-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RnOwY1ed/7KY1bwn4MxaN5vGcBJYYbq3XRs8U93TRT7JtwwGfbJSnT69QDLepfgT doESyy35oJEXSSCgciFkeg== 0000950137-01-000205.txt : 20010123 0000950137-01-000205.hdr.sgml : 20010123 ACCESSION NUMBER: 0000950137-01-000205 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20010117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOUSEHOLD INTERNATIONAL INC CENTRAL INDEX KEY: 0000354964 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 363121988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-53862 FILM NUMBER: 1510518 BUSINESS ADDRESS: STREET 1: 2700 SANDERS RD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 BUSINESS PHONE: 8475646996 MAIL ADDRESS: STREET 1: 2700 SANDERS ROAD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOUSEHOLD CAPITAL TRUST VI CENTRAL INDEX KEY: 0001132572 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-53862-01 FILM NUMBER: 1510519 BUSINESS ADDRESS: STREET 1: 2700 SANDERS RD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 BUSINESS PHONE: 8475646141 MAIL ADDRESS: STREET 1: 2700 SANDERS RD CITY: PROSPECT HEIGHTS STATE: IL ZIP: 60070 S-3 1 c59540s-3.txt REGISTRAION STATEMENT 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 2001. REGISTRATION NOS. 333- AND 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ HOUSEHOLD INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER OR GOVERNING DOCUMENT) DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 36-3121988 (I.R.S. EMPLOYER IDENTIFICATION NUMBER) HOUSEHOLD CAPITAL TRUST VI (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER OR GOVERNING DOCUMENT) DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) APPLIED FOR (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 2700 SANDERS ROAD PROSPECT HEIGHTS, ILLINOIS 60070 847-564-5000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) JOHN W. BLENKE, VICE PRESIDENT-CORPORATE LAW HOUSEHOLD INTERNATIONAL, INC. 2700 SANDERS ROAD PROSPECT HEIGHTS, ILLINOIS 60070 847-564-6150 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ WITH A COPY TO: (UNDERWRITERS' COUNSEL) SCOTT N. GIERKE MCDERMOTT, WILL & EMERY 227 WEST MONROE STREET CHICAGO, ILLINOIS 60606 312-984-7521 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement, as determined by market conditions. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED(2) PER UNIT(2)(3) PRICE(2)(3) FEE - --------------------------------------------------------------------------------------------------------------------------------- Trust Preferred Securities of Household Capital Trust V and Junior Subordinated Deferrable 8,000,000 Interest Notes of Household International, Preferred Inc.(1)........................................... Securities $25.00 $200,000,000 $50,000.00 Guarantee of Trust Preferred Securities by Household International, Inc. and certain back-up obligations(4).................................... N/A N/A N/A N/A - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(1) The Junior Subordinated Deferrable Interest Notes will be purchased by and constitute assets of Household Capital Trust VI. No separate consideration therefor will be received. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(i) and Rule 457(n). (3) Exclusive of accrued interest and distributions, if any. (4) Includes the rights of holders of the Trust Preferred Securities under the Preferred Securities Guarantee and certain back-up undertakings, comprised of the obligations of Household International to provide certain indemnities in respect of, and pay and be responsible for certain costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Preferred Securities) and such obligations of Household International as set forth in the Declaration and the Indenture, in each case as further described in the Registration Statement. The Preferred Securities Guarantee, when taken together with Household International's obligations under the Junior Subordinated Deferrable Interest Notes, the Indenture and the Declaration, will provide a full and unconditional guarantee on a subordinated basis by Household International of payments due on the Trust Preferred Securities. The Guarantee of Trust Preferred Securities referred to in this table is the Preferred Securities Guarantee described in the Registration Statement. No separate consideration will be received for the Guarantee or such back-up obligations. ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION DATED JANUARY 17, 2001 PROSPECTUS 8,000,000 TRUST PREFERRED SECURITIES HOUSEHOLD CAPITAL TRUST VI % TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY) FULLY AND UNCONDITIONALLY GUARANTEED BY HOUSEHOLD INTERNATIONAL, INC. ------------------------ THE TRUST: Household Capital Trust VI is a Delaware business trust which will: - sell Trust Preferred Securities to the public; - sell common interests to Household International; - use the proceeds from these sales to buy an equal principal amount of % Junior Subordinated Deferrable Interest Notes due , of Household International; and - distribute the cash payments it receives on the Notes to the holders of its Trust Preferred Securities and common interests. QUARTERLY DISTRIBUTIONS: - For each Trust Preferred Security that you own, you will receive cumulative cash distributions, accumulating from , 2001 at an annual rate of % of the liquidation amount of $25 per Trust Preferred Security, on , , and of each year beginning , 2001. - Household International may defer interest payments on the Notes at any time, and from time to time, for up to 20 consecutive quarters. If Household International does defer interest payments on the Notes, the Trust will also defer payment of distributions on the Trust Preferred Securities. However, deferred distributions will themselves accrue interest at an annual rate of %, to the extent permitted by law. REDEMPTION: - Household International may redeem the Notes on or after , or at any time upon the occurrence of specified changes in tax law at a redemption price equal to their principal amount plus any accrued and unpaid interest to the redemption date. If Household International does redeem the Notes, the Trust will use the cash it receives on redemption of the Notes to redeem the Trust Preferred Securities and the common interests. INVESTING IN THE TRUST PREFERRED SECURITIES INVOLVES CERTAIN RISKS WHICH ARE DESCRIBED IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE 5 OF THIS PROSPECTUS. We intend to list the Trust Preferred Securities on the New York Stock Exchange under the trading symbol " ". We expect that the Trust Preferred Securities will begin trading on the New York Stock Exchange within 30 days after they are first issued. ------------------------
PER TRUST PREFERRED SECURITY TOTAL --------------- ----- Public Offering Price (1)................................... $ $ Underwriting Commission..................................... $(2) $(2) Proceeds, before expenses, to the Trust..................... $ $
- --------------- (1) Plus accumulated distributions from , 2001, if settlement occurs after that date. (2) The underwriting commission of $ per Trust Preferred Security ($ per Trust Preferred Security sold to certain institutions) will be paid by Household International. The maximum total underwriting commission will be $ . Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. We expect that the Trust Preferred Securities will be ready for delivery in book-entry form through The Depository Trust Company on or about , 2001. ------------------------ ------------------------ The date of this prospectus is , 2001. 3 TABLE OF CONTENTS
PAGE ---- ABOUT THIS PROSPECTUS................. 2 SUMMARY INFORMATION -- QUESTIONS & ANSWERS............................. 2 RISK FACTORS.......................... 5 HOUSEHOLD CAPITAL TRUST VI............ 7 FINANCIAL STATEMENTS OF TRUST AND ACCOUNTING TREATMENT................ 8 HOUSEHOLD INTERNATIONAL, INC.......... 8 USE OF PROCEEDS....................... 9 RATIO OF EARNINGS TO FIXED CHARGES OF HOUSEHOLD........................... 9 SELECTED FINANCIAL INFORMATION OF HOUSEHOLD........................... 10 CAPITALIZATION OF HOUSEHOLD........... 11 DESCRIPTION OF TRUST PREFERRED SECURITIES.......................... 11
PAGE ---- DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE................ 22 DESCRIPTION OF THE NOTES.............. 24 EFFECT OF OBLIGATIONS UNDER THE NOTES AND THE PREFERRED SECURITIES GUARANTEE........................... 33 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.................... 34 CERTAIN ERISA CONSIDERATIONS.......... 37 UNDERWRITING.......................... 39 WHERE YOU CAN FIND MORE INFORMATION... 40 INCORPORATION OF INFORMATION WE FILE WITH THE SEC........................ 41 LEGAL MATTERS......................... 41 EXPERTS............................... 41
ABOUT THIS PROSPECTUS You should only rely on the information provided or incorporated by reference in this prospectus. We have not authorized anyone else to provide you with different information. We are not making an offer of the Trust Preferred Securities to any person in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this document. SUMMARY INFORMATION -- QUESTIONS & ANSWERS This summary includes questions and answers that highlight selected information from the prospectus to help you understand the Trust Preferred Securities. This summary may not contain all the information that may be important to you. You should carefully read this prospectus to fully understand the terms of the Trust Preferred Securities, as well as the tax and other considerations that should be important to you in making a decision about whether to invest in the Trust Preferred Securities. You should pay special attention to the "Risk Factors" section to determine whether an investment in the Trust Preferred Securities is appropriate for you. You should also read the documents described under "Where You Can Find More Information" to learn more about Household's business. In this prospectus references to: - "Household International", "Household", "we", "us" and "our" are to Household International, Inc., - "Household Trust" or "Trust" are to Household Capital Trust VI, - "Notes" are to the % Junior Subordinated Deferrable Interest Notes due , of Household that are deposited with Household Trust, and - "Trust Preferred Securities" are to the % Trust Preferred Securities being offered by Household Trust through this prospectus. 2 4 Q: WHO IS HOUSEHOLD TRUST? A: Household Trust is a business trust established under Delaware law that exists for the sole purpose of issuing the Trust Preferred Securities and a set amount of common interests for cash. The proceeds from these securities will be used by the Trust to purchase the Notes from us. Q: WHAT ARE THE TRUST PREFERRED SECURITIES? A: Each Trust Preferred Security is a preferred undivided beneficial ownership interest in the assets of Household Trust. The common interests issued by the Trust are subordinate to the Trust Preferred Securities with respect to distributions made by the Trust in the event the Trust is liquidated or dissolved. We will own all of the common interests of Household Trust. The sole assets of Household Trust will be our capital contribution to Household Trust for the common interests and our Notes that will be purchased from us by Household Trust. Q: WHAT DISTRIBUTIONS WILL I RECEIVE ON THE TRUST PREFERRED SECURITIES? A: The Trust Preferred Securities provide for quarterly cash distributions at the annual rate of % or $ per quarter ($ per year) for each Trust Preferred Security you own. Distributions are payable on each , , and , beginning , 2001. Distributions will accumulate from the date Household Trust originally issues the Trust Preferred Securities, which is expected to be , 2001. The initial cash distribution payable on , 2001 will equal $ . for each Trust Preferred Security. Because the principal asset of Household Trust will be the Notes issued by us, Household Trust's ability to pay distributions on the Trust Preferred Securities is ultimately dependent upon our ability to make interest payments on those Notes. If we exercise our right to defer making an interest payment on our Notes, Household Trust will not be able to pay distributions to you until we resume making interest payments on those Notes. Q: WHO IS HOUSEHOLD? A: Household is a holding company. Our subsidiary companies provide consumer lending, credit cards and credit insurance products in the United States, the United Kingdom and Canada. Our principal executive offices are located at 2700 Sanders Road, Prospect Heights, Illinois 60070. Our telephone number is (847) 564-5000. For information about us, see the section "Household International, Inc." in this prospectus. You should also read the other documents we have filed with the SEC, which you can find by referring to the section entitled "Where You Can Find More Information" in this prospectus. Q: WHAT ARE THE NOTES? A: The Notes are unsecured, junior subordinated debt obligations of Household. They rank below any of our senior debt, including normal day-to-day business expenses. We may exercise our right to defer interest payments on the Notes for a period of not more than 20 consecutive quarters. We cannot, however, defer any payments on the Notes beyond their stated maturity which is , . In certain circumstances we can elect to liquidate Household Trust and distribute the Notes to you. Q: CAN THE TRUST PREFERRED SECURITIES BE REDEEMED? A: The Trust must redeem the Trust Preferred Securities when the Notes are paid at maturity or if Household redeems the Notes early. Household can redeem the Notes in whole or in part from time to time on or after , . Also, Household can redeem the Notes at any time if there is a tax event as described in this prospectus. In the event of any redemption, you will be entitled to receive $25 per Trust Preferred Security plus accrued and unpaid distributions to the redemption date. The trustees of Household Trust can elect to liquidate Household Trust and distribute the Notes to you if at any time there is a specified tax event or a change in U.S. investment company law as described in this prospectus. Neither the Notes nor the Trust Preferred Securities can be redeemed at any time at the option of their holders. Q: ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT? A: Yes, an investment in the Trust Preferred Securities is subject to risk. Please refer to the section entitled "Risk Factors" in this prospectus for a description of these risks. Q: WHAT HAPPENS IF HOUSEHOLD TRUST DOESN'T PAY DISTRIBUTIONS ON THE TRUST PREFERRED SECURITIES? A: If your distributions are deferred, you will still accumulate distributions at the annual rate of 3 5 % plus you will be entitled to additional distributions at the same rate, compounded quarterly, on any deferred distribution that remains unpaid. If distributions are deferred, during that period until all scheduled quarterly distributions which are due and owing are paid or set aside for payment to you, we may not, except in limited circumstances, declare or pay dividends on, acquire, or make a liquidation payment with respect to, any of our outstanding capital stock. This limitation prevents us from paying cash or other dividends to our shareholders if payments are not being made on the Trust Preferred Securities, the Notes or the guarantee issued by us in connection with the Trust Preferred Securities. However, these provisions will not restrict: - our ability to pay dividends or distributions on our capital stock in shares of, or options, warrants or rights to subscribe for or purchase shares of our capital stock; - our ability to convert or exchange our common stock or preferred stock of one class into our common stock or preferred stock of another class; - our ability to redeem or purchase any rights under a rights agreement applicable to our common stock or issue preferred stock under those rights; and - our ability to purchase our capital stock in the open market or in private transactions for employee benefit or similar purposes. Q: WHAT IS THE GUARANTEE? A: We will guarantee, to the extent described in this prospectus: - distribution of quarterly payments on the Trust Preferred Securities by Household Trust to you to the extent Household Trust receives distributions on the Notes; - the redemption amount due to you if Household Trust redeems the Trust Preferred Securities; and - the liquidation amount of the Trust Preferred Securities if Household Trust is liquidated. Our obligations under the guarantee, like our Notes, are subordinate and junior in right of payment to all other of our liabilities and rank equally with our most senior preferred stock and similar guarantees of ours with respect to previous and future issues of securities that are similar to the Trust Preferred Securities. Q: CAN HOUSEHOLD TRUST BE LIQUIDATED? A: Household has the right to liquidate the Trust under certain circumstances and cause cash or the Notes to be distributed to you as part of the Trust liquidation. If Household Trust is liquidated and cash is to be distributed, you will be entitled to receive $25 plus any accumulated and unpaid distributions per Trust Preferred Security before we can receive any payment for our common interests. If Household Trust is liquidated and the Notes are distributed, you will be entitled to receive $25 principal amount of Notes plus accumulated and unpaid distributions per Trust Preferred Security. Q: DO I HAVE VOTING RIGHTS? A: Except in limited circumstances you will not have any voting rights. The holders of a majority of the Trust Preferred Securities, however, have the right to direct the time, method and place of conducting any proceeding for any remedy available to the property trustee, or direct the exercise of any trust power conferred upon the property trustee. Q: IN WHAT FORM WILL THE TRUST PREFERRED SECURITIES BE ISSUED? A: The Trust Preferred Securities will be issued in the form of a global certificate or certificates registered in the name of Cede & Co., as nominee for The Depository Trust Company also known as DTC. This means you will not receive a certificate for your Trust Preferred Securities. Your interests in the Trust Preferred Securities will be evidenced by, and transfers of the Trust Preferred Securities will be effected only through, records maintained by the participants in DTC. Q: WILL THE TRUST PREFERRED SECURITIES BE LISTED ON A STOCK EXCHANGE? A: We intend to list the Trust Preferred Securities on the New York Stock Exchange. If approved for listing, trading on the New York Stock Exchange will begin within 30 days after the issuance of the Trust Preferred Securities. The listing of the Trust Preferred Securities will not necessarily ensure that a liquid trading market will be available for the Trust Preferred Securities. 4 6 RISK FACTORS Your investment in the Trust Preferred Securities will involve risks. You should carefully consider the following discussion of risks before deciding whether an investment in the Trust Preferred Securities is suitable for you. YOU WILL ONLY RECEIVE DISTRIBUTIONS IF PAYMENTS ON THE NOTES ARE MADE Household Trust's ability to pay distributions on the Trust Preferred Securities to you is dependent upon its receipt of payments on the Notes it holds. We may defer interest payments on the Notes for up 20 consecutive quarters. If we fail to make the payments of interest or principal on the Notes the Trust will lack the funds necessary to pay distributions on the Trust Preferred Securities. If Household Trust does not make payments to you on the Trust Preferred Securities, we will be restricted from, among other things, paying cash or certain other dividends on our capital stock. THERE MAY BE TAX CONSEQUENCES TO YOU IF WE FAIL TO PAY YOU DISTRIBUTIONS As a holder of the Trust Preferred Securities, each of which represents a preferred ownership interest in the assets of Household Trust, if we defer the payment of interest and principal on the Notes you will be required to accrue income, for U.S. federal income tax purposes, on the cumulative deferred distributions and accumulated interest allocable to your Trust Preferred Securities. As a result, you will recognize income for U.S. federal income tax purposes in advance of the receipt of cash and will not receive the cash from Household Trust related to that distribution if you dispose of your Trust Preferred Securities before the record date for the date on which those distributions are made. OUR OBLIGATIONS UNDER THE GUARANTEE AND OUR NOTES ARE SUBORDINATED Our obligations under the guarantee are unsecured and will rank in priority of payment: - subordinate and junior in right of payment to all of our other liabilities; and - equally with any of our most senior preferred stock issued from time to time, and similar guarantees of ours with respect to previous and future issues of securities that are similar to the Trust Preferred Securities. This means that our obligations under the guarantee will not be paid unless we can satisfy in full all of our other obligations ranking senior to the guarantee. Our obligations under our Notes issued to Household Trust are subordinate and junior in right of payment to all of our senior indebtedness, including our day-to-day expenses. At December 31, 2000, we had outstanding senior indebtedness aggregating approximately $ billion which would have ranked senior to our obligations under the guarantee and our Notes. In addition, because we are a holding company, our obligations under the Notes and the guarantee are effectively subordinated to all existing and future liabilities of our subsidiaries. There are no terms in the Trust Preferred Securities, the guarantees or the Notes that limit our ability to incur additional indebtedness, including indebtedness that ranks senior to the Notes or the guarantee. REDEMPTION OF THE TRUST PREFERRED SECURITIES OR NOTES MAY AFFECT YOUR RETURN Under certain circumstances involving a tax event or a change in U.S. investment company law, we may dissolve Household Trust, pay its creditors, if any, and distribute the Notes to you in exchange for the Trust Preferred Securities. If your Trust Preferred Securities are exchanged for the Notes, - the trading value of the Notes may be lower than the trading value of the Trust Preferred Securities, which may result in a lower return upon your sale of the Notes; and - any resulting loss might not be deductible for tax purposes. 5 7 Because you may receive Notes upon the occurrence of a tax event or a change in U.S. investment company law, in connection with your investment decision with regard to the Trust Preferred Securities you are also making an investment decision with regard to the Notes. You should carefully review all the information regarding the Notes contained in this prospectus. ENFORCEMENT OF YOUR RIGHTS BY OR ON YOUR BEHALF IS LIMITED If at any time: - you have not received a distribution on the Trust Preferred Securities for six consecutive quarters; or - an event of default occurs and is continuing on the Notes; then: - you will be entitled to elect one trustee of the Trust; - you would rely on the enforcement by the property trustee of its rights, as a holder of the Notes, against us; and - the property trustee, under our guarantee of the Trust Preferred Securities, will have the right to enforce the terms of the guarantee. Our guarantee only guarantees payments to you in the event Household Trust has the funds to make such payments. If your Trust Preferred Securities are exchanged for the Notes, you would only look to the Notes for repayment. Except in the case of failure by us to pay interest on principal on the Notes, you will not be able to proceed directly against us to enforce the Notes or the guarantee unless the property trustee or the trustee for the guarantee fail to do so. YOU HAVE LIMITED VOTING RIGHTS As a holder of the Trust Preferred Securities you will have limited voting rights and will not be entitled to vote to appoint, change, or to increase or decrease the number of trustees of Household Trust appointed by us. Since we own all of Household Trust's common interests, those rights are ours exclusively. THERE IS NO PRIOR MARKET FOR THE TRUST PREFERRED SECURITIES This series of Trust Preferred Securities constitutes a new issue of securities with no established trading market. Household Trust intends to list the Trust Preferred Securities on the New York Stock Exchange. There can be no assurance that an active market for the Trust Preferred Securities will develop or be sustained in the future on the New York Stock Exchange. Although the underwriters have indicated to us that they intend to make a market in the Trust Preferred Securities, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue any market-making activities at any time without notice. Accordingly, there is no assurance that a trading market for the Trust Preferred Securities will exist and no assurance as to the liquidity of any trading market. POTENTIAL TAX LAW CHANGES Certain tax law changes have been proposed from time to time which could affect the deductibility of interest paid on the Notes. None of these proposals have become law. If they were to become law, however, that event could result in the early redemption of the Trust Preferred Securities. 6 8 HOUSEHOLD CAPITAL TRUST VI The Trust is a statutory business trust formed under Delaware law pursuant to the filing of a certificate of trust with the Delaware Secretary of State on January 17, 2001. The Trust's business is defined in a Declaration of Trust, executed by Household International, as sponsor and the Household International trustees. The Declaration of Trust will be amended and restated in its entirety (as so amended and restated, the "Declaration") substantially in the form filed as an exhibit to the registration statement of which this prospectus forms a part. The Declaration will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Trust will issue only the Trust Preferred Securities and the common interests (together, the "Trust Securities"). Upon issuance of the Trust Preferred Securities, the purchasers thereof will own all of the Trust Preferred Securities. Household International will acquire all of the common interests in the Trust for an aggregate liquidation value equal to % of the total capital of the Trust. The Trust exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interest in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Notes and (iii) engaging in only those other activities necessary or incidental thereto. The Trust has a term of approximately 55 years, but may terminate earlier as provided in the Declaration. The Trust's business and affairs will be conducted by the trustees appointed by Household International, as holder of the common interests. The duties and obligations of the Household International trustees shall be governed by the Declaration. Pursuant to the Declaration, the number of Household International trustees will initially be four. Two of the Household International trustees (the "Regular Trustees") will be persons who are employees or officers of, or affiliated with Household International. The third trustee will be a financial institution which maintains a principal place of business in the State of Delaware and which is unaffiliated with Household International. The fourth trustee will serve as property trustee under the Declaration and as indenture trustee for purposes of the Trust Indenture Act. The Bank of New York (Delaware) will act as the trustee with a principal place of business in the State of Delaware. The Bank of New York, an affiliate of The Bank of New York (Delaware), will be the other trustee and will act as the property trustee until removed or replaced by Household. Bank of New York will also act as indenture trustee under the Preferred Securities Guarantee (the "Preferred Guarantee Trustee"). See "Description of the Preferred Securities Guarantee." In certain circumstances, the holders of a majority of the Trust Preferred Securities will be entitled to appoint one Regular Trustee (a "Special Regular Trustee"), who need not be an officer or employee of, or otherwise affiliated with, Household International. See "Description of Trust Preferred Securities -- Voting Rights." The property trustee will hold title to the Notes for the benefit of the holders of the Trust Preferred Securities and will have the power to exercise all rights, powers and privileges under the Indenture as the holder of the Notes. In addition, the property trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments made in respect of the Notes for the benefit of the holders of the Trust Preferred Securities. The property trustee will make payments of distributions and payments on liquidation, redemption and otherwise to the holders of the Trust Securities out of funds from the Property Account. The Preferred Guarantee Trustee will hold the Preferred Securities Guarantee for the benefit of the holders of the Trust Preferred Securities. Subject to the right of the holders of the Trust Preferred Securities to appoint a Special Regular Trustee, Household International, as the holder of all the common interests, will have the right to appoint, remove or replace any Household International trustee and to increase the number of Household International trustees, provided that the number of Household International trustees shall be at least three, a majority of which shall be Regular Trustees. Household International will pay all fees and expenses related to the Trust and the offering of the Trust Securities. See "Description of the Notes -- Miscellaneous." The rights of the holders of the Trust Preferred Securities, including economic rights, rights to information and voting rights, are as set forth in the Declaration, the Delaware Business Trust Act (the "Delaware Trust Act") and the Trust Indenture Act. See "Description of Trust Preferred Securities." The Trust's registered office in the State of Delaware is c/o The Bank of New York (Delaware), White Clay Center, Newark, Delaware 19711. The principal place of business of the Trust shall be c/o Household International, 2700 Sanders Road, Prospect Heights, Illinois 60070 (telephone number (847) 564-5000). 7 9 FINANCIAL STATEMENTS OF TRUST AND ACCOUNTING TREATMENT The financial statements of the Trust will be consolidated with Household International's financial statements, with the Trust Preferred Securities shown as "Company obligated mandatorily redeemable preferred securities of subsidiary trusts." There are no separate financial statements of Household Trust in this prospectus. We do not believe such financial statements would be helpful because: - The Trust is a direct wholly-owned subsidiary of Household International, which files consolidated financial information under the Exchange Act. - The Trust does not have any independent operations other than the issuing of the Trust Preferred Securities and common interests, and purchasing the Notes. - The obligations of Household International under the Notes and the Preferred Securities Guarantee have the effect of providing a full, irrevocable and unconditional guarantee of the Trust's obligations under the Trust Preferred Securities. Holders of Trust Preferred Securities may, under certain circumstances, enforce these obligations directly against Household International. The Trust is not, and will not become, subject to the information reporting requirements of the Exchange Act. HOUSEHOLD INTERNATIONAL, INC. Household International was formed in 1981 as a holding company for various subsidiaries which operated in the financial services, manufacturing, transportation and merchandising industries. In 1985 we initiated a restructuring program that has resulted in the disposition of our merchandising, transportation and manufacturing businesses. This has enabled Household to focus its resources in the consumer finance industry. Our principal executive office is located at 2700 Sanders Road, Prospect Heights, Illinois 60070 (telephone: 847-564-5000). Through subsidiaries, such as Household Finance Corporation, Beneficial Corporation, Household Bank, f.s.b., Household Automotive Finance Corporation, Household Retail Services, Inc., Household Bank (Nevada), National Association, Household Bank (S.B.), National Association, Household Financial Corporation Limited, and HFC Bank plc, we offer numerous consumer finance products, including home equity credit lines, revolving and closed-end unsecured personal loans, non-prime automobile loans, private label credit cards, MasterCard* and VISA* credit cards and tax refund anticipation loans. Also, in conjunction with this business, and where applicable laws permit, we make credit life, credit accident and health, and household contents insurance available to our customers. This insurance is generally directly written by or reinsured with one of our insurance subsidiaries. Household International is principally a holding company whose primary source of funds is cash received from its subsidiaries primarily in the form of dividends and borrowings under intercorporate agreements. Dividend distributions to Household from its savings and loan, banking and insurance subsidiaries may be restricted by federal and state laws and regulations. Dividend distributions from our foreign subsidiaries may also be restricted by exchange controls of the country in which the subsidiary is located. Also, as a holding company, the rights of any creditors or stockholders of Household International to participate in the assets of any subsidiary upon the latter's liquidation or recapitalization will be subject to the prior claims of the subsidiary's creditors, except to the extent that Household may itself be a creditor with recognized claims against the subsidiary. Nevertheless, there are no restrictions that currently materially limit our ability to make payments to our creditors or to pay dividends on our preferred stock or common stock at current levels nor are there any restrictions which we reasonably believe are likely to limit materially such payments in the future. - --------------- * MasterCard and VISA are registered trademarks of MasterCard International Incorporated and VISA, USA, Inc., respectively. 8 10 USE OF PROCEEDS The proceeds from the sale of the Trust Preferred Securities will be used by the Trust to purchase the Notes. Household International will use the net proceeds from the sale of such Notes for the repayment of indebtedness we incurred in the normal and ordinary course of our business and for other general corporate purposes, including advances or capital contributions to our subsidiaries. RATIO OF EARNINGS TO FIXED CHARGES OF HOUSEHOLD The ratio of earnings to fixed charges for Household International and subsidiaries for the periods indicated below was as follows:
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, -------------- -------------------------------- 2000 1999 1999 1998 1997 1996 1995 ----- ----- ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges................. 1.64 1.76 1.79 1.37 1.58 1.54 1.42
For purposes of calculating the above ratios, earnings consist of net income to which has been added income taxes and fixed charges. Fixed charges consist of interest on all indebtedness (including capitalized interest) and one-third of rental expense (approximate portion representing interest). The 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 1.75. 9 11 SELECTED FINANCIAL INFORMATION OF HOUSEHOLD The financial information which is set forth below as of and for the three years ended December 31, 1999 has been derived from the consolidated financial statements and notes thereto of Household International and subsidiaries which have been audited by Arthur Andersen LLP, independent certified public accountants. All consolidated financial information of Household International and subsidiaries presented below should be read in conjunction with the detailed financial statements included in documents on file with the Commission and listed under "Incorporation of Information We File with the SEC" in this prospectus. The selected financial information for the nine months ended September 30, 2000 and 1999 are unaudited and should be read in conjunction with Household's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000, which is incorporated by reference herein. Operating results for the nine months ended September 30, 2000 should not be considered indicative of results for any future periods or the year ending December 31, 2000. All dollar amounts stated below are in millions.
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ------------------- ------------------------------------ 2000 1999 1999 1998 1997 -------- -------- --------- --------- --------- (UNAUDITED) STATEMENT OF INCOME DATA: Finance income..................................... $6,252.3 4,776.3 $ 6,549.5 $ 5,604.2 $ 5,131.0 Other interest income.............................. 26.4 25.3 33.4 57.1 49.8 Interest expense................................... 2,811.9 2,013.8 2,776.6 2,517.0 2,358.4 -------- -------- --------- --------- --------- Net interest margin.............................. 3,466.8 2,787.8 3,806.3 3,144.3 2,822.4 Provision for credit losses on owned receivables... 1,542.1 1,263.2 1,716.4 1,516.8 1,493.0 -------- -------- --------- --------- --------- Net interest margin after provision for credit losses........................................... 1,924.7 1,524.6 2,089.9 1,627.5 1,329.4 -------- -------- --------- --------- --------- Securitization income.............................. 1,081.9 995.3 1,393.5 1,548.9 1,638.4 Insurance revenues................................. 413.5 405.4 534.6 492.8 454.2 Investment income.................................. 127.2 128.0 168.8 161.2 173.1 Fee income......................................... 591.4 421.2 595.5 599.7 592.4 Other income....................................... 195.3 180.0 223.8 243.7 355.7 Gain on sale of Beneficial Canada.................. -- -- -- 189.4 -- -------- -------- --------- --------- --------- Total other revenues............................. 2,409.3 2,129.9 2,916.2 3,235.7 3,213.8 -------- -------- --------- --------- --------- Salaries and fringe benefits....................... 1,109.9 887.4 1,194.6 1,127.5 1,085.3 Occupancy and equipment expense.................... 229.5 200.0 270.9 316.1 333.6 Other marketing expenses........................... 366.6 264.0 370.0 403.2 449.6 Other servicing and administrative expenses........ 466.9 433.4 547.9 654.9 857.9 Amortization of acquired intangibles and goodwill......................................... 121.1 107.8 143.9 170.6 158.4 Policyholders' benefits............................ 198.3 199.0 258.1 238.2 255.9 Merger and integration related costs............... -- -- -- 1,000.0 -- -------- -------- --------- --------- --------- Total costs and expenses......................... 2,492.3 2,091.6 2,785.4 3,910.5 3,140.7 -------- -------- --------- --------- --------- Income before income taxes......................... 1,841.7 1,562.9 2,220.7 952.7 1,402.5 Income taxes....................................... 633.7 515.3 734.3 428.6 462.2 -------- -------- --------- --------- --------- Net income....................................... $1,208.0 1,047.6 $ 1,486.4 $ 524.1(2) $ 940.3 ======== ======== ========= ========= =========
AS OF DECEMBER 31, SEPTEMBER 30, ----------------------------------- 2000 1999 1998 1997 -------------- --------- --------- --------- (UNAUDITED) PERIOD END BALANCE SHEET DATA: Total assets: Owned........................................... $73,728.6 $60,749.4 $52,892.7 $46,817.0 Managed(1)...................................... 92,596.1 80,188.3 72,594.6 71,295.5 Deposits.......................................... 8,530.7 4,980.0 2,105.0 2,344.2 Total other debt.................................. 53,369.9 45,665.1 40,356.5 34,402.3 Company obligated mandatorily redeemable preferred securities of subsidiary trusts................. 675.0 375.0 375.0 175.0 Preferred stock................................... 164.4 164.4 164.4 264.5 Common shareholders' equity....................... 7,550.4 6,450.9 6,221.4 6,174.0
- ------------------ (1) Managed assets include assets on our balance sheet and assets that we service for investors as part of our asset securitization program. (2) Excluding merger and integration related costs of $751.0 million after-tax and the $118.5 million after-tax gain on sale of Beneficial's Canadian operations, operating net income was $1,156.6 million. 10 12 CAPITALIZATION OF HOUSEHOLD The following table sets forth the consolidated capitalization of Household International at September 30, 2000 and as adjusted to reflect a proposed application of the estimated net proceeds from the sale of the Trust Preferred Securities to reduce our short-term borrowings. See "Use of Proceeds." The table should be read in conjunction with Household International's consolidated financial statements and notes thereto included in the documents incorporated by reference herein. See "Incorporation of Information We File with the SEC."
------------------------ ACTUAL PRO FORMA --------- ----------- (UNAUDITED) ----------- (DOLLARS IN MILLIONS) Deposits............................................. $ 8,530.7 $ 8,530.7 Commercial paper, bank and other borrowings.......... 10,882.6 10,682.6 Senior and senior subordinated debt (with original maturities over one year).......................... 42,487.3 42,487.3 --------- --------- Total debt........................................... 61,900.6 61,700.6 Company obligated mandatorily redeemable preferred securities of subsidiary trusts(1)................. 675.0 875.0 Preferred stock...................................... 164.4 164.4 Common shareholders' equity.......................... 7,550.4 7,550.4 --------- --------- Total capitalization................................. $70,290.4 $70,290.4 ========= =========
- ------------------------- (1) The sole assets of the trusts are Junior Subordinated Deferrable Interest Notes issued by Household International in June 2000, March 1998, June 1996 and June 1995, bearing interest at 10.00, 7.25, 8.70 and 8.25 percent, respectively, with principal balances of $309.3, $206.2, $103.1 and $77.3 million, respectively, and due June 30, 2030, December 31, 2037, June 30, 2036 and June 30, 2025, respectively. (2) Pro forma assets of the trusts includes the $ million principal amount of Notes issued by Household International in connection with the issuance of the Trust Preferred Securities offered hereby. DESCRIPTION OF TRUST PREFERRED SECURITIES The Trust Preferred Securities will be issued pursuant to the terms of the Declaration. The Declaration will be qualified as an indenture under the Trust Indenture Act. The property trustee will act as the indenture trustee for purposes of compliance with the provisions of the Trust Indenture Act. The terms of the Trust Preferred Securities will include those stated in the Declaration and those made part of the Declaration by the Trust Indenture Act. The following summary of the principal terms and provisions of the Trust Preferred Securities does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Declaration, a copy of which is filed as an exhibit to the registration statement, of which this prospectus is a part, the Delaware Trust Act and the Trust Indenture Act. The Declaration authorizes the Regular Trustees, on behalf of the Trust, to issue the Trust Preferred Securities, which represent preferred undivided beneficial interests in the assets of the Trust, and the common interests, which represent common undivided beneficial interests in the assets of the Trust. All of the common interests will be owned by Household International. The common interests rank pari passu, and payments will be made to them on a pro rata basis with the Trust Preferred Securities, except that upon the occurrence of a Declaration Event of Default, the rights of the holders of the common interests to receive payment of periodic distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Trust Preferred Securities. The Declaration does not permit the issuance by the Trust of any securities other than the Trust Preferred Securities and the common interests or the incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the property trustee will own and hold the Notes for the benefit of the holders of the Trust Securities. The payment of distributions out of money held by the Trust, 11 13 and payments upon redemption of the Trust Preferred Securities or liquidation of the Trust, are guaranteed by Household International on a subordinated basis as and to the extent described under "Description of the Preferred Securities Guarantee." The Preferred Guarantee Trustee will hold the Preferred Securities Guarantee for the benefit of the holders of the Trust Preferred Securities. The Preferred Securities Guarantee does not cover payment of distributions on the Trust Preferred Securities when the Trust does not have sufficient available funds in the Property Account to make such distributions. In such event, the remedy of a holder of Trust Preferred Securities is to (i) vote to appoint a Special Regular Trustee, (ii) to direct the property trustee to enforce its rights under the Notes or (iii) if the failure of the Trust to pay distributions is attributable to the failure of Household International to pay interest or principal on the Notes, institute a proceeding directly against Household International for enforcement of payment to such holder of the principal or interest on the Notes having a principal amount equal to the aggregate liquidation amount of the Trust Preferred Securities of such holder on or after the respective due date specified in the Notes. See "Description of the Trust Preferred Securities -- Voting Rights." DISTRIBUTIONS Distributions on the Trust Preferred Securities will be fixed at a rate per annum of % of the stated liquidation amount of $25 per Trust Preferred Security. Distributions in arrears for more than one quarter will bear interest thereon at the rate per annum of % thereof. The term "distributions" as used herein includes any such interest payable unless otherwise stated. The amount of distributions payable for any period will be computed (i) for any full 90-day quarterly distribution period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 90-day quarterly distribution period on the basis of a 30-day month, and for periods of less than a month, the actual number of days elapsed per 30-day month. Distributions on the Trust Preferred Securities will be cumulative, will accrue from , 2001 and will be payable quarterly in arrears on , , and of each year to the holders of record on the applicable record date, commencing , 2001 when, as and if available for payment by the property trustee, except as otherwise described below. The distribution on , 2001 will include the period from , 2001 to , 2001. Household International has the right under the Indenture to defer payments of interest on the Notes by extending the interest payment period from time to time on the Notes (each, an "Extension Period"). If Household elects to defer such payments, this would defer quarterly distributions on the Trust Preferred Securities (though such distributions would continue to accrue interest since interest would continue to accrue on the Notes) during any such extended interest payment period. In the event that Household International exercises this right, then (a) Household International shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock (other than (i) repurchases, redemptions or other acquisitions of shares of capital stock of Household International in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (ii) as a result of an exchange or conversion of any class or series of Household International's capital stock for any other class or series of Household International's capital stock, or (iii) the purchase of fractional interests in shares of Household International's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged), and (b) Household International shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by Household International which rank pari passu with or junior to the Notes. The foregoing, however, will not apply to any stock dividends paid by Household International where the dividend stock is the same stock as that on which the dividend is being paid. Prior to the termination of any such Extension Period, Household International may further extend the interest payment period, provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters and provided further that no Extension Period may extend beyond the maturity of the Notes. Upon the termination of any Extension Period and the payment of all amounts then due, Household International may select a new Extension Period as if no Extension Period had previously been declared, subject to the 12 14 above requirements. See "Description of the Notes -- Interest" and "-- Option to Extend Interest Payment Period." If distributions are deferred, the deferred distributions and accrued interest thereon shall be paid to holders of record of the Trust Preferred Securities, if funds are available therefor, as they appear on the books and records of the Trust on the record date next following the termination of such Extension Period. Distributions on the Trust Preferred Securities must be paid on the dates payable to the extent that the Trust has funds available for the payment of such distributions in the Property Account. The Trust's funds available for distribution to the holders of the Trust Preferred Securities will be limited to payments received under the Notes. See "Description of the Notes." The payment of distributions out of moneys held by the Trust is guaranteed by Household International to the extent set forth under "Description of the Preferred Securities Guarantee." Distributions on the Trust Preferred Securities will be payable to the holders thereof as they appear on the books and records of the Trust on the relevant record dates, which, as long as the Trust Preferred Securities remain in book-entry only form, will be one business day prior to the relevant payment dates. Such distributions will be paid through the property trustee, who will hold amounts received in respect of the Notes in the Property Account for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under "-- Book-Entry Only Issuance -- The Depository Trust Company" below. In the event the Trust Preferred Securities shall not continue to remain in book-entry only form, the Regular Trustees shall have the right to select record dates which shall be more than one business day, but less than 30 business days prior to the relevant payment dates. In the event that any date on which distributions are to be made on the Trust Preferred Securities is not a business day, then payment of the distributions payable on such date will be made on the next succeeding day which is a business day (and without any interest or other payment in respect of any such delay) except that, if such business day is in the next succeeding calendar year, such payment shall be made on the immediately preceding business day, in each case with the same force and effect as if made on such date. A "business day" shall mean any day other than Saturday, Sunday or any day on which banking institutions in Chicago, Illinois, New York, New York, or the State of Delaware are authorized or required by law to close. MANDATORY REDEMPTION The Notes will mature on , , and may be redeemed at any time, in whole or in part, on or after , or at any time, in whole or in part, in certain circumstances upon the occurrence of a tax event. See "-- Special Event Redemption or Distribution" below. Upon the repayment of the Notes, whether at maturity or upon redemption, the proceeds from such repayment or payment shall simultaneously be applied to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Notes so repaid or redeemed at $25 per Trust Preferred Security plus accrued and unpaid distributions thereon to the redemption date; provided that holders of Trust Securities shall be given not less than 30 nor more than 60 days notice of such redemption. See "Description of the Notes." In the event that fewer than all of the outstanding Trust Preferred Securities are to be redeemed, the Trust Preferred Securities will be redeemed as described under "-- Book-Entry Only Issuance -- The Depository Trust Company" below. SPECIAL EVENT REDEMPTION OR DISTRIBUTION "Tax event" means that the Regular Trustees shall have received an opinion from independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of such laws or regulations, there is more than an insubstantial risk that (i) the Trust would be subject to United States federal income tax with respect to income accrued or received on the Notes, (ii) interest payable to the Trust on the Notes would not be deductible, in whole or in part, by Household International for United States federal income tax purposes or (iii) the Trust would be subject to 13 15 more than a de minimis amount of other taxes, duties or other governmental charges, which change or amendment becomes effective on or after the date of this prospectus. A "change in U.S. investment company law" means that the Regular Trustees shall have received an opinion from independent counsel to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which change becomes effective on or after the date of this prospectus. If, at any time, a tax event or a change in U.S. investment company law (each, as defined above, a "Special Event") shall occur and be continuing, the Trust shall, except in the circumstances described below, be dissolved with the result that Notes with an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on, all securities issued by the Trust would be distributed to the holders of the such securities, in liquidation of such holders' interests in the Trust on a pro rata basis, within 90 days following the occurrence of such Special Event; provided, however, that in the case of the occurrence of a Special Event, as a condition of such dissolution and distribution, the Regular Trustees shall have received an opinion from independent tax counsel experienced in such matters, which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the holders of all securities issued by the Trust will not recognize any gain or loss for United States federal income tax purposes as a result of such dissolution and distribution of Notes; and, provided, further, that, if at the time there is available to the Trust the opportunity to eliminate, within such 90 day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on the Trust, Household International or the holders of all securities issued by the Trust, the Trust will pursue such measure in lieu of dissolution. Furthermore, if in the case of the occurrence of a tax event, (i) Household International has received an opinion from independent tax counsel experienced in such matters that, as a result of the tax event, there is more than an insubstantial risk that Household International would be precluded from deducting the interest on the Notes for United States federal income tax purposes even after the Notes were distributed to the holders of all securities issued by the Trust in liquidation of such holders' interests in the Trust as described above or (ii) the Regular Trustees shall have been informed by such counsel that the legal opinion required to be delivered with respect to the recognition of gain or loss as described above cannot be delivered, Household International shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Notes in whole or in part for cash within 90 days following the occurrence of such tax event, and, following such redemption, such securities with an aggregate liquidation amount equal to the aggregate principal amount of the Notes so redeemed shall be redeemed by the Trust at the redemption price on a pro rata basis; provided, however, that, if at the time there is available to Household International or the Trust the opportunity to eliminate, within such 90 day period, the tax event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Trust, the holders of securities issued by the Trust or Household International, the Trust will pursue such measure in lieu of redemption. If Notes are distributed to the holders of the Trust Preferred Securities, Household International will use its best efforts to have the Notes listed on the New York Stock Exchange or on such other exchange as the Trust Preferred Securities are then listed. After the date for any distribution of Notes upon dissolution of the Trust, (i) the Trust Preferred Securities and Preferred Securities Guarantee will no longer be deemed to be outstanding, (ii) the depositary or its nominee, as the record holder of the Trust Preferred Securities, will receive a registered global certificate or certificates representing the Notes to be delivered upon such distribution and (iii) any certificates representing the Trust Preferred Securities and the Preferred Securities Guarantee not held by the depositary or its nominee will be deemed to represent Notes having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid 14 16 interest equal to accrued and unpaid distribution on, such Trust Preferred Securities, until such certificates are presented to Household International or its agent for transfer or reissuance. There can be no assurance as to the market prices for the Trust Preferred Securities or the Notes that may be distributed in exchange for the Trust Preferred Securities if a dissolution and liquidation of the Trust were to occur. Accordingly, the Trust Preferred Securities that an investor may purchase, or the Notes that the investor may receive on dissolution and liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the Trust Preferred Securities offered hereby. REDEMPTION PROCEDURES The Trust may not redeem fewer than all of the outstanding Trust Preferred Securities unless all accrued and unpaid distributions have been paid on all Trust Preferred Securities for all quarterly distribution periods terminating on or prior to the date of redemption. If the Trust gives a notice of redemption in respect of the Trust Preferred Securities (which notice will be irrevocable), then, by 12:00 noon, New York City time, on the redemption date, provided that Household International has paid to the property trustee a sufficient amount of cash in connection with the related redemption or maturity of the Notes, the property trustee will irrevocably deposit with the depositary funds sufficient to pay the applicable redemption price and will give the depositary irrevocable instructions and authority to pay the redemption price to the holders of the Trust Preferred Securities. See "-- Book-Entry Only Issuance -- The Depository Trust Company." If notice of redemption shall have been given and funds deposited as required, then immediately prior to the close of business on the date of such deposit, distributions will cease to accrue and all rights of holders of such Trust Preferred Securities so called for redemption will cease, except the right of the holders of such Trust Preferred Securities to receive the redemption price, but without interest on such redemption price. In the event that any date fixed for redemption of the Trust Preferred Securities is not a business day, then payment of the redemption price payable on such date will be made on the next succeeding day which is a business day (and without any interest or other payment in respect of any such delay), except that, if such business day falls in the next calendar year, such payment will be made on the immediately preceding business day. In the event that payment of the redemption price in respect of the Trust Preferred Securities is improperly withheld or refused and not paid either by the Trust or by Household International pursuant to the Preferred Securities Guarantee, distributions on such Trust Preferred Securities will continue to accrue from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the redemption price. In the event that fewer than all of the outstanding Trust Preferred Securities are to be redeemed, the Trust Preferred Securities will be redeemed as described under "-- Book-Entry Only Issuance -- The Depository Trust Company" below. Subject to the foregoing and to applicable law (including, without limitation, United States federal securities laws), Household International or its affiliates may, at any time and from time to time, purchase outstanding Trust Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust, the holders of the Trust Preferred Securities at that time will be entitled to receive out of the assets of the Trust, after satisfaction of liabilities to creditors, distributions in an amount equal to the aggregate of the stated liquidation amount of $25 per Trust Preferred Security plus accrued and unpaid distributions thereon to the date of payment, unless, in connection with such liquidation, dissolution, winding-up or termination, Notes in an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on, the Trust Preferred Securities have been distributed on a pro rata basis to the holders of Trust Preferred Securities. 15 17 If, upon any such dissolution, the liquidation distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate liquidation distribution, then the amounts payable directly by the Trust on the Trust Preferred Securities shall be paid on a pro rata basis. The holders of the common interests will be entitled to receive distributions upon any such dissolution pro rata with the holders of the Trust Preferred Securities, except that if a Declaration Event of Default has occurred and is continuing, the Trust Preferred Securities shall have a preference over the common interests with respect to such distributions. Pursuant to the Declaration, the Trust shall terminate (i) on , , the expiration of the term of the Trust, (ii) upon the bankruptcy of Household International, (iii) upon the filing of a certificate of dissolution or its equivalent with respect to Household International (except for permitted mergers, consolidations or reorganizations of Household International), the filing of a certificate of cancellation with respect to the Trust, or the revocation of the charter of Household International and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iv) upon the distribution of the Notes following the occurrence of a Special Event, (v) upon the redemption of all of the securities issued by the Trust or (vi) upon the entry of a decree of a judicial dissolution of Household International or the Trust. DECLARATION EVENTS OF DEFAULT An event of default under the Indenture constitutes an event of default under the Declaration with respect to the Trust Preferred Securities (a "Declaration Event of Default"), provided that pursuant to the Declaration, the holder of the common interests will be deemed to have waived any Declaration Event of Default with respect to the common interests until all Declaration Events of Default with respect to the Trust Preferred Securities have been cured, waived or otherwise eliminated. Until such Declaration Events of Default with respect to the Trust Preferred Securities have been so cured, waived or otherwise eliminated, the property trustee will be deemed to be acting solely on behalf of the holders of the Trust Preferred Securities and only the holders of the Trust Preferred Securities will have the right to direct the property trustee with respect to certain matters under the Declaration, and therefore the Indenture. In the event that any Declaration Event of Default with respect to the Trust Preferred Securities is waived by the holders of the Trust Preferred Securities as provided in the Declaration, the holders of common interests pursuant to the Declaration have agreed that such waiver also constitutes a waiver of such Declaration Event of Default with respect to the common interests for all purposes under the Declaration without any further act, vote or consent of the holders of common interests. See " -- Voting Rights." If the property trustee fails to enforce its rights under the Notes, any holder of Trust Preferred Securities may directly institute a legal proceeding against Household International to enforce the property trustee's rights under the Notes, without first instituting any legal proceeding against the property trustee or any other person or entity. Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of Household International to pay interest or principal on the Notes on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), then a holder of Trust Preferred Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of or interest on the Notes having a principal amount equal to the aggregate liquidation amount of the Trust Preferred Securities of such holder on or after the respective due date specified in the Notes. In connection with such action, Household International will be subrogated to the rights of such holder of Trust Preferred Securities under the Declaration to the extent of any payment made by Household International to such holder of Trust Preferred Securities in such action. The holders of Trust Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Notes. Upon the occurrence of a Declaration Event of Default, the property trustee, as the sole holder of the Notes, will have the right under the Indenture to declare the principal of and interest on the Notes to be immediately due and payable. 16 18 VOTING RIGHTS Except as provided below, under the Delaware Trust Act, the Trust Indenture Act and "Description of the Preferred Securities Guarantee -- Amendments and Assignment" and as otherwise required by law and the Declaration, the holders of the Trust Preferred Securities will have no voting rights. If (i) the Trust fails to pay distributions in full on the Trust Preferred Securities for six consecutive quarterly distribution periods, or (ii) a Declaration Event of Default occurs and is continuing then the holders of the Trust Preferred Securities, acting as a single class, will be entitled by the majority vote of such holders to appoint a Special Regular Trustee. For purposes of determining whether the Trust has failed to pay distributions in full for six consecutive quarterly distribution periods, distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative distributions have been or contemporaneously are paid with respect to all quarterly distribution periods terminating on or prior to the date of payment of such cumulative distributions. Any holder of Trust Preferred Securities (other than Household International or any of its affiliates) shall be entitled to nominate any person to be appointed as Special Regular Trustee. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees shall convene a meeting of the holders of Trust Preferred Securities for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the holders of not less than 10% of the aggregate stated liquidation amount of the outstanding Trust Preferred Securities will be entitled to convene such meeting. The provisions of the Declaration relating to the convening and conduct of the meetings of the holders will apply with respect to any such meeting. Any Special Regular Trustee so appointed shall cease to be a Special Regular Trustee if the event pursuant to which the Special Regular Trustee was appointed and all other events which could cause such appointment cease to be continuing. Notwithstanding the appointment of any Special Regular Trustee, Household International shall retain all rights under the Indenture, including the right to extend or defer interest payments as provided under "Description of the Notes -- Option to Extend Interest Payment Period." If such an extension or deferment occurs, there will be no Indenture event of default, and therefore no Declaration Event of Default, for failure to make any scheduled interest payment during that period. The holders of a majority in aggregate liquidation amount of the Trust Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the property trustee, or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the property trustee, as the holder of the Notes, to (i) direct the time, method or place of conducting any proceeding for any remedy available to the Debt Trustee or exercise any trust or power conferred on the Debt Trustee with respect to the Notes, (ii) waive any past Indenture event of default which is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all Notes shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Notes where such consent shall be required; provided that where a consent or action under the Indenture would require the consent or action of the holders of more than a majority in principal amount of the Notes (a "Super-Majority") affected thereby, only the holders of at least such Super-Majority in aggregate liquidation amount of the Trust Preferred Securities may direct the property trustee to give such consent or take such action. If the property trustee fails to enforce its rights under the Notes, a holder of Trust Preferred Securities may institute a legal proceeding directly against Household International to enforce the property trustee's rights under the Notes without first instituting any legal proceeding against the Property Trustee or any other person or entity. The property trustee shall notify all holders of the Trust Preferred Securities of any notice of default received from the Debt Trustee with respect to the Notes. Such notice shall state that such Indenture event of default also constitutes a Declaration Event of Default. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the property trustee shall not take any action described in clauses (i), (ii), (iii) or (iv) above unless the property trustee has obtained an opinion of independent tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. In the event the consent of the property trustee, as the holder of the Notes, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the property trustee shall request the direction of the holders of the securities issued by the Trust with respect to such amendment, 17 19 modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in liquidation amount of the such securities voting together as a single class, provided that where a consent under the Indenture would require the consent of a Super-Majority, the property trustee may only give such consent at the direction of the holders of at least the proportion in liquidation amount of all securities issued by the Trust which the relevant Super-Majority represents of the aggregate principal amount of the Notes outstanding. The property trustee shall not take any such action in accordance with the directions of the holders of all securities issued by the Trust unless the property trustee has obtained an opinion of independent tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. A waiver of an Indenture event of default by the property trustee at the direction of the holders of the Trust Preferred Securities will constitute a waiver of the corresponding Declaration Event of Default. Any required approval or direction of holders of Trust Preferred Securities may be given at a separate meeting of holders of Trust Preferred Securities convened for such purpose, at a meeting of all of the holders of securities issued by the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of Trust Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Trust Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Trust Preferred Securities will be required for the Trust to redeem and cancel Trust Preferred Securities or distribute Notes in accordance with the Declaration. Notwithstanding that holders of Trust Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Trust Preferred Securities at such time that are owned by Household International or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with Household International, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. The procedures by which holders of Trust Preferred Securities may exercise their voting rights are described below. See "-- Book-Entry Only Issuance -- The Depository Trust Company." Except in the limited circumstances described above in connection with the appointment of a Special Regular Trustee, holders of the Trust Preferred Securities will have no rights to appoint or remove the Household International trustees, who may be appointed, removed or replaced solely by Household International, as the direct or indirect holder of all the common interests. MODIFICATION OF THE DECLARATION The Declaration may be amended or modified if approved and executed by a majority of the Regular Trustees, provided that if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would materially adversely affect the powers, preferences or special rights of the holders of securities issued by the Trust, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the holders of all the securities issued by the Trust voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least 66 2/3% in liquidation amount of the Trust Preferred Securities affected thereby, provided that (a) any modification of the right of holders of Trust Preferred Securities to appoint a Special Regular Trustee or (b) a reduction of the principal amount or the distribution rate, or a change in the payment dates or maturity dates of the Trust Preferred Securities, shall not be permitted without the consent of each holder of Trust Preferred Securities. In the event any amendment or proposal referred to in clause (i) above would materially adversely affect only the Trust Preferred Securities or the common interests, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66 2/3% in liquidation amount of such class of Trust Securities. 18 20 Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the property trustee or (iii) cause the Trust to be deemed to be an "investment company" which is required to be registered under the 1940 Act. MERGERS, CONSOLIDATIONS OR AMALGAMATIONS The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described below. The Trust may, with the consent of a majority of the Regular Trustees and without the consent of the holders of the securities issued by the Trust, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided, that (i) such successor entity either (x) expressly assumes all of the obligations of the Trust with respect to the securities issued by the Trust or (y) substitutes for the Trust Preferred Securities other securities having substantially the same terms as the Trust Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Trust Preferred Securities in priority with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) Household International expressly appoints a trustee of such successor entity possessing the same powers and duties as the property trustee as the holder of the Notes, (iii) the Trust Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Trust Preferred Securities are then listed, (iv) such merger, consolidation, amalgamation or replacement does not cause the Trust Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (vi) such successor entity has a purpose identical to that of the Trust, (vii) prior to such merger, consolidation, amalgamation or replacement, Household International has received an opinion from independent counsel experienced in such matters to the effect that (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act and (viii) Household International guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in liquidation amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified for United States federal income tax purposes as other than a grantor trust. In addition, so long as any Trust Preferred Securities are outstanding and are not held entirely by Household International, the Trust may not voluntarily liquidate, dissolve, wind-up or terminate except as described above under "-- Special Event Redemption or Distribution." BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC") will act as securities depositary for the Trust Preferred Securities. The Trust Preferred Securities will be issued only as fully registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully registered global Trust Preferred Securities certificates will be issued, representing in the aggregate the total number of Trust Preferred Securities, and will be deposited with DTC. 19 21 The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in a global Trust Preferred Security. 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 Exchange Act. 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 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, the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC 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. The rules applicable to DTC and its participants are on file with the Commission. Purchases of Trust Preferred Securities within the DTC system must be made by or through direct participants, which will receive a credit for the Trust Preferred Securities on DTC's records. The ownership interest of each actual purchaser of Trust Preferred Securities is in turn to be recorded on the participants' records. Beneficial owners will not receive written confirmation from DTC of their purchases, but beneficial owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the participants through which the beneficial owners purchased Trust Preferred Securities. Transfers of ownership interests in the Trust Preferred 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 Trust Preferred Securities, except in the event that use of the book-entry system for the Trust Preferred Securities is discontinued. To facilitate subsequent transfers, all the Trust Preferred Securities deposited by participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of Trust Preferred Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the Trust Preferred Securities. DTC's records reflect only the identity of the direct participants to whose accounts such Trust Preferred Securities 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 participants, and by 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. Redemption notices shall be sent to Cede & Co. If less than all of the Trust Preferred Securities are being redeemed, DTC will use a lottery to select certain of the Trust Preferred Securities to be redeemed in accordance with its procedures. Although voting with respect to the Trust Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Trust Preferred Securities. Under its usual procedures, DTC would mail an omnibus proxy to the Trust as soon as possible after the record date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to those direct participants to whose accounts the Trust Preferred Securities are credited on the record date (identified in listing attached to the omnibus proxy). Household International and the Trust believe the arrangements among DTC, participants, and beneficial owners will enable the beneficial owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a beneficial interest in the Trust. Distribution payments on the Trust Preferred Securities will be made to DTC. DTC's practice is to credit direct participants' accounts on the relevant payment date in accordance with their respective holdings shown 20 22 on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by participants to beneficial owners will be governed by standing instructions and customary practices, as in the case with securities held for the account of customers in bearer form or registered in "street name," and will be the responsibility of such participant and not of DTC, the Trust, any trustee or Household International, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of distributions to DTC is the responsibility of the Trust, disbursement of such payments to direct participants is the responsibility of DTC, and disbursement of such payments to the beneficial owners is the responsibility of participants. Except as provided herein, a beneficial owner in a global Trust Preferred Security will not be entitled to receive physical delivery of Trust Preferred Securities. Accordingly, each beneficial owner must rely on the procedures of DTC to exercise any rights under the Trust Preferred Securities. DTC may discontinue providing its services as securities depositary with respect to the Trust Preferred Securities at any time by giving reasonable notice to the Trust. Under such circumstances, in the event that a successor securities depositary is not obtained, Trust Preferred Securities certificates are required to be printed and delivered. Additionally, the Regular Trustees (with consent of Household International) may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depositary) with respect to the Trust Preferred Securities. In that event, certificates for the Trust Preferred Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system have been obtained from sources that Household International and the Trust believe to be reliable, but Household International and the Trust take no responsibility for the accuracy thereof. INFORMATION CONCERNING THE PROPERTY TRUSTEE The property trustee, prior to the occurrence of a default with respect to the Trust Securities or interest, undertakes to perform only such duties as are specifically set forth in the Declaration and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the property trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Trust Preferred Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The holders of Trust Preferred Securities will not be required to offer such indemnity in the event such holders, by exercising their voting rights, direct the property trustee to take any action following a Declaration Event of Default. The property trustee also serves as trustee under the Preferred Securities Guarantee. Household International, and certain of its affiliates, maintain a banking relationship with the property trustee. The property trustee, or affiliates thereof, serves as trustee under other indentures pursuant to which securities of Household International, or an affiliate, are outstanding. REGISTRAR, TRANSFER AGENT AND PAYING AGENT In the event that the Trust Preferred Securities do not remain in book-entry only form, the property trustee will act as paying agent and may designate an additional or substitute paying agent at any time. Registration of transfers of Trust Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust or Household International may require) in respect of any tax or other government charges which may be imposed in relation to it, the Trust will not be required to register or cause to be registered the transfer of Trust Preferred Securities after such Trust Preferred Securities have been called for redemption. GOVERNING LAW The Declaration and the Trust Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware. 21 23 MISCELLANEOUS The Regular Trustees are authorized and directed to operate the Trust in such a way so that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act or characterized for United States federal income tax purposes as other than a grantor trust. Household International is authorized and directed to conduct its affairs so that the Notes will be treated as indebtedness of Household International for United States federal income tax purposes. In this connection, the Regular Trustees and Household International are authorized to take any action, not inconsistent with applicable law, the Declaration or the amended and restated certificate of incorporation of Household International, that each of the Regular Trustees and Household International determines in their discretion to be necessary or desirable for such purposes, as long as such action does not materially and adversely affect the interests of the holders of the Trust Preferred Securities. DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE Set forth below is a summary of information concerning the Preferred Securities Guarantee that will be executed and delivered by Household International for the benefit of the holders from time to time of Trust Preferred Securities. The Preferred Securities Guarantee will be qualified as an indenture under the Trust Indenture Act. The Bank of New York will act as indenture trustee under the Preferred Securities Guarantee (the "Preferred Guarantee Trustee") including for purposes of the Trust Indenture Act. The terms of the Preferred Securities Guarantee will be those set forth therein and those made part thereof by the Trust Indenture Act. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to the Preferred Securities Guarantee, which is filed as an exhibit to the registration statement of which this prospectus forms a part, and the Trust Indenture Act. The Preferred Securities Guarantee will be held by the Preferred Guarantee Trustee for the benefit of holders of the Trust Preferred Securities. GENERAL Pursuant to the Preferred Securities Guarantee, Household International will irrevocably agree, to the extent set forth therein, to pay in full to the holders of the Trust Preferred Securities, the guarantee payments (without duplication of amounts theretofore paid by the Trust), to the extent not paid by the Trust, regardless of any defense, right of set-off or counterclaim that the Trust may have or assert. The guarantee payments with respect to the Trust Preferred Securities, to the extent not paid or made by the Trust, will be: (i) any accrued and unpaid distributions on the Trust Preferred Securities where Household International has made a payment of principal, premium or interest on the Notes held by the property trustee, (ii) the redemption price, including all accrued and unpaid distributions to the date of the redemption, to the extent the Trust has funds available therefor with respect to the Trust Preferred Securities called for redemption by the Trust and (iii) upon a liquidation of the Trust (other than in connection with the distribution of Notes to the holders of Trust Securities or the redemption of all of the Trust Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on the Trust Preferred Securities to the date of payment, to the extent the Trust has funds available therefor, and (b) the amount of assets of the Trust remaining available for distribution to holders of Trust Preferred Securities in liquidation of the Trust. Household International's obligation to make a guarantee payment may be satisfied by direct payment of the required amounts by Household International to the holders of Trust Preferred Securities or by causing the Trust to pay such amounts to such holders. If Household International does not make interest payments on the Notes held by the property trustee, the Trust will not make distributions on the Trust Preferred Securities. The Preferred Securities Guarantee will guarantee, on a subordinated basis, the guarantee payments with respect to the Trust Preferred Securities from the time of issuance of the Trust Preferred Securities, but will not apply to the payment of distributions and other payments on the Trust Preferred Securities when the property trustee does not have sufficient funds in the Property Account to make such distributions or other payments. The Preferred Securities Guarantee, when taken together with Household International's obligations under the Notes, the Indenture and the 22 24 Declaration, including its obligations to pay costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Securities), will provide a full and unconditional guarantee on a subordinated basis by Household International of amounts due on the Trust Preferred Securities. CERTAIN COVENANTS OF HOUSEHOLD INTERNATIONAL In the Preferred Securities Guarantee, Household International will covenant that, so long as the Trust Preferred Securities remain outstanding, if there shall have occurred and is continuing any event that would constitute an event of default under the Preferred Securities Guarantee or the Declaration, then (a) Household International will not declare or pay any dividends on, or purchase, acquire or make a distribution or liquidation payment with respect to, any of its capital stock (other than (i) repurchases, redemptions or other acquisitions of shares of capital stock of Household International in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (ii) as a result of an exchange or conversion of any class or series of Household International's capital stock for any other class or series of Household International's capital stock, or (iii) the purchase of fractional interests in shares of Household International's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged), and (b) Household International shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by Household International which rank pari passu with or junior to such Notes. The foregoing, however, will not apply to any stock dividends paid by Household International where the dividend stock is the same stock as that on which the dividend is being paid. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not materially adversely affect the rights of holders of Trust Preferred Securities (in which case no consent will be required), the Preferred Securities Guarantee may be amended only with the prior approval of the holders of not less than 66 2/3% in aggregate liquidation amount of the outstanding Trust Preferred Securities. The manner of obtaining any such approval of holders of the Trust Preferred Securities is set forth under "Description of the Trust Preferred Securities -- Voting Rights." All guarantees and agreements contained in the Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of Household International and shall inure to the benefit of the holders of the Trust Preferred Securities then outstanding. TERMINATION OF THE PREFERRED SECURITIES GUARANTEE The Preferred Securities Guarantee will terminate and be of no further force and effect as to the Trust Preferred Securities upon full payment of the redemption price of all Trust Preferred Securities, upon distribution of the Notes to the holders of Trust Preferred Securities, or upon full payment of the amounts payable upon liquidation of the Trust. See "Description of the Notes -- Events of Default" for a description of the events of default and enforcement rights of the holders of Notes. The Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Trust Preferred Securities must repay to the Trust or Household International, or their respective successors, any sums paid to them under the Trust Preferred Securities or the Preferred Securities Guarantee. EVENTS OF DEFAULT An event of default under a Preferred Securities Guarantee will occur upon the failure of Household International to perform any of its payment or other obligations thereunder. The holders of a majority in liquidation amount of the Trust Preferred Securities relating to such Preferred Securities Guarantee have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of the Preferred Securities Guarantee or to direct the exercise of any trust or power conferred upon the Preferred Guarantee Trustee under such Preferred Securities Guarantee. If the Preferred Guarantee Trustee fails to enforce the Preferred 23 25 Securities Guarantee, any holder of Trust Preferred Securities may institute a legal proceeding directly against Household International to enforce such holder's rights under such Preferred Securities Guarantee, without first instituting a legal proceeding against the Trust, the Preferred Guarantee Trustee or any other person or entity. Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of Household International to pay interest or principal on the Notes on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), then a holder of Trust Preferred Securities may directly institute a proceeding for enforcement of payment to such holder of the principal of or interest on the Notes having a principal amount equal to the aggregate liquidation amount of the Trust Preferred Securities of such holder on or after the respective due date specified in the Notes. In connection with such action, Household International will be subrogated to the rights of such holder of Trust Preferred Securities under the Declaration to the extent of any payment made by Household International to such holder of Trust Preferred Securities in such action. The holders of Trust Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Notes. STATUS OF THE PREFERRED SECURITIES GUARANTEE Household International's obligations under the Preferred Securities Guarantee to make the guarantee payments will constitute an unsecured obligation of Household International and will rank (i) subordinate and junior in right of payment to all other liabilities of Household International, including the Notes, except those made pari passu or subordinate by their terms, and (ii) pari passu with the most senior preferred stock now or hereafter issued by Household International and with any guarantee now or hereafter entered into by Household International in respect of any preferred security of any affiliate of Household International. The terms of the Trust Preferred Securities provide that each holder of Trust Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Preferred Securities Guarantee. In addition, because Household International is a holding company, its obligations under the Preferred Securities Guarantee are effectively subordinated to all existing and future liabilities of its subsidiaries. The Preferred Securities Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its rights under the guarantee without first instituting a legal proceeding against any other person or entity). The Preferred Securities Guarantee will be deposited with the property trustee to be held for the benefit of the holders of the Trust Preferred Securities. Except as otherwise noted herein, the property trustee has the right to enforce the Preferred Securities Guarantee on behalf of the holders of the Trust Preferred Securities. The Preferred Securities Guarantee will not be discharged except by payment of the guarantee payments in full (without duplication of amounts theretofore paid by the Trust). INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE The Preferred Guarantee Trustee, prior to the occurrence of a default with respect to a Preferred Securities Guarantee, undertakes to perform only such duties as are specifically set forth in such Preferred Securities Guarantee and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Preferred Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Preferred Securities Guarantee at the request of any holder of Trust Preferred Securities, unless offered reasonable indemnity against the costs, expenses and liabilities which might be incurred thereby. The Preferred Guarantee Trustee also serves as property trustee. Household International, and certain of its affiliates, maintain a banking relationship with the Preferred Guarantee Trustee. The Preferred Guarantee Trustee, or affiliates thereof, serves as trustee under other indentures pursuant to which securities of Household International, or an affiliate, are outstanding. 24 26 GOVERNING LAW The Preferred Securities Guarantee will be governed by and construed in accordance with the laws of the State of Illinois. DESCRIPTION OF THE NOTES Set forth below is a description of the terms of the Notes. The following description does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Indenture (the "Base Indenture"), dated as of May 15, 1995, between Household International and Bank One, National Association (formerly known as The First National Bank of Chicago) as trustee (the "Debt Trustee"), as supplemented by a Fifth Supplemental Indenture, dated as of , 2001 (the Base Indenture, as so supplemented, is hereinafter referred to as the "Indenture"), the forms of which are filed as exhibits to the registration statement of which this prospectus forms a part. The terms of the Notes will include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act. Certain capitalized terms used herein are defined in the Indenture. Under certain circumstances involving the dissolution of the Trust following the occurrence of a Special Event, Notes may be distributed to the holders of Trust securities in liquidation of the Trust. See "Description of the Trust Preferred Securities -- Special Event Redemption or Distribution." If the Notes are distributed to the holders of the Trust Preferred Securities, Household International will use its best efforts to have the Notes listed on the New York Stock Exchange or on such other exchange as the Trust Preferred Securities are then listed. GENERAL The Notes will be issued as unsecured junior subordinated debt securities under the Indenture. The Notes will be limited in aggregate principal amount to approximately $ , such amount being the sum of the aggregate stated liquidation amount of the Trust Preferred Securities and the capital contributed by Household International in exchange for the common interests (the "Payment"). The Notes are not subject to a sinking fund provision. The Notes will mature on , (such date, as it may be advanced as hereinafter described, the "Stated Maturity"). If a tax event occurs, then Household International will have the right prior to the termination of the Trust, to advance the Stated Maturity of the Notes to the minimum extent required in order to allow for the payments of interest in respect of the Notes to continue to be tax deductible, but in no event shall the resulting maturity of the Notes be less than 15 years from the date of original issuance thereof. The Stated Maturity shall be advanced only if, in the opinion of counsel to Household International experienced in such matters, (a) after advancing the Stated Maturity, interest paid on the Notes will be deductible for United States federal income tax purposes and (b) advancing the Stated Maturity will not result in a taxable event to holders of the Trust Preferred Securities. If Household International elects to advance the Stated Maturity of the Notes, it will give notice to the Debt Trustee, and the Debt Trustee will give notice of such change to the holders of the Notes not less than 30 and not more than 60 days prior to the effectiveness thereof. If Notes are distributed to holders of the Trust Preferred Securities in liquidation of such holders' interests in the Trust, such Notes will initially be issued as a Global Security. As described herein, under certain limited circumstances, Notes may be issued in certificated form in exchange for a Global Security. See "-- Book-Entry and Settlement." In the event Notes are issued in certificated form, the Notes will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Notes issued as Global Securities will be made to the depositary for the Notes. In the event Notes are issued in certificated form, principal and interest will be payable, the transfer of the Notes will be registrable and Notes will be exchangeable for Notes of other denominations of a like aggregate principal amount at the corporate trust office of the Debt Trustee in Chicago, Illinois or its current principal 25 27 office; provided, that payment of interest may be made at the option of Household International by check mailed to the address of the persons entitled thereto. The Indenture does not contain provisions that afford holders of Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving Household International. SUBORDINATION The Indenture provides that the Notes are subordinated and junior in right of payment to all senior indebtedness of Household International. No payment of principal of (including redemption payments, if any), premium, if any, or interest on, the Notes may be made if (a) any senior indebtedness is not paid when due and any applicable grace period with respect to such default has ended with such default not being cured or waived or ceasing to exist, or (b) the maturity of any senior indebtedness has been accelerated because of a default. Upon any distribution of assets of Household International to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal of, premium, if any, and interest due or to become due on, all senior indebtedness must be paid in full before the holders of Notes are entitled to receive or retain any payment. The rights of the holders of the Notes will be subrogated to the rights of the holders of senior indebtedness to receive payments or distributions applicable to such senior indebtedness until all amounts owing on the Notes are paid in full. The term "senior indebtedness" means, with respect to Household International, (i) any payment in respect of (a) indebtedness of such obligor for money borrowed (including any financial derivative, hedging or futures contract or similar instrument) and (b) indebtedness evidenced by securities, debentures, bonds, notes or other similar instruments issued by Household International which, by their terms, are senior or senior subordinated debt securities including, without limitation, all obligations under its indentures with various trustees; (ii) all capital lease obligations; (iii) all obligations issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations of Household International under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons the payment of which Household International is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other persons secured by any lien on any property or asset of Household International (whether or not such obligation is assumed by Household International), except for (1) any such indebtedness that is by its terms subordinated to or pari passu with the Notes and (2) any unsecured indebtedness between or among Household International or its affiliates including all other debt securities and guarantees in respect of these debt securities, issued to (a) any other trust or a trustee of such trust and (b) any other partnership or other entity affiliated with Household International that is a financing vehicle of Household International or its subsidiaries in connection with the issuance by such financing vehicle of securities similar to the Trust Preferred Securities or other securities that rank pari passu with, or junior to, the Trust Preferred Securities. Such senior indebtedness shall continue to be senior indebtedness and be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such senior indebtedness. The Indenture does not limit the aggregate amount of senior indebtedness which may be issued by Household International. As of December 31, 2000, senior indebtedness of Household International aggregated approximately $ billion. In addition, because Household International is a holding company, its obligations under the Notes will be effectively subordinated to all existing and future liabilities of its subsidiaries. At , 2000, such subsidiaries had total liabilities of approximately $ billion. CERTAIN COVENANTS If (i) there shall have occurred any event that would constitute an event of default under the Indenture, (ii) Household International shall be in default with respect to its payment of any obligations under the 26 28 Preferred Securities Guarantee, or (iii) Household International shall have given notice of its election to extend or defer interest payments on the Notes as provided in the Indenture and such period, or any extension thereof, shall be continuing, then (a) Household International shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock, other than (x) repurchases, redemptions or other acquisitions of shares of capital stock of Household International in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (y) as a result of an exchange or conversion of any class or series of Household International's capital stock for any other class or series of Household International's capital stock, or (z) the purchase of fractional interests in shares of Household International's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, and (b) Household International shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by Household International which rank pari passu with or junior to the Notes. For so long as the Trust Securities remain outstanding, Household International will covenant (i) to directly or indirectly maintain 100% ownership of the common interests of the Trust; provided, however, that any permitted successor of Household International under the Indenture may succeed to Household International's ownership of such common interests, and (ii) to use its reasonable efforts to cause the Trust (a) to remain a statutory business trust, except in connection with the distribution of Notes to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities of the Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes. OPTIONAL REDEMPTION Household International shall have the right to redeem the Notes at any time, in whole or in part, on or after , , or at any time, in whole or in part, in certain circumstances upon the occurrence of a tax event as described under "Description of the Trust Preferred Securities -- Special Event Redemption or Distribution," upon not less than 30 nor more than 60 days' notice. The redemption price shall be equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest, including Additional Interest, if any, to the redemption date. If a partial redemption of the Trust Preferred Securities resulting from a partial redemption of the Notes would result in the delisting of the Trust Preferred Securities, Household International may only redeem the Notes in whole. POSSIBLE TAX LEGISLATION There can be no assurance that legislation affecting Household International's ability to deduct interest paid on the Notes or the characterization of the Notes for United States federal income tax purposes will not be enacted in the future or that any such legislation would not be effective retroactively. If tax law changes are enacted and apply retroactively to the Notes, such changes could give rise to a tax event, which would, in certain circumstances, require the dissolution of the Trust or permit Household International to redeem the Notes. See "Risk Factors -- Redemption of the Trust Preferred Securities or Notes May Affect Your Return," "Description of Trust Preferred Securities -- Special Event Redemption or Distribution," and "Certain United States Federal Income Consequences -- Possible Tax Legislation." INTEREST Each Note shall bear interest at the rate of % per annum from the original date of issuance, payable quarterly in arrears on , , and of each year (each, an "Interest Payment Date"), commencing , 2001, to the person in whose name such Note is registered, subject to certain exceptions, at the close of business on the business day next preceding such Interest Payment Date. In the event the Notes shall not continue to remain in book-entry only form, Household International shall have the right to select such record dates which shall be not less than fifteen days prior to each Interest Payment Date. 27 29 The amount of interest payable for any period will be computed (i) for any full 90-day quarterly interest payment period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 90-day quarterly interest payment period for which interest payments are computed, on the basis of a 30-day month, and for periods of less than a month, the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Notes is not a business day, then payment of the interest payable on such date will be made on the next succeeding day which is a business day (and without any interest or other payment in respect of any such delay), except that, if such business day is in the next succeeding calendar year, such payment shall be made on the immediately preceding business day, in each case with the same force and effect as if made on such date. OPTION TO EXTEND INTEREST PAYMENT PERIOD Household International shall have the right at any time, and from time to time, during the term of the Notes to defer payments of interest by extending the interest payment period for a period not exceeding 20 consecutive quarters, provided, that no extension period may extend beyond the maturity of the Notes, at the end of which extension period, Household International shall pay all interest then accrued and unpaid (including any Additional Interest) (together with interest thereon at the rate specified for the Notes to the extent permitted by applicable law); provided further that, during any such extension period, (a) Household International shall not declare or pay any dividend or make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock (other than (i) repurchases, redemptions or other acquisitions of shares of capital stock of Household International in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (ii) as a result of an exchange or conversion of any class or series of Household International's capital stock for any other class or series of Household International's capital stock, or (iii) the purchase of fractional interests in shares of Household International's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged), and (b) Household International shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by Household International which rank pari passu with or junior to the Notes. The foregoing, however, will not apply to any stock dividends paid by Household International where the dividend stock is the same stock as that on which the dividend is being paid. Prior to the termination of any such extension period, Household International may further defer payments of interest by extending the interest payment period, provided that such extension period together with all such previous and further extensions thereof may not exceed 20 consecutive quarterly periods and no extension period may extend beyond the maturity of the Notes. Upon the termination of any extension period and the payment of all amounts then due, Household International may select a new extension period, as if no extension period had previously been declared, subject to the above requirements. No interest during an extension period, except at the end thereof, shall be due and payable. Household International has no present intention of exercising its rights to defer payments of interest by extending the interest payment period on the Notes. If the property trustee shall be the sole holder of the Notes, Household International shall give the Regular Trustees and the property trustee notice of its selection of such extension period one business day prior to the earlier of (i) the date distributions on the Trust Preferred Securities are payable or (ii) the date the Regular Trustees are required to give notice to the New York Stock Exchange or the applicable self-regulatory organization or to holders of the Trust Preferred Securities of the record date or the date such distribution is payable, but in any event not less than one Business Day prior to such record date. The Regular Trustees shall give notice of Household International's selection of such extension period to the holders of the Trust Preferred Securities. If the property trustee shall not be the sole holder of the Notes, Household International shall give the holders of the Notes notice of its selection of such extension period ten business days prior to the earlier of (i) the next Interest Payment Date or (ii) the date Household International is required to give notice to the New York Stock Exchange or the applicable self-regulatory organization or to holders of the Notes of the record or payment date of such related interest payment. 28 30 ADDITIONAL INTEREST If at any time the Trust shall be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, Household International will pay as additional interest ("Additional Interest") such additional amounts as shall be required so that the net amounts received and retained by the Trust after paying such taxes, duties, assessments or other governmental charges will be not less than the amounts the Trust would have received had no such taxes, duties, assessments or other governmental changes been imposed. INDENTURE EVENTS OF DEFAULT If any Indenture event of default shall occur and be continuing, the property trustee, as the holder of the Notes, will have the right to declare the principal of and the interest on the Notes (including Additional Interest, if any) and any other amounts payable under the Indenture to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Notes. The Indenture provides that any one or more of the following described events, which has occurred and is continuing, constitutes an "event of default" with respect to the Notes: (a) failure for 60 days to pay interest on the Notes, including any Additional Interest in respect thereof, when due; provided, however, that a valid extension of the interest payment period by Household International shall not constitute a default in the payment of interest for this purpose; or (b) failure to pay principal or premium, if any, on the Notes when due whether at maturity or upon earlier redemption; (c) failure to observe or perform any other covenant (other than those specifically relating to another series of Notes) contained in the Indenture for 90 days after written notice to Household International from the Debt Trustee or the holders of at least 25% in principal amount of the outstanding Notes; or (d) certain events of bankruptcy, insolvency, or reorganization of Household International; or (e) the voluntary or involuntary dissolution, winding-up or termination of the Trust, except in connection with the distribution of Notes to the holders of Trust Preferred Securities in liquidation of the Trust and in connection with certain mergers, consolidations or amalgamation permitted by the Declaration. The holders of a majority in aggregate outstanding principal amount of the Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debt Trustee. The Debt Trustee or the holders of not less than 25% in aggregate outstanding principal amount of the Notes may declare the principal due and payable immediately on default, but the holders of a majority in aggregate outstanding principal amount may annul such declaration and waive the default if the default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration and any applicable premium has been deposited with the Debt Trustee. The holders of a majority in aggregate outstanding principal amount of the Notes affected thereby may, on behalf of the holders of all the Notes, waive any past default, except (i) a default in the payment of principal, premium, if any, or interest (unless such default been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration and any applicable premium has been deposited with the Debt Trustee) or (ii) a default in the covenant of Household International not to declare or pay dividends on, or redeem, purchase or acquire any of its capital stock during an extension period. An Indenture event of default also constitutes a Declaration Event of Default. The holders of Trust Preferred Securities in certain circumstances have the right to direct the Property Trustee to exercise its rights as the holder of the Notes. See "Description of the Trust Preferred Securities -- Declaration Events of Default" and "-- Voting Rights." 29 31 Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of Household International to pay interest or principal on the Notes on the date such interest or principal is otherwise payable, Household International acknowledges that, in such event, a holder of Trust Preferred Securities may institute a direct action for payment on or after the respective due date specified in the Notes. Household International may not amend the Indenture to remove the foregoing right to bring a direct action without the prior written consent of all of the holders of Trust Preferred Securities of the Trust. Notwithstanding any payment made to such holder of Trust Preferred Securities by Household International in connection with such a direct action, Household International shall remain obligated to pay the principal of or interest on the Notes held by the Trust or property trustee, and Household International shall be subrogated to the rights of the holder of such Trust Preferred Securities with respect to payments on the Trust Preferred Securities to the extent of any payments made by Household International to such holder in any such direct action. The holders of Trust Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Notes. BOOK-ENTRY AND SETTLEMENT If distributed to holders of Trust Preferred Securities in connection with the voluntary or involuntary dissolution, winding-up or liquidation of the Trust as a result of the occurrence of a Special Event, the Notes will be issued in the form of one or more global certificates (each, a "Global Security") registered in the name of the depositary or its nominee. Except under the limited circumstances described below, Notes represented by the Global Security will not be exchangeable for, and will not otherwise be issuable as, Notes in definitive form. The Global Securities described above may not be transferred except by the depositary to a nominee of the depositary or by a nominee of the depositary to the depositary or another nominee of the depositary or to a successor depositary or its nominee. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Security. Except as provided below, owners of beneficial interests in such a Global Security will not be entitled to receive physical delivery of Notes in definitive form and will not be considered the holders (as defined in the Indenture) thereof for any purpose under the Indenture, and no Global Security representing Notes shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of the depositary or its nominee or to a successor depositary or its nominee. Accordingly, each beneficial owner must rely on the procedures of the depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder under the Indenture. If Notes are distributed to holders of Trust Preferred Securities in liquidation of such holders' interests in the Trust, DTC will act as securities depositary for the Notes. For a description of DTC and the specific terms of the depository arrangements, see "Description of the Trust Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust Company." The description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Trust Preferred Securities apply in all material respects to any debt obligations represented by one or more Global Securities held by DTC. Household International may appoint a successor to DTC or any successor depositary in the event DTC or such successor depositary is unable or unwilling to continue as depositary. None of Household International, the Trust, the Debt Trustee, any paying agent and any other agent of Household International or the Debt Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. A Global Security shall be exchangeable for Notes registered in the names of persons other than the depositary or its nominee only if (i) the depositary notifies Household International that it is unwilling or unable to continue as a depositary for such Global Security and no successor depositary shall have been appointed, or if at any time the depositary ceases to be a clearing agency registered under the Exchange Act at a time when the depositary is required to be so registered to act as such depositary and no successor depositary 30 32 shall have been appointed, (ii) Household International in its sole discretion determines that such Global Security shall be so exchangeable or (iii) there shall have occurred an event of default with respect to the Notes. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Notes registered in such names as the depositary shall direct. It is expected that such instructions will be based upon directions received by the depositary from its participants with respect to ownership of beneficial interests in such Global Security. In the event the Notes are not represented by one or more Global Securities, certificates evidencing Notes may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed) or exchange, at the office of the Note Registrar or at the office of any transfer agent designated by Household International for such purpose with respect to the Notes, without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. Such transfer or exchange will be effected upon the Note Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. Household International has appointed the Debt Trustee as Note Registrar with respect to the Notes. Household International may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that Household International will be required to maintain a transfer agent at the place of payment. Household International may at any time designate additional transfer agents with respect to the Notes. In the event of any redemption in part, Household International shall not be required to (i) issue, register the transfer of or exchange Notes during a period beginning at the opening of business 15 days before any selection for redemption of Notes and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all holders of the Notes and (ii) register the transfer of or exchange any Notes so selected for redemption, in whole or in part, except the unredeemed portion of any Notes being redeemed in part. PAYMENT AND PAYING AGENTS Payment of principal of and premium (if any) on the Notes will be made only against surrender to the paying agent of the Notes. Principal of and any premium and interest, if any, on Notes will be payable, subject to any applicable laws and regulations, at the office of such paying agent or paying agents as Household International may designate from time to time, except that at the option of Household International payment of any interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Note Register with respect to the Notes. Payment of interest on Notes on any Interest Payment Date will be made to the person in whose name the Notes (or predecessor security) is registered at the close of business on the Regular Record Date for such interest payment. The Indenture Trustee will act as paying agent with respect to the Notes. Household International may at any time designate additional paying agents or rescind the designation of any paying agents or approve a change in the office through which any paying agent acts, except that Household International will be required to maintain a paying agent at the place of payment. All moneys paid by Household International to a paying agent for the payment of the principal of or premium or interest, if any, on the Notes which remain unclaimed at the end of two years after such principal, premium, if any, or interest shall have become due and payable will be repaid to Household International and the holder of such Notes will thereafter look only to Household International for payment thereof. MODIFICATION OF THE INDENTURE The Indenture contains provisions permitting Household International and the Debt Trustee, with the consent of the holders of not less than a majority in principal amount of the Notes, to modify the Indenture or any supplemental indenture affecting that series or the rights of the holders of the Notes; provided, that no such modification may, without the consent of the holder of each outstanding Note affected thereby, (i) extend the fixed maturity of the Notes, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the holder of Notes so affected or (ii) reduce the percentage of Notes, the holders of which are 31 33 required to consent to any such supplemental indenture, without the consent of the holders of each Note then outstanding and affected thereby. In addition, Household International and the Debt Trustee may execute, without the consent of holders of the Notes, any supplemental indenture for certain other usual purposes including the creation of any new series of Notes. CONSOLIDATION, MERGER AND SALE The Indenture provides that Household International will not consolidate with or merge into any other corporation or convey, transfer or lease its assets substantially as an entirety unless (a) the successor is a corporation organized in the United States and expressly assumes the due and punctual payment of the principal of (and premium, if any) and interest on all Notes issued thereunder and the performance of every other covenant of the Indenture on the part of Household International and (b) immediately thereafter no event of default and no event which, after notice or lapse of time, or both, would become an event of default, shall have happened and be continuing. Upon any such consolidation, merger, conveyance or transfer, the successor corporation shall succeed to and be substituted for Household International under the Indenture and thereafter the predecessor corporation shall be relieved of all obligations and covenants under the Indenture and the Notes. DEFEASANCE AND DISCHARGE Under the terms of the Indenture, Household International will be discharged from any and all obligations in respect of the Notes (except in each case for certain obligations to register the transfer or exchange of Notes, replace stolen, lost or mutilated Notes, maintain paying agencies and hold moneys for payment in trust) if Household International deposits with the Debt Trustee, in trust, moneys or government obligations, in an amount sufficient to pay all the principal of, and interest on, the Notes on the dates such payments are due in accordance with the terms of the Notes. For federal income tax purposes, any such defeasance of the Notes will be treated as a taxable exchange of the Notes for an issue of obligations of the trust or a direct interest in the cash or government securities held in the trust. In that case, holders of the Trust Preferred Securities would recognize gain or loss as if the trust obligations or the cash or government obligations deposited, as the case may be, had actually been received by them in exchange for their Trust Preferred 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. Holders of the Trust Preferred Securities should consult their own tax advisors as to the specific consequences of defeasance. GOVERNING LAW The Indenture and the Notes will be governed by, and construed in accordance with, the internal laws of the State of Illinois. INFORMATION CONCERNING THE DEBT TRUSTEE The Debt Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Indenture and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Debt Trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of Notes, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Debt Trustee is not required to expand or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Debt Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. 32 34 Household International and certain of its affiliates maintain a deposit account and a banking relationship with the Debt Trustee. The Debt Trustee serves as trustee under other indentures pursuant to which debt securities of an affiliate of Household International are outstanding. MISCELLANEOUS Household International will have the right at all times to assign any of its rights or obligations under the Indenture to a direct or indirect wholly-owned subsidiary of Household International; provided, that, in the event of any such assignment, Household International will remain liable for all of their respective obligations. Subject to the foregoing, the Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto. The Indenture will also provide that Household International will pay all fees and expenses related to (i) the offering of the Trust Securities and the Notes, (ii) the organization, maintenance and dissolution of the Trust, (iii) the retention of the Household International trustees and (iv) the enforcement by the property trustee of the rights of holders of Trust Preferred Securities. EFFECT OF OBLIGATIONS UNDER THE NOTES AND THE PREFERRED SECURITIES GUARANTEE As set forth in the Declaration, the sole purpose of the Trust is to issue Trust Preferred Securities and the common interests and invest the proceeds thereof in the Notes. As long as payments of interest and other payments are made when due on the Notes, such payments will be sufficient to cover distributions and payments due on the Trust Securities primarily because (i) the aggregate principal amount of Notes will be equal to the sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the interest rate and interest and other payment dates on the Notes will match the distribution rate and distribution and other payment dates for the Trust Preferred Securities; (iii) Household International shall pay for all costs and expenses of the Trust; and (iv) the Declaration provides that the Household International trustees shall not cause or permit the Trust to, among other things, engage in any activity that is not consistent with the purposes of the Trust. Payments of distributions (to the extent funds therefor are available) and other payments due on the Trust Preferred Securities (to the extent funds therefor are available) are guaranteed by Household International as and to the extent set forth under "Description of the Preferred Securities Guarantee." If Household International does not make interest payments on the Notes purchased by the Trust, it is expected that the Trust will not have sufficient funds to pay distributions on the Trust Preferred Securities. The Preferred Securities Guarantee is a guarantee on a subordinated basis from the time of its issuance, but does not apply to any payment of distributions unless and until the Trust has sufficient funds for the payment of such distributions. If Household International fails to make interest or other payments on the Notes when due (taking into account any extension period), the Declaration provides a mechanism whereby the holders of the Trust Preferred Securities, using the procedures described in "Description of the Trust Preferred Securities -- Voting Rights," may (i) appoint a Special Regular Trustee and (ii) direct the property trustee to enforce its rights under the Notes, including proceeding directly against Household International to enforce the Notes. If the property trustee fails to enforce its rights under the Notes, a holder of Trust Preferred Securities may institute a legal proceeding directly against Household International to enforce the property trustee's rights under the Notes without first instituting any legal proceeding against the property trustee or any other person or entity. Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of Household International to pay interest or principal on the Notes on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a holder of Trust Preferred Securities may institute an action for payment on or after the respective due date specified in the Notes. In connection with such action, Household International will be subrogated to the 33 35 rights of such holder of Trust Preferred Securities under the Declaration to the extent of any payment made by Household International to such holder of Trust Preferred Securities in such action. Household International, under the Preferred Securities Guarantee, acknowledges that the Preferred Guarantee Trustee shall enforce the Preferred Securities Guarantee on behalf of the holders of the Trust Preferred Securities. If Household International fails to make payments under the Preferred Securities Guarantee, the Preferred Securities Guarantee provides a mechanism whereby the holders of the Trust Preferred Securities may direct the Preferred Guarantee Trustee to enforce its rights thereunder. If the Preferred Guarantee Trustee fails to enforce the Preferred Securities Guarantee, any holder of Trust Preferred Securities may institute a legal proceeding directly against Household International to enforce the Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee, without first instituting a legal proceeding against the Trust, the Preferred Guarantee Trustee or any other person or entity. The Preferred Securities Guarantee, when taken together with Household International's obligations under the Notes, the Indenture and the Declaration, including its obligations under the Indenture to pay costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Securities), will provide a full and unconditional guarantee of amounts due on the Trust Preferred Securities. See "Description of the Preferred Securities Guarantee -- General." CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following is a summary of certain of the principal United States federal income tax consequences of the purchase, ownership and disposition of the Trust Preferred Securities to a beneficial owner that is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any state thereof or the District of Columbia or an estate or trust treated as a United States person under Section 7701(a)(30) of the Code (a "Holder"). Except as set forth below, this summary does not address the United States federal income tax consequences to persons other than Holders. This summary is based on the United States federal income tax laws, regulations and rulings and decisions now in effect, all of which are subject to change, possibly on a retroactive basis. This summary does not address the tax consequences applicable to investors that may be subject to special tax rules such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors or persons that will hold the Trust Preferred Securities as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment or as other than a capital asset. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. dollar or the tax consequences to shareholders, partners or beneficiaries of a Holder. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to a Holder. CLASSIFICATION OF HOUSEHOLD CAPITAL TRUST VI Sidley & Austin, special counsel to Household International and the Trust, is of the opinion that, under current law and assuming full compliance with the terms of the Indenture and the Declaration (and certain other documents), Household Capital Trust VI will be classified as a "grantor trust" for federal income tax purposes and will not be classified as an association taxable as a corporation or a publicly traded partnership. Each Holder will be treated as owning an undivided beneficial interest in the Notes. Accordingly, each Holder will be required to include in its gross income interest (or accrued original issue discount ("OID"), if any) with respect to its allocable share of Notes. Investors should be aware that the opinion of Sidley & Austin does not address any other issue and is not binding on the Internal Revenue Service (the "Service") or the courts. INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT Unless the Notes are issued with OID, stated interest on the Notes will be taxable to a Holder as ordinary income at the time such interest is paid (if the Holder uses the cash method of accounting for tax purposes) or 34 36 accrued (if the Holder uses the accrual method of accounting for tax purposes). Under regulations of the U.S. Treasury Department, the Notes will not be considered issued with OID if they contain terms that make the likelihood of Household International exercising its right to defer interest (as described under "Description of the Notes -- Option to Extend Interest Payment Period") a "remote" contingency at the time the Notes are issued. Household International believes that such likelihood is remote, because exercise of its right to defer interest would prevent Household International from declaring dividends on its capital stock. Accordingly, Household International intends to take the position that the Notes will not be issued with OID. However, the definition of the term "remote" in the regulations has not yet been addressed in any rulings or other interpretations by the Service, and it is possible that the Service would assert that the Notes were issued with OID. If, notwithstanding Household International's current belief, it does exercise its right to defer interest payments, the Notes would be treated as if they were retired and then reissued with OID at such time. In such case, the amount of OID would generally be equal to the interest payable thereafter. If the Notes are treated as having been issued or reissued with OID (either because Household International exercises its right to defer interest payments or because the likelihood of exercise of such right is not considered a remote contingency at the time of issuance), Holders would include that interest in income on an accrual basis, regardless of their method of tax accounting. The amount of OID that accrued in any period would approximately equal the amount of interest that accrued on the Notes in that period at the stated interest rate. If interest payments were received later than the taxable year in which the interest accrued, OID treatment would have the effect of accelerating the reporting of income for Holders who otherwise use a cash method of tax reporting. Corporate Holders of Trust Preferred Securities will not be entitled to a dividends-received deduction with respect to any interest earned with respect to the Trust Preferred Securities. PREMIUM AND MARKET DISCOUNT To the extent a Holder acquires its Trust Preferred Securities at a price that is greater or less than the principal payable at maturity (or, if the Notes are treated as having been issued or reissued with OID, the adjusted issue price of such Holder's share of Notes (which generally should approximate par plus any OID accrued with respect to unpaid interest)), the Holder will be deemed to have acquired its interest in the Trust Preferred Securities with premium or with market discount, as the case may be. A Holder acquiring Trust Preferred Securities at a premium may elect to reduce the amount of interest payments (and will reduce the amount of OID, if any) required to be included in income to reflect amortization of the premium over the remaining term. A Holder acquiring Trust Preferred Securities at a market discount will include the amount of such discount in income in accordance with the market discount rules described below. A Holder acquiring Trust Preferred Securities at a market discount generally will be required to recognize ordinary income to the extent of accrued market discount upon the retirement of the underlying Notes or, to the extent of any gain, upon the disposition of the Trust Preferred Securities. Such market discount would accrue ratably, or, at the election of the Holder, under a constant yield method over the remaining term of the Notes. A Holder will also be required to defer the deduction of a portion of the interest paid or accrued on indebtedness incurred to purchase or carry Trust Preferred Securities acquired with market discount. In lieu of the foregoing, a Holder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by such Holder in the taxable year of the election or thereafter, in which case the interest deferral rule will not apply. RECEIPT OF NOTES UPON LIQUIDATION OF THE TRUST Under certain circumstances, as described under the caption "Description of Trust Preferred Securities -- Special Event Redemption or Distribution," Notes may be distributed to Holders in exchange for the Trust Preferred Securities and in liquidation of the Trust. Under current law, such a distribution would be treated as a non-taxable event to each Holder, and each Holder would receive an aggregate tax basis in the Notes equal to such Holder's aggregate tax basis in its Trust Preferred Securities. A Holder's holding period in 35 37 the Notes so received in liquidation of the Trust would include the period for which the Trust Preferred Securities were held by such Holder. SALE OF TRUST PREFERRED SECURITIES AND REDEMPTION OF NOTES A Holder that sells Trust Preferred Securities, or whose Trust Preferred Securities or Notes (which shall have been distributed to Holders upon liquidation of the Trust) are redeemed, will recognize gain or loss equal to the difference between its adjusted tax basis in the Trust Preferred Securities or Notes and the amount realized on the sale or redemption. A Holder's adjusted tax basis in the Trust Preferred Securities or Notes generally will be its initial purchase price increased by OID, if any, previously includible in such Holder's gross income to the date of disposition (and the accrual of market discount, if any) and decreased by payments (other than payments of interest not reflected in OID) received on the Trust Preferred Securities and/or Notes and by any premium that the Holder has taken into account. Subject to the market discount rules described above, any such gain or loss generally will be capital gain or loss. The Trust Preferred Securities may trade at prices that do not accurately reflect the value of accrued but unpaid interest with respect to the underlying Notes. A Holder that uses the accrual method of accounting for tax purposes (and a cash method Holder if the Notes are deemed to have been issued with OID) and that disposes of Trust Preferred Securities between record dates for payments of distributions thereon will be required to include accrued but unpaid interest on the Notes through the date of disposition in income as ordinary income, and to add such amount to such Holder's adjusted tax basis in the pro rata share of the underlying Notes deemed disposed of. To the extent that the selling price is less than the Holder's adjusted tax basis (so determined) a Holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. POSSIBLE TAX LEGISLATION There can be no assurance that legislation affecting Household International's ability to deduct interest paid on the Notes or the characterization of the Notes for United States federal income tax purposes will not be enacted in the future or that any such legislation would not be effective retroactively. If tax law changes are enacted and apply retroactively to the Notes, such changes could give rise to a Tax Event, which would, in certain circumstances, require the dissolution of the Trust or permit Household International to redeem the Notes. See "Risk Factors -- Possible Tax Event," "Risk Factors -- Redemption of the Trust Preferred Securities or Notes May Affect Your Return," "Description of Trust Preferred Securities -- Special Event Redemption or Distribution," and "Description of the Notes -- Possible Tax Legislation." FOREIGN INVESTORS Subject to the discussion of backup withholding below, interest (including OID) with respect to the Trust Preferred Securities paid to a nonresident alien individual, foreign corporation, foreign partnership or foreign estate or trust (collectively, "United States Alien Holder") will be exempt from U.S. withholding tax, provided that the United States Alien Holder complies with applicable certification requirements (and does not actually or constructively own ten percent or more of the total combined voting power of all classes of stock of Household International and is not a controlled foreign corporation related to Household International or its affiliates). New regulations governing withholding became effective on January 1, 2001 (the "Withholding Regulations"). In general, the Withholding Regulations provide certification requirements designed to simplify compliance by those responsible for withholding on payments to United States Alien Holders. Among other provisions, the Withholding Regulations provide, in the case of an entity classified as a foreign partnership under United States tax principles, that the partners, rather than the partnership, generally will be required to provide the required certification to qualify for an exemption from withholding. 36 38 INFORMATION REPORTING TO HOLDERS Subject to the qualifications discussed below, income on the Trust Preferred Securities will be reported to Holders on Form 1099, which forms should be mailed to Holders of Trust Preferred Securities by January 31 following each calendar year. The Trust will be obligated to report annually to Cede & Co., as Holder of record of the Trust Preferred Securities, the interest (and OID, if any) with respect to the Trust Preferred Securities that accrued during that year. The Trust currently intends to report such information on Form 1099 prior to January 31 following each calendar year even though the Trust is not legally required to report to record Holders until April 15 following each calendar year. The Underwriters have indicated to the Trust that, to the extent that they hold Trust Preferred Securities as nominees for beneficial Holders, they currently expect to report to such beneficial Holders on Forms 1099 by January 31 following each calendar year. Under current law, record holders of Trust Preferred Securities who hold as nominees for beneficial Holders will not have any obligation to report information regarding the beneficial Holders to the Trust. The Trust, moreover, will not have any obligation to report to beneficial Holders who are not also record holders. Thus, beneficial Holders of Trust Preferred Securities who hold their Trust Preferred Securities through the Underwriters will receive Forms 1099 reflecting the income on their Trust Preferred Securities from such nominee holders rather than the Trust. BACKUP WITHHOLDING Payments made on, and proceeds from the sale of, the Trust Preferred Securities may be subject to a "backup" withholding tax of 31% unless the Holder or the United States Alien Holder complies with certain identification or certification requirements. Any withheld amounts will be allowed as a credit against the holder's United States federal income tax, if any, provided the required information is provided to the Service. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. CERTAIN ERISA CONSIDERATIONS Before authorizing an investment in the Trust Preferred Securities, fiduciaries of pension, profit sharing or other employee benefit plans subject to ERISA ("Plans") should consider, among other matters, (a) ERISA's fiduciary standards (including its prudence and diversification requirements), (b) whether such fiduciaries have authority to make such investment in the Trust Preferred Securities under the applicable Plan investment policies and governing instruments, and (c) rules under ERISA and the Code that prohibit Plan fiduciaries from causing a Plan to engage in a "prohibited transaction." Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as individual retirement accounts and Keogh plans subject to Section 4975 of the Code (also "Plans"), from, among other things, engaging in certain transactions involving "plan assets" with persons who are "parties in interest" under ERISA or "disqualified persons" under the Code (collectively, "Parties in Interest") with respect to such Plan. A violation of these "prohibited transaction" rules may result in an excise tax or other liabilities under ERISA and/or Section 4975 of the Code for such persons, unless exemptive relief is available under an applicable statutory or administrative exemption. Such administrative exemptions include prohibited transaction class exemption ("PTCE"). PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 95-60 (for certain transaction involving insurance company general accounts), PTCE 90-1 (for certain transactions 37 39 involving insurance company pooled separate accounts), and PTCE 84-14 (for certain transactions determined by independent qualified asset managers). The Department of Labor has issued a regulation (29 C.F.R. section 2510.3-101) (the "Plan Assets Regulation") concerning the definition of what constitutes the assets of a Plan. The Plan Assets Regulation provides that, as a general rule, the underlying assets and properties of corporations, partnerships, trusts and certain other entities in which a Plan makes an "equity" investment will be deemed, for purposes of ERISA, to be assets of the investing Plan unless certain exceptions apply. Pursuant to an exception contained in the Plan Assets Regulations, the assets of the Trust would not be deemed to be "plan assets" of investing Plans if the equity interests acquired by employee benefit plans are "publicly-offered securities" -- that is, they are (1) widely held (i.e., owned by more than 100 investors independent of the issuer and of each other), (2) freely transferable and (3) sold as part of an offering pursuant to an effective registration statement under the Securities Act and then timely registered under Section 12(b) or 12(g) of the Exchange Act. It is expected that the Trust Preferred Securities will meet the criteria of "publicly-offered securities" above. The Underwriters expect that the Trust Preferred Securities will be held by at least 100 independent investors at the conclusion of the offering; there are no restrictions imposed on the transfer of the Trust Preferred Securities and the Trust Preferred Securities will be sold as part of an offering pursuant to an effective registration statement under the Securities Act, and then will be timely registered under the Exchange Act. Although it is expected that the assets of the Trust should not be deemed to be "plan assets" of an investing Plan, if Household International or the Trust is a Party in Interest with respect to the Plan, in the absence of an applicable exemption, the Plan's purchase of the Trust Preferred Securities from the Trust would likely constitute a prohibited transaction under Section 406(a)(1)(A) or ERISA and Section 4975(c)(1)(A) of the Code. In addition, in the absence of an applicable exemption, certain other transactions coincident to the Trust Preferred Securities may involve a prohibited transaction, such as a distribution of the Notes from the Trust to a Plan investor. Any plans or other entities whose assets include Plan assets subject to ERISA or Section 4975 of the Code proposing to acquire Trust Preferred Securities should consult with their own counsel to confirm that such investment will not result in a prohibited transaction that is not subject to an exemption and will satisfy any other applicable requirements of ERISA and the Code. Each purchaser using assets of a Plan to acquire Trust Preferred Securities will be deemed to have represented that its purchase and holding of such Trust Preferred Securities will not result in a non-exempt prohibited transaction under ERISA or the Code or will be covered by the exemptive relief provided by PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption. Governmental Plans and certain church plans are not subject to ERISA, and are also not subject to the prohibited transaction provisions of Section 4975 of the Code. However, state laws or regulations governing the investment and management of the assets of such plans may contain fiduciary and prohibited transaction provisions similar to those under ERISA and the Code discussed above. Accordingly, fiduciaries of governmental and church plans, in consultation with their advisers, should consider the impact of their respective state laws on investments in the Trust Preferred Securities and the considerations discussed above to the extent applicable. 38 40 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the Trust has agreed to sell to each of the Underwriters named below (the "Underwriters"), for whom and are acting as joint book running managers and representatives (the "Representatives"), and the Underwriters have severally agreed to purchase from the Trust, the respective number of Trust Preferred Securities set forth opposite their names below. In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein (including, without limitation, the approval of certain legal matters by counsel to the Underwriters), to purchase all the Trust Preferred Securities offered hereby if any of the Trust Preferred Securities are purchased. In the event of default by an Underwriter, the Underwriting Agreement provides that, in certain circumstances, the purchase commitments of the nondefaulting Underwriters may be increased or the Underwriting Agreement may be terminated.
NUMBER OF TRUST PREFERRED UNDERWRITER SECURITIES - ----------- --------------- --------- Total............................................. 8,000,000 =========
The Representatives have advised us that they propose initially to offer the Trust Preferred Securities to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at such price less a concession not in excess of $ per Trust Preferred Security. The Underwriters may allow, and such dealers may reallow, a discount not in excess of $ per Trust Preferred Security to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed by the Representatives. In view of the fact that the proceeds from the sale of the Trust Preferred Securities will be used to purchase the Notes issued by Household, the Underwriting Agreement provides that Household will pay to the Underwriters as compensation for their arranging the investment therein of such proceeds an amount of $ per Trust Preferred Security (or $ in the aggregate); provided that such compensation will be $ per Trust Preferred Security sold to certain institutions. Therefore, to the extent of such sales, the aggregate amount of compensation will be less than that specified in the preceding sentence. Household estimates that the total expenses of the offering, excluding the underwriting commission, will be $ . Household and the Trust have agreed that, during a period of 30 days from the date of the Underwriting Agreement they will not offer, sell, contract to sell or otherwise dispose of any preferred securities in any trust similar to the Trust, any other beneficial interests in the assets of the Trust or any trust similar to the Trust, or any preferred securities or any other securities of the Trust or Household, as the case may be, that are substantially similar to the Trust Preferred Securities, including any guarantee of such securities, or any securities convertible into or exchangeable for or representing the right to receive securities, preferred securities or any such substantially similar securities of either the Trust, any trust similar to the Trust or Household that are subordinated to Household's senior indebtedness in a manner substantially similar to the subordination of the Notes, without the prior written consent of the Underwriters, except for the Trust Preferred Securities offered in connection with this offering. The Trust Preferred Securities are a new issue of securities with no established trading market. The Trust Preferred Securities are expected to be approved for listing on the New York Stock Exchange subject to official notice of issuance. Trading of the Trust Preferred Securities on the New York Stock Exchange is expected to commence within a 30-day period after the initial delivery of the Trust Preferred Securities. The Underwriters have advised Household and the Trust that they intend to make a market in the Trust Preferred Securities prior to commencement of trading on the New York Stock Exchange, but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Trust Preferred Securities. 39 41 In order to meet one of the requirements for listing the Trust Preferred Securities on the New York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more Trust Preferred Securities to a minimum of 400 beneficial holders. Household and the Trust have agreed to indemnify the several Underwriters against, or contribute to payments that the Underwriters may be required to make in respect of, certain liabilities, including liabilities under the Securities Act of 1933, as amended. In order to facilitate the offering of the Trust Preferred Securities, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Trust Preferred Securities. Specifically, the Underwriters may overallot in connection with the offering, creating a short position in the Trust Preferred Securities for their own account. In addition, to cover overallotments or to stabilize the price of the Trust Preferred Securities, the Underwriters may bid for, and purchase, the Trust Preferred Securities in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an Underwriter or a dealer for distributing the Trust Preferred Securities in the offering, if the syndicate repurchases previously distributed Trust Preferred Securities in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the Trust Preferred Securities above independent market levels. The Underwriters are not required to engage in these activities, and may end any of these activities at any time. It is expected that delivery of the Trust Preferred Securities will be made against payment therefor on or about the date specified in the last paragraph of the cover page of this prospectus, which will be the fifth business day following the date of pricing of the Trust Preferred Securities. Under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended, purchases or sales of securities in the secondary market generally are required to settle within three business days ("T+3"), unless the parties to any such transactions expressly agree otherwise. Accordingly, prospective purchasers of the Trust Preferred Securities who wish to trade such securities will be required, by virtue of the fact that the Trust Preferred Securities initially will settle within five business days ("T+5"), to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Prospective purchasers of the Trust Preferred Securities who wish to trade prior to the settlement date should consult their own legal advisors. Certain of the Underwriters or their affiliates have provided from time to time, and expect to provide in the future, investment or commercial banking services to Household and its affiliates, for which such Underwriters or their affiliates have received or will receive customary fees and commissions. WHERE YOU CAN FIND MORE INFORMATION We file reports, proxy statements and other information with the SEC. Our SEC filings are also available over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file by visiting 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 about the public reference rooms. You may also inspect our SEC reports and other information at the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. We have filed a registration statement on Form S-3 with the SEC covering the Trust Preferred Securities, the Notes and the guarantee. For further information on Household International and the Trust Preferred Securities, the Notes and the guarantee, you should refer to our registration statement and its exhibits. This prospectus summarizes material provisions of contracts and other documents that are included with that registration statement. Because this prospectus may not contain all the information that you may find important, you should review the full text of these contracts and documents. 40 42 INCORPORATION OF INFORMATION WE FILE WITH THE SEC The SEC allows us to incorporate by reference the information we file with them, which means: - incorporated documents are considered part of the prospectus; - we can disclose important information to you by referring you to those documents; and - information that we file with the SEC will automatically update and supersede this incorporated information. We incorporate by reference the documents listed below which were filed with the SEC under the Exchange Act: - annual report on Form 10-K for the year ended December 31, 1999; - quarterly report on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2000; and - current reports on Form 8-K dated January 19, 2000, April 20, 2000, July 19, 2000, October 18, 2000, November 8, 2000 and January 17, 2001. We also incorporate by reference each of the following documents that we will file with the SEC after the date of this prospectus until this offering is completed or after the date of this initial registration statement and before the effectiveness of the registration statement: - reports filed under Sections 13(a) and (c) of the Exchange Act; - definitive proxy or information statements filed under Section 14 of the Exchange Act in connection with any subsequent stockholders' meeting; and - any reports filed under Section 15(d) of the Exchange Act. You may request a copy of any filings referred to above (excluding exhibits), at no cost, by contacting us at the following address: Ms. Darcie Oakes Office of the Corporate Secretary Household International, Inc. 2700 Sanders Road Prospect Heights, Illinois 847-564-7580 email: djoakes@household.com LEGAL MATTERS Certain matters of Delaware law relating to the validity of the Trust Preferred Securities will be passed upon on behalf of the Trust and Household International by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Trust and Household International. The validity of the Notes, the Preferred Securities Guarantee and certain matters relating thereto will be passed upon on behalf of Household International by John W. Blenke, Vice President -- Corporate Law and Assistant Secretary of Household International. Certain legal matters will be passed upon for the Underwriters by McDermott, Will & Emery, Chicago, Illinois. Certain United States federal income taxation matters will be passed upon for Household International and the Trust by Sidley & Austin, Chicago, Illinois. EXPERTS The financial statements and schedules of Household International 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. 41 43 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 8,000,000 TRUST PREFERRED SECURITIES HOUSEHOLD CAPITAL TRUST VI % TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY) FULLY AND UNCONDITIONALLY GUARANTEED BY HOUSEHOLD INTERNATIONAL, INC. -------------------- PROSPECTUS -------------------- , 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 44 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Estimated Expenses: Printing and Engraving...................................... $ 70,000 Fees of Trustees/Transfer Agents/Registrars................. 25,000 Accountants' Fees........................................... 20,000 Blue Sky Qualifications Fees................................ 15,000 SEC Filing Fee*............................................. 50,000 Rating Service Fees......................................... 30,000 Stock Exchange Listing Fees................................. 25,000 Legal Fees and Expenses..................................... 30,000 Miscellaneous............................................... 10,000 -------- Total.................................................. $275,000 ========
- ------------------------- * Actual ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The General Corporation Law of Delaware (Section 102) allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or to any of its stockholders for monetary damage for a breach of his/her fiduciary duty as a director, except in the case where the director breached his/her duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. The Restated Certificate of Incorporation, as amended, of Household International, Inc. (the "Company"), contains a provision which eliminates directors' personal liability as set forth above. The General corporation of Law of Delaware (Section 145) gives Delaware corporation broad powers to indemnify their present and former directors and officers and those of affiliated corporations against expenses incurred in the defense of any lawsuit to which they are made parties by reason of being or having been such directors or officers, subject to specified conditions and exclusions; gives a director or officer who successfully defends an action the right to be so indemnified; and authorizes the Company to buy directors' and officers' liability insurance. Such indemnification is not exclusive of any other right to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or otherwise. The Company's Restated Certificate of Incorporation, as amended, provides for indemnification to the fullest extent as expressly authorized by Section 145 of the General Corporation Law of Delaware for directors, officers and employees of the Company and also to persons who are serving at the request of the Company as directors, officers or employees of other corporations (including subsidiaries). This right of indemnification is not exclusive of any other right which any person may acquire under any statute, bylaw, agreement, contract, vote of stockholders or otherwise. The Company has purchased liability policies which indemnify its officers and directors against loss arising from claims by reason of their legal liability for acts as officers, subject to limitations and conditions as set forth in the policies. The Declaration of Household Capital Trust VI provides that no Household International trustee, affiliate of any Household International trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Household International trustee, or any employee or agent of such Trust or its affiliates (each an "Indemnified Person") shall be liable, responsible or accountable in damages or otherwise to such Trust or any employee or agent of the trust or its affiliates for any loss, damage or claim incurred by II-1 45 reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of such Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by such Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omission. The Declaration of Trust also provides that to the fullest extent permitted by applicable law, Household International shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of such Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by such Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions. The Declaration of Trust further provides that to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by Household International prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by Household International of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified for the underlying cause of action as authorized by such Declaration. Pursuant to agreements which the Company and the Trust may enter into with underwriters or agents (forms of which are or will be filed as exhibit to this Registration Statement) officers and directors of the Company and the Trustees of the Trust may be entitled to indemnification by such underwriters or agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended, arising from information appearing in the Registration Statement or any Prospectus or Prospectus Supplement which has been furnished to the Company by such underwriters or agents. II-2 46 ITEM 16. EXHIBITS. 1* Form of Underwriting Agreement for Trust Preferred Securities. 4.1 Indenture between Household International, Inc. and Bank One, National Association (successor to The First National Bank of Chicago), as Trustee, dated as of May 15, 1995 (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (Nos. 333-03337 and 333-03337-01). 4.2 Form of Supplemental Indenture between Household International, Inc. and Bank One, National Association, as Trustee. 4.3 Declaration of Trust of Household Capital Trust VI. 4.4 Form of Amended and Restated Declaration of Trust. 4.5 Form of Trust Preferred Security (included in Exhibit 4.4 above). 4.6 Form of Notes (included in Exhibit 4.2 above). 4.7 Form of Guarantee with respect to Trust Preferred Securities. 4.8 Certificate of Trust. 5.1* Opinion and Consent of Mr. John W. Blenke, Vice President -- Corporate Law and Assistant Secretary of Household International, Inc. 5.2* Opinion and Consent of Richards, Layton & Finger, P.A. 8* Tax opinion of Sidley & Austin. 12 Statement on the Computation of Ratio of Earnings to Fixed Charges incorporated herein by reference to Exhibit 12 of Household International's Form 10-K (File No. 1-8198) for the year ended December 31, 1999 and Form 10-Q (File No. 1-8198) for the quarter ended September 30, 2000. 23.1* Consent of Arthur Andersen LLP, Certified Public Accountants. 23.2* Consent of Mr. John W. Blenke, Vice President -- Corporate Law and Assistant Secretary of Household International, Inc. is contained in his opinion (Exhibit 5.1). 23.3* Consent of Sidley & Austin is contained in their opinion (Exhibit 8). 23.4* Consent of Richards, Layton & Finger, P.A. is contained in their opinion (Exhibit 5.2). 24.1 Powers of Attorney with respect to Household International officers and directors (included on Page II-5 hereto). 24.2 Powers of Attorney with respect to Household Capital Trust VI trustees (included in Exhibit 4.3 hereto). 25.1* Statement of eligibility and qualification of The Bank of New York. 25.2* Statement of eligibility and qualification of Bank One, National Association.
- --------------- * To be filed by amendment. ITEM 17. UNDERTAKINGS. The undersigned Registrants hereby undertake: (1) That for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the Securities offered herein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (2) That for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective. (3) That for purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 47 Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the provisions set forth or described in Item 15 of this Registration Statement, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a Registrant of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted against a Registrant by such director, officer or controlling person, in connection with the Securities registered hereby, such Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 48 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Prospect Heights, and State of Illinois, on the 17th day of January, 2001. HOUSEHOLD INTERNATIONAL, INC. By: /s/ WILLIAM F. ALDINGER ------------------------------------ William F. Aldinger Chairman and Chief Executive Officer Each person whose signature appears below constitutes and appoints J. W. Blenke, L. S. Mattenson and J. S. VanderLinde and each or any of them (with full power to act alone), as his/her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him/her in his/her name, place and stead, in any and all capacities, to sign and file, with the Securities and Exchange Commission, any and all amendments (including post-effective amendments) to the Registration Statement, granting unto each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and agent or their substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated and on the 17th day of January, 2001.
SIGNATURE TITLE --------- ----- /s/ WILLIAM F. ALDINGER - --------------------------------------------------- Chairman, Chief Executive Officer, and Director (William F. Aldinger) (as Principal Executive Officer) /s/ ROBERT J. DARNALL - --------------------------------------------------- (Robert J. Darnall) Director /s/ GARY G. DILLON - --------------------------------------------------- (Gary G. Dillon) Director /s/ JOHN A. EDWARDSON - --------------------------------------------------- (John A. Edwardson) Director /s/ MARY J. EVANS - --------------------------------------------------- (Mary J. Evans) Director /s/ DUDLEY FISHBURN - --------------------------------------------------- (Dudley Fishburn) Director /s/ CYRUS F. FREIDHEIM, JR. - --------------------------------------------------- (Cyrus F. Freidheim, Jr.) Director /s/ JAMES H. GILLIAM, JR. - --------------------------------------------------- (James H. Gilliam, Jr.) Director
II-5 49
SIGNATURE TITLE --------- ----- /s/ LOUIS E. LEVY - --------------------------------------------------- (Louis E. Levy) Director /s/ GEORGE A. LORCH - --------------------------------------------------- (George A. Lorch) Director /s/ JOHN D. NICHOLS - --------------------------------------------------- (John D. Nichols) Director /s/ JAMES B. PITBLADO - --------------------------------------------------- (James B. Pitblado) Director /s/ S. JAY STEWART - --------------------------------------------------- (S. Jay Stewart) Director /s/ LOUIS W. SULLIVAN, M.D. - --------------------------------------------------- (Louis W. Sullivan, M.D.) Director /s/ DAVID A. SCHOENHOLZ Group Executive -- Chief Financial Officer - --------------------------------------------------- (as Principal Accounting and Financial (David A. Schoenholz) Officer)
The Registrant reasonably believes that the security rating to be assigned to the Securities registered hereunder will make the Securities "investment grade securities" pursuant to Transaction Requirements B-2 of Form S-3. II-6 50 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Household Capital Trust VI certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Prospect Heights, State of Illinois, on this 17th day of January, 2001. HOUSEHOLD CAPITAL TRUST VI By: /s/ B.B. MOSS, JR. ------------------------------------ Name: Benjamin B. Moss, Jr. Title: Trustee By: /s/ DENNIS J. MICKEY ------------------------------------ Name: Dennis J. Mickey Title: Trustee The Registrant reasonably believes that the security rating to be assigned to the Securities registered hereunder will make the Securities "investment grade securities" pursuant to Transaction Requirements B-2 of Form S-3. II-7 51 EXHIBIT INDEX
EXHIBIT - ------- 1* Form of Underwriting Agreement for Trust Preferred Securities.................................................. 4.1 Indenture between Household International, Inc. and Bank One, National Association (successor to The First National Bank of Chicago, as Trustee, dated as of May 15, 1995 (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-3 (Nos. 333-03337 and 333-03337-01)............................................... 4.2 Form of Supplemental Indenture between Household International, Inc. and Bank One, National Association, as Trustee..................................................... 4.3 Declaration of Trust of Household Capital Trust VI.......... 4.4 Form of Amended and Restated Declaration of Trust........... 4.5 Form of Trust Preferred Security (included in Exhibit 4.4 above)...................................................... 4.6 Form of Notes (included in Exhibit 4.2 above)............... 4.7 Form of Guarantee with respect to Trust Preferred Securities.................................................. 4.8 Certificate of Trust........................................ 5.1* Opinion and Consent of Mr. John W. Blenke, Vice President -- Corporate Law and Assistant Secretary of Household International, Inc.......................................... 5.2* Opinion and Consent of Richards, Layton & Finger, P.A....... 8* Tax opinion of Sidley & Austin.............................. 12 Statement on the Computation of Ratio of Earnings to Fixed Charges incorporated herein by reference to Exhibit 12 of Household International's Form 10-K (File No. 1-8198) for the year ended December 31, 1999 and Form 10-Q (File No. 1-8198) for the quarter ended September 30, 2000............ 23.1* Consent of Arthur Andersen LLP, Certified Public Accountants................................................. 23.2* Consent of Mr. John W. Blenke, Vice President -- Corporate Law and Assistant Secretary of Household International, Inc. is contained in his opinion (Exhibit 5.1)................... 23.3* Consent of Sidley & Austin is contained in their opinion (Exhibit 8)................................................. 23.4* Consent of Richards, Layton & Finger, P.A. is contained in their opinion (Exhibit 5.2)................................. 24.1 Powers of Attorney with respect to Household International officers and directors (included on page II-5 hereof)....... 24.2 Powers of Attorney with respect to Household Capital Trust VI trustees (included in Exhibit 4.3 above)................. 25.1* Statement of eligibility and qualification of The Bank of New York.................................................... 25.2* Statement of eligibility and qualification of Bank One, National Association........................................
- --------------- * To be filed by amendment. II-8 EX-4.2 2 c59540ex4-2.txt FORM OF SUPPLEMENTAL INDENTURE 1 Exhibit 4.2 FIFTH SUPPLEMENTAL INDENTURE, dated as of _________ __, 2001 (the "Supplemental Indenture"), between Household International, Inc., a Delaware corporation (the "Company"), and Bank One, National Association, as trustee (the "Trustee") under the Indenture dated as of May 15, 1995 between the Company and the Trustee (the "Indenture"). WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of the Company's unsecured junior subordinated debt securities, to be issued from time to time in one or more series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered as provided in the Indenture; WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of its debt securities to be known as its ____% Junior Subordinated Deferrable Interest Notes due ____ (the "Notes"), the form and substance of such Notes and the terms, provisions and conditions thereof to be set forth as provided in the Indenture and this Supplemental Indenture; WHEREAS, Household Capital Trust VI, a Delaware statutory business trust (the "Trust"), intends to offer to the public $___________ aggregate liquidation amount of its ____% Trust Preferred Securities (the "Preferred Securities") and intends to issue to the Company, as sponsor, its ____% Trust Common Securities (the "Common Securities", and together with the Preferred Securities, the "Trust Securities"), representing undivided beneficial interests in the assets of the Trust and proposes to invest the proceeds from such offering in $_______ aggregate principal amount of the Notes; and WHEREAS, the Company has requested that the Trustee execute and deliver this Supplemental Indenture, and all requirements necessary to make this Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Notes, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed, and the execution and delivery of this Supplemental Indenture has been duly authorized in all respects: NOW THEREFORE, in consideration of the purchase and acceptance of the Notes by the holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Notes and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: 1 2 ARTICLE I DEFINITIONS SECTION 1.1 Definition of Terms. Unless the context otherwise requires: (a) a term defined in the Indenture has the same meaning when used in this Supplemental Indenture; (b) a term defined anywhere in this Supplemental Indenture has the same meaning throughout; (c) the singular includes the plural and vice versa; (d) a reference to a Section or Article is to a Section or Article of this Supplemental Indenture; (e) headings are for convenience of reference only and do not affect interpretation; (f) the following terms have the meanings given to them in the Declaration: (i) Clearing Agency (ii) Delaware Trustee; (iii) Dissolution Tax Opinion; (iv) No Recognition Opinion; (v) Pricing Agreement; (vi) Property Trustee; (vii) Preferred Security Certificate; (viii) Redemption Tax Opinion; (ix) Regular Trustees; (x) Special Event; (xi) Tax Event; and (xii) Underwriting Agreement; and (g) the following terms have the meanings given to them in this Section l.l(g): "Additional Interest" has the meaning set forth in Section 2.5(c). "Compounded Interest" has the meaning set forth in Section 4.1. "Coupon Rate" has the meaning set forth in Section 2.5(a). "Declaration" means the Amended and Restated Declaration of Trust of Household Capital Trust VI, a Delaware business trust, dated as of _________________, 2001. "Deferred Interest" has the meaning set forth in Section 4.1. "Dissolution Event" means that as a result of the occurrence and continuation of a Special Event, the Trust is to be dissolved in accordance with the Declaration and the Notes held by the 2 3 Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Extended Interest Payment Period" has the meaning set forth in Section 4.1. "Interest Payment Date" has the meaning set forth in Section 2.5(a). "Maturity Date" means, ________________, or such other earlier date as may be determined by the Company pursuant to Section 3.4 herein. "Ministerial Action" has the meaning set forth in Section 3.1. "90 Day Period" has the meaning set forth in Section 3.1. "Non Book Entry Preferred Securities" has the meaning set forth in Section 2.4(b). "Paying Agent" means Bank One, National Association, until a successor paying agent has been appointed and has accepted such appointment. "Redemption Price" has the meaning set forth in Section 3.1. ARTICLE II GENERAL TERMS AND CONDITIONS OF THE NOTES SECTION 2.1 Designation and Principal Amount. There is hereby authorized a series of debt securities designated the "____% Junior Subordinated Deferrable Interest Notes due ____", limited in aggregate principal amount to $____________, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Notes pursuant to Section 2.02 of the Indenture. SECTION 2.2 Maturity. The Maturity Date will be ___________________, or such other earlier date as may be determined by the Company pursuant to Section 3.4 herein, and the date on which the Notes mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon. 3 4 SECTION 2.3 Form and Payment. Except as provided in Section 2.4, the Notes shall be issued in fully registered certificated form without interest coupons. Principal and interest on the Notes issued in certificated form will be payable, the transfer of such Notes will be registrable and such Notes will be exchangeable for Notes bearing identical terms and provisions at the office or agency of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Note Register. Notwithstanding the foregoing, so long as the registered Holder of any Notes is the Property Trustee, the payment of the principal of (and premium, if any) and interest on such Notes held by the Property Trustee will be made by wire transfer at such place and to such account as may be designated by the Property Trustee. SECTION 2.4 Depository Note. In connection with a Dissolution Event; (a) the Notes in certificated form may be presented to the Trustee by the Property Trustee in exchange for a Depository Note in an aggregate principal amount equal to all Outstanding Notes, to be registered in the name of the Depository, or its nominee, and delivered by the Trustee to the Depository for crediting to the accounts of its participants pursuant to the instructions of the Regular Trustees. The Company upon any such presentation shall execute a Depository Note in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this Supplemental Indenture. Payments on the Notes issued as a Depository Note will be made to the Depository; and b) if any Preferred Securities are held in non book-entry certificated form, the Notes in certificated form may be presented to the Trustee by the Property Trustee and any Preferred Security Certificate which represents Preferred Securities other than Preferred Securities held by the Clearing Agency or its nominee ("Non Book-Entry Preferred Securities") will be deemed to represent beneficial interests in Notes presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until such Preferred Security Certificates are presented to the Security Registrar for transfer or reissuance at which time such Preferred Security Certificates will be cancelled and a Note registered in the name of the holder of the Preferred Security Certificate or the transferee of the 4 5 holder of such Preferred Security Certificate as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security Certificate cancelled will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this Supplemental Indenture. On issue of such Notes, Notes with an equivalent aggregate principal amount that were presented by the Property Trustee to the Trustee will be deemed to have been cancelled. SECTION 2.5 Interest. (a) Each Note will bear interest at the rate of _______ % per annum (the "Coupon Rate") from the original date of issuance until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly and payable (subject to the provisions of Article IV) quarterly in arrears on ______, ______, ______ and ______, of each year (each, an "Interest Payment Date", commencing on _______________________), to the person in whose name such Note or any predecessor Note is registered, at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day next preceding that Interest Payment Date. If pursuant to the provisions of Section 2.11(c) of the Indenture the Notes are no longer represented by a Depository Note, the Company may select a Regular Record Date for such interest installment which shall be any date at least fifteen days before an Interest Payment Date. (b) The amount of interest payable for any period will be computed (i) for any full 90-day quarterly interest payment period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 90-day quarterly interest payment period for which interest payments are computed, on the basis of a 30-day month, and for periods of less than a month, the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Notes is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. 5 6 (c) If at any time while the Property Trustee is the Holder of any Notes, the Trust or the Property Trustee is required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any case, the Company will pay as additional interest ("Additional Interest") on the Notes held by the Property Trustee, such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Property Trustee after paying such taxes, duties assessments or other governmental charges will be equal to the amounts the Trust and the property Trustee would have received had no such taxes, duties, assessments or other government charges been imposed. ARTICLE III REDEMPTION OF THE NOTES AND ACCELERATION OF MATURITY SECTION 3.1 Tax Event Redemption. If a Tax Event has occurred and is continuing and: (a) the Company has received a Redemption Tax Opinion; or (b) after receiving a Dissolution Tax Opinion, the Regular Trustees shall have been informed by tax counsel rendering the Dissolution Tax Opinion that a No Recognition Opinion cannot be delivered to the Trust, then, notwithstanding Section 3.2, the Company shall have the right upon not less than 30 days nor more than 60 days notice to the registered Holders of the Notes to redeem the Notes in whole or in part for cash, at the redemption price set forth below, within 90 days following the occurrence of such Tax Event (the "90 Day Period"), provided that, if at the time there is available to the Company the opportunity to eliminate within the 90 Day Period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure which has no adverse effect on the Company, the Trust or the Holders of the Trust Securities issued by the Trust, the Company shall pursue such Ministerial Action in lieu of redemption; and provided, further, that the Company shall have no right to redeem the Notes while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Declaration. The Redemption Price shall be equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption (the "Redemption Price"). 6 7 SECTION 3.2 Optional Redemption by Company. (a) Subject to the provisions of Article III of the Indenture and to Section 3.2(b) hereof, the Company shall have the right to redeem the Notes, in whole or in part, from time to time, on or after __________, at the Redemption Price. Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice to the registered Holder of the Notes, at the Redemption Price. If the Notes are only partially redeemed pursuant to this Section 3.2, the Notes will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided, that if at the time of redemption, the Notes are registered as a Depository Note, the Depository shall determine by lot the principal amount of such Notes held by each Holder to be redeemed. (b) If a partial redemption of the Notes would result in the delisting of the Preferred Securities issued by the Trust from any national securities exchange or other organization on which the Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and may only redeem the Notes in whole. SECTION 3.3 No Sinking Fund. The Notes are not entitled to the benefit of any sinking fund. SECTION 3.4 Conditional Right to Advance Maturity. If a Tax Event has occurred and is continuing the Company shall have the right, prior to dissolution of the Trust, to advance the Maturity Date of the Notes to the minimum extent required in order to allow the Company to deduct the interest payments on the Notes for United States federal income tax purposes; provided, however, the resulting Maturity Date shall not be less than 15 years from the original issuance of the Notes or earlier than _____________. The Company may elect to advance the Maturity Date only if it has received an opinion of nationally recognized independent tax counsel to the Company experienced in such matters (which opinion may rely on published revenue rulings of the Internal Revenue Service), to the effect that (i) after the Maturity Date has been advanced, interest paid on the Notes will be deductible by the Company for United States federal income tax purposes and (ii) advancing the Maturity Date will not result in a taxable event to holders of the Preferred Securities. 7 8 SECTION 3.5 Notice of Advancement of Maturity Date. If the Company elects to advance the Maturity Date of the Notes pursuant to Section 3.4, the Company shall give written notice of such election to the Trustee, the Regular Trustees and the Property Trustee, and the Trustee shall give notice to the holders of the Preferred Securities not less than 30 and not more than 60 days prior to the effective date of such election. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1 Extension of Interest Payment Period. The Company shall have the right, at any time during the term of the Notes, from time to time to defer the payment of interest by extending the interest payment period of such Notes for up to 20 consecutive quarters (the "Extended Interest Payment Period"), provided that no Extended Interest Payment Period may extend beyond the Maturity Date of the Notes. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension of the interest payment period pursuant to this Section 4.1, will bear interest thereon at the Coupon Rate, compounded quarterly, for each quarter of the Extended Interest Payment Period ("Compounded Interest"). At the end of the Extended Interest Payment Period the Company shall pay all interest accrued and unpaid on the Notes including any Additional Interest and Compounded Interest ("Deferred Interest") which shall be payable to the Holders of the Notes in whose names the Notes are registered in the Note Register on the first record date after the end of the Extended Interest Payment Period. Before the termination of any Extended Interest Payment Period, the Company may further extend such period, provided that such period together with all such further extensions thereof shall not exceed 20 consecutive quarters and provided further that no Extended Interest Payment Period may extend beyond the Maturity Date of the Notes. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof. SECTION 4.2 Notice of Extension. (a) If the Property Trustee is the only registered Holder of the Notes at the time the Company selects an Extended Interest Payment Period, the Company shall give written notice to both the Regular Trustees and the Property Trustee of its selection of such Extended Interest Payment Period one Business Day before the earlier of (i) the next succeeding date on which Distributions on the 8 9 Trust Securities issued by the Trust are payable, or (ii) the date the Trust is required to give notice of the record date or the date such Distributions are payable to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities issued by the Trust, but in any event at least one Business Day before such record date. (b) If the Property Trustee is not the only Holder of the Notes at the time the Company selects an Extended Interest Payment Period, the Company shall give the Holders of the Notes written notice of its selection of such Extended Interest Payment Period 10 Business Days before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to Holders of the Notes, but in any event at least two Business Days before such record date. (c) The quarter in which any notice is given pursuant to paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20 quarters permitted in the maximum Extended Interest Payment Period permitted under Section 4.1. ARTICLE V EXPENSES AND GUARANTEE SECTION 5.1 Payment of Expenses. In connection with the offering, sale and issuance of the Notes to the Property Trustee in connection with the sale of the Trust Securities by the Trust, the Company shall: (a) pay for all costs and expenses relating to the offering, sale and issuance of the Notes, including commissions to the underwriters payable pursuant to the Underwriting Agreement and the Pricing Agreement and compensation of the Trustee under the Indenture in accordance with the provisions of Section 8.07 of the Indenture; (b) pay for all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the offering, sale and issuance of the Trust Securities (including commissions to the underwriters in connection therewith), the fees and expenses of the Property Trustee and the Delaware Trustee, the costs and expenses relating to the operation 9 10 of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), travel expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); and (c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. ARTICLE VI SUBORDINATION SECTION 6.1 Agreement to Subordinate. The Company covenants and agrees, and each Holder of Notes issued hereunder by such Holder's acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article VI; and each Holder of a Note, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The payment by the Company of the principal of, (premium, if any) and interest on all Notes issued hereunder shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred. No provision of this Article VI shall prevent the occurrence of any default or Event of Default hereunder. SECTION 6.2 Default on Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company, or in the event that the maturity of any Senior Indebtedness of the Company, has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption payments) of, or premium, if any, or interest on the Notes including payment with respect to any obligation due under the Preferred Securities Guarantee. 10 11 In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the preceding paragraph of this Section 6.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of such Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on such Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of such Senior Indebtedness. SECTION 6.3 Liquidation; Dissolution; Bankruptcy. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company, shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, as the case may be, on account of the principal (and premium, if any) or interest on the Notes; and upon any such dissolution or winding-up or liquidation or reorganization any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Notes or the Trustee would be entitled to receive from the Company, except for the provisions of this Article VI, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Notes or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company, (pro rata to the holders of the respective amounts of Senior Indebtedness, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness before any payment or distribution is made to the Holders of Notes or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the Holders of the Notes 11 12 before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. For purposes of this Article VI, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article VI with respect to the Notes to the payment of all Senior Indebtedness of the Company that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article X of the Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 6.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article X of the Indenture. Nothing in Section 6.2 or in this Section 6.3 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 8.07 of the Indenture. SECTION 6.4 Subordination. Subject to the payment in full of all Senior Indebtedness of the Company, the rights of the Holders of the Notes shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Notes shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Holders of the Notes or the Trustee would be entitled except 12 13 for the provisions of this Article VI, and no payment over pursuant to the provisions of this Article VI, to or for the benefit of the holders of such Senior Indebtedness by Holders of the Notes or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the Holders of the Notes, be deemed to be a payment by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article VI are and are intended solely for the purposes of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of Senior Indebtedness of the Company on the other hand. Nothing contained in this Article VI or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the Holders of the Notes the obligation of the Company which is absolute and unconditional, to pay to the Holders of the Notes the principal of (and premium, if any) and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Notes and creditors of the Company other than the holders of Senior Indebtedness of the Company, nor shall anything herein or therein prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under the Indenture, subject to the rights, if any, under this Article VI of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article VI, the Trustee, subject to the provisions of Section 8.01 of the Indenture, and the Holders of the Notes, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Notes, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness of the Company the amount thereof or payable thereon, the amount facts pertinent thereto or to this Article VI. SECTION 6.5 Trustee to Effectuate Subordination. Each Holder of Notes by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article VI and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. 13 14 SECTION 6.6 Notice by the Company. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article VI. Notwithstanding the provisions of this Article VI or any other provision of the Indenture and this Supplemental Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Notes pursuant to the provisions of this Article VI, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 8.01 of the Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 6.6 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Note), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 8.01 of the Indenture, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness of the Company (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of such Senior indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article VI, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article VI, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 14 15 SECTION 6.7 Rights of the Trustee; Holders of Senior Indebtedness. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article VI in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article VI, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Section 8.01 of the Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Holders of Notes, the Company, or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article VI or otherwise. SECTION 6.8 Subordination May Not Be Impaired. No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article VI or the obligations hereunder of the Holders of the Notes to the holders of such Senior Indebtedness, do any one or more the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of 15 16 of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person. ARTICLE VII COVENANTS SECTION 7.1 Listing on Exchanges. If the Notes are to be issued as a Depository Note in connection with the distribution of the Notes to the holders of the Preferred Securities issued by the Trust upon a Dissolution Event, the Company will use its best efforts to list such Notes on the New York Stock Exchange or on such other exchange as the Preferred Securities are then listed. SECTION 7.2 Limitation on Dividends; Transactions with Affiliates. (a) If (i) there shall have occurred any event that would constitute an Event of Default or (ii) the Company shall be in default with respect to its payment of any obligations under the Preferred Securities Guarantee or Common Securities Guarantee relating to the Trust, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its capital stock (other than (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (ii) as a result of an exchange or conversion of any class or series of the Company's capital stock for any other class or series of the Company's capital stock, or (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged), and (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Notes. However, nothing herein will limit the Company's ability to pay stock dividends where the dividend stock is the same stock as that on which the dividend is being paid. (b) If the Company shall have given notice of its election to defer payments of interest on the Notes by extending the interest payment period as provided in Article IV of this Supplemental Indenture and such period, or any extension thereof, shall be continuing, then (i) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of its 16 17 capital stock (other than (x) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (y) as a result of an exchange or conversion of any class or series of the Company's capital stock for any other class or series of the Company's capital stock, or (z) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged), and (ii) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Notes. However, nothing herein will limit the Company's ability to pay stock dividends where the dividend stock is the same stock as that on which the dividend is being paid. SECTION 7.3 Covenants as to the Trust. For so long as such Trust Securities remain outstanding, the Company will (i) maintain 100% direct or indirect ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities, (ii) use its reasonable efforts to cause the Trust (a) to remain a statutory business trust, except in connection with the distribution of Notes to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities of the Trust, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration of the Trust, and (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes. ARTICLE VIII FORM OF NOTE SECTION 8.1 Form of Note. The Notes, and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the following forms: (FORM OF FACE OF NOTE) [IF THE NOTE IS TO BE A Depository Note, INSERT - This Note is a Depository Note within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository. This Note is exchangeable for Notes registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Note (other than a transfer of this 17 18 Note as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Note is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] No. $___________________ CUSIP No. HOUSEHOLD INTERNATIONAL, INC. _____% JUNIOR SUBORDINATED DEFERRABLE INTEREST NOTE DUE Household International, Inc., a Delaware corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _________________ __________________________________ or registered assigns, the principal sum of $____________ on _______________, and to pay interest on said principal sum from _________, 2001 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on _________, _________, _________ and ___________ of each year commencing ________________, at the rate of ____% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum, compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed (i) for any full 90-day quarterly interest payment period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 90-day quarterly interest payment period for which interest payments are computed, on the basis of a 30-day month, and for periods of less than a month, the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on this Note is not a Business Day, then payment of interest payable on such date 18 19 will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Note (or one or more Predecessor Notes, as defined in said Indenture) is registered at the close of business on the Regular Record Date for such interest installment [which shall be the close of business on the fifteenth day preceding such Interest Payment Date]. [IF PURSUANT TO THE PROVISIONS OF SECTION 2.11(c) OF THE INDENTURE THE NOTES ARE NO LONGER REPRESENTED BY A Depository Note -- which shall be the close of business on the day preceding such Interest Payment Date.] Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such Regular Record Date, and may be paid to the person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered Holders of this series of Notes not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Note Register. Notwithstanding the foregoing, so long as the Holder of this Note is the Property Trustee, the payment of the principal of (and premium, if any) and interest on this Note will be made at such place and to such account as may be designated by the Property Trustee. The indebtedness evidenced by this Note is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Note is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives 19 20 all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. This Note shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. Unless the Certificate of Authentication hereon has been executed by the Trustee referred to on the reverse side hereof, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 20 21 The provisions of this Note are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this instrument to be executed. Dated ---------------- HOUSEHOLD INTERNATIONAL, INC. By ----------------------------------------------------------------------- Attest: By ----------------------------------------------------------------------- Assistant Secretary (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Notes of the series of Notes described in the within-mentioned Indenture. BANK ONE, NATIONAL ASSOCIATION ----------------------------------- ------------------------------- as Trustee or as Authentication Agent By By -------------------------------- ------------------------------- Authorized Signatory Authorized Signatory 21 22 (FORM OF REVERSE OF NOTE) This Note is one of a duly authorized series of Notes of the Company (herein sometimes referred to as the "Notes"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of May 15, 1995 duly executed and delivered between the Company and Bank One, National Association (formerly known as The First National Bank of Chicago), a national banking association, as Trustee (the "Trustee"), as supplemented by the Fifth Supplemental Indenture dated as of _________, 2001 between the Company and the Trustee (the Indenture as so supplemented, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Notes. By the terms of the Indenture, the Notes are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided. This series of Notes is limited in aggregate principal amount as specified in said Fifth Supplemental Indenture. In the event of the occurrence and continuation of a Tax Event, in certain circumstances this Note may become due and payable at the redemption price set forth below (the "Redemption Price"). The Redemption Price shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines. The Redemption Price shall be equal to 100% of the principal amount plus any accrued but unpaid interest thereon to the date of such redemption. In addition, the Company shall have the right to redeem this Note at the option of the Company, without premium or penalty, in whole or in part at any time on or after ________, ____, at the Redemption Price (an "Optional Redemption"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Redemption Price. If the Notes are only partially redeemed by the Company pursuant to an Optional Redemption, the Notes will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided that if, at the time of redemption, the Notes are registered as a Depository Note, the Depository shall determine by lot the principal amount of such Notes held by each Holder to be redeemed. In the event of redemption of this Note in part only, a new Note or Notes of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In the event of the occurrence and continuation of a Tax Event, in certain circumstances the Company may elect to advance the Maturity Date of this Note to the minimum extent required in order to allow the Company to deduct the interest payments on the Notes for United States federal income tax purposes. However, the 22 23 Maturity Date will not be advanced to a date less than 15 years from the original issuance of the Notes. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Notes of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, without the consent of the Holder of each Note so affected or (ii) reduce the aforesaid percentage of Notes, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of each Note then outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Notes of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Notes of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Notes of such series. Any such consent or waiver by the registered Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and of any Note issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed. The Company shall have the right at any time during the term of the Notes from time to time to extend the interest payment period of such Notes to up to 20 consecutive quarters (an "Extended Interest Payment Period"), at the end of which period the Company 23 24 shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Notes to the extent that payment of such interest is enforceable under applicable law), provided that no Extended Interest Payment Period may extend beyond the Maturity Date of the Notes. Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such further extensions thereof shall not exceed 20 consecutive quarters and provided further that no Extended Interest Payment Period may extend beyond the Maturity Date of the Notes. At the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest and any additional amounts then due, the Company may select a new Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Note is transferable by the registered Holder hereof on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company in Chicago, Illinois accompanied by written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any paying agent and any Note Registrar may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Note Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Note Registrar shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the interest on this Note, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. 24 25 The notes of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. This Depository Note is exchangeable for Notes in definitive form only under certain limited circumstances set forth in the Indenture. Notes of this series so issued are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations herein and therein set forth, Notes of this series so issued are exchangeable for a like aggregate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE IX ADDITIONAL EVENT OF DEFAULT; MODIFICATION AND WAIVER SECTION 9.1 Additional Event of Default. "Event of Default", wherever used in the Indenture or this Supplemental Indenture with respect to the Notes, in addition to the Events of Default set forth in Section 7.01 of the Indenture shall include the following event: the Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of Notes to Holders of Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities of the Trust or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration of the Trust. SECTION 9.2 MODIFICATION AND WAIVER. The covenant set forth in Section 7.2 of this Supplemental Indenture shall not be modified or waived without the consent of the Holders of each Note affected thereby. 25 26 ARTICLE X ORIGINAL ISSUE OF NOTES SECTION 10.1 Original Issue of Notes. Notes in the aggregate principal amount of $ ________________ may, upon execution of this Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes to or upon the written order of the Company, signed by its Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE XI MISCELLANEOUS SECTION 11.1 Ratification of Indenture. The Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. SECTION 11.2 Trustee Not Responsible for Recitals. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. SECTION 11.3 Governing Law. This Supplemental Indenture and each Note shall be deemed to be a contract made under the internal laws of the State of Illinois, and for all purposes shall be construed in accordance with the laws of said State. SECTION 11.4 Separability. In case any one or more of the provisions contained in this Supplemental Indenture or in the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Supplemental Indenture or of the Notes, but Supplemental Indenture and the Notes shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. 26 27 SECTION 11.5 Counterparts. This Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, on the date or dates indicated in the acknowledgments and as of the day and year first above written. HOUSEHOLD INTERNATIONAL, INC. By ------------------------------------- Edgar Ancona Managing Director-Treasurer Attest: ------------------------ Assistant Secretary BANK ONE, NATIONAL ASSOCIATION, as Trustee By ------------------------------------- Steven M. Wagner Vice President Attest: ------------------------ Mark J. Frye Assistant Vice President 27 EX-4.3 3 c59540ex4-3.txt DECLARATION OF TRUST OF HOUSEHOLD CAPITAL TRUST VI 1 EXHIBIT 4.3 DECLARATION OF TRUST, dated as of January 17, 2001, between Household International, Inc., a Delaware corporation, as Sponsor, and The Bank of New York, The Bank of New York (Delaware), Benjamin B. Moss, Jr., Dennis J. Mickey, as Trustees. The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby shall be known as "Household Capital Trust VI", in which name the Trustees, or the Sponsor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Sponsor hereby assigns, transfers, conveys and sets over to the Trustees the sum of $10. The Trustees hereby acknowledge receipt of such amount in trust from the Sponsor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Sponsor. It is the intention of the parties hereto that the Trust created hereby constitutes a business trust under Chapter 38 of title 12 of the Delaware Code, 12 Del. C. SS. 3801 et seq. (the "Business Trust Act"), and that this document constitutes the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State substantially in the form attached hereto or in such other form as the Trustees may approve. 3. The Sponsor and the Trustees will enter into an amended and restated Declaration of Trust, satisfactory to each such party and substantially in the form included as Exhibit 4(d) to the 1933 Act Registration Statement referred to below, or in such other form as the Trustees may approve, to provide for the contemplated operation of the Trust created hereby and the issuance of the Preferred Securities and common interests referred to therein. Prior to the execution and delivery of such amended and restated Declaration of Trust, the Trustees shall not have any duty or obligation hereunder or with respect of the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. However, notwithstanding the foregoing, all Trustees may take all actions deemed proper as are necessary to effect the transactions contemplated herein. 4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, as the agent of the Trust, (i) to file with the Securities and Exchange Commission (the "Commission") and execute, in each case on behalf of the Trust, (a) the Registration Statement on Form S-3 (the "1933 Act Registration Statement") including pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of 1933, as amended, of the Trust Preferred Securities of the Trust and (b) a Registration Statement on Form 8-A (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the 2 Trust Preferred Securities of the Trust under Section 12(b) of the Securities Exchange Act of 1934, as amended; (ii) to file with the New York Stock Exchange and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Trust Preferred Securities to be listed on the New York Stock Exchange; (iii) to file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Trust Preferred Securities under the securities or "Blue Sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable; (iv) to execute and deliver letters or documents to, or instruments for filing with, a depository relating to the Trust Preferred Securities of the Trust; and (v) to execute, deliver and perform on behalf of the Trust one or more underwriting agreements, dealer manager agreements, escrow agreements and other related agreements providing for or relating to the sale of the Trust Preferred Securities of the Trust. The Trustees further hereby ratify and approve all actions having previously been taken with respect to the foregoing. In the event that any filing referred to in clauses (i)-(iii) above is required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by the Trustees, Benjamin B. Moss, Jr. and Dennis J. Mickey, in their capacities as Trustees of the Trust, are hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that neither The Bank of New York (Delaware) or The Bank of New York in its capacity as Trustee of the Trust, shall be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws. In connection with all of the foregoing, the Sponsor and each such Trustee, solely in its capacity as Trustee of the Trust, hereby constitutes and appoints John W. Blenke, Laurie S. Mattensen and Joan S. VanderLinde, and each of them, as his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for the Sponsor or such Trustee or in the Sponsor's or such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as the Sponsor or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Declaration of Trust may be executed in one or more counterparts. 2 3 6. The number of Trustees initially shall be four (4) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor which may increase or decrease the number of Trustees; provided, however, that the number of Trustees shall in no event be less than three (3); and provided, further that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. Subject to the foregoing, the Sponsor is entitled to appoint or remove without cause any Trustee at any time. The Trustees may resign upon thirty days prior notice to the Sponsor provided, however, that no resignation of The Bank of New York (Delaware) shall be effective until a successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such successor Delaware Trustee and delivered to the Trust, the Sponsor and The Bank of New York (Delaware). 7. To the fullest extent permitted by applicable law, the Sponsor agrees to indemnify the Trustees and any officers, directors, shareholders, members, partners, employees representative, nominees, custodians or agents of the Trustees (each of the persons being referred to as an "Indemnified Person") for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this paragraph 7 shall survive the termination of this Declaration. IN WITNESS WHEREOF, the parties hereto have caused this Declaration of Trust to be duly executed as of the day and year first above written. HOUSEHOLD INTERNATIONAL, INC. as Sponsor By: /s/ John W. Blenke ---------------------------------------- Name: John W. Blenke Title: Vice President THE BANK OF NEW YORK as Trustee By: /s/ Mary LaGumina ------------------------------------------ Name: Mary LaGumina Title: Vice President THE BANK OF NEW YORK (DELAWARE), as Trustee By: /s/ Patrick Burns ------------------------------------------ Name: Patrick Burns Title: Senior Vice President /s/ B.B. Moss, Jr. -------------------------------------------- Benjamin B. Moss, Jr. as Trustee /s/ Dennis J. Mickey -------------------------------------------- Dennis J. Mickey as Trustee 3 EX-4.4 4 c59540ex4-4.txt FORM OF AMENDED AND RESTATED DECLARATION OF TRUST 1 Exhibit 4.4 ========================================= AMENDED AND RESTATED DECLARATION OF TRUST HOUSEHOLD CAPITAL TRUST VI Dated as of ________ ___, 2001 ========================================= 2 CROSS-REFERENCE TABLE*
Section of Trust Indenture Act Section of of 1939, as amended Declaration - ------------------- 310(a) . . . . . . . . . . . . . . . . . . . . . . . 5.3(a) 310(b) . . . . . . . . . . . . . . . . . . . . . . . 5.3(c) 310(c) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 311(a) . . . . . . . . . . . . . . . . . . . . . . . 2.2(b) 311(b) . . . . . . . . . . . . . . . . . . . . . . . 2.2(b) 311(c) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 312(a) . . . . . . . . . . . . . . . . . . . . . . . 2.2(a) 312(b) . . . . . . . . . . . . . . . . . . . . . . . 2.2(b) 313 . . . . . . . . . . . . . . . . . . . . . . . . 2.3 314(a) . . . . . . . . . . . . . . . . . . . . . . . 2.4 314(b) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 314(c) . . . . . . . . . . . . . . . . . . . . . . . 2.5 314(d) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 314(f) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable 315(a) . . . . . . . . . . . . . . . . . . . . . . . 3.9(b) 315(b) . . . . . . . . . . . . . . . . . . . . . . . 2.8 315(c) . . . . . . . . . . . . . . . . . . . . . . . 3.9(a) 315(d) . . . . . . . . . . . . . . . . . . . . . . . 3.9(a) 316(a) . . . . . . . . . . . . . . . . . . . . . . . Exhibit At 2.6 316(c) . . . . . . . . . . . . . . . . . . . . . . . 3.6(e)
* This Cross-Reference Table does not constitute part of the Declaration and shall not affect the interpretation of any of its terms or provisions. 3 TABLE OF CONTENTS DECLARATION OF TRUST ..................................................... 1 ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions ............................................. 1 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application ........................ 8 SECTION 2.2 Lists of Holders of Securities .......................... 8 SECTION 2.3 Reports by the Property Trustee ......................... 9 SECTION 2.4 Periodic Reports to Property Trustee .................... 9 SECTION 2.5 Evidence of Compliance with Conditions Precedent ........ 9 SECTION 2.6 Events of Default; Waiver ............................... 9 SECTION 2.7 Event of Default; Notice ................................ 11 ARTICLE III ORGANIZATION SECTION 3.1 Name .................................................... 12 SECTION 3.2 Office .................................................. 12 SECTION 3.3 Purpose ................................................. 12 SECTION 3.4 Authority ............................................... 12 SECTION 3.5 Title to Property of the Trust .......................... 13 SECTION 3.6 Powers and Duties of the Regular Trustees ............... 13 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees .... 16 SECTION 3.8 Powers and Duties of the Property Trustee ............... 17 SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee ............................................... 19 SECTION 3.10 Certain Rights of Property Trustee ...................... 20 SECTION 3.11 Delaware Trustee ........................................ 23 SECTION 3.12 Execution of Documents .................................. 23 SECTION 3.13 Not Responsible for Recitals or Issuance of Securities ......................................... 23 SECTION 3.14 Duration of Trust ....................................... 24 SECTION 3.15 Mergers ................................................. 24 ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities ................. 26 SECTION 4.2 Responsibilities of the Sponsor ......................... 26
4 ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees ...................................... 27 SECTION 5.2 Delaware Trustee ........................................ 27 SECTION 5.3 Property Trustee; Eligibility ........................... 28 SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally ..................................... 29 SECTION 5.5 Initial Trustees ........................................ 29 SECTION 5.6 Appointment, Removal and Resignation of Trustees ........ 29 SECTION 5.7 Vacancies Among Trustees ................................ 31 SECTION 5.8 Effect of Vacancies ..................................... 32 SECTION 5.9 Meetings ................................................ 32 SECTION 5.10 Delegation of Power ..................................... 32 ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions ........................................... 33 ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities ................. 33 ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust .................................... 34 ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities .................................. 35 SECTION 9.2 Transfer of Certificates ................................ 36 SECTION 9.3 Deemed Security Holders ................................. 36 SECTION 9.4 Book Entry Interests .................................... 37 SECTION 9.5 Notices to Clearing Agency .............................. 37 SECTION 9.6 Appointment of Successor Clearing Agency ................ 38 SECTION 9.7 Definitive Preferred Security Certificates .............. 38 SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates ....... 39
5 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability ............................................... 39 SECTION 10.2 Exculpation ............................................. 40 SECTION 10.3 Fiduciary Duty .......................................... 40 SECTION 10.4 Indemnification ......................................... 42 SECTION 10.5 Outside Businesses ...................................... 42 ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year ............................................. 43 SECTION 11.2 Certain Accounting Matters .............................. 43 SECTION 11.3 Banking ................................................. 44 SECTION 11.4 Withholding ............................................. 44 ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments .............................................. 44 SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent ............................. 46 ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee ...... 48 ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices ................................................. 49 SECTION 14.2 Governing Law ........................................... 50 SECTION 14.3 Intention of the Parties ................................ 50 SECTION 14.4 Headings ................................................ 50 SECTION 14.5 Successors and Assigns .................................. 50 SECTION 14.6 Partial Enforceability .................................. 51 SECTION 14.7 Counterparts ............................................ 51
6 AMENDED AND RESTATED DECLARATION OF TRUST OF HOUSEHOLD CAPITAL TRUST VI _______ __, 2001 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of _______ __, 2001 by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Household International, Inc., a Delaware corporation, as trust sponsor (the "Sponsor"), and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor established a trust (the "Trust") under the Delaware Business Trust Act pursuant to a Declaration of Trust, dated as of ________, 2001 (the "Original Declaration") and a Certificate of Trust filed with the Secretary of State of Delaware on ________, 2001, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain Junior Subordinated Debt Securities of the Sponsor; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory business trust under the Business Trust Act and that this Declaration constitutes the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration of Trust as modified, supplemented or amended from time to time; 1 7 (d) all references in this Declaration to Articles and Sections and Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. "Appointment Event" means an event defined in the terms of the Preferred Securities as set forth in Exhibit A which entitles the Holders of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee. "Authorized Officer" of a Person means any Person that is authorized to bind such Person. "Book Entry Interest" means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than a day on which banking institutions in New York, New York, Chicago, Illinois, or the State of Delaware are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section Section 3801 et seq., as it may be amended from time to time. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depository for the Preferred Securities and in whose name or in the name of a nominee of that organization, shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. 2 8 "Closing Date" means ____________________, 2001. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" has the meaning specified in Section 3.6. "Common Security" has the meaning specified in Section 7.1. "Common Securities Guarantee" means the guarantee agreement of the Sponsor in respect of the Common Securities. "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Annex II to Exhibit A. "Coupon Rate" has the meaning set forth in Section 2(a) of Exhibit A hereto. "Covered Person" means: (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust; or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Debt Issuer" means Household International, Inc., a Delaware corporation. "Debt Trustee" means Bank One, National Association, a national banking association, as trustee under the Indenture until a successor is appointed thereunder and thereafter means such successor trustee. "Delaware Trustee" has the meaning set forth in Section 5.2. "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.4. "Direction" by a Person means a written direction signed (a) if the Person is a natural person, by that Person; or (b) in any other case, in the name of such Person by one or more Authorized Officers of that Person. "Dissolution Tax Opinion" has the meaning set forth in Section 4(c) of Exhibit A hereto. "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.1. "DTC" means the Depository Trust Company, the initial Clearing Agency. 3 9 "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time or any successor legislation. "Event of Default" in respect of the Securities means an Event of Default (as defined in the Indenture) has occurred and is continuing in respect of the Notes. "Global Certificate" has the meaning set forth in Section 9.4. "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means any Trustee, any Affiliate of any Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee, or any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of May 15, 1995 among the Debt Issuer, and Bank One, National Association, as trustee and the indenture supplemental thereto pursuant to which the Notes are to be issued. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time or any successor legislation. "Legal Action" has the meaning set forth in Section 3.6(g). "Majority in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities, Holder(s) of Securities voting together as a single class or, as the context may require, Holder(s) of Preferred Securities or Common Securities each, voting separately as a class, who vote Securities of a relevant class, and the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or maturity, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Securities voted by such Holders represents more than 50% of the above stated liquidation amount of all Securities of such class. "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Exhibit A. "No Recognition Opinion" has the meaning set forth in Section 4(c) of Exhibit A hereto. "Notes" means the series of junior subordinated debt securities to be issued by the Debt Issuer under the Indenture to the Property 4 10 Trustee, a specimen certificate for such series of Notes being Exhibit B. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Paying Agent" has the meaning specified in Section 3.8(h). "Person" means a legal entity, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities Guarantee" means the guarantee agreement of the Sponsor in respect of the Preferred Securities. "Preferred Security" has the meaning specified in Section 7.1. "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a certificate representing a Preferred Security substantially in the form of Annex I to Exhibit A. 5 11 "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.3. "Property Account" has the meaning set forth in Section 3.8(c). "Quorum" means a majority of the Regular Trustees or if there are only two Regular Trustees, both of them. "Redemption Tax Opinion" has the meaning set forth in Section 4(c) of Exhibit A hereto. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. "Related Party" means, with respect to the Sponsor, any direct or indirect wholly owned subsidiary of the Sponsor or any other Person which owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. "Responsible Officer" means, with respect to the Property Trustee, the chairman of the board of directors, the president, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Property Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended. "Securities Guarantees" means the Common Securities Guarantee and the Preferred Security Guarantee. "66-2/3% in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities, Holder(s) of Securities voting together as a single class or, as the context may require, Holder(s) of Preferred Securities or Common Securities, each voting separately as a class, who vote Securities of a relevant class, and the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or maturity, plus accrued and unpaid Distributions, to the date upon which the voting percentages are determined) of the Securities voted by such Holders represents 66-2/3% of the above-stated liquidation amount of all Securities of such class. 6 12 "Special Event" has the meaning set forth in the terms of the Securities. "Special Regular Trustee" means a Regular Trustee appointed by the Holders of a Majority in liquidation amount of the Preferred Securities in accordance with Section 5.6(a)(ii)(B). "Sponsor" means Household International, Inc., a Delaware corporation or any successor entity in a merger, in its capacity as sponsor of the Trust. "Successor Entity" has the meaning set forth in Section 3.15(b). "Successor Property Trustee" means a successor Trustee possessing the qualifications to act as Property Trustee under Section 5.3(a). "Successor Securities" has the meaning set forth in Section 3.15(b). "Super Majority" means where consent under the Indenture would require the consent of greater than a majority of the holders in principal amount of Notes affected thereby. "Tax Event" has the meaning set forth in Section 4(c) of Exhibit A hereto. "10% in liquidation amount of the Securities" means, except as provided in the terms of the Preferred Securities, Holder(s) of Securities voting together as a single class or, as the context may require, Holder(s) of Preferred Securities or Common Securities, each voting separately as a class, who vote Securities of a relevant class, and the liquidation amount (including the stated amount that would be paid on redemption, liquidation or maturity, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Securities voted by such Holders represents 10% of the above stated liquidation amount of all Securities of such class. "Treasury Regulations" means income tax regulations including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. 7 13 "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Underwriting Agreement" means the Underwriting Agreement for the offering and sale of Preferred Securities in the form of Exhibit C. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions; (b) the Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act; (c) if and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by Section Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; and (d) the application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. (a) Each of the Sponsor, the Debt Issuer and the Regular Trustees on behalf of the Trust shall provide the Property Trustee (i) within 14 days after each record date for payment of Distributions a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that none of the Sponsor, the Debt Issuer or the Regular Trustees on behalf of the Trust shall be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Property Trustee by the Sponsor, the Debt Issuer and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Property Trustee. The Property Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of 8 14 Holders given to it or which it receives in its capacity as Paying Agent (if acting in such capacity) provided that the Property Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders; and (b) the Property Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Property Trustee. Within 60 days after May 15 of each year, the Property Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Property Trustee. Each of the Sponsor, the Debt Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. Each of the Sponsor, the Debt Issuer and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. (a) The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences provided that if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, the Event of Default under the Declaration shall also not be waivable; or 9 15 (ii) which requires the consent or vote of all or a Super Majority of the holders of the Notes to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Preferred Securities or such proportion thereof in liquidation amount as represents the relevant Super Majority of the aggregate principal amount of Notes outstanding. Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Preferred Securities of an Event of Default with respect to the Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities. (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the Event of Default arises out of an Event of Default under the Indenture: (i) which is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below, the Event of Default under the Declaration is not waivable; or (ii) which requires the consent or vote of all or a Super Majority of the holders of the Notes to be waived under the Indenture, the Event of Default under the Declaration may only be waived by the vote of all of the Holders of the Preferred Securities or such proportion thereof in liquidation amount as represents the relevant Super Majority of the aggregate principal amount of the Notes outstanding, provided that, each Holder of Common Securities will be deemed to have waived any such Event of Default and all Events of Default with respect to the Common Securities until all Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated and until such Events of Default have been so 10 16 cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of the Securities. Subject to the foregoing proviso, upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an event of default under the Indenture by the Property Trustee at the direction of the Holders of the Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. SECTION 2.7 Event of Default; Notice (a) The Property Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities known to the Property Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Event of Default as defined in the Indenture, not including any periods of grace provided for therein and irrespective of the giving of any notice provided therein); provided, that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Notes or in the payment of any sinking fund installment established for the Notes, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Property Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Property Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 6.01(a)(1) and 6.01(a)(2) of the Indenture; or (ii) any default as to which the Property Trustee shall have received written notice or a Responsible 11 17 Officer charged with the administration of the Declaration shall have obtained written notice of. ARTICLE III ORGANIZATION SECTION 3.1 Name. The Trust created hereby shall be known as "Household Capital Trust VI", as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. The address of the principal office of the Trust is c/o Household International, Inc., 2700 Sanders Road, Prospect Heights, Illinois 60070. On ten Business Days written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purpose. The exclusive purposes and functions of the Trust are (a) to issue and sell Securities and use the proceeds from such sale to acquire the Notes, and (b) except as otherwise limited herein, to enter into such agreements and engage in only those other activities necessary, or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust to be classified for United States federal income tax purposes as other than grantor trust. SECTION 3.4 Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. 12 18 SECTION 3.5 Title to Property of the Trust. Except as provided in Section 3.8 with respect to the Notes and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers and Duties of the Regular Trustees. The Regular Trustees shall have the exclusive power and authority and duty to cause the Trust to engage in the following activities: (a) to issue and sell the Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided further, there shall be no interests in the Trust other than the Securities and the issuance of Securities shall be limited to a one time, simultaneous issuance of both Preferred Securities and Common Securities on the Closing Date; (b) in connection with the issue and sale of the Preferred Securities, at the direction of the Sponsor, to: (i) execute and file with the Securities and Exchange Commission (the "Commission") the registration statement on Form S-3 prepared by the Sponsor in relation to the Preferred Securities, including any amendments thereto prepared by the Sponsor; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor as necessary in order to qualify or register all or part of the Preferred Securities in any State in which the Sponsor has determined to qualify or register such Preferred Securities for sale; (iii) execute and file an application prepared by the Sponsor to the New York Stock Exchange or any other national stock exchange or the NASDAQ National Market for listing upon notice of issuance of any Preferred Securities; (iv) execute and file with the Commission a registration statement on Form 8-A prepared by the Sponsor relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto prepared by the Sponsor; and 13 19 (v) execute and enter into the Underwriting Agreement providing for the sale of the Preferred Securities; (c) to acquire the Notes with the proceeds of the sale of the Preferred Securities and the Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Notes to be held of record in the name of the Property Trustee for the benefit of the Holders of the Preferred Securities and the Common Securities; (d) to give the Debt Issuer, the Sponsor and the Property Trustee prompt written notice of the occurrence of a Special Event provided, that the Regular Trustees shall consult with the Debt Issuer, the Sponsor and the Property Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including for the purposes of Section 316(c) of the Trust Indenture Act and with respect to Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Preferred Securities and Common Securities as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to 3.8(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate to the Property Trustee required by Section 314(a)(4) of the Trust Indenture Act which certificate may be executed by any Regular Trustee; 14 20 (k) incur expenses which are necessary or incidental to carry out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debt Issuer of its election to defer payments of interest on the Notes by extending the interest payment period under the Indenture; (n) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action which may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust was created; (p) to take any action, not inconsistent with this Declaration or with applicable law, which the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6 including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust to be characterized for United States federal income tax purposes as other than a grantor trust; and (iii) cooperating with the Debt Issuer to ensure that the Notes will be treated as indebtedness of the Debt Issuer for United States federal income tax purposes, provided that such action does not adversely affect the interests of Holders; and (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust. 15 21 The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.3 and the Regular Trustees shall not take any action which is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Property Trustee set forth in Section 3.8. SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. (a) The Trust shall not, and the Trustees (including the Property Trustee) shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall not: (i) invest any proceeds received by the Trust from holding the Notes but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Notes; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) (A) direct the time, method and place of exercising any trust or power conferred upon the Debt Trustee with respect to the Notes, (B) waive any past default that is waivable under Section 7.13 of the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Notes shall be due and payable or (D) consent to any amendment, modification or termination of the Indenture or the Notes, where such consent shall be required, unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that for United States 16 22 federal income tax purposes the Trust will be characterized as other than a grantor trust. SECTION 3.8 Powers and Duties of the Property Trustee. (a) The legal title to the Notes shall be owned by and held of record in the name of the Property Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Property Trustee to the Notes shall vest automatically in each Person who may hereafter be appointed as Property Trustee as set forth in Section 5.6. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Notes to the Regular Trustees or to the Delaware Trustee (if the Property Trustee does not also act as Delaware Trustee). (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing bank account (the "Property Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Notes held by the Property Trustee, deposit such funds into the Property Account and make payments to the Holders of the Preferred Securities and the Common Securities from the Property Account in accordance with Section 6.1. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration. The Property Account shall be an account which is maintained with a banking institution the rating on whose long term unsecured indebtedness is at least equal to the rating assigned to the Preferred Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Preferred Securities and the Common Securities to the extent the Notes are redeemed or mature; and (iii) upon notice of distribution issued by the Regular Trustees in accordance with the terms of the Preferred Securities and the Common Securities, 17 23 engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Notes to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities; (d) the Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of the Securities; (e) the Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration or the Trust Indenture Act; (f) the Property Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Property Trustee has been appointed and accepted that appointment in accordance with Section 5.6; (g) the Property Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Notes under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Notes subject to the rights of the Holders pursuant to the terms of such Securities; (h) the Property Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to either or both of the Preferred Securities and the Common Securities and any such Paying Agent shall comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee; and 18 24 (i) subject to this Section 3.8, the Property Trustee shall have none of the powers or the authority of the Regular Trustees set forth in Section 3.6. The Property Trustee must exercise the powers set forth in this Section 3.8 in a manner which is consistent with the purposes and functions of the Trust set forth in Section 3.3 and the Property Trustee shall not take any action which is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee (a) The Property Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and in the terms of the Securities, and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (b) no provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration and in the terms of the Securities, and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions 19 25 expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under this Declaration; and (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 3.10 Certain Rights of Property Trustee. (a) Subject to the provisions of Section 3.9: (i) the Property Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document 20 26 believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by a Direction or an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part and, if the Trust is excluded from the definition of an Investment Company solely by means of Rule 3a-5, subject to the requirements of Rule 3a-5, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Regular Trustees; (iv) the Property Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof); (v) the Property Trustee may consult with counsel and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees. The Property Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Property Trustee adequate security and indemnity which would satisfy a reasonable person in the position of the Property Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as 21 27 may be requested by the Property Trustee provided, that, nothing contained in this Section 3.10 (a) (vi) shall be taken to relieve the Property Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Property Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Property Trustee to so act, or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Property Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Property Trustee (i) may request instructions from the Holders of the Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and 22 28 (xi) except as otherwise expressly provided by this Declaration, the Property Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration except upon the Direction of the Sponsor or the Regular Trustees as the case may be. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Property Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Property Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Property Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees and the Property Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. SECTION 3.12 Execution of Documents Unless otherwise determined by the Regular Trustees and except as otherwise required by the Business Trust Act, a majority of, or if there are only two, both of the Regular Trustees are authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to execute pursuant to Section 3.6, provided that any listing application prepared by the Sponsor referred to in Section 3.6(b)(iii) may be executed by any Regular Trustee. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. 23 29 SECTION 3.14 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence until ________, ____. SECTION 3.15 Mergers. (a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except as described in Section 3.15 (b) and (c). (b) The Trust may, with the consent of a majority of the Regular Trustees and without the consent of the Holders of the Securities, the Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state; provided, that: (i) such successor entity (the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Preferred Securities; or (B) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Preferred Securities rank with respect to priority of Distributions and payments upon liquidation, redemption and maturity; (ii) the Debt Issuer expressly acknowledges a trustee of the Successor Entity which possess the same powers and duties as the Property Trustee as the Holder of the Notes; (iii) the Preferred Securities or any Successor Securities are listed, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed; (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities) to be 24 30 downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); (vi) such successor entity has a purpose identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Preferred Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the Holders' interest in the new entity); and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Preferred Securities Guarantee; and (c) notwithstanding Section 3.15(b), the Trust shall not consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity for United States federal income tax purposes to be classified as other than a grantor trust, except with the consent of Holders of 100% in liquidation amount of the Securities. 25 31 ARTICLE IV SPONSOR SECTION 4.1 Sponsor's Purchase of Common Securities. On the Closing Date the Sponsor will purchase all the Common Securities issued by the Trust, at the same time as the Preferred Securities are sold, in an amount equal to 3% of the capital of the Trust. SECTION 4.2 Responsibilities of the Sponsor. In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; (b) to determine the states in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and to take any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such states; (c) to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (d) to prepare for filing by the Trust with the Commission a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) of the Exchange Act, including any amendments thereto; and (e) to negotiate the terms of the Underwriting Agreement providing for the sale of the Preferred Securities. 26 32 ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees. The number of Trustees shall initially be three (3), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase the number of Trustees; and (b) after the issuance of any Securities: (i) and except as provided in Section 5.1 (b)(ii)and 5.6 (a) (ii) (B) with respect to the Special Regular Trustee, the number of Trustees may be increased or decreased by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and (ii) the number of Trustees shall be increased automatically by one (1) if an Appointment Event has occurred and is continuing and the Holders of a Majority in liquidation amount of the Preferred Securities appoint a Special Regular Trustee in accordance with Section 5.6, provided that in any case, the number of Trustees shall be at least three (3) so long as the Trustee that acts as the Property Trustee also acts as the Delaware Trustee pursuant to Section 5.2. In the event the Property Trustee is not also acting as the Delaware Trustee, the number of Trustees shall be at least five (5). SECTION 5.2 Delaware Trustee. If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (a) a natural person who is a resident of the State of Delaware; or (b) if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise meets the requirements of applicable law, provided that if the Property Trustee has its principal place of business in the State of Delaware and otherwise meets the 27 33 requirements of applicable law, then the Property Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3 Property Trustee; Eligibility. (a) There shall at all times be one Trustee (which may be the Delaware Trustee) which shall act as Property Trustee which shall: (i) not be an Affiliate of the Sponsor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.3 (a) (ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus asset forth in its most recent report of condition so published. (b) If at any time the Property Trustee shall cease to be eligible to so act under Section 5.3(a), the Property Trustee shall immediately resign in the manner and with the effect set out in Section 5.6(c). (c) If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Property Trustee and the Holder of the Common Securities (as if it were the obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. 28 34 (d) The Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee Generally. Each Regular Trustee and the Delaware Trustee (unless the Property Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity which shall act through one or more Authorized Officers. SECTION 5.5 Initial Trustees. The initial Regular Trustees shall be: Dennis J. Mickey 2700 Sanders Road Prospect Heights, Illinois 60070 and Benjamin B. Moss, Jr. 2700 Sanders Road Prospect Heights, Illinois 60070 The initial Delaware Trustee shall be: The Bank of New York (Delaware) - ------------ - ------------ - ------------ The initial Property Trustee should be: The Bank of New York - ------------ - ------------ - ------------ SECTION 5.6 Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.6(b) Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities; (A) other than in respect to a Special Regular Trustee, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities; and 29 35 (B) if an Appointment Event has occurred and is continuing, one (1) additional Regular Trustee (the "Special Regular Trustee") may be appointed by vote of the Holders of a Majority in liquidation amount of the Preferred Securities, voting as a class at a meeting of the Holders of the Preferred Securities and such Special Regular Trustee may only be removed (otherwise than by the operation of Section 5.6(c)), by vote of the Holders of a Majority in liquidation amount of the Preferred Securities voting as a class at a meeting of the Holders of the Preferred Securities. (b) (i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.6(a) until Successor Property Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.6(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation, provided that a Special Regular Trustee shall only hold office while an Appointment Event is continuing and shall cease to hold office immediately after the Appointment Event pursuant to which the Special Regular Trustee was appointed and all other Appointment Events cease to be continuing. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective until either: 30 36 (A) a Successor Property Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee; and (iii) no such resignation of a Special Regular Trustee shall be effective until the 60th day following delivery of the instrument of resignation of the Special Regular Trustee to the Sponsor and the Trust or such later date specified in such instrument during which period the Holders of the Preferred Securities shall have the right to appoint a successor Special Trustee as provided in this Section 5.6. (d) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust of an instrument of resignation, the resigning Property Trustee or Delaware Trustee may petition any court of competent jurisdiction for appointment of a Successor Property Trustee or Successor Delaware Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.7 Vacancies Among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.6. 31 37 SECTION 5.8 Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee, or any one of them, shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.6, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.9 Meetings. Meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible vote with respect to such matter, provided that a quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.10 Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6 including any registration statement or amendment thereto filed with the Commission or making any other governmental filing; and (b) the Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the 32 38 names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debt Issuer makes a payment of interest (including Compounded Interest (as defined in the Indenture)), premium and principal on the Notes held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed, to the extent funds are available for that purpose, to make a Distribution of the Payment Amount to Holders. ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. (a) The Regular Trustees shall, on behalf of the Trust, issue one class of preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A and incorporated herein by reference (the "Preferred Securities"), and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit A and incorporated herein by reference (the "Common Securities"). The Trust shall have no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. (b) The Certificates shall be signed on behalf of the Trust by the Regular Trustees (or if there are more than two Regular Trustees by any two of the Regular Trustees). Such signatures may be the manual or facsimile signatures of the present or any future Regular Trustee. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect 33 39 the validity of any Certificate. In case any Regular Trustee of the Trust who shall have signed any of the Certificates shall cease to be such Regular Trustee before the Certificate so signed shall be delivered by the Trust, such Certificate nevertheless may be delivered as though the person who signed such Certificate had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who shall at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation of any stock exchange on which Securities may be listed, or to conform to usage. (c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and nonassessable. (e) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by this Declaration. ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust. (a) The Trust shall dissolve; (i) upon the bankruptcy of the Holder of the Common Securities, the Sponsor or the Debt Issuer; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Holder of the Common Securities, the Sponsor or the Debt Issuer, 34 40 the filing of a certificate of cancellation with respect to the Trust or the revocation of the Holder of the Common Securities, the Sponsor's or the Debt Issuer's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Debt Issuer or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Notes endorsed thereon shall have been distributed to the Holders of Securities in exchange for all of the Securities; or (vi) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 8.1 (a), the Trustees shall, after paying or making reasonable provision for payment of the liabilities of the Trust, file a certificate of cancellation with the Secretary of State of the State of Delaware and the Trust shall terminate. (c) The provisions of Section 3.9 and Article X shall survive the termination of the Trust. ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. 35 41 (b) Subject to this Article IX, Preferred Securities shall be freely transferable. (c) Subject to this Article IX, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor, provided, that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of nationally recognized independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and each Holder of Securities would not be treated as owning an undivided beneficial interest in the Notes; and (ii) the Trust would be an Investment Company, or would be controlled by an Investment Company. SECTION 9.2 Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges which may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration and the documents incorporated by reference herein. SECTION 9.3 Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on 36 42 the part of any Person, whether or not the Trustees shall have actual or other notice thereof. SECTION 9.4 Book Entry Interests. Unless otherwise specified in the terms of the Preferred Securities, the Preferred Securities Certificates, on original issuance, will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.7. Unless and until definitive, fully registered Preferred Security Certificates (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.7: (a) the provisions of this Section 9.4 shall be in full force and effect; (b) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Preferred Security Beneficial Owners; (c) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (d) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC will make book entry transfers among the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Preferred Security Holders is required under this Declaration, unless and until Definitive Preferred Security Certificates shall have been issued 37 43 to the Preferred Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all such notices and communications specified herein to be given to the Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Preferred Security Beneficial Owners. SECTION 9.6 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Preferred Securities. SECTION 9.7 Definitive Preferred Security Certificates. If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Preferred Securities, then: (c) Definitive Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, such instructions. The Definitive Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Preferred Securities may be listed, or to conform to usage. 38 44 SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless, then in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally is sued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; and (ii) required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. 39 45 (b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets. (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of the Preferred Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. SECTION 10.2 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. SECTION 10.3 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration, subject to any duties or obligations imposed on the Property Trustee under the Trust Indenture Act and 40 46 Rule 3a-5, shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than duties imposed on the Property Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided here in: (i) whenever a conflict of interest exists or arises between an Indemnified Person and any Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provide that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, 41 47 the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.4(a). SECTION 10.5 Outside Businesses. Any Covered Person, the Sponsor, the Debt Issuer, the Delaware Trustee and the Property Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Debt Issuer, the Delaware Trustee, or the Property Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor, the Debt Issuer, the Delaware Trustee and the Property Trustee shall have the right to take for its own account (individually or 42 48 as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related statements of income or loss. (c) The Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. 43 49 (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. SECTION 11.3 Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Notes held by the Property Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the sole signatories for the Property Account. SECTION 11.4 Withholding. The Trust and the Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Trust shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may be amended by, and only by, a written instrument 44 50 approved and executed by the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees); provided, however, that: (i) no amendment shall be made, and any such purported amendment shall be void and ineffective, to the extent the result thereof would be to: (A) cause the Trust to be characterized for purposes of United States federal income taxation as other than a grantor trust; (B) reduce or otherwise adversely affect the rights, powers, obligations or liabilities of the Property Trustee or the Delaware Trustee without the written consent of the affected trustee; or (C) cause the Trust to be deemed to be an Investment Company which is required to be registered under the Investment Company Act; (ii) at such time after the Trust has issued any Securities which remain outstanding, any amendment which would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities; (iii) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities; (iv) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities; and (v) the rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities. (b) Notwithstanding Section 12.1(a)(ii), this Declaration may be amended without the consent of the Holders of the Securities to: (i) cure any ambiguity; 45 51 (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) to add to the covenants, restrictions or obligations of the Sponsor; and (iv) to conform to any change in Rule 3a-5 or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders. SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of such class of Holders, if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Security Certificates held by the Holders of Securities exercising the right to call a meeting and only those specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such 46 52 vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided here in, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; and (iv) unless the Business Trust Act, this Declaration, the terms of the Securities or the listing rules of any stock exchange on which the Preferred Securities are then listed or trading otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on 47 53 by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII REPRESENTATIONS OF PROPERTY TRUSTEE SECTION 13.1 Representations and Warranties of Property Trustee. The Trustee which acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (a) The Property Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration. (b) The execution, delivery and performance by the Property Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and it constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (c) The execution, delivery and performance of the Declaration by the Property Trustee does not conflict with or constitute a breach of the Certificate of Incorporation or By-laws of the Property Trustee. (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Property Trustee, of the Declaration. 48 54 (e) The Property Trustee, pursuant to the Declaration, shall hold legal title and a valid ownership interest in the Notes under the law of its place of incorporation and Delaware law. (f) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): Household Capital Trust VI 2700 Sanders Road Prospect Heights, Illinois 60070 Attention: Treasurer (b) if given to the Property Trustee, at the mailing address set forth below (or such other address as the Property Trustee may give notice of to the Holders of the Securities): The Bank of New York ____________________________ ____________________________ ____________________________ 49 55 (c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): Household International, Inc. 2700 Sanders Road Prospect Heights, Illinois 60070 Attention: Treasurer (d) if given to any other Holder, at the address set forth on the books and records of the Trust. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.2 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 14.3 Intention of the Parties. It is the intention of the parties hereto that the Trust not be characterized for United States federal income tax purposes as an association taxable as a corporation or a partnership but rather, the Trust be characterized as a grantor trust or otherwise in a manner that each Holder of Securities be treated as owning an undivided beneficial interest in the Notes. The provisions of this undivided beneficial interest in the Notes. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns Whenever in this Declaration any of the parties hereto is named or 50 56 referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 51 57 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. ------------------------------------ Dennis J. Mickey, as Trustee ------------------------------------ Benjamin B. Moss Jr., as Trustee The Bank of New York, as Trustee and as Property Trustee By: ------------------------------------ Name: Title: Household International, Inc., as Sponsor By: ------------------------------------ Name: John W. Blenke Title: Vice President-Corporate Law 52 58 EXHIBIT A TERMS OF _______% TRUST PREFERRED SECURITIES _______% TRUST COMMON SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust, dated as of ________________, 2001 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration or, if not defined in such Declaration, as defined in the Prospectus referred to below): 1. Designation and Number. (a) Preferred Securities. Preferred Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $______________ and a liquidation amount with respect to the assets of the Trust of $25 per Preferred Security, are hereby designated for the purposes of identification only as "____% Trust Preferred Securities" (the "Preferred Securities"). The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Preferred Securities are listed. (b) Common Securities. Common Securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of $__________________ and a liquidation amount with respect to the assets of the Trust of $__ per Common Security, are hereby designated for the purposes of identification only as "_____% Trust Common Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form attached hereto as Annex II, 1 59 with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. (a) Distributions payable on each Security will be fixed at a rate per annum of _____% (the "Coupon Rate") of the stated liquidation amount of $25 per Security, such rate being the rate of interest payable on the Notes to be held by the Property Trustee. Distributions in arrears for more than one quarter will bear interest thereon, compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Notes held by the Property Trustee. The amount of Distributions payable for any period will be computed (i) for any full 90-day quarterly Distribution period, on the basis of a 360-day year of twelve 30-day months and (ii) for any period shorter than a full 90-day quarterly Distribution period for which Distributions are computed, on the basis of a 30-day month, and for periods of less than a month, the actual number of days elapsed per 30-day month. (b) Distributions on the Securities will be cumulative, will accrue from _______________, 2001 and will be payable quarterly in arrears, on ___________, ____________, ____________, and ___________ of each year, commencing on ____________, 2001, except as otherwise described below. The Debt Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Notes for a period not exceeding 20 consecutive quarters (each, an "Extension Period") and, as a consequence of such extension, Distributions will also be deferred. No Extension Period will extend beyond the maturity date for the Notes. Despite such deferral, quarterly Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the Coupon Rate during any such Extension Period. Prior to the termination of any such Extension Period, the Debt Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters and provided further that no Extension Period may extend beyond the maturity date for the Notes. Payments of accrued Distributions will be payable to Holders as they appear on the books and records of the Trust on the first record date after the end of the 2 60 Extension Period. Upon the termination of any Extension Period and the payment of all amounts then due, the Debt Issuer may commence a new Extension Period, subject to the above requirements. (c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Preferred Securities remain in book-entry only form, the relevant record dates shall be one Business Day prior to the relevant payment dates which payment dates correspond to the interest payment dates on the Notes. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment in respect of the Preferred Securities will be made as described under the heading "Description of the Preferred Securities -- Book-Entry Only Issuance - The Depository Trust Company" in the Prospectus dated ___________, (the "Prospectus"), included in the Registration Statement on Form S-3 of the Sponsor, the Debt Issuer and the Trust. The relevant record dates for the Common Securities, and if the Preferred Securities shall not continue to remain in book-entry only form, the relevant record dates for the Preferred Securities, shall conform to the rules of any securities exchange on which the securities are listed and, if none, shall be selected by the Regular Trustees, which dates shall be at least one Business Day but less than 60 Business Days before the relevant payment dates which payment dates correspond to the interest payment dates on the Notes. Distributions payable on any Securities that are not punctually paid on any Distribution payment date as a result of the Debt Issuer or the Sponsor having failed to make a payment under the Notes, will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (d) In the event that there is any money or other property held by or for the Trust that is not accounted for 3 61 hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. Liquidation Distribution Upon Dissolution. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Securities on the date of the dissolution, winding-up or termination as the case may be, will be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities to creditors, an amount equal to the aggregate of the stated liquidation amount of $25 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, Notes in an aggregate principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. 4. Redemption and Distribution. (a) Upon the repayment of the Notes in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or payment shall be simultaneously applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Notes so repaid or redeemed at a redemption price of $25 per Security plus an amount equal to accrued and unpaid Distributions thereon to the date of the redemption, payable in cash (the "Redemption Price"). Holders will be given not less than 30 nor more than 60 days notice of such redemption. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Preferred Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed will be as described in Section 4(f)(ii) below. (c) If, at any time, a Tax Event or an Investment Company Event (each as defined below, and each a "Special Event") 4 62 shall occur and be continuing, the Regular Trustees shall dissolve the Trust and, after satisfaction of creditors, cause Notes held by the Property Trustee, having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on and having the same record date for payment as the Securities to be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90 Day Period"), provided, however, that in the case of the occurrence of a Tax Event, as a condition of such dissolution and distribution, the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and the distribution of Notes and provided, further, that, if at the time there is available to the Trust the opportunity to eliminate, within the 90 Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Debt Issuer, the Sponsor or the Holders of the Securities ("Ministerial Action"), the Trust will pursue such Ministerial Action in lieu of dissolution. In addition, if a Tax Event shall occur and be continuing, the Debt Issuer has the right to advance the maturity date of the Notes to the minimum extent required in order to permit payments of interest on the Notes to be deductible by the Debt Issuer for United States federal income tax purposes, but the resulting maturity may not be less than 15 years from the original issuance of the Notes. The Debt Issuer may take such action only if nationally recognized independent tax counsel to the Debt Issuer experienced in such matters has delivered an opinion, which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that (i) after advancing the maturity of the Notes, interest payments on the Notes will be deductible for United States federal income tax purposes and (ii) advancing the maturity date of the Notes will not result in a taxable event to holders of the Preferred Securities. If, in the case of the occurrence of a Tax Event (i) the Debt Issuer has received an opinion (a "Redemption Tax 5 63 Opinion") of a nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Debt Issuer would be precluded from deducting the interest on the Notes for United States federal income tax purposes even if the Notes were distributed to the Holders of Securities in liquidation of such Holders' interests in the Trust as described in this Section 4(c), or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to the Trust, the Debt Issuer shall have the right at any time, upon not less than 30 nor more than 60 days notice, to redeem the Notes in whole or in part for cash within 90 days following the occurrence of such Tax Event, and following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Notes so redeemed shall be redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided, however, that, if at the time there is available to the Trust the opportunity to eliminate, within such 90 day period, the Tax Event by taking some Ministerial Action, the Trust or the Debt Issuer will pursue such Ministerial Action in lieu of redemption. "Tax Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of the Prospectus, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority therefore or therein, or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of the Prospectus, there is more than an insubstantial risk that (i) the Trust is or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Notes, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest payable by the Debt Issuer to the Trust on the Notes is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debt Issuer for United States federal income tax purposes. 6 64 "Investment Company Event" means that the Regular Trustees shall have received an opinion of a nationally recognized independent counsel experienced in practice under the Investment Company Act that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an Investment Company which is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after the date of the Prospectus Supplement. On and from the date fixed by the Regular Trustees for any distribution of Notes and dissolution of the Trust: (i) the Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company (the "Depository") or its nominee (or any successor Clearing Agency or its nominee), as the record Holder of the Preferred Securities, will receive a registered global certificate or certificates representing the Notes and the Note Guarantee to be delivered upon such distribution and any certificates representing Securities, except for certificates representing Preferred Securities held by the Depository or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent beneficial interests in the Notes having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal co accrued and unpaid Distributions on such Securities until such certificates are presented to the Debt Issuer or its agent for transfer or reissue. (d) The Trust may not redeem fewer than all the outstanding Securities unless all accrued and unpaid Distributions have been paid on all Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) If the Notes are distributed to holders of the Securities, pursuant to the terms of the Indenture, the Debt Issuer will use its best efforts to have the Notes listed on the New York Stock Exchange or on such other exchange as the Preferred Securities were listed immediately prior to the distribution of the Notes. (f) "Redemption or Distribution Procedures." 7 65 (i) Notice of any redemption of, or notice of distribution of Notes in exchange for the Securities (a "Redemption/ Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Notes. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 4(e)(i), a Redemption/ Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Securities. Each Redemption/ Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/ Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Securities, it being understood that in respect of Preferred Securities registered in the name of and held of record by DTC (or a successor clearing agency) or any other Nominee, the distribution of the proceeds of such redemption will be made to each Clearing Agency Participant (or person on whose behalf such nominee holds such securities) in accordance with the procedures applied by such agency or nominee. (iii) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice which notice may only be issued if the Notes are redeemed as set out in this Section 4 (which notice will be irrevocable) then (A) while the Preferred Securities are in book entry only form, with respect to the Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that the Debt Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Notes, the Property Trustee will deposit irrevocably with the Depository (or successor Clearing Agency) funds sufficient to pay the applicable Redemption Price with respect to the 8 66 Preferred Securities and will give the Depository irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities, and (B) if the Preferred Securities are issued in definitive form, with respect to the Preferred Securities, and with respect to the Common Securities, provided that the Debt Issuer has paid the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Notes, the Property Trustee will pay the relevant Redemption Price to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the date of such deposit, or on the redemption date, as applicable, Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities which have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of Securities is improperly withheld or refused and not paid either by the Property Trustee or by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accrue, from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Preferred Securities, the 9 67 Depository or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or if Definitive Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Common Securities to the Holder thereof. (v) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), provided the acquirer is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. Voting Rights - Preferred Securities. (a) Except as provided under Section 5(b) and as otherwise required by law and the Declaration, the Holders of the Preferred Securities will have no voting rights. (b) If (i) the Trust fails to make Distributions in full on the Preferred Securities for six consecutive quarterly Distribution periods (other than during an Extension Period), or (ii) an Event of Default occurs and is continuing (each of (i) and (ii) being an "Appointment Event"), then the Holders of the Preferred Securities, acting as a single class, will be entitled by the vote of a Majority in liquidation amount of the Preferred Securities to appoint a Special Regular Trustee in accordance with Section 5.6(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities (other than the Sponsor, or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor) will be entitled to nominate any person to be appointed as Special Regular Trustee. For purposes of determining whether the Trust has failed to make Distributions in full for six consecutive quarterly Distribution periods, Distributions shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Distributions have been or contemporaneously are paid with respect to all quarterly Distribution periods terminating on or prior to the date of payment of such cumulative Distributions. Not later than 30 days after such right to appoint a Special Regular Trustee arises, the Regular Trustees will convene a meeting for the purpose of appointing a Special Regular Trustee. If the Regular Trustees fail to convene such meeting within such 30-day period, the Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such meeting in accordance with Section 12.2 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which notice of the meeting is 10 68 sent to Holders. The provisions of the Declaration relating to the convening and conduct of the meetings of the Holders will apply with respect to any such meeting. A Special Regular Trustee may be removed without cause at any time by vote of the Holders of a Majority in liquidation amount of the Preferred Securities at a meeting of the Holders of the Preferred Securities in accordance with Section 5.6(a)(ii)(B) of the Declaration. The Holders of 10% in liquidation amount of the Preferred Securities will be entitled to convene such a meeting in accordance with Section 12.2 of the Declaration. The record date for such meeting will be the close of business on the Business Day which is one Business Day before the day on which the notice of meeting is sent to Holders. Notwithstanding the appointment of a Special Regular Trustee, the Debt Issuer shall retain all rights under the Indenture, including the right to extend the interest payment period on the Notes. Subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Preferred Securities, voting separately as a class may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Note Trustee, or executing any trust or power conferred on the Note Trustee with respect to the Notes, (ii) waive any past default and its consequences that is waivable under Section 7.13 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Notes shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Notes, where such consent shall be required, provided, however, that where a Super Majority of the holders of the Notes is required, the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Preferred Securities which the relevant Super Majority represents of the aggregate principal amount of the Notes. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Note Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Preferred Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Preferred Securities 11 69 may, to the extent permissible by applicable law, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or to distribute the Notes in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Sponsor, or by any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 6. Voting Rights - Common Securities. (a) Except as provided under Section 6(b), 6(c) and 7 as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees, subject to the exclusive right of the Holders of the Preferred Securities to appoint, remove or replace a Special Regular Trustee. (c) Subject to Section 2.6 of this Declaration and only after 12 70 the Event of Default with respect to the Preferred Securities have been cured, waived, or otherwise eliminated, and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class may direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Note Trustee, or executing any trust or power conferred on the Note Trustee with respect to the Notes, (ii) waive any past default and its consequences that is waivable under Section 7.13 of the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Notes shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture or the Notes, where such consent shall be required, provided, however, that where a consent under the Indenture would require the consent of greater than a majority of the Holders in principal amount of Notes affected thereby (a "Super Majority"),the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Notes outstanding. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Property Trustee or the Note Trustee as set forth above, the Property Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust. If the Property Trustee fails to enforce its rights under the Declaration, any Holder of Common Securities may, after a period of 30 days has elapsed from such holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against any Person to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of 13 71 Securities in the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Notes in accordance with the Declaration and the terms of the Securities. 7. Amendments to Declaration and Indenture. (a) If any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Securities as a class, will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) and such amendment or proposal shall not be effective except with the approval of the Holders of at least 66-2/3% in liquidation amount of the Securities, voting together as a single class provided, however, that the rights Holders of Preferred Securities under Article V of the Declaration to appoint, remove or replace a Special Regular Trustee shall not amended without the consent of each Holder of Preferred Securities, provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66 2/3% in liquidation amount of such class of securities. (b) In the event the consent of the Property Trustee as the holder of the Notes is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Notes, the Property Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or 14 72 termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super Majority, the Property Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Notes outstanding provided, further, that the Property Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this Section 7(b) unless the Property Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust. 8. Pro Rata. A reference in these terms of the Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default under the Indenture has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 9. Ranking. The Preferred Securities rank pari pasu and payment thereon shall be made Pro Rata with the Common Securities except that where an Event of Default occurs and is continuing under the Indenture in respect of the Notes held by the Property Trustee, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Preferred Securities. 15 73 10. Listing. The Regular Trustees shall use their best efforts to cause the Preferred Securities to be listed for quotation on the New York Stock Exchange. 11. Acceptance of Securities Guarantee and Indenture. Each Holder of Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 12. No Preemptive Rights. The Holders of the Securities shall have no preemptive rights to subscribe for any additional Securities. 13. Miscellaneous. These terms constitute a part of the Declaration. The Regular Trustees will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. 16 74 Annex I [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Declaration and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Preferred Securities CUSIP NO. ___________________ Certificate Evidencing Preferred Securities of HOUSEHOLD PREFERRED TRUST VI Preferred Securities. (Liquidation Amount $25 per Preferred Security) Household Capital Trust VI, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that _____________ (the "Holder") is the registered owner of preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _____% Trust Preferred Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and A-1 75 provisions of the Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of ______________, as the same may be amended from time to time (the "Declaration") including the designation of the terms of the Preferred Securities as set forth in Exhibit A to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Preferred Securities Guarantee to the extent provided therein. The Trust will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat the Notes as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Notes. IN WITNESS WHEREOF, the Trust has executed this certificate this ______ day of , 200_. [ ] as Trustee ____________________________ [ ] as Trustee ____________________________ A-2 76 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfer this Preferred Security Certificate to: _____________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _______________(Insert assignee's social security of tax identification number) _____________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _____________________________________________________ (Insert address and zip code of assignee) and irrevocably appoint) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _________________________________________ agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:__________________________________________________ Signature:_____________________________________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) A-3 77 Annex II Certificate Number Number of Common Securities Certificate Evidencing Common Securities of HOUSEHOLD CAPITAL TRUST VI Common Securities (Liquidation Amount $25 per Common Security) Household Capital Trust VI, a business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ________________ (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the _______% Trust Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of ___________, as the same may be amended from time to time (the "Declaration") including the designation of the terms of the Common Securities as set forth in Exhibit A to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Trust will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat the Notes as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Notes. IN WITNESS WHEREOF, the Trust has executed this certificate this day of _____, 2001. [ ] as Trustee _______________________________ [ ] as Trustee _______________________________ A-4 78 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfer this Common Security Certificate to: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _______________(Insert assignee's social security of tax identification number) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _____________________________________________________ (Insert address and zip code of assignee) and irrevocably appoint) ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _________________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:__________________________________________________ Signature:_____________________________________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) A-5 79 EXHIBIT B SPECIMEN OF NOTE 80 EXHIBIT C UNDERWRITING AGREEMENT EX-4.7 5 c59540ex4-7.txt FORM OF GUARANTEE 1 Exhibit 4.7 ---------------------------------------- PREFERRED SECURITIES GUARANTEE AGREEMENT Household International, Inc. Dated as of __________, 2001 ---------------------------------------- 2 CROSS-REFERENCE TABLE*
Section of Trust Indenture Section of Act of 1939, as amended Guarantee Agreement - -------------------------- ------------------- 310(a) ......................................... 4.1(a) 310(b) ......................................... 4.1(c) 310(c) ......................................... Inapplicable 311(a) ......................................... 2.2(b) 311(b) ......................................... 2.2(b) 311(c) ......................................... Inapplicable 312(a) ......................................... 2.2(a) 312(b) ......................................... 2.2(b) 313 ......................................... 2.3 314(a) ......................................... 2.4 314(b) ......................................... Inapplicable 314(c) ......................................... 2.5 314(d) ......................................... Inapplicable 314(f) ......................................... Inapplicable 315(a) ......................................... 3.1(b) 315(b) ......................................... 2.7 315(c) ......................................... 3.1(a) 315(d) ......................................... 3.1(a) 316(a) ......................................... 5.4(a), 2.6
- -------------------- * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. 3 PREFERRED SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of ________ __, 2001, is executed and delivered by Household International, Inc., a Delaware corporation (the "Guarantor"), and The Bank of New York, a New York banking corporation, as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Household Capital Trust VI, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of _______ __, 2001 among the trustees of the Issuer named therein, the Guarantor as Sponsor and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof $___________ aggregate stated liquidation amount of Preferred Securities designated the ____% Trust Preferred Securities (the "Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires to irrevocably and unconditionally agree, to the extent set forth in this Guarantee Agreement, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee Agreement") in substantially identical terms to this Guarantee Agreement for the benefit of the holders of the Common Securities (as defined herein) except that if an Event of Default (as defined in the Indenture (as defined herein)), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under this Guarantee Agreement. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders. 4 ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 DEFINITIONS AND INTERPRETATION. In this Guarantee Agreement, unless the context otherwise requires: (a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933 as amended or any successor rule thereunder. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Covered Person" means any Holder of Preferred Securities. "Distributions" means a distribution payable to holders of the Preferred Securities or the Common Securities in accordance with Section 6.1 of the Declaration. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions which are required to be paid on such Preferred Securities to the extent the Issuer shall have funds 5 available therefore, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Issuer has funds available therefor, with respect to any Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Notes to the Holders in exchange for Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Event of Default under the Indenture has occurred and is continuing, the rights of Holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee Agreement are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with the Guarantor. "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives or agents of the Preferred Guarantee Trustee. "Indenture" means the Indenture dated as of May 15, 1995 among Bank One, National Association (formerly known as The First National Bank of Chicago) as trustee and Household International Inc. (as "Debt Issuer") and any indenture supplemental thereto pursuant to which certain subordinated debt securities of the Debt Issuer are to be issued to the Property Trustee of the Issuer. "Majority in liquidation amount of the Preferred Securities" means, except as provided by the Trust Indenture Act, Holder(s) of Preferred Securities voting separately as a class, who vote Preferred Securities and the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of the Preferred Securities voted by such Holders represents more than 50% of the above stated liquidation amount of all Preferred Securities. -3- 6 "Notes" means a series of debt securities issued by the Debt Issuer pursuant to the Indenture to be known as ____% Junior Subordinated Deferrable Interest Notes due ____. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Guarantee Trustee" means The Bank of New York, a _____________ ______________________ until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Preferred Guarantee Trustee. "Responsible Officer" means, with respect to the Preferred Guarantee Trustee, the chairman of the board of directors, the president, any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer or any other officer of the Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is -4- 7 referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 TRUST INDENTURE ACT; APPLICATION. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be a part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 LISTS OF HOLDERS OF SECURITIES. (a) To the extent the Preferred Securities Trustee shall not also be acting as Property Trustee at the time action is called for under (i) or (ii) below, the Guarantor shall provide the Preferred Securities Trustee (i) within 14 days after January 1 and June 30 of each year, a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Preferred Securities ("List of Holders") as of such date, provided that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Guarantee Trustee. The Preferred Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Preferred Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. -5- 8 SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE. Within 60 days after May 15 of each year, the Preferred Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE. The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information as required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement which relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officer's Certificate. SECTION 2.6 EVENT OF DEFAULT; WAIVER. The Holders of a Majority in liquidation amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. -6- 9 SECTION 2.7 EVENT OF DEFAULT; NOTICE. (a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities, notices of all Events of Default known to the Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided that, the Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Preferred Guarantee Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Preferred Securities. (b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default except any Event of Default as to which the Preferred Guarantee Trustee shall have received written notice or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice of. SECTION 2.8 CONFLICTING INTERESTS. The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE. (a) This Guarantee Agreement shall be held by the Preferred Guarantee Trustee for the benefit of the Holders of the Preferred Securities and the Preferred Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Preferred Guarantee Trustee. The right, title and interest of the Preferred Guarantee Trustee shall automatically vest in any Successor Preferred Guarantee Trustee and such vesting and -7- 10 cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) If an Event of Default has occurred and is continuing, the Preferred Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of the Preferred Securities. (c) The Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; (d) No provision of this Guarantee Agreement shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Preferred Guarantee Trustee; and (B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision -8- 11 hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Declaration; (ii) the Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts; (iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE. (a) Subject to the provisions of Section 3.1: (i) the Preferred Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties; (ii) any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate; -9- 12 (iii) whenever in the administration of this Guarantee Agreement, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor; (iv) the Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof); (v) the Preferred Guarantee Trustee may consult with counsel and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates, and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction; (vi) the Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee adequate security and indemnity which would satisfy a reasonable person in the position of the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee provided, that, nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement; (vii) the Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, -10- 13 order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (ix) any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act, or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action; and (x) whenever in the administration of this Guarantee Agreement the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Preferred Guarantee Trustee (i) may request instructions from the Holders of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; and (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty. -11- 14 SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee Agreement. ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY. (a) There shall at all times be a Preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; (ii) be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee and -12- 15 Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE TRUSTEE. (a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Preferred Guarantee Trustee shall not be removed in accordance with this Section 4.2 until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor. (c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee. (d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Preferred Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Preferred Guarantee Trustee. ARTICLE V GUARANTEE SECTION 5.1 GUARANTEE. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make -13- 16 a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Notes or any extension of the maturity date of the Notes permitted by the Indenture); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, -14- 17 reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation on the Holders or any other Person to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 RIGHTS OF HOLDERS. (a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon Preferred Guarantee Trustee under this Guarantee Agreement. (b) If the Preferred Guarantee Trustee fails to enforce this Guarantee Agreement, any Holder of Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer, the Preferred Guarantee Trustee or any other Person. SECTION 5.5 GUARANTEE OF PAYMENT. This Guarantee Agreement creates a guarantee of payment and not of collection. SECTION 5.6 SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee Agreement; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire -15- 18 by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 LIMITATION OF TRANSACTIONS. So long as any Preferred Securities remain outstanding, if there shall have occurred and is continuing any event that would constitute an Event of Default or an Event of Default under the Declaration, then (a) the Guarantor shall not declare or pay any dividends on, or purchase, acquire or make a distribution or liquidation payment with respect to any of its capital stock (other than (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, (ii) as a result of an exchange or conversion of any class or series of the Guarantor's capital stock for any other class or series of the Guarantor's capital stock, or (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged), and (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Guarantor which rank pari passu with or junior to the Notes. The foregoing, however, will not apply to any stock dividends paid by the Guarantor where the dividend stock is the same stock as that on which the dividend is being paid. -16- 19 SECTION 6.2 RANKING. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, including the Notes, except those made pari passu or subordinate by their terms, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor and (iii) senior to the Guarantor's common stock. ARTICLE VII TERMINATION SECTION 7.1 TERMINATION. This Guarantee Agreement shall terminate upon full payment of the Redemption Price of all of the Preferred Securities and Common Securities upon the distribution of the Notes to the Holder's of all of the Preferred Securities or upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1 EXCULPATION. (a) No indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by -17- 20 reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 8.2 INDEMNIFICATION. (a) To the fullest extent permitted by applicable law, the Guarantor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee Agreement and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this in accordance with this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason or negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.2(a). ARTICLE IX MISCELLANEOUS SECTION 9.1 SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees -18- 21 and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. SECTION 9.2 AMENDMENTS. Except with respect to any changes which do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of at least 66-2/3% in liquidation amount of all the outstanding Preferred Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders of the Preferred Securities and Common Securities apply to the giving of such approval. SECTION 9.3 NOTICES. All notices provided for in this Guarantee Agreement shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) if given to the Preferred Guarantee Trustee at the Preferred Guarantee Trustee's mailing address set forth below(or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities): The Bank of New York _________________________ _________________________ _________________________ Attn: [Corporate Trust Administration] (b) if given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities): Household International, Inc. 2700 Sanders Road Prospect Heights, IL 60070 Attn: Treasurer (c) if given to any holder of Preferred Securities, at the address set forth on the books and records of the Issuer. -19- 22 All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 BENEFIT. This Guarantee Agreement is solely for the benefit of the Holders of the Preferred Securities and subject to Section 3.1(a) is not separately transferable from the Preferred Securities. SECTION 9.5 GOVERNING LAW. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. HOUSEHOLD INTERNATIONAL, INC. By:___________________________ Name: B. B. Moss, Jr. Title: Assistant Treasurer THE BANK OF NEW YORK, not in its individual capacity but solely as Preferred Guarantee Trustee By:___________________________ Name: Title: -20- EX-4.8 6 c59540ex4-8.txt CERTIFICATE OF TRUST 1 EXHIBIT 4.8 CERTIFICATE OF TRUST OF HOUSEHOLD CAPITAL TRUST VI This Certificate of Trust of Household Capital Trust VI (the "Trust"), is being duly executed and filed by the undersigned, as trustee, to form a business trust under the Delaware Business Trust Act (12 Del.C. SS. 3801 et seq.) (the "Act"). 1. Name. The name of the business trust formed hereby is Household Capital Trust VI. 2. Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware is The Bank of New York (Delaware), White Clay Center, Newark, Delaware, 19711. 3. Effective Date. This Certificate of Trust shall be effective upon filing. 4. Counterparts. This Certificate of Trust may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned have executed this Certificate of Trust in accordance with Section 3811 of the Act. THE BANK OF NEW YORK as Trustee By: /s/ Mary LaGumina --------------------------------------- Name: Mary LaGumina Title: Vice President THE BANK OF NEW YORK (DELAWARE) as Trustee By: /s/ Patrick Burns ----------------------------------- Name: Patrick Burns Title: Senior Vice President /s/ Benjamin B. Moss Jr. --------------------------------------- Benjamin B. Moss Jr., as trustee /s/ Dennis J. Mickey -------------------------------------- Dennis J. Mickey, as trustee -----END PRIVACY-ENHANCED MESSAGE-----