beneficial owner of the Offered Debt Security 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 Offered Debt Security 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 Offered Debt Security or
such owner's agent provides an IRS Form 1001 or IRS Form W-8BEN 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 Offered Debt Security or such owner's agent
provides an IRS Form 4224 or IRS Form W-8ECI; 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 an Offered Debt Security 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
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(iii) an Offered Debt Security 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 Offered Debt Security would not have
been effectively connected with a U.S. trade or business of the individual.
Interest on an Offered Debt Security that is effectively connected with the
conduct of a trade or business in the United States by a holder of an Offered
Debt Security 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 an Offered Debt Security and the proceeds of the
sale of an Offered Debt Security within the United States to non-corporate
holders of the Offered Debt Securities, 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 an Offered Debt Security 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) (d) 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 an Offered Debt Security 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 (or,
effective for payments made after December 31, 1999, a United States branch of
a foreign bank or foreign insurance company or a foreign partnership controlled
by United States persons or engaged in a United States trade or business),
information reporting may apply to such payments. Payments of the proceeds from
the sale of an Offered Debt Security to or through the United States office of
a broker are subject to information reporting and backup withholding 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 an Offered Debt Security that is beneficially owned by a non-
United States person will be reported annually on IRS Form 1042-S, which must
be filed with the Internal Revenue Service and furnished to such beneficial
owner.
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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 will set forth
the terms of the offering of the Offered Debt Securities and any Offered
Warrants (collectively, the "Offered Securities"), including the name or names
of any underwriters, dealers or agents, the purchase price of the Offered
Securities and the proceeds to 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 will describe 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 will be named in the
Prospectus Supplement relating to such offering, and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all the Offered Securities if any
are purchased.
The Offered Securities may be sold directly by 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.
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
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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 HFC 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), PTCE 95-60 (an exemption for certain transactions
involving life insurance general accounts), PTCE 96-23 (an exemption for
certain transactions determined by in-house investment managers), 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.
LEGAL OPINIONS
The legality of the Offered Securities will be passed upon for HFC by John
W. Blenke, Vice President--Corporate Law 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 Debt
Securities. Certain legal matters will be passed upon for underwriters and
agents by McDermott, Will & Emery, Chicago, Illinois. Mr. Blenke is a full-time
employee and an officer of Household International and owns, and holds options
to purchase, shares of Common Stock of Household International.
EXPERTS
The financial statements and schedules of HFC and its subsidiaries
incorporated by reference in this Prospectus, 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.
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