<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 333-33240
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 7, 2000)
$1,500,000,000
Household Finance Corporation
EXTENDIBLE LIQUIDITY SECURITIESSM (EXLSSM)
----------------
The senior floating rate renewable notes (EXtendible Liquidity Securities)
described in this prospectus supplement, which we refer to as the EXLs, will
mature on October 16, 2001, the initial maturity date, unless the maturity of
all or any portion of the principal amount of the EXLs is extended in
accordance with the procedures described herein. In no event will the maturity
of the EXLs be extended beyond February 16, 2006, the final maturity date. We
may not redeem the EXLs prior to maturity.
We will pay interest on the EXLs on the sixteenth day of each month,
commencing October 16, 2000, at a rate determined for each interest period by
reference to one-month LIBOR, plus the applicable spread for that interest
period. We describe how such rate is calculated under "Description of EXLs--
Interest" herein.
----------------
PRICE 100% AND ACCRUED INTEREST, IF ANY
----------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company
-------------- ------------- --------------
<S> <C> <C> <C>
Per EXL............................. 100.000% .250% 99.750%
Total............................... $1,500,000,000 $3,750,000 $1,496,250,000
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the EXLs to purchasers on
September 25, 2000.
"EXtendible Liquidity Securities" and "EXLs" are the service marks of Morgan
Stanley Dean Witter & Co.
----------------
MORGAN STANLEY DEAN WITTER
September 19, 2000
<PAGE>
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. We
have not, and the underwriter has not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriter is not, making an offer to sell the EXLs in any jurisdiction where
the offer or sale is not permitted. You should assume that the information
appearing in this Prospectus Supplement, the accompanying Prospectus and the
documents incorporated by reference is accurate only as of their respective
dates. Our business, financial condition, results of operations and prospects
may have changed since those dates.
----------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Use of Proceeds............................................................ S-3
Ratio of Earnings to Fixed Charges......................................... S-3
Description of EXLs........................................................ S-3
United States Federal Taxation............................................. S-6
Underwriter................................................................ S-8
Legal Opinions............................................................. S-8
Experts.................................................................... S-9
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......................................... 4
Description of Debt Securities............................................. 5
Description of Warrants.................................................... 15
Certain United States Tax Documentation Requirements....................... 16
United States Taxation of Non-United States Persons........................ 17
Plan of Distribution....................................................... 19
ERISA Matters.............................................................. 20
Legal Opinions............................................................. 20
Experts.................................................................... 20
</TABLE>
S-2
<PAGE>
USE OF PROCEEDS
HFC will apply the net proceeds from the sale of the EXLs 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 the six months ended June 30,
2000 and June 30, 1999 was 1.58 and 1.65, respectively. See "Ratio of Earnings
to Fixed Charges" in the accompanying Prospectus for additional information.
DESCRIPTION OF EXLs
General
The following description of the terms of the senior floating rate renewable
notes (EXtendible Liquidity Securities) offered hereby (referred to herein as
the EXLs and in the Prospectus as the "Offered Debt Securities") supplements,
insofar as such description relates to the EXLs, the description of the Debt
Securities set forth in the Prospectus, to which description reference is
hereby made. The EXLs 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 EXLs 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 EXLs are to be issued as a
series of Senior Debt Securities under an Indenture dated as of October 1, 1992
(the "Indenture"), between the Company and U.S. Bank Trust National
Association, as Trustee, which is more fully described in the accompanying
Prospectus under "Description of Debt Securities--Senior Debt Securities."
The EXLs are not subject to redemption by the Company prior to maturity. The
EXLs will be issued in denominations of $1,000 and integral multiples thereof.
Upon issuance, the EXLs 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, as Depositary. Investors may elect
to hold interests in the Global Notes through either the Depositary (in the
United States) or Clearstream Luxembourg or 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.
Any EXLs 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 EXLs so issued
will be registered in such names, and in such denominations, as the Depositary
shall request. Such EXLs may be presented for registration of transfer or
exchange at the office of the Trustee in New York, 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 EXLs.
Maturity and Extension of Maturity
The initial maturity date for the EXLs is October 16, 2001, or if such day
is not a business day, the immediately preceding business day, unless the
maturity of all or any portion of the principal amount of the EXLs is extended
in accordance with the procedures set forth below. In no event will the
maturity of the EXLs be extended beyond the final maturity date of February 16,
2006, or if such day is not a business day, the immediately preceding business
day.
S-3
<PAGE>
On each election date, you may elect to extend the maturity of all or any
portion of the principal amount of your EXLs so that the maturity of your EXLs
will be extended to the date occurring 366 calendar days from and including the
sixteenth day of the next succeeding month. However, if that 366th calendar day
is not a business day, the maturity of your EXLs will be extended to the
immediately preceding business day. The election dates will be the sixteenth
calendar day of each month from October 2000 to January 2005 inclusive, whether
or not any such day is a business day.
You may elect to extend the maturity of all of your EXLs or of any portion
thereof having a principal amount of $1,000 or any multiple of $1,000 in excess
thereof. To make your election effective on any election date, you must deliver
a notice of election during the notice period for that election date. The
notice period for each election date will begin on the fifth business day prior
to the election date and end on the election date, however, if that election
date is not a business day, the notice period will be extended to the following
business day. Your notice of election must be delivered to the trustee for the
EXLs, through the normal clearing system channels described in more detail
below and in the accompanying Prospectus, no later than the last business day
in the notice period. Upon delivery to the trustee of a notice of election to
extend the maturity of the EXLs or any portion thereof, that election will be
irrevocable.
If on any election date you do not make an election to extend the maturity
of all or any portion of the principal amount of your EXLs, the principal
amount of the EXLs for which you have failed to make such an election will
become due and payable on the initial maturity date, or any later date to which
the maturity of your EXLs has previously been extended. The principal amount of
the EXLs for which such election is not exercised will be represented by a note
issued on such election date. The note so issued will have the same terms as
the EXLs, except that it will not be extendible, will have a separate CUSIP
number and its maturity date will be the date that is 366 calendar days from
and including such election date or, if such 366th calendar day is not a
business day, the immediately preceding business day. The failure to elect to
extend the maturity of all or any portion of the EXLs will be irrevocable and
will be binding upon any subsequent holder of such EXLs.
The EXLs will be issued in registered global form and will remain on deposit
with the Depositary. Therefore, you must exercise the option to extend the
maturity of your EXLs through the Depositary. To ensure that the Depositary
will receive timely notice of your election to extend the maturity of all or a
portion of your EXLs, so that it can deliver notice of your election to the
trustee prior to the close of business on the last business day in the notice
period, you must instruct the direct or indirect participant through which you
hold an interest in the EXLs to notify the Depositary of your election to
extend the maturity of your EXLs in accordance with the then applicable
operating procedures of the Depositary.
The Depositary must receive any notice of election from its participants no
later than 12:00 noon (New York City time) on the last business day in the
notice period for any election date. Different firms have different deadlines
for accepting instructions from their customers. You should consult the direct
or indirect participant through which you hold an interest in the EXLs to
ascertain the deadline for ensuring that timely notice will be delivered to the
Depositary. If you hold your interest in the EXLs through Euroclear or
Clearstream Luxembourg, additional time may be needed to give your notice. If
the election date is not a business day, notice of your election to extend the
maturity date of your EXLs must be delivered to the Depositary by its
participants no later than 12:00 noon (New York City time) on the business day
following such election date.
Interest
The EXLs will bear will bear interest at LIBOR plus the spread, as described
below. We will pay interest monthly in arrears on the sixteenth day of each
month (each an "interest payment date"), beginning October 16, 2000, and on the
applicable maturity date. If any interest payment date falls on a day that is
not a business day, we will postpone the interest payment date to the next
succeeding business day unless that business day is in the next succeeding
calendar month, in which case the interest payment date will be the
S-4
<PAGE>
immediately preceding business day. The final interest payment date for the
EXLs, or any portion of the EXLs maturing prior to the final maturity date,
will be the maturity date and interest for the final interest period will
accrue from and including the interest payment date in the month immediately
preceding such maturity date to but excluding the maturity date. Interest on
the EXLs will be computed on the basis of a 360 day year for the actual number
of days elapsed.
Interest on the EXLs will accrue from, and including, September 25, 2000,
to, and excluding, the first interest payment date and then from, and
including, the immediately preceding interest payment date to which interest
has been paid or duly provided for to, but excluding, the next interest payment
date or the maturity date, as the case may be. We will refer to each of these
periods as an "interest period."
We will pay interest on the EXLs to the persons in whose names the EXLs are
registered at the close of business on the fifteenth calendar day, whether or
not a business day, immediately preceding the interest payment date. However,
we will pay interest on the maturity date to the same persons to whom the
principal will be payable.
When we use the term "business day," we mean any day except a Saturday, a
Sunday or a legal holiday in The City of New York on which banking institutions
are authorized or required by law, regulation or executive order to close;
provided, that the day is also a London business day. "London business day"
means any day on which dealings in United States dollars are transacted in the
London interbank market.
The calculation agent appointed by us, initially U.S. Bank Trust National
Association, will calculate the interest rate on the EXLs. The calculation
agent will reset the interest rate on each interest payment date, each of which
we will refer to as an "interest reset date." The interest rate for each
interest period will be equal to LIBOR, as determined below, plus the spread.
The spread for each interest period will be as follows:
<TABLE>
<CAPTION>
For Interest Reset Dates Occurring Spread
---------------------------------- ----------
<S> <C>
From September 25, 2000, to but excluding October 16, 2001..... Plus 0.03%
From October 16, 2001, to but excluding October 16, 2002....... Plus 0.07%
From October 16, 2002, to but excluding October 16, 2003....... Plus 0.10%
From October 16, 2003, to but excluding October 16, 2004....... Plus 0.12%
From October 16, 2004, to but excluding February 16, 2006...... Plus 0.12%
</TABLE>
The interest rate in effect for the period from September 25, 2000, to, but
excluding, October 16, 2000, the initial interest reset date, will be LIBOR, as
determined on September 21, 2000, plus 0.03%. The second London business day
preceding an interest reset date will be the "interest determination date" for
that interest reset date. The interest rate in effect on each day that is not
an interest reset date will be the interest rate determined as of the interest
determination date pertaining to the immediately preceding interest reset date.
The interest rate in effect on any day that is an interest reset date will be
the interest rate determined as of the interest determination date pertaining
to that interest reset date, except that the interest rate in effect for the
period from and including September 25, 2000 to the first interest reset date
will be the initial interest rate.
The calculation agent will determine "LIBOR" in accordance with the
following provisions:
(i) With respect to any interest determination date, LIBOR will be the
rate for deposits in United States dollars having a maturity of one month
commencing on the interest reset date that appears on Telerate Page 3750 as
of 11:00 A.M., London time, on that interest determination date. If no rate
appears, LIBOR, in respect to that interest determination date, will be
determined in accordance with the provisions described in (ii) below.
(ii) With respect to an interest determination date on which no rate
appears on Telerate Page 3750, as specified in (i) above, the calculation
agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
calculation agent, to provide the calculation agent with its offered
quotation for deposits in United States dollars for the period of one
S-5
<PAGE>
month, commencing on the interest reset date, to prime banks in the London
interbank market at approximately 11:00 A.M., London time, on that interest
determination date and in a principal amount that is representative for a
single transaction in United States dollars in that market at that time. If
at least two quotations are provided, then LIBOR on that interest
determination date will be the arithmetic mean of those quotations. If
fewer than two quotations are provided, then LIBOR on the interest
determination date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in The City of New York, on the interest
determination date by three major banks in The City of New York selected by
the calculation agent for loans in United States dollars to leading
European banks, having a one-month maturity and in a principal amount that
is representative for a single transaction in United States dollars in that
market at that time; provided, however, that if the banks selected by the
calculation agent are not providing quotations in the manner described by
this sentence, LIBOR determined as of that interest determination date will
be LIBOR in effect on that interest determination date.
"Telerate Page 3750" means the display designated as "Page 3750" on Bridge
Telerate, Inc., or any successor service, for the purpose of displaying the
London interbank rates of major banks for United States dollars.
Further Issues
The Company may from time to time, without notice to or the consent of the
registered holders of the EXLs, create and issue further notes ranking pari
passu with the EXLs 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 EXLs and have the same terms as to status, redemption or
otherwise as the EXLs.
UNITED STATES FEDERAL TAXATION
Taxation of United States Persons
The following summary describes the principal United States federal income
tax consequences applicable to beneficial owners of the EXLs who are United
States persons. This summary provides general information only and is directed
solely to United States persons who are original holders purchasing EXLs at the
"issue price," that is, the first price to the public at which a substantial
amount of the EXLs is sold (excluding sales to bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers). This summary is based on the Internal Revenue Code of
1986, as amended to the date hereof (the "Code"), existing administrative
pronouncements and judicial decisions, existing and proposed Treasury
Regulations currently in effect, and interpretations of the foregoing, changes
to any of which subsequent to the date of this prospectus supplement may affect
the tax consequences described herein, possibly with retroactive effect. This
summary discusses only EXLs held as capital assets within the meaning of
Section 1221 of the Code. This summary does not discuss all of the tax
consequences that may be relevant to a United States person in light of its
particular circumstances or to United States persons subject to special rules,
such as certain financial institutions, insurance companies, dealers in
securities, persons holding EXLs in connection with a hedging transaction,
"straddle," conversion transaction or other integrated transaction, or persons
whose functional currency, as defined in Section 985 of the Code, is not the
U.S. dollar. United States persons considering the purchase of EXLs should
consult their tax advisors with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any states, local or foreign taxing
jurisdiction.
Payments of Interest
Interest on an EXL should be taxable to a United States person as ordinary
interest income at the time it is accrued or is received in accordance with the
United States person's method of accounting for tax purposes.
S-6
<PAGE>
Notwithstanding the foregoing, it is possible that the United States Internal
Revenue Service ("IRS") could successfully assert that the EXLs are subject to
special rules governing contingent payment obligations, in which case the
timing and character of income thereon would be affected. Among other things,
United States persons would be required to accrue as "original issue discount,"
subject to adjustments, at a "comparable yield" on the issue price.
Furthermore, any gain recognized with respect to the EXLs would generally be
treated as ordinary income. However, because the EXLs bear a variable interest
rate that is reset every month, HFC expects that (i) the accrual of income at
the comparable yield would not significantly alter the timing of income
inclusion; and (ii) any gain recognized with respect to the EXLs should not be
significant (but the amount of any such gain will depend upon all of the facts
and circumstances present at the time of the recognition event). The remainder
of this discussion assumes that the EXLs will not be subject to the rules
governing contingent payment obligations.
Election to Extend
Under regulations of the United States Treasury Department, the exercise of
an option by a holder of a debt instrument to defer any scheduled payment of
principal is a taxable event if, based on all the facts and circumstances, such
deferral is material. Under these regulations, an election to extend the
maturity of an EXL by up to six months beyond the initial maturity date should
not be viewed as material. Although the treatment of an election to extend the
maturity by more than six months is unclear, HFC intends, in view of the unique
features of the EXLs (including their economic equivalence to a five-year debt
instrument containing put options), to take the position that an election to
extend the maturity of all or any portion of the principal amount of the EXLs
will not be a taxable event for HFC. However, such an election may be viewed as
a material deferral under the regulations, in which case a holder would be
required to recognize any gain inherent in the EXL at such time. As noted
above, HFC does not expect that any such gain should be significant (but the
amount of any such gain will depend upon all of the facts and circumstances
present at the time of the recognition event). No assurance can be given that
the IRS will accept, or that the courts will uphold, this position. Potential
investors are urged to consult their own tax advisors regarding the treatment
of the investor's exercise of an election to extend.
Sale, Exchange or Retirement of the EXLs
Upon the sale, exchange or retirement of an EXL, a United States person will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and the United States person's
adjusted tax basis in the EXL. For these purposes, the amount realized does not
include any amount attributable to accrued interest on the EXL. Amounts
attributable to accrued interest are treated as interest as described under
"Payments of Interest" above. A United States person's adjusted tax basis in an
EXL generally will equal the cost of the EXL to such person. If an election to
extend were treated as a taxable event as described above, a United States
person would have a tax basis in the EXL equal to the fair market value of the
EXL at the time of the election.
In general, gain or loss realized on the sale, exchange or redemption of an
EXL will be capital gain or loss. Prospective investors should consult their
tax advisors regarding the treatment of capital gains (which may be taxed at
lower rates than ordinary income for taxpayers who are individuals, trusts or
estates) and losses (the deductibility of which is subject to limitations).
Backup Withholding and Information Reporting
Backup withholding and information reporting requirements may apply to
certain payments of principal, premium and interest on an EXL, and to payments
of proceeds of the sale or redemption of any EXL, to certain non-corporate
United States persons. HFC, its agent, a broker, or a paying agent, as the case
may be, will be required to withhold from any payment a tax equal to 31 percent
of such payment if the United States person fails to furnish or certify its
correct taxpayer identification number to the payor in the manner required,
fails to
S-7
<PAGE>
certify that such United States person is not subject to backup withholding, or
otherwise fails to comply with the applicable requirements of the backup
withholding rules. Any amounts withheld under the backup withholding rules from
a payment to a United States person may be credited against such United States
person's United States federal income tax and may entitle such United States
person to a refund, provided that the required information is furnished to the
IRS.
UNDERWRITER
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus Supplement, Morgan Stanley & Co.
Incorporated, as underwriter, has agreed to purchase, and we have agreed to
sell to the underwriter, $1,500,000,000 principal amount of EXLs.
The Underwriting Agreement provides that the obligation of the underwriter
to pay for and accept delivery of the EXLs is subject to the approval of
certain legal matters by its counsel and to certain other conditions. The
underwriter is obligated to take and pay for all the EXLs if any are taken.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
We do not intend to apply for listing of the EXLs on a national securities
exchange, but we have been advised by the underwriter that it presently intends
to make a market in the EXLs as permitted by applicable laws and regulations.
The underwriter is not obligated however, to make a market in the EXLs and any
such market making may be discontinued at any time at the sole discretion of
the underwriter. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the EXLs.
In order to facilitate the offering of the EXLs the underwriter may engage
in transactions that stabilize, maintain or otherwise affect the price of the
EXLs. Specifically, the underwriter may over-allot in connection with the
offering, creating a short position in the EXLs for its own account. In
addition, to cover over-allotments or to stabilize the price of the EXLs, the
underwriter may bid for, and purchase, the EXLs in the open market. Finally,
the underwriter may reclaim selling concessions allowed to a dealer for
distributing the EXLs in the offering, if the underwriter repurchases
previously distributed EXLs in transactions to cover underwriter short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the EXLs above independent market
levels. The underwriter is not required to engage in these activities and may
end any of these activities at any time.
From time to time, the underwriter has acted as our financial advisor and
has received customary compensation for such services.
The expenses of the offering, not including the underwriting discounts and
commissions, are estimated to be $500,000 and are payable by us.
It is expected that delivery of the EXLs will be made against payment
therefor on or about the date specified on the cover page of this Prospectus
Supplement, which is the fourth business day following the date hereof. Under
Rule 15c6-1 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, trades in the secondary market generally are required to
settle in three business days, unless the parties to any such trade expressly
agree otherwise. Accordingly, purchasers who wish to trade EXLs on the date
hereof will be required, by virtue of the fact that the EXLs initially will
settle in T + 4, to specify an alternate settlement cycle at the time of any
such trade to prevent a failed settlement and should consult their own advisor.
LEGAL OPINIONS
The legality of the EXLs 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
underwriter 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-8
<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.
S-9
<PAGE>
Household Finance Corporation
$11,261,000,000
Debt Securities
and
Warrants to Purchase Debt Securities
----------------
Household Finance Corporation may sell at one or more times up to
$11,261,000,000 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 April 7, 2000
<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 $11,261,000,000. 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, "us," "we," "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, 1999; and
. Current Report on Form 8-K dated February 10, 2000.
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.
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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, telemarketing and the
internet. 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 primarily through strategic affinity relationships. 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. We also make tax refund anticipation
loans. These loans are marketed to consumers at H&R Block offices and offices
of other tax preparation services throughout the U.S.
Subsidiaries of HFC primarily service the loans made by HFC and its
subsidiaries, including loans made by the credit card operations.
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.
USE OF PROCEEDS
Unless otherwise indicated in the prospectus supplement, we will apply the
net proceeds from the sale of the securities to our general funds to be used in
our financial services business, including the funding of investments in, or
extensions of credit to, our affiliates. Pending such applications, the net
proceeds will be used initially to reduce our outstanding commercial paper. The
proceeds of such commercial paper are used in connection with our financial
services business.
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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,
------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges..................... 1.72 1.32 1.61 1.57 1.41
</TABLE>
For purposes of calculating the ratio, earnings consist of net income 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 Corporation. Excluding the
merger and integration related costs of $751 million after-tax, 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.
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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. $11,261,000,000, 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
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redemption provisions, be redeemed at the option of HFC or of the holder
thereof and the other detailed terms and provisions of such optional
redemption; (10) the denominations in which the Offered Debt Securities are
authorized to be issued; (11) the securities exchange, if any, on which the
Debt Securities will be listed; and (12) additional provisions, if any, with
respect to the Offered Debt Securities.
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or any interest on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such issue of 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 Clearstream
Banking, societe anonyme, formerly Cedelbank ("Clearstream Luxembourg"), 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.
Clearstream Luxembourg and Euroclear will hold interests on behalf of their
participants through customers' securities accounts in Clearstream Luxembourg'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 Clearstream Luxembourg 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
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<PAGE>
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 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
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<PAGE>
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.
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.
Clearstream Luxembourg advises that it is incorporated under the laws of
Luxembourg as a professional depositary. Clearstream Luxembourg holds
securities for its participating organizations ("Clearstream Participants") and
facilitates the clearance and settlement of securities transactions between
Clearstream Participants through electronic book-entry changes in accounts of
Clearstream Participants, thereby eliminating the need for physical movement of
certificates. Clearstream Luxembourg provides to Clearstream Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream Luxembourg interfaces with domestic markets in several
countries. As a professional depositary, Clearstream Luxembourg is subject to
regulation by the Luxembourg Monetary Institute. Clearstream 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 Clearstream Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream Participant either directly or indirectly.
Distributions with respect to Offered Debt Securities held beneficially
through Clearstream Luxembourg will be credited to cash accounts of Clearstream
Participants in accordance with its rules and procedures, to the extent
received by the U.S. Depositary for Clearstream Luxembourg.
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Euroclear advises that it was created in 1968 to hold securities for
participants of Euroclear ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries. Euroclear is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under
contract with Euro-clear Clearance Systems S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities
and cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
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 Clearstream Luxembourg or
Euroclear, secondary market trading between Clearstream Participants and/or
Euroclear Participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream Luxembourg 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
Clearstream 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
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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. Clearstream Participants and Euroclear
Participants may not deliver instructions directly to the Depositary.
Because of time-zone differences, credits of Offered Debt Securities
received in Clearstream Luxembourg or Euroclear as a result of a transaction
with a DTC Participant will be made during subsequent securities settlement
processing and will be credited the business day following the Depositary
settlement date. Such credits or any transactions in Offered Debt Securities
settled during such processing will be reported to the relevant Euroclear or
Clearstream Participants on such business day. Cash received in Clearstream
Luxembourg or Euroclear as a result of sales of Offered Debt Securities by or
through a Clearstream 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 Clearstream Luxembourg or Euroclear cash
account only as of the business day following settlement in the Depositary.
Although the Depositary, Clearstream Luxembourg and Euroclear have agreed to
the foregoing procedures in order to facilitate transfers of Offered Debt
Securities among participants of the Depositary, Clearstream Luxembourg 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,
Bank One, National Association, Allfirst 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
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corporation merges or consolidates with or into HFC or which security interests
exist at the time of the sale or transfer of all or substantially all of the
assets of such corporation to HFC; (d) security interests to secure any
indebtedness of HFC to a subsidiary; (e) security interests in property of HFC
in favor of the United States of America or any state or agency or
instrumentality thereof, or in favor of any other country or political
subdivision, to secure partial, progress, advance, or other payments pursuant
to any contract or statute or to secure any indebtedness incurred or guaranteed
for the purpose of financing all or any part of the purchase price or the cost
of construction of the property subject to such security interests; (f)
security interests on properties financed through tax-exempt municipal
obligations; provided that such security interests are limited to the property
so financed; (g) security interests existing on the date of execution of the
applicable Indenture; and (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
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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, 1999, the aggregate amount of the outstanding
senior indebtedness of HFC was approximately $30.4 billion. HFC is not directly
limited in its ability to issue additional senior indebtedness.
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to HFC or to its creditors, as such, or to its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of HFC, whether or not involving insolvency or
bankruptcy, then the holders of senior indebtedness shall be entitled to
receive payment in full of all principal and interest on all senior
indebtedness before the holders of the Senior Subordinated Debt Securities are
entitled to receive any payment on account of principal or interest upon the
Senior Subordinated Debt Securities, and to that end (but subject to the power
of a court of competent jurisdiction to make other equitable provision
reflecting the rights conferred in the Indentures for Senior Subordinated Debt
Securities upon the senior indebtedness and the holders thereof with respect to
the subordinated indebtedness represented by the Senior Subordinated Debt
Securities and the holders thereof by a lawful plan of reorganization under
applicable bankruptcy law) the holders of senior indebtedness shall be entitled
to receive for application in payment thereof any payment or distribution of
any kind or character, whether in cash or property or securities, which may be
payable or deliverable in any such proceedings in respect of the Senior
Subordinated Debt Securities, except securities which are subordinate and
junior in right of payment to the payment of all senior indebtedness then
outstanding.
In the event that any Senior Subordinated Debt Security is declared or
becomes due and payable before its expressed maturity because of the occurrence
of a default under the 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.
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Satisfaction, Discharge, and Defeasance of the Indentures and Debt Securities
If there is deposited irrevocably with the Trustee as trust funds for the
benefit of the holders of Debt Securities of a particular series an amount, in
money or the equivalent in securities of the United States or securities the
principal of and interest on which is fully guaranteed by the United States,
sufficient to pay the principal, premium, if any, and interest, if any, on such
series of Debt Securities on the dates such payments are due in accordance with
the terms of such series of Debt Securities through their maturity, and if HFC
has paid or caused to be paid all other sums payable by it under the applicable
Indenture with respect to such series, then HFC will be deemed to have
satisfied and discharged the entire indebtedness represented by such series of
Debt Securities and all of the obligations of HFC under such Indenture with
respect to such series, except as otherwise provided in such Indenture. In the
event of any such defeasance, holders of such Debt Securities would be able to
look only to such trust funds for payment of principal, premium, if any, and
interest, if any, on their Debt Securities. (Standard Provisions--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
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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 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))
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DESCRIPTION OF WARRANTS
HFC may issue, together with any Debt Securities offered by any Prospectus
Supplement or separately, Warrants for the purchase of other Debt Securities.
The Warrants are to be issued under warrant agreements (each a "Warrant
Agreement") to be entered into between HFC and a bank or trust company, as
warrant agent ("Warrant Agent"), all as set forth in the Prospectus Supplement
relating to the particular issue of Warrants ("Offered Warrants"). A copy of
the forms of Warrant Agreement, including the form of warrant certificates
representing the Warrants ("Warrant Certificates"), reflecting the alternative
provisions to be included in the Warrant Agreements that will be entered into
with respect to particular offerings of Warrants, is filed as an exhibit to the
Registration Statement. The following summaries of certain provisions of the
Warrant Agreement and the Warrant Certificates do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
the provisions of the Warrant Agreement and the Warrant certificates,
respectively, including the definitions therein of certain terms.
General
The Prospectus Supplement describes the terms of the Offered Warrants, the
Warrant Agreement relating to the Offered Warrants and the Warrant Certificates
representing the Offered Warrants, including the following: (1) the
designation, aggregate principal amount, and terms of the Debt Securities
purchasable upon exercise of the Offered Warrants; (2) the designation and
terms of any related Debt Securities with which the Offered Warrants are issued
and the number of Offered Warrants issued with each such Debt Security; (3) the
date, if any, on and after which the Offered Warrants and the related Offered
Debt Securities will be separately transferable; (4) the principal amount of
Debt Securities purchasable upon exercise of one Offered Warrant and the price
at which such principal amount of Debt Securities may be purchased upon such
exercise; (5) the date on which the right to exercise the Offered Warrants
shall commence and the date ("Expiration Date") on which such right shall
expire; (6) whether the Warrants represented by the Warrant Certificates will
be issued in registered or bearer form, and if registered, where they may be
transferred and registered; and (7) any other terms of the Offered Warrants.
Warrant Certificates will be exchangeable on the terms specified in the
Prospectus Supplement for new Warrant Certificates of different denominations,
and Warrants may be exercised at the corporate trust office of the Warrant
Agent or any other office indicated in the Prospectus Supplement. Prior to the
exercise of their Warrants, holders of Warrants will not have any of the rights
of Holders of the Debt Securities purchasable upon such exercise and will not
be entitled to payments of principal of, premium, if any, or interest, if any,
on the Debt Securities purchasable upon such exercise.
Exercise of Warrants
Each Offered Warrant will entitle the holder to purchase such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement
relating to the Offered Warrants by payment of such exercise price in full in
the manner specified in the Prospectus Supplement. Offered Warrants may be
exercised at any time up to the close of business on the Expiration Date set
forth in the Prospectus Supplement relating to the Offered Warrants. After the
close of business on the Expiration Date, unexercised Warrants will become
void.
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.
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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 are related to the
Company through stock ownership or that are banks receiving certain types of
interest as described in clauses (x) (a), (b) and (c) 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 Clearstream
Luxembourg as the holder of the Offered Debt Security, the IRS Form must be
provided to Euroclear or Clearstream Luxembourg, 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 Clearstream Luxembourg, 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.
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Regulations issued by the IRS, which are generally proposed to become
effective for payments made after December 31, 2000, 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 currently. 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 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 Debt Securities. 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
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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
(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, 2000, 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 issued by the IRS, which are currently proposed to become
effective for payments made after December 31, 2000, make certain modifications
to the certification procedures applicable to non-United States
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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.
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
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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
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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