<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 13, 1998
$200,000,000
DAYTON HUDSON CORPORATION
5.875% Notes due 2008
Dayton Hudson will pay interest on the Notes on May 1 and November 1 of each
year, beginning May 1, 1999. The Notes will mature on November 1, 2008, are not
redeemable prior to maturity and will not be entitled to any sinking fund. The
Notes will be represented by one or more global Notes registered in the name of
The Depository Trust Company, which will act as Depositary.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Notes or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
------------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
---------- --------------
<S> <C> <C>
Initial public offering price......................................................... 99.717% $ 199,434,000
Underwriting discount................................................................. 0.650% $ 1,300,000
Proceeds, before expenses, to Dayton Hudson........................................... 99.067% $ 198,134,000
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the Notes will accrue from November 3, 1998 and
must be paid by the purchaser if the Notes are delivered after November 3, 1998.
------------------------
The Underwriters have agreed severally to purchase the Notes on a firm
commitment basis. The Underwriters expect to deliver the Notes in book-entry
form only through the facilities of The Depository Trust Company against payment
in New York, New York on or about November 3, 1998.
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
Prospectus Supplement dated October 29, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
Description of Notes................................................................... S-3
Underwriting........................................................................... S-5
Legal Opinions......................................................................... S-6
PROSPECTUS
About This Prospectus.................................................................. 2
Where You Can Find More Information.................................................... 2
The Company............................................................................ 4
Use of Proceeds........................................................................ 6
Ratios of Earnings to Fixed Charges and to Fixed Charges and
Preferred Stock Dividends............................................................ 7
Description of Debt Securities......................................................... 8
Description of Preferred Shares........................................................ 17
Description of Depositary Shares....................................................... 23
Description of Common Stock............................................................ 26
Description of Securities Warrants..................................................... 31
Plan of Distribution................................................................... 35
Legal Opinions......................................................................... 36
Experts................................................................................ 36
</TABLE>
You should read this prospectus supplement along with the prospectus that
follows. Both documents contain information you should consider when making your
investment decision. You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the accompanying
prospectus. We have not, and the Underwriters have not, authorized any other
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it.
This prospectus supplement and the accompanying prospectus do not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the Notes. This prospectus supplement and the accompanying prospectus do not
constitute an offer to sell or a solicitation of an offer to buy such Notes in
any circumstances in which such offer or solicitation is unlawful.
Information in this prospectus supplement or in the accompanying prospectus
may change after the date on the front of the applicable document. You should
not interpret the delivery of this prospectus supplement or the accompanying
prospectus, or the sale of the Notes, as an indication that there has been no
change in our affairs since those dates.
S-2
<PAGE>
DESCRIPTION OF NOTES
The following discussion of the terms of the Notes supplements the
description of the general terms and provisions of the Debt Securities contained
in the accompanying prospectus and identifies any general terms and provisions
described in the accompanying prospectus that will not apply to the Notes.
GENERAL
The Notes will be our general unsecured and senior obligations and will be
limited to $200,000,000 aggregate principal amount. We will issue the Notes
under an Indenture, dated as of October 3, 1996, as amended or supplemented from
time to time (the "INDENTURE"), between us and The First National Bank of
Chicago, as Trustee. You should read the accompanying prospectus for a general
discussion of the terms and provisions of the Indenture.
The Notes will mature on November 1, 2008, are not redeemable prior to
maturity and will not be entitled to any sinking fund.
The Notes will bear interest at a rate of 5.875% per annum from November 3,
1998 or from the most recent interest payment date on which we paid or provided
for interest on the Notes. We will pay interest on the Notes on each May 1 and
November 1, commencing May 1, 1999 to the Person listed as the Holder of the
Note (or any predecessor Note) in the Security Register at the close of business
on the preceding April 15 or October 15, as the case may be.
The Notes will be issued only in denominations of $1,000 each or integral
multiples of $1,000.
The Notes are subject to defeasance in the manner described under the
heading "Description of Debt Securities--Defeasance" in the accompanying
prospectus.
SAME-DAY SETTLEMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. The Notes will trade in the Depositary's settlement system
until maturity. As a result, the Depositary will require secondary trading
activity in the Notes to be settled in immediately available funds.
BOOK ENTRY SYSTEM
We will issue the Notes in the form of one or more fully registered global
Notes which will be deposited with, or on behalf of, The Depositary Trust
Company, New York, New York ("DTC"), which will act as Depositary. The Notes
will be registered in the name of DTC or its nominee.
Ownership of beneficial interests in a global Note will be limited to DTC
participants and to persons that may hold interests through institutions that
have accounts with DTC ("PARTICIPANTS"). Beneficial interests in a global Note
will be shown on, and transfers of those ownership interests will be effected
only through, records maintained by DTC and its participants for such global
Note. The conveyance of notices and other communications by DTC to its
participants and by its participants to owners of beneficial interests in the
Notes will be governed by arrangements among them, subject to any statutory or
regulatory requirements in effect.
DTC holds the securities of its participants and facilitates the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of its
participants. The electronic book-entry system eliminates the need for physical
certificates. DTC's participants include:
- securities brokers and dealers (including the Underwriters);
- banks;
S-3
<PAGE>
- trust companies;
- clearing corporations; and
- certain other organizations (some of which, and/or their representatives,
own DTC).
Banks, brokers, dealers, trust companies and others that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly, also have access to DTC's book-entry system.
Principal and interest payments on the Notes represented by a global Note
will be made to DTC or its nominee, as the case may be, as the sole registered
owner and the sole Holder of the Notes represented by the global Note for all
purposes under the Indenture. Accordingly, we, the Trustee and any paying agent
will have no responsibility or liability for:
- any aspect of DTC's records relating to, or payments made on account of,
beneficial ownership interests in a Note represented by a global Note;
- any other aspect of the relationship between DTC and its participants or
the relationship between such participants and the owners of beneficial
interests in a global Note held through such participants; or
- the maintenance, supervision or review of any of DTC's records relating to
such beneficial ownership interests.
DTC has advised us that upon receipt of any payment of principal of or
interest on a global Note, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such global Note as shown on DTC's records. The Underwriters will
initially designate the accounts to be credited. Payments by participants to
owners of beneficial interests in a global Note will be governed by standing
instructions and customary practices, as is the case with securities held for
customer accounts registered in "street name", and will be the sole
responsibility of those participants.
A global Note can only be transferred:
- as a whole by DTC to one of its nominees;
- as a whole by a nominee of DTC to DTC or another nominee of DTC; or
- as a whole by DTC or a nominee of DTC to a successor of DTC or a nominee
of such successor.
Notes represented by a global Note can be exchanged for definitive Notes in
registered form only if:
- DTC notifies us that it is unwilling or unable to continue as Depositary
for such global Note;
- at any time DTC ceases to be a clearing agency registered under the
Securities Exchange Act of 1934;
- we in our sole discretion determine that such global Note will be
exchangeable for definitive Notes in registered form and notify the
Trustee of our decision; or
- an Event of Default with respect to the Notes represented by such global
Note has occurred and is continuing.
A global Note that can be exchanged under the preceding sentence will be
exchanged for definitive Notes that are issued in authorized denominations in
registered form for the same aggregate amount. Such definitive Notes will be
registered in the names of the owners of the beneficial interests in such global
Note as directed by DTC.
Except as provided above, (1) owners of beneficial interests in such global
Note will not be entitled to receive physical delivery of Notes in definitive
form and will not be considered the Holders of the Notes for any purpose under
the Indenture and (2) no Notes represented by a global Note will be
S-4
<PAGE>
exchangeable. Accordingly, each person owning a beneficial interest in a global
Note must rely on the procedures of DTC (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 or such
global Note. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of the securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in a global Note.
We understand that under existing industry practices, if we request Holders
to take any action, or if an owner of a beneficial interest in a global Note
desires to take any action which a Holder is entitled to take under the
Indenture, then (1) DTC would authorize the participants holding the relevant
beneficial interests to take such action and (2) such participants would
authorize the beneficial owners owning through such participants to take such
action or would otherwise act upon the instructions of beneficial owners owning
through them.
DTC has provided the following information to us. DTC is:
- a limited-purpose trust company organized under the laws of the State of
New York;
- 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 under the Exchange Act.
CONCERNING THE TRUSTEE
From time to time, we and certain of our subsidiaries maintain deposit
accounts and conduct other banking transactions with the Trustee in the ordinary
course of business. The Trustee also acts as the transfer agent and registrar
for our Common Stock and as the issuing and paying agent for our commercial
paper.
UNDERWRITING
We and the Underwriters named below have entered into an underwriting
agreement with respect to the Notes. Subject to certain conditions set forth in
the underwriting agreement, each Underwriter has severally agreed to purchase
the total principal amount of Notes shown in the following table.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Salomon Smith Barney Inc........................................................................ $ 50,000,000
Goldman, Sachs & Co............................................................................. 50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................................................... 50,000,000
J.P. Morgan Securities Inc...................................................................... 50,000,000
----------------
Total....................................................................................... $ 200,000,000
----------------
----------------
</TABLE>
The Underwriters have agreed to purchase the Notes on a firm commitment
basis. The Underwriters will purchase the Notes from us at a price equal to
99.067% of the principal amount of the Notes.
The Underwriters will initially offer the Notes to the public at 99.717% of
the principal amount of the Notes. The Underwriters may sell Notes to securities
dealers at a discount from the initial public offering price of up to 0.400% of
the principal amount of the Notes. Any such securities dealers may resell any
Notes purchased from the Underwriters to certain other brokers or dealers at a
discount
S-5
<PAGE>
from the initial public offering price of up to 0.250% of the principal amount
of the Notes. The Notes will be sold to the public when and if the Underwriters
purchase the Notes from us. An Underwriter may reject any offer for the Notes.
After the initial offering of the Notes, the Underwriters may change the
offering price and the other selling terms of the Notes.
The Notes are a new issue of securities with no established trading market.
The Underwriters have advised us that the Underwriters intend to make a market
in the Notes but are not obligated to do so and may discontinue market making at
any time without notice. Neither we nor the Underwriters can assure you as to
the liquidity of the trading market for the Notes.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater total
principal amount of Notes than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the Notes
while the offering is in progress. The Underwriters may also impose a penalty
bid. This occurs when a particular Underwriter repays to the Underwriters a
portion of the underwriting discount received by it because an Underwriter has
repurchased Notes sold by or for the account of that particular Underwriter in
stabilizing or short covering transactions. These activities by the Underwriters
may stabilize, maintain or otherwise affect the market price of the Notes, which
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the Underwriters at
any time. These transactions may be effected in the over-the-counter market or
otherwise.
We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
In addition to the underwriting discount discussed above, we estimate that
we will spend approximately $100,000 for expenses in connection with this
offering.
LEGAL OPINIONS
The validity of the Notes will be passed upon for us by Faegre & Benson LLP,
Minneapolis, Minnesota, and for the Underwriters by King & Spalding, New York,
New York. Faegre & Benson LLP may rely on King & Spalding as to matters of New
York law, and King & Spalding may rely on Faegre & Benson LLP as to matters of
Minnesota law.
S-6
<PAGE>
PROSPECTUS
[LOGO]
DAYTON HUDSON CORPORATION
777 NICOLLET MALL
14TH FLOOR
MINNEAPOLIS, MINNESOTA 55402-2055
(612) 370-6948
$1,525,000,000
DEBT SECURITIES
PREFERRED SHARES
COMMON STOCK
DEBT WARRANTS
PREFERRED SHARE WARRANTS
COMMON STOCK WARRANTS
------------------
We will provide the specific terms of these securities in supplements to this
prospectus.
You should read this prospectus and the applicable supplement carefully before
you invest.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
This prospectus is dated October 13, 1998
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may sell:
- debt securities,
- preferred shares,
- common stock,
- debt warrants,
- preferred share warrants and
- common stock warrants,
either separately or in units, in one or more offerings up to a total dollar
amount of $1,525,000,000. This prospectus provides you with a general
description of those securities. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read this prospectus and
the applicable prospectus supplement together with the additional information
described under the heading "Where You Can Find More Information."
The registration statement that contains this prospectus (including the
exhibits to the registration statement) contains additional information about
our company and the securities offered under this prospectus. That registration
statement can be read at the SEC web site or at the SEC offices mentioned under
the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. You can also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
facilities. Our SEC filings are also available at the office of the New York
Stock Exchange. For further information on obtaining copies of our public
filings at the New York Stock Exchange, you should call (212) 656-5060.
We "incorporate by reference" into this prospectus the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus and information that we file subsequently
with the SEC will automatically update this prospectus. We incorporate by
reference the documents listed below and any filings we make with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after
the initial filing of the registration statement that contains this prospectus
and prior to the time that we sell all the securities offered by this
prospectus:
- Annual Report on Form 10-K for the year ended January 31, 1998 (including
information specifically incorporated by reference into our Form 10-K from
our 1997 Annual Report to Shareholders and our definitive Notice and Proxy
Statement for our 1998 Annual Meeting of Shareholders);
- Quarterly Reports on Form 10-Q for the quarters ended May 2, 1998 and
August 1, 1998;
2
<PAGE>
- Current Report on Form 8-K dated June 4, 1998;
- the description of the Company's common stock contained in the
Registration Statement on Form 8-A filed in connection with the Company's
common stock; and
- the description of the Company's preferred share purchase rights contained
in the Registration Statement on Form 8-A dated September 12, 1996.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing to or telephoning us at the following address:
Secretary
Dayton Hudson Corporation
777 Nicollet Mall
14th Floor
Minneapolis, Minnesota 55402-2055
(612) 370-6948
You should rely only on the information incorporated by reference or set
forth in this prospectus or the applicable prospectus supplement. We have not
authorized anyone else to provide you with different information. We may only
use this prospectus to sell securities if it is accompanied by a prospectus
supplement. We are only offering these securities in states where the offer is
permitted. You should not assume that the information in this prospectus or the
applicable prospectus supplement is accurate as of any date other than the dates
on the front of those documents.
3
<PAGE>
THE COMPANY
We focus on general merchandise retailing through three operating divisions:
- Target is an upscale discounter that provides quality merchandise at
attractive prices in clean, spacious and guest-friendly stores. On August
1, 1998, Target operated 828 stores in 40 states.
- Mervyn's California is a promotional, middle-market, neighborhood
department store. On August 1, 1998, Mervyn's operated 269 stores in 14
states.
- The Department Stores emphasize fashion leadership, quality merchandise
and superior guest service. On August 1, 1998, The Department Stores
operated 64 Dayton's, Hudson's and Marshall Field's stores in 8 states.
When we refer to "OUR COMPANY," "WE," "OUR" and "US" in this prospectus
under the headings "The Company," "Use of Proceeds" and "Ratios of Earnings to
Fixed Charges and to Fixed Charges and Preferred Stock Dividends," we mean
Dayton Hudson Corporation and its subsidiaries. When such terms are used
elsewhere in this prospectus, we refer only to Dayton Hudson Corporation unless
the context indicates otherwise.
4
<PAGE>
The information below provides detail on the operations of our business
segments.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, JANUARY 31,
1994 1995 1996* 1997 1998
----------- ----------- ----------- ----------- -----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
REVENUES
Target........................................... $ 11,743 $ 13,600 $ 15,807 $ 17,853 $ 20,368
Mervyn's......................................... 4,436 4,561 4,516 4,369 4,227
Department Store Division........................ 3,054 3,150 3,193 3,149 3,162
----------- ----------- ----------- ----------- -----------
Total revenues................................... $ 19,233 $ 21,311 $ 23,516 $ 25,371 $ 27,757
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PRE-TAX SEGMENT PROFIT
Target........................................... $ 600 $ 732 $ 721 $ 1,048 $ 1,287
Mervyn's......................................... 172 198 117 272 280
Department Store Division........................ 246 259 192 151 240
----------- ----------- ----------- ----------- -----------
Total pre-tax segment profit..................... $ 1,018 $ 1,189 $ 1,030 $ 1,471 $ 1,807
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
LIFO provision (expense)/credit.................. 91 19 (17) (9) (6)
Real estate repositioning charge................. -- -- -- (134) --
Securitization adjustments:
Interest equivalent.......................... -- -- (10) (25) (33)
SFAS 125 gain................................ -- -- -- -- 45
Interest expense, net............................ (446) (426) (442) (442) (416)
Corporate and other.............................. (56) (68) (60) (78) (71)
----------- ----------- ----------- ----------- -----------
Earnings before income taxes and extraordinary
charges........................................ $ 607 $ 714 $ 501 $ 783 $ 1,326
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
ASSETS
Target........................................... $ 5,495 $ 6,247 $ 7,330 $ 8,257 $ 9,487
Mervyn's......................................... 2,750 2,917 2,776 2,658 2,281
Department Store Division........................ 2,240 2,392 2,309 2,296 2,188
Corporate and other.............................. 293 141 155 178 235
----------- ----------- ----------- ----------- -----------
Total assets..................................... $ 10,778 $ 11,697 $ 12,570 $ 13,389 $ 14,191
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
DEPRECIATION AND AMORTIZATION
Target........................................... $ 264 $ 294 $ 328 $ 377 $ 437
Mervyn's......................................... 146 145 150 151 126
Department Store Division........................ 104 108 113 119 128
Corporate and other.............................. 1 1 3 3 2
----------- ----------- ----------- ----------- -----------
Total depreciation and amortization.............. $ 515 $ 548 $ 594 $ 650 $ 693
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
CAPITAL EXPENDITURES
Target........................................... $ 716 $ 842 $ 1,067 $ 1,048 $ 1,155
Mervyn's......................................... 180 146 273 79 72
Department Store Division........................ 80 96 161 173 124
Corporate and other.............................. 2 11 21 1 3
----------- ----------- ----------- ----------- -----------
Total capital expenditures....................... $ 978 $ 1,095 $ 1,522 $ 1,301 $ 1,354
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
SEGMENT EBITDA**
Target........................................... $ 864 $ 1,026 $ 1,049 $ 1,425 $ 1,724
Mervyn's......................................... 318 343 267 423 406
Department Store Division........................ 350 367 305 270 368
----------- ----------- ----------- ----------- -----------
Total Segment EBITDA**........................... $ 1,532 $ 1,736 $ 1,621 $ 2,118 $ 2,498
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------------
* Consisted of 53 weeks
** Segment EBITDA is pre-tax segment profit before depreciation and
amortization. Pre-tax segment profit is first-in first-out (FIFO) earnings
before securitization effects, interest, corporate and other expense, and
unusual items. Our management uses EBITDA and pre-tax segment profit, among
other standards, to measure divisional operating performance. EBITDA
supplements, and is not intended to represent a measure of performance in
accordance with, disclosures required by generally accepted accounting
principles. It is included as a tool for analyzing our results.
Each operating division's assets and operating results include the retained
securitized receivables held by Dayton Hudson Receivables Corporation and
Retailers National Bank, as well as related income and expenses.
5
<PAGE>
USE OF PROCEEDS
Unless the applicable prospectus supplement states otherwise, the net
proceeds from the sale of the offered securities will be added to our general
funds and may be used to:
- meet our working capital requirements;
- fund capital expenditures relating to the construction and fixturing of
our new stores;
- remodel our existing stores;
- refinance debt; and
- finance acquisitions of real estate, other assets and companies.
Until the net proceeds have been used, they will be invested in short-term
marketable securities.
6
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES AND TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
------------------------------------------------------------------------- ------------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, JANUARY 31, AUGUST 2, AUGUST 1,
1994 1995 1996 1997 1998 1997 1998
------------- ------------- ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges................. 2.19x 2.43 1.94 2.46 3.65 2.71 3.26
Ratio of Earnings to Fixed
Charges and Preferred
Stock Dividends......... 2.04x 2.25 1.81 2.30 3.40 2.54 3.05
</TABLE>
- For purposes of calculating the ratios, fixed charges consist of:
- interest on debt;
- amortization of discount on debt; and
- the interest portion of rental expense on operating leases.
- The ratio of earnings to fixed charges is calculated as follows:
(income before extraordinary charges and income taxes) + (fixed charges) -
(capitalized interest)
- --------------------------------------------------------------------------------
(fixed charges)
- The ratio of earnings to fixed charges and preferred stock dividends is
calculated as follows:
(income before extraordinary charges and income taxes) + (fixed charges) -
(capitalized interest)
- --------------------------------------------------------------------------------
(fixed charges) + (pretax earnings required to cover preferred stock dividends)
- Pretax earnings required to cover preferred stock dividends are calculated
as follows:
preferred stock dividends, as adjusted for the tax benefits related to
unallocated shares
- --------------------------------------------------------------------------------
1 - (our effective income tax rate)
7
<PAGE>
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the Debt
Securities (as defined below). The prospectus supplement will describe the
specific terms of the Debt Securities offered through that prospectus supplement
and any general terms outlined in this section that will not apply to those Debt
Securities.
The Debt Securities will be issued under an indenture (the "INDENTURE")
between us and the trustee named in the applicable prospectus supplement (the
"TRUSTEE"). As used in this prospectus, "DEBT SECURITIES" means the debentures,
notes, bonds and other evidences of indebtedness that we issue and the Trustee
authenticates and delivers under the Indenture.
We have summarized certain terms and provisions of the Indenture in this
section. The summary is not complete. We have also filed the form of the
Indenture as an exhibit to the registration statement. You should read the form
of Indenture for additional information before you buy any Debt Securities. The
summary that follows includes references to section numbers of the Indenture so
that you can more easily locate these provisions. Capitalized terms used but not
defined in this summary have the meanings specified in the Indenture.
GENERAL
The Debt Securities will be our direct, senior, unsecured obligations. The
Indenture does not limit the amount of Debt Securities that we may issue and
permits us to issue Debt Securities from time to time. Debt Securities issued
under the Indenture will be issued as part of a series that has been established
by us pursuant to the Indenture. (Section 301) Unless a prospectus supplement
relating to Debt Securities states otherwise, the Indenture and the terms of the
Debt Securities will not contain any covenants designed to afford holders of any
Debt Securities protection in a highly leveraged or other transaction involving
us that may adversely affect holders of the Debt Securities. If we ever issue
Bearer Securities we will summarize provisions of the Indenture that relate to
Bearer Securities in the applicable prospectus supplement.
A prospectus supplement relating to a series of Debt Securities being
offered will include specific terms relating to the offering. (Section 301)
These terms will include some or all of the following:
- the title and type of the Debt Securities;
- any limit on the total principal amount of the Debt Securities;
- the price at which the Debt Securities will be issued;
- the date or dates on which the principal of and premium, if any, on the
Debt Securities will be payable;
- the maturity date of the Debt Securities;
- if the Debt Securities will bear interest:
- the interest rate on the Debt Securities;
- the date from which interest will accrue;
- the record and interest payment dates for the Debt Securities;
- the first interest payment date; and
- any circumstances under which we may defer interest payments;
- any optional redemption provisions that would permit us or the Holders (as
defined below) of Debt Securities to elect redemption of the Debt
Securities prior to their final maturity;
- any sinking fund provisions that would obligate us to redeem the Debt
Securities prior to their final maturity;
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- the currency or currencies in which the Debt Securities will be
denominated and payable, if other than U.S. dollars;
- any provisions that would permit us or the Holders of the Debt Securities
to elect the currency or currencies in which the Debt Securities are paid;
- whether the provisions described under the heading "Defeasance" below
apply to the Debt Securities;
- any changes to or additional Events of Default or covenants;
- whether the Debt Securities will be issued in whole or in part in the form
of Global Securities and, if so, the Depositary for those Global
Securities (a "GLOBAL SECURITY" means a Debt Security that we issue in
accordance with the Indenture to represent all or part of a series of Debt
Securities);
- any special tax implications of the Debt Securities; and
- any other terms of the Debt Securities.
A "HOLDER," with respect to a Registered Security, means the Person in whose
name such Registered Security is registered in the Security Register. (Section
101)
PAYMENT; TRANSFER
We will designate a Place of Payment where you can receive payment of the
principal of and any premium and interest on the Debt Securities or transfer the
Debt Securities. Even though we will designate a Place of Payment, we may elect
to pay any interest on the Debt Securities by mailing a check to the Person
listed as the owner of the Debt Securities in the Security Register or by wire
transfer to an account designated by that Person in writing not less than ten
days before the date of the interest payment. (Sections 305, 307, 1002) There
will be no service charge for any registration of transfer or exchange of the
Debt Securities, but we may require you to pay any tax or other governmental
charge payable in connection with a transfer or exchange of the Debt Securities.
(Section 305)
DENOMINATIONS
Unless the prospectus supplement states otherwise, the Debt Securities will
be issued only in registered form, without coupons, in denominations of $1,000
each or multiples of $1,000.
ORIGINAL ISSUE DISCOUNT
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities and sold at a substantial discount below their stated principal
amount. If a Debt Security is an "ORIGINAL ISSUE DISCOUNT SECURITY," that means
that an amount less than the principal amount of the Debt Security will be due
and payable upon a declaration of acceleration of the maturity of the Debt
Security pursuant to the Indenture. (Section 101) The applicable prospectus
supplement will describe the federal income tax consequences and other special
factors which should be considered prior to purchasing any Original Issue
Discount Securities.
CLASSIFICATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Indenture contains certain restrictive covenants that apply to us and
all of our Restricted Subsidiaries. Those covenants do not apply to our
Unrestricted Subsidiaries. For example, (1) the assets and indebtedness of
Unrestricted Subsidiaries and (2) investments by us or our Restricted
Subsidiaries in Unrestricted Subsidiaries are not included in the calculations
described under the heading
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"--Restrictions on Secured Funded Debt" below. The Indenture does not require us
to maintain any Restricted Subsidiaries and, if we do not, the Indenture will
not provide any limitations on the amount of secured debt created or incurred by
our Subsidiaries.
A "SUBSIDIARY" is any corporation of which we own more than 50% of the
outstanding shares of Voting Stock directly or through one or more of our other
Subsidiaries. "VOTING STOCK" means stock that is entitled in the ordinary course
(I.E., not only as a result of the happening of certain events) to vote in an
election for directors.
"RESTRICTED SUBSIDIARIES" are all of our Subsidiaries other than
Unrestricted Subsidiaries. A "WHOLLY-OWNED RESTRICTED SUBSIDIARY" is a
Restricted Subsidiary of which we own all of the outstanding capital stock
directly or through our other Wholly-owned Restricted Subsidiaries.
Our "UNRESTRICTED SUBSIDIARIES" are:
- Eighth Street Development Company, Dayton Hudson Capital Corporation,
Dayton Hudson Receivables Corporation and The Associated Merchandising
Corp.;
- certain other finance Subsidiaries acquired or formed by us after the date
of this prospectus;
- any Subsidiary that our Board of Directors in the future designates as an
Unrestricted Subsidiary pursuant to the Indenture; and
- any other Subsidiary if a majority of its Voting Stock is owned by an
Unrestricted Subsidiary.
Our Board of Directors can at any time change a Subsidiary's designation from an
Unrestricted Subsidiary to a Restricted Subsidiary if (1) the majority of that
Subsidiary's Voting Stock is not owned by an Unrestricted Subsidiary and (2)
after the change of designation, we would be in compliance with the restrictions
contained in the Secured Funded Debt covenant described under the heading
"--Restrictions on Secured Funded Debt" below. (Sections 101, 1010(a))
RESTRICTIONS ON SECURED FUNDED DEBT
The Indenture limits the amount of Secured Funded Debt that we and our
Restricted Subsidiaries may incur or otherwise create (including by guarantee).
Neither we nor our Restricted Subsidiaries may incur or otherwise create any new
Secured Funded Debt unless immediately after such incurrence or creation:
- the sum of:
- the aggregate principal amount of all of our outstanding Secured Funded
Debt and that of our Restricted Subsidiaries (other than certain
categories of Secured Funded Debt discussed below), plus
- the aggregate amount of our Attributable Debt and that of our
Restricted Subsidiaries relating to sale and lease-back transactions,
- does not exceed 5% of our Consolidated Net Tangible Assets.
This limitation does not apply if the outstanding Debt Securities are secured
equally and ratably with or prior to the new Secured Funded Debt. (Sections
1008(a), 1008(c))
"SECURED FUNDED DEBT" means Funded Debt which is secured by a mortgage, lien
or other similar encumbrance upon any of our assets or those of our Restricted
Subsidiaries. (Section 101)
"FUNDED DEBT" means:
- Indebtedness maturing (or which we may extend or renew to mature) more
than 12 months after the time the amount of Secured Funded Debt is
computed, plus
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- guarantees of Indebtedness of the type described in (1) above, or of
dividends of others (except guarantees in connection with the sale or
discount of accounts receivable, trade acceptances and other paper
arising in the ordinary course of business), plus
- Funded Debt secured by a mortgage, lien or similar encumbrance on our
assets or those of our Restricted Subsidiaries, whether or not such
Funded Debt is assumed by us or one of our Restricted Subsidiaries,
plus
- in the case of a Subsidiary, all Preferred Stock of that Subsidiary.
Funded Debt DOES NOT INCLUDE any amount relating to obligations under leases (or
guarantees of leases) whether or not those obligations would be included as
liabilities on our consolidated balance sheet. (Section 101)
"INDEBTEDNESS" means, except as set forth in the next sentence:
- all items of indebtedness or liability (except capital and surplus) which
under GAAP would be included in total liabilities on the liability side of
a balance sheet as of the date that indebtedness is being determined;
- indebtedness secured by a mortgage, lien or other similar encumbrance on
property owned subject to that mortgage, lien or other similar
encumbrance, regardless of whether the indebtedness secured by that
mortgage, lien or other similar encumbrance was assumed; and
- guarantees, endorsements (other than for purposes of collection) and other
contingent obligations relating to, or to purchase or otherwise acquire,
indebtedness of others, unless such amount is included in the preceding
two bullet points.
Indebtedness does not include any obligations or guarantees of obligations
relating to lease rentals, even if such obligations or guarantees of obligations
would be included as liabilities on the consolidated balance sheet of us and our
Restricted Subsidiaries. (Section 101)
"ATTRIBUTABLE DEBT" means:
- the balance sheet liability amount of capital leases as determined by
GAAP, plus
- the amount of future minimum operating lease payments required to be
disclosed by GAAP, less any amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water rates and
similar charges, discounted using the methodology used to calculate the
present value of operating lease payments in our most recent Annual Report
to Shareholders reflecting that calculation.
The amount of Attributable Debt relating to an operating lease that can be
terminated by the lessee with the payment of a penalty will be calculated based
on the lesser of (1) the aggregate amount of lease payments required to be made
until the first date the lease can be terminated by the lessee plus the amount
of the penalty or (2) the aggregate amount of lease payments required to be made
during the remaining term of the lease. (Section 101)
"CONSOLIDATED NET TANGIBLE ASSETS" means the total consolidated amount of
our assets and those of our Restricted Subsidiaries (minus applicable reserves
and other properly deductible items and after excluding any investments made in
Unrestricted Subsidiaries or in corporations while they were Unrestricted
Subsidiaries but which are not Subsidiaries at the time of the calculation),
minus
- all liabilities and liability items, including capital leases (or
guarantees of capital leases) which under GAAP would be included in the
balance sheet, except Funded Debt, capital stock and surplus, surplus
reserves and provisions for deferred income taxes, and
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- goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other similar intangibles. (Section 101)
The following categories of Secured Funded Debt will not be considered in
determining whether we are in compliance with the covenant described in the
first paragraph under the heading "Restrictions on Secured Funded Debt":
- Secured Funded Debt of a Restricted Subsidiary owing to us or to one of
our Wholly-owned Restricted Subsidiaries;
- Secured Funded Debt resulting from a mortgage, lien or other similar
encumbrance in favor of the U.S. Government or any State or any
instrumentality thereof to secure certain payments;
- Secured Funded Debt resulting from a mortgage, lien or other similar
encumbrance on property, shares of stock or Indebtedness of any company
existing at the time that such company becomes one of our Subsidiaries;
- Secured Funded Debt resulting from a mortgage, lien or other similar
encumbrance on property, shares of stock or Indebtedness which (1) exists
at the time that the property, shares of stock or Indebtedness is acquired
by us or one of our Restricted Subsidiaries (including acquisitions by
merger or consolidation), (2) secures the payment of any part of the
purchase price of or construction cost for such property, shares of stock
or Indebtedness or (3) secures any indebtedness incurred prior to, at the
time of, or within 120 days after, the acquisition of such property,
shares of stock or Indebtedness or the completion of any construction of
such property for the purpose of financing all or a part of the purchase
price or construction cost of such property, shares of stock or
Indebtedness, provided that, in all cases, we continue to comply with the
covenant relating to mergers and consolidations discussed under the
heading "--Consolidation, Merger or Sale" below;
- Secured Funded Debt secured by a mortgage, lien or other similar
encumbrance in connection with the issuance of revenue bonds on which the
interest is exempt from federal income tax pursuant to the Internal
Revenue Code of 1986; and
- any extension, renewal or refunding of (1) any Secured Funded Debt
permitted under the first paragraph under the heading "Restrictions on
Secured Funded Debt," (2) any Secured Funded Debt outstanding at February
3, 1996 of any then Restricted Subsidiary or (3) any Secured Funded Debt
of any company outstanding at the time such company became a Restricted
Subsidiary. (Section 1008(b))
RESTRICTIONS ON SALE AND LEASE-BACK TRANSACTIONS
The Indenture provides that neither we nor any of our Restricted
Subsidiaries may enter into any sale and lease-back transaction involving any
Operating Property (as defined below) more than 120 days after its acquisition
or the completion of its construction and commencement of its full operation,
unless either:
- we or such Restricted Subsidiary could (1) create Secured Funded Debt on
such property equal to the Attributable Debt with respect to the sale and
lease-back transaction and (2) still be in compliance with the
restrictions on Secured Funded Debt (see "--Restrictions on Secured Funded
Debt" above); or
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- we apply an amount (subject to credits for certain voluntary retirements
of Debt Securities and/ or Funded Debt) equal to the greater of (1) the
fair value of such property or (2) the net proceeds of such sale, within
120 days, to the retirement of Secured Funded Debt.
This restriction will not apply to any sale and lease-back transaction (1)
between us and one of our Restricted Subsidiaries, (2) between any of our
Restricted Subsidiaries or (3) involving a lease for a period, including
renewals, of three years or less. (Section 1009)
"OPERATING PROPERTY" means any retail store, distribution center or other
property related to our general retail business or that of one of our
Subsidiaries, parking facilities and any equipment located at, or a part of, any
such property if it has a net book value greater than .35% of our Consolidated
Net Tangible Assets and has been owned and operated by us or one of our
Subsidiaries for more than 90 days. If we acquire a new Subsidiary that already
owns and operates such property, then such property will not be considered
Operating Property until 90 days after such acquisition. (Section 101)
CONSOLIDATION, MERGER OR SALE
The Indenture generally permits a consolidation or merger between us and
another corporation. It also permits the sale or transfer by us of all or
substantially all of our property and assets and the purchase by us of all or
substantially all of the property and assets of another corporation. These
transactions are permitted if:
- the resulting or acquiring corporation (if other than us) assumes all of
our responsibilities and liabilities under the Indenture, including the
payment of all amounts due on the Debt Securities and performance of the
covenants in the Indenture;
- immediately after the transaction, no Event of Default exists; and
- except in the case of a consolidation or merger of a Restricted Subsidiary
with or into us, either (1) we have obtained the consent of the Holders of
a majority in aggregate principal amount of the Outstanding Debt
Securities of each series or (2) immediately after the transaction, the
resulting or acquiring corporation could incur additional Secured Funded
Debt and still be in compliance with the restrictions on Secured Funded
Debt (see "--Restrictions on Secured Funded Debt" above). (Section 801)
Even though the Indenture contains the provisions described above, we are
not required by the Indenture to comply with those provisions if we sell all of
our property and assets to another corporation if, immediately after the sale:
- that corporation is one of our Wholly-owned Restricted Subsidiaries; and
- we could incur additional Secured Funded Debt and still be in compliance
with the restrictions on Secured Funded Debt (see "--Restrictions on
Secured Funded Debt" above). (Section 803)
If we consolidate or merge with or into any other corporation or sell all or
substantially all of our assets according to the terms and conditions of the
Indenture, the resulting or acquiring corporation will be substituted for us in
the Indenture with the same effect as if it had been an original party to the
Indenture. As a result, such successor corporation may exercise our rights and
powers under the Indenture, in our name or in its own name and we will be
released from all our liabilities and obligations under the Indenture and under
the Debt Securities. (Section 802)
MODIFICATION AND WAIVER
Under the Indenture, certain of our rights and obligations and certain of
the rights of Holders of the Debt Securities may be modified or amended with the
consent of the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of each series of Debt Securities
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affected by the modification or amendment. The following modifications and
amendments will not be effective against any Holder without its consent:
- a change in the stated maturity date of any payment of principal or
interest;
- a reduction in certain payments due on the Debt Securities;
- a change in the Place of Payment or currency in which any payment on the
Debt Securities is payable;
- a limitation of a Holder's right to sue us for the enforcement of certain
payments due on the Debt Securities;
- a reduction in the percentage of Outstanding Debt Securities required to
consent to a modification or amendment of the Indenture;
- a limitation of a Holder's right, if any, to repayment of Debt Securities
at such Holder's option; and
- a modification of any of the foregoing requirements or a reduction in the
percentage of Outstanding Debt Securities required to waive compliance
with certain provisions of the Indenture or to waive certain defaults
under the Indenture. (Section 902)
Under the Indenture, the Holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of any series of Debt Securities may, on
behalf of all Holders of that series:
- waive compliance by us with certain restrictive covenants of the
Indenture; and
- waive any past default under the Indenture, except:
- a default in the payment of the principal of or any premium or interest
on any Debt Securities of that series; or
- a default under any provision of the Indenture which itself cannot be
modified or amended without the consent of the Holders of each
Outstanding Debt Security of that series. (Sections 1012, 513)
EVENTS OF DEFAULT
"EVENT OF DEFAULT," when used in the Indenture with respect to any series of
Debt Securities, means any of the following:
- failure to pay interest on any Debt Security of that series for 30 days
after the payment is due;
- failure to pay the principal of or any premium on any Debt Security of
that series when due;
- failure to deposit any sinking fund payment when due on Debt Securities of
that series;
- failure to perform any other covenant in the Indenture that applies to
Debt Securities of that series for 90 days after we have received written
notice of the failure to perform in the manner specified in the Indenture;
- default under any Indebtedness for borrowed money (including other series
of Debt Securities), or under any mortgage, lien or other similar
encumbrance, indenture or instrument (including the Indenture) which
secures any Indebtedness for borrowed money, and which results in
acceleration of the maturity of an outstanding principal amount of
Indebtedness greater than $20 million, unless such acceleration is
rescinded (or the Indebtedness is discharged) within 10 days after we have
received written notice of the default in the manner specified in the
Indenture;
- certain events in bankruptcy, insolvency or reorganization; or
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- any other Event of Default that may be specified for the Debt Securities
of that series when that series is created. (Section 501)
If an Event of Default for any series of Debt Securities occurs and continues,
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of the series may declare the entire principal of
all the Debt Securities of that series to be due and payable immediately. If
such a declaration occurs, the Holders of a majority of the aggregate principal
amount of the Outstanding Debt Securities of that series can, subject to certain
conditions, rescind the declaration. (Sections 502, 513)
The prospectus supplement relating to each series of Debt Securities which
are Original Issue Discount Securities will describe the particular provisions
that relate to the acceleration of maturity of a portion of the principal amount
of such series when an Event of Default occurs and continues.
An Event of Default for a particular series of Debt Securities does not
necessarily constitute an Event of Default for any other series of Debt
Securities issued under the Indenture. The Indenture requires us to file an
Officers' Certificate with the Trustee each year that states that certain
defaults do not exist under the terms of the Indenture. (Section 1011) The
Trustee may withhold notice to the Holders of Debt Securities of any default
(except defaults in the payment of principal, premium, interest or any sinking
fund installment) if it considers such withholding of notice to be in the best
interests of the Holders. (Section 602)
Other than its duties in the case of a default, a Trustee is not obligated
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any Holders, unless the Holders offer the Trustee
reasonable indemnification. (Sections 601, 603) If reasonable indemnification is
provided, then, subject to certain other rights of the Trustee, the Holders of a
majority in principal amount of the Outstanding Debt Securities of any series
may, with respect to the Debt Securities of that series, direct the time, method
and place of:
- conducting any proceeding for any remedy available to the Trustee; or
- exercising any trust or power conferred upon the Trustee. (Sections 512,
603)
The Holder of a Debt Security of any series will have the right to begin any
proceeding with respect to the Indenture or for any remedy only if:
- the Holder has previously given the Trustee written notice of a continuing
Event of Default with respect to that series;
- the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series have made a written request of,
and offered reasonable indemnification to, the Trustee to begin such
proceeding;
- the Trustee has not started such proceeding within 60 days after receiving
the request; and
- the Trustee has not received directions inconsistent with such request
from the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series during those 60 days. (Section
507)
However, the Holder of any Debt Security will have an absolute right to receive
payment of principal of and any premium and interest on the Debt Security when
due and to institute suit to enforce such payment. (Section 508)
DEFEASANCE
DEFEASANCE AND DISCHARGE. At the time that we establish a series of Debt
Securities under the Indenture, we can provide that the Debt Securities of that
series are subject to the defeasance and
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discharge provisions of the Indenture. If we so provide, we will be discharged
from our obligations on the Debt Securities of that series if we deposit with
the Trustee, in trust, sufficient money or Government Obligations (as defined
below) to pay the principal, interest, any premium and any other sums due on the
Debt Securities of that series (such as sinking fund payments) on the dates such
payments are due under the Indenture and the terms of the Debt Securities.
(Section 403) As used above, "GOVERNMENT OBLIGATIONS" mean:
- securities of the same government which issued the currency in which the
series of Debt Securities are denominated and in which interest is
payable; or
- securities of government agencies backed by the full faith and credit of
such government. (Section 101)
In the event that we deposit funds in trust and discharge our obligations
under a series of Debt Securities as described above, then:
- the Indenture will no longer apply to the Debt Securities of that series
(except for certain obligations to compensate, reimburse and indemnify the
Trustee, to register the transfer and exchange of Debt Securities, to
replace lost, stolen or mutilated Debt Securities and to maintain paying
agencies and the trust funds); and
- Holders of Debt Securities of that series can only look to the trust fund
for payment of principal, any premium and interest on the Debt Securities
of that series. (Section 403)
Under federal income tax law, such deposit and discharge may be treated as
an exchange of the related Debt Securities for an interest in the trust
mentioned above. Each holder might be required to recognize gain or loss equal
to the difference between (1) the holder's cost or other tax basis for the Debt
Securities and (2) the value of the holder's interest in the trust. Holders
might be required to include in income a share of the income, gain or loss of
the trust, including gain or loss recognized in connection with any substitution
of collateral, as described in this section under the heading "--Substitution of
Collateral" below. You are urged to consult your own tax advisers as to the
specific consequences of such a deposit and discharge, including the
applicability and effect of tax laws other than federal income tax law.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. At the time
that we establish a series of Debt Securities under the Indenture, we can
provide that the Debt Securities of that series are subject to the covenant
defeasance provisions of the Indenture. If we so provide and we make the deposit
described in this section under the heading "--Defeasance and Discharge" above:
- we will not have to comply with the following restrictive covenants
contained in the Indenture:
- Consolidation, Merger or Sale (Sections 801, 803);
- Restrictions on Secured Funded Debt (Section 1008);
- Restrictions on Sale and Lease-Back Transactions (Section 1009);
- Classification of Restricted and Unrestricted Subsidiaries (Section
1010); and
- any other covenant we designate when we establish the series of Debt
Securities; and
- we will not have to treat the events described in the fourth bullet point
under the heading "--Events of Default" (see page 14) as they relate to
the covenants listed above that have been defeased and no longer are in
effect and the events described in the fifth, sixth and seventh bullet
points under the heading "--Events of Default" as Events of Default under
the Indenture in connection with that series.
In the event of a defeasance, our obligations under the Indenture and the Debt
Securities, other than with respect to the covenants and the Events of Default
specifically referred to above, will remain in effect. (Section 1501)
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If we exercise our option not to comply with the certain covenants listed
above and the Debt Securities of such series become immediately due and payable
because an Event of Default has occurred (other than as a result of an Event of
Default specifically referred to above), the amount of money and/or Government
Obligations on deposit with the Trustee will be sufficient to pay the principal,
interest, any premium and any other sums, due on the Debt Securities of such
series (such as sinking fund payments) on the date such payments are due under
the Indenture and the terms of the Debt Securities, but may not be sufficient to
pay amounts due at the time of acceleration. However, we would remain liable for
the balance of the payments. (Section 1501)
SUBSTITUTION OF COLLATERAL. At the time that we establish a series of Debt
Securities under the Indenture, we can provide for our ability to, at any time,
withdraw any money or Government Obligations deposited pursuant to the
defeasance provisions described above if we simultaneously substitute other
money and/or Government Obligations which would satisfy our payment obligations
on the Debt Securities of that series pursuant to the defeasance provisions
applicable to those Debt Securities. (Section 402)
DESCRIPTION OF PREFERRED SHARES
This section describes the general terms and provisions of our preferred
stock ("PREFERRED STOCK") that may be offered by this prospectus ("PREFERRED
SHARES"). The prospectus supplement will describe the specific terms of the
series of the Preferred Shares offered through that prospectus supplement and
any general terms outlined in this section that will not apply to those
Preferred Shares.
We have summarized certain terms and provisions of the Preferred Shares in
this section. The summary is not complete. We have also filed our Restated
Articles of Incorporation and the form of Certificate of Designation,
Preferences and Rights of Preferred Shares as exhibits to the registration
statement. You should read our Restated Articles of Incorporation and the
Certificate of Designation, Preferences and Rights ("CERTIFICATE OF
DESIGNATION") relating to the applicable series of the Preferred Shares for
additional information before you buy any Preferred Shares.
GENERAL
Pursuant to our Restated Articles of Incorporation, our Board of Directors
has the authority, without further shareholder action, to issue a maximum of
5,000,000 shares of Preferred Stock, including shares issued or reserved for
issuance. As of August 1, 1998, we had 349,183 shares of Preferred Stock
outstanding. The Board of Directors has the authority to determine or fix the
following terms with respect to shares of any series of Preferred Stock:
- the number of shares and designation or title of the shares;
- dividend rights;
- whether and upon what terms the shares will be redeemable;
- the rights of the holders upon our dissolution or upon the distribution of
our assets;
- whether and upon what terms the shares will have a purchase, retirement or
sinking fund;
- whether and upon what terms the shares will be convertible;
- the voting rights, if any, which will apply; and
- any other preferences, rights, limitations or restrictions of the series.
If we purchase, redeem or convert shares of Preferred Stock, we will retire and
cancel them and restore them to the status of authorized but unissued shares of
Preferred Stock. Such shares will not be part of any particular series of
Preferred Stock and may be reissued by us.
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As described under "Description of Depositary Shares" below, we may elect to
offer Depositary Shares represented by Depositary Receipts. If we so elect, each
Depositary Share will represent a fractional interest (to be specified in the
applicable prospectus supplement) in a Preferred Share. If we issue Depositary
Shares representing interests in Preferred Shares, those Preferred Shares will
be deposited with a Depositary.
The Preferred Shares will have the dividend, liquidation, redemption, voting
and conversion rights described in this section unless the applicable prospectus
supplement provides otherwise. You should read the prospectus supplement
relating to the particular series of the Preferred Shares it offers for specific
terms, including:
- the title and liquidation preference of the Preferred Shares and the
number of shares offered;
- the initial public offering price at which we will issue the Preferred
Shares;
- the dividend rate or rates (or method of calculation), the dividend
periods, the dates on which dividends will be payable and whether the
dividends will be cumulative or noncumulative and, if cumulative, the
dates from which the dividends will start to cumulate;
- any redemption or sinking fund provisions;
- any conversion provisions;
- whether we have elected to offer Depositary Shares as described under
"Description of Depositary Shares" below; and
- any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
When we issue the Preferred Shares, they will be fully paid and
nonassessable (I.E., the full purchase price for the outstanding Preferred
Shares will have been paid and the holders of such Preferred Shares will not be
assessed any additional monies for such Preferred Shares). Unless the applicable
prospectus supplement specifies otherwise:
- each series of the Preferred Shares will rank equally in all respects with
the outstanding shares of each other series of the Preferred Shares;
- each series of the Preferred Shares will rank senior to our Series B
Preferred Stock and Series A Junior Participating Preferred Stock
described under the heading "--Outstanding Preferred Stock" below;
- the Preferred Shares will have no preemptive rights to subscribe for any
additional securities which we may issue in the future (I.E., the holders
of Preferred Shares will have no right, as holders of Preferred Shares, to
buy any portion of those issued securities); and
- First Chicago Trust Company of New York will be the transfer agent and
registrar for the Preferred Shares and any Depositary Shares.
DIVIDENDS
The holders of the Preferred Shares of each series will be entitled to
receive cash dividends, if declared by our Board of Directors or its duly
authorized committee, out of our assets that we can legally use to pay
dividends. The prospectus supplement relating to a particular series of
Preferred Shares will set forth the dividend rates and dates on which dividends
will be payable. The rates may be fixed or variable or both. If the dividend
rate is variable, the applicable prospectus supplement will describe the formula
used for determining the dividend rate for each dividend period. We will pay
dividends to the holders of record as they appear on our stock books on the
record dates fixed by our Board of Directors or its duly authorized committee.
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The applicable prospectus supplement will also state whether the dividends
on any series of the Preferred Shares are cumulative or noncumulative. If our
Board of Directors does not declare a dividend payable on a dividend payment
date on any noncumulative series of Preferred Shares, then the holders of that
series will not be entitled to receive a dividend for that dividend period and
we will not be obligated to pay the dividend for that dividend period even if
the Board declares a dividend on that series payable in the future.
Our Board will not declare and pay a dividend on any of our stock ranking,
as to dividends, equal with or junior to the Preferred Shares unless full
dividends on the Preferred Shares have been declared and paid (or declared and
sufficient money is set aside for payment). Until full dividends are paid (or
declared and payment is set aside) on Preferred Shares ranking equal as to
dividends, then:
- we will declare any dividends pro rata among the Preferred Shares of each
series and any Preferred Stock ranking equal to the Preferred Shares as to
dividends (I.E., the dividends we declare per share on each series of such
Preferred Stock will bear the same relationship to each other that the
full accrued dividends per share on each such series of the Preferred
Stock bear to each other);
- other than such pro rata dividends, we will not declare or pay any
dividends or declare or make any distributions upon any security ranking
junior to or equal with the Preferred Shares as to dividends or upon
liquidation (except dividends or distributions paid for with securities
ranking junior to the Preferred Shares as to dividends and upon
liquidation); and
- we will not redeem, purchase or otherwise acquire (or set aside money for
a sinking fund for) any securities ranking junior to or equal with the
Preferred Shares as to dividends or upon liquidation (except by conversion
into or exchange for stock junior to the Preferred Shares as to dividends
and upon liquidation).
We will not owe any interest, or any money in lieu of interest, on any dividend
payment(s) on any series of the Preferred Shares which may be past due.
REDEMPTION
A series of the Preferred Shares may be redeemable, in whole or in part, at
our option, and may be subject to mandatory redemption pursuant to a sinking
fund or otherwise, as described in the applicable prospectus supplement.
Redeemed Preferred Shares will become authorized but unissued shares of
Preferred Stock that we may issue in the future.
If a series of the Preferred Shares is subject to mandatory redemption, the
applicable prospectus supplement will specify the number of shares that we will
redeem each year and the redemption price. If Preferred Shares are redeemed, we
will pay all accrued and unpaid dividends on those Preferred Shares to, but
excluding, the redemption date. The prospectus supplement will also specify
whether the redemption price will be paid in cash or other property. If (1) we
are only permitted to pay the redemption price for a series of Preferred Shares
from the proceeds of a capital stock issuance and (2) the proceeds from the
issuance are insufficient or no such issuance has occurred, then the terms of
that series may provide that the Preferred Shares will automatically and
mandatorily be converted into such capital stock.
If fewer than all of the outstanding shares of any series of the Preferred
Shares are to be redeemed, our Board of Directors will determine the number of
shares to be redeemed. We will redeem the shares pro rata from the holders of
record in proportion to the number of shares held by them (with adjustments to
avoid redemption of fractional shares).
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Even though the terms of a series of Preferred Shares may permit redemption
of the Preferred Shares in whole or in part, if any dividends, including
accumulated dividends, on that series are past due:
- we will not redeem any Preferred Shares of that series unless we
simultaneously redeem all outstanding Preferred Shares of that series; and
- we will not purchase or otherwise acquire any Preferred Shares of that
series.
The prohibition discussed in the prior sentence will not prohibit us from
purchasing or acquiring Preferred Shares of that series pursuant to a purchase
or exchange offer if we make the offer on the same terms to all holders of that
series.
Unless the applicable prospectus supplement specifies otherwise, we will
give notice of a redemption by mailing a notice to each record holder of the
shares to be redeemed, between 30 to 60 days prior to the date fixed for
redemption (unless we issue Depositary Shares representing interests in
Preferred Shares, in which case we will send a notice to the Depositary between
40 to 70 days prior to the date fixed for redemption). We will mail the notices
to the holders' addresses as they appear on our stock records. Each notice will
state:
- the redemption date;
- the number of shares and the series of the Preferred Shares to be
redeemed;
- the redemption price;
- the place or places where holders can surrender the certificates for the
Preferred Shares for payment of the redemption price;
- that dividends on the shares to be redeemed will cease to accrue on the
redemption date; and
- the date when the holders' conversion rights, if any, will terminate.
If we redeem fewer than all shares of any series of the Preferred Shares held by
any holder, we will also specify the number of shares to be redeemed from the
holder in the notice.
If we have given notice of the redemption and have provided the funds for
the payment of the redemption price, then beginning on the redemption date:
- the dividends on the Preferred Shares called for redemption will no longer
accrue;
- such shares will no longer be considered outstanding; and
- the holders will no longer have any rights as shareholders except to
receive the redemption price.
When the holder properly surrenders the redeemed shares, the redemption price
will be paid out of the funds provided by us. If we redeem fewer than all of the
shares represented by any certificate, we will issue a new certificate
representing the unredeemed shares without cost to the holder.
In the event that a redemption described above is deemed to be a "tender
offer" within the meaning of Rule 14e-1 under the Exchange Act, we will comply
with all applicable provisions of the Exchange Act.
CONVERSION
The applicable prospectus supplement relating to a series of convertible
Preferred Shares will describe the terms on which shares of that series are
convertible into shares of Common Stock or a different series of Preferred
Stock.
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RIGHTS UPON LIQUIDATION
Unless the applicable prospectus states otherwise, if we voluntarily or
involuntarily liquidate, dissolve or wind up our business, the holders of shares
of each series of the Preferred Shares will be entitled to receive:
- liquidation distributions in the amount stated in the applicable
prospectus supplement; and
- all accrued and unpaid dividends (whether or not earned or declared).
We will pay these amounts to the holders of shares of each series of the
Preferred Shares, and all amounts owing on any Preferred Stock ranking equally
with such series of Preferred Shares as to distributions upon liquidation, out
of our assets available for distribution to shareholders before any distribution
is made to holders of any securities ranking junior to the series of Preferred
Shares upon liquidation.
The sale of all or substantially all of our property and assets, our merger
into or consolidation with any other corporation or the merger of any other
corporation into us will not be considered a dissolution, liquidation or winding
up of our business.
If (1) we voluntarily or involuntarily liquidate, dissolve or wind up our
business and (2) the assets available for distribution to the holders of the
Preferred Shares of any series and any other shares of our stock ranking equal
with such series as to any such distribution are insufficient to pay all amounts
to which the holders are entitled, then we will only make pro rata distributions
to the holders of all shares ranking equal as to distributions upon dissolution,
liquidation or winding up of our business (I.E., the distributions we pay to the
holders of all shares ranking equal as to distributions upon dissolution,
liquidation or winding up of our business will bear the same relationship to
each other that the full distributable amounts for which such holders are
respectively entitled upon such dissolution, liquidation or winding up of our
business bear to each other).
After we pay the full amount of the liquidation distribution to which the
holders of a series of the Preferred Shares are entitled, such holders will have
no right or claim to any of our remaining assets.
VOTING RIGHTS
Except as described in this section or in the applicable prospectus
supplement, or except as expressly required by applicable law, the holders of
the Preferred Shares will not be entitled to vote. If the holders of a series of
Preferred Shares are entitled to vote and the applicable prospectus supplement
does not state otherwise, then each Preferred Share will be entitled to one
vote.
As more fully described under "Description of Depositary Shares" below, if
we elect to provide for the issuance of Depositary Shares representing
fractional interests in a Preferred Share, the holders of each Depositary Share
will be entitled to a fraction of a vote.
For any series of Preferred Shares having one vote per share, the voting
power of the series, on matters on which holders of such series and holders of
any other series of Preferred Stock are entitled to vote as a single class, will
solely depend on the total number of shares in such series (not the aggregate
liquidation preference or initial offering price).
Unless we receive the consent of the holders of an outstanding series of
Preferred Shares and the outstanding shares of all other series of Preferred
Stock which (1) rank equal with such series either as to dividends or the
distribution of assets upon liquidation, dissolution or winding up of our
business and (2) have voting rights that are exercisable and that are similar to
those of such series, we will not:
- authorize, create or issue, or increase the authorized or issued amount
of, any class or series of stock ranking prior to such outstanding
Preferred Shares with respect to payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up of our business; or
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- amend, alter or repeal, whether by merger, consolidation or otherwise, the
provisions of our Restated Articles of Incorporation or of the resolutions
contained in a Certificate of Designation creating such series of the
Preferred Shares so as to materially and adversely affect any right,
preference, privilege or voting power of such outstanding Preferred
Shares.
This consent must be given by the holders of at least two-thirds of all such
outstanding Preferred Stock described in the preceding sentence, voting together
as a single class. We will not be required to obtain this consent with respect
to the actions listed in the second bullet point above, however, if we only (1)
increase the amount of the authorized Preferred Stock, (2) create and issue
another series of Preferred Stock, or (3) increase the amount of authorized
shares of any series of Preferred Stock, if such Preferred Stock in each case
ranks equal with or junior to the Preferred Shares with respect to the payment
of dividends and the distribution of assets upon liquidation, dissolution or
winding up of our business.
OUTSTANDING PREFERRED STOCK
We have established the terms of three series of Preferred Stock: the Series
A Junior Participating Preferred Stock (the "SERIES A PREFERRED STOCK"), which
is described more fully under the heading "Description of Common Stock--Rights
Agreement" below; and the Series B ESOP Convertible Preferred Stock and the
Series B-1 ESOP Convertible Preferred Stock (together, the "SERIES B PREFERRED
STOCK"). At this time, we have only issued shares of the Series B Preferred
Stock. As of August 1, 1998, we had 458,353 shares designated as Series B
Preferred Stock, of which 349,183 shares were outstanding, and 2,000,000 shares
designated as Series A Preferred Stock.
Unless the applicable prospectus supplement specifies otherwise, the
Preferred Shares will rank senior to the outstanding Series B Preferred Stock
and to any Series A Preferred Stock that may be issued in the future. Our Common
Stock, including the Common Stock that we may issue pursuant to an offering
under this prospectus or upon conversion or exercise of other securities offered
under this prospectus, will be subject to any prior rights of the Preferred
Stock. As a result, our outstanding Preferred Stock, and any Preferred Stock
that we may issue in the future, may limit the rights of the holders of our
Common Stock.
A trustee acting on behalf of The Dayton Hudson Corporation 401(k) Plan (the
"PLAN") is the record holder of all outstanding shares of Series B Preferred
Stock. The Series B Preferred Stock provides for cumulative quarterly dividends
equal to $56.20 per year, subject to adjustment. The Series B Preferred Stock is
subject to redemption:
- in whole or in part, at our option, at any time after January 10, 2000 at
a price equal to $864.60 per share plus accrued and unpaid dividends to
the date fixed for redemption (the "REDEMPTION PRICE");
- in whole or in part, at our option, at any time after a change in any
statute, rule or regulation causes us to lose any or all of the tax
deductions for certain amounts paid on the Series B Preferred Stock at a
price equal to the higher of (1) the Redemption Price or (2) the per share
fair market value of the Series B Preferred Stock (determined as set forth
in its Certificate of Designation);
- if the Plan is terminated or the employee stock ownership feature of the
Plan is terminated or eliminated from the Plan, at a price equal to the
higher of (1) the Redemption Price or (2) the per share fair market value
of the Series B Preferred Stock (determined as set forth in its
Certificate of Designation) (and must be so redeemed by us); and
- in whole or in part, at the option of the holder, in certain circumstances
related to (1) the payment by the holder of indebtedness incurred by or
for the benefit of the Plan or (2) distributions required to be made by
the holder under the Plan.
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Once a redemption notice is sent, a holder of Series B Preferred Stock will have
the option of accepting the redemption price or converting such holder's Series
B Preferred Stock into Common Stock as described below. If a holder accepts the
redemption price, we will pay it in cash or, if we elect, in shares of Common
Stock or a combination of such shares and cash.
One share of the Series B Preferred Stock is convertible into 60 shares of
Common Stock, subject to adjustment for stock splits and certain other events.
The Series B Preferred Stock is mandatorily convertible, without any further
action by us or the holder, into Common Stock at the then applicable conversion
price (as defined in its Certificate of Designation) when record ownership of
the shares of Series B Preferred Stock is transferred to any person other than a
successor trustee under the Plan. In addition, a holder of Series B Preferred
Stock can convert shares of Series B Preferred Stock into shares of Common Stock
at the then applicable conversion price at any time prior to the date fixed for
redemption.
The Series B Preferred Stock does not have preemptive rights to subscribe
for any additional securities which we may issue in the future.
If we voluntarily or involuntarily liquidate, dissolve or wind up our
business, the holders of the Series B Preferred Stock are entitled to receive
$864.60 per share, plus accrued and unpaid dividends, out of the assets
available for distribution to our shareholders, before any distribution is made
to holders of Common Stock or any other capital stock ranking junior to the
Series B Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of our business.
Each share of Series B Preferred Stock entitles its holder to one vote for
each share of Common Stock into which it may be converted on all matters
submitted to a vote of our shareholders. The holders of Series B Preferred Stock
vote together with the holders of our Common Stock as one class. In addition,
the holders of at least two-thirds of the outstanding shares of each series of
the Series B Preferred Stock must vote to adopt any amendment of any provision
of the Restated Articles of Incorporation or the applicable Certificate of
Designation for such series of the Series B Preferred Stock, if the amendment
would adversely change the special rights of such shares of the Series B
Preferred Stock. Except as otherwise required by law or described above, the
holders of Series B Preferred Stock have no special voting rights.
DESCRIPTION OF DEPOSITARY SHARES
This section describes the general terms and provisions of the Depositary
Shares (as defined below). The prospectus supplement will describe the specific
terms of the Depositary Shares offered through that prospectus supplement and
any general terms outlined in this section that will not apply to those
Depositary Shares.
We have summarized certain terms and provisions of the Deposit Agreement,
the Depositary Shares and the Depositary Receipts in this section. The summary
is not complete. We have also filed the form of Deposit Agreement, including the
form of Depositary Receipt, as an exhibit to the registration statement. You
should read the forms of Deposit Agreement and Depositary Receipt relating to a
series of Preferred Shares for additional information before you buy any
Depositary Shares that represent Preferred Shares of such series.
GENERAL
We may offer fractional interests in Preferred Shares, rather than full
Preferred Shares. If we do, we will provide for the issuance by a Depositary (as
defined below) to the public of receipts for depositary shares ("DEPOSITARY
SHARES"), each of which will represent a fractional interest in a share of a
particular series of Preferred Shares.
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The shares of any series of Preferred Shares underlying the Depositary
Shares will be deposited under a separate deposit agreement (the "DEPOSIT
AGREEMENT") between us and a bank or trust company having its principal office
in the United States and having a combined capital and surplus of at least $50
million (the "DEPOSITARY"). We will name the Depositary in the applicable
prospectus supplement. Subject to the terms of the Deposit Agreement, each owner
of a Depositary Share will have a fractional interest in all the rights and
preferences of the Preferred Share underlying such Depositary Share. Those
rights include any dividend, voting, redemption, conversion and liquidation
rights.
The Depositary Shares will be evidenced by depositary receipts issued under
the Deposit Agreement (the "DEPOSITARY RECEIPTS"). If you purchase fractional
interests in shares of the related series of Preferred Shares, you will receive
Depositary Receipts as described in the applicable prospectus supplement. While
the final Depositary Receipts are being prepared, we may order the Depositary to
issue temporary Depositary Receipts substantially identical to the final
Depositary Receipts although not in final form. The holders of the temporary
Depositary Receipts will be entitled to the same rights as if they held the
Depositary Receipts in final form. Holders of the temporary Depositary Receipts
can exchange them for the final Depositary Receipts at our expense.
If you surrender Depositary Receipts at the principal office of the
Depositary (unless the related Depositary Shares have previously been called for
redemption), you are entitled to receive at such office the number of Preferred
Shares and any money or other property represented by such Depositary Shares. We
will not issue partial Preferred Shares. If you deliver Depositary Receipts
evidencing a number of Depositary Shares that represent more than a whole number
of Preferred Shares, the Depositary will issue you a new Depositary Receipt
evidencing such excess number of Depositary Shares at the same time that the
Preferred Shares are withdrawn. Holders of Preferred Shares received in exchange
for Depositary Shares will no longer be entitled to deposit such shares under
the Deposit Agreement or to receive Depositary Shares in exchange for such
Preferred Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received with respect to the Preferred Shares to the record
holders of Depositary Shares representing the Preferred Shares in proportion to
the numbers of Depositary Shares owned by the holders on the relevant record
date. The Depositary will distribute only the amount that can be distributed
without attributing to any holder of Depositary Shares a fraction of one cent.
The balance not distributed will be added to and treated as part of the next sum
received by the Depositary for distribution to record holders of Depositary
Shares.
If there is a distribution other than in cash, the Depositary will
distribute property to the holders of Depositary Shares, unless the Depositary
determines that it is not feasible to make such distribution. If this occurs,
the Depositary may, with our approval, sell the property and distribute the net
proceeds from the sale to the holders of Depositary Shares.
The Deposit Agreement will also contain provisions relating to how any
subscription or similar rights offered by us to holders of the Preferred Shares
will be made available to the holders of Depositary Shares.
CONVERSION AND EXCHANGE
If any series of Preferred Shares underlying the Depositary Shares is
subject to conversion or exchange, the applicable prospectus supplement will
describe the rights or obligations of each record holder of Depositary Receipts
to convert or exchange the Depositary Shares.
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REDEMPTION OF DEPOSITARY SHARES
If the series of the Preferred Shares underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the
redemption proceeds, in whole or in part, of such series of the Preferred Shares
held by the Depositary. The Depositary will mail notice of redemption between 30
to 60 days prior to the date fixed for redemption to the record holders of the
Depositary Shares to be redeemed at their addresses appearing in the
Depositary's records. The redemption price per Depositary Share will bear the
same relationship to the redemption price per Preferred Share that the
Depositary Share bears to the underlying Preferred Share. Whenever we redeem
Preferred Shares held by the Depositary, the Depositary will redeem, as of the
same redemption date, the number of Depositary Shares representing the Preferred
Shares redeemed. If less than all the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as
determined by the Depositary.
After the date fixed for redemption, the Depositary Shares called for
redemption will no longer be outstanding. When the Depositary Shares are no
longer outstanding, all rights of the holders will cease, except the right to
receive money or other property that the holders of the Depositary Shares were
entitled to receive upon such redemption. Such payments will be made when
holders surrender their Depositary Receipts to the Depositary.
VOTING THE PREFERRED SHARES
Upon receipt of notice of any meeting at which the holders of the Preferred
Shares are entitled to vote, the Depositary will mail information about the
meeting contained in the notice to the record holders of the Depositary Shares
relating to such Preferred Shares. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Shares) will be entitled to instruct the Depositary as to how the
Preferred Shares underlying the holder's Depositary Shares should be voted.
The Depositary will try, if practical, to vote the number of Preferred
Shares underlying the Depositary Shares according to the instructions received.
We will agree to take all action requested by and deemed necessary by the
Depositary in order to enable the Depositary to vote the Preferred Shares in
that manner. The Depositary will not vote any Preferred Shares for which it does
not receive specific instructions from the holders of the Depositary Shares
relating to such Preferred Shares.
TAXATION
Owners of Depositary Shares will be treated for federal income tax purposes
as if they were owners of the Preferred Shares represented by the Depositary
Shares. Accordingly, for federal income tax purposes they will have the income
and deductions to which they would be entitled if they were holders of the
Preferred Shares. In addition:
- no gain or loss will be recognized for federal income tax purposes upon
the withdrawal of Preferred Shares in exchange for Depositary Shares as
provided in the Deposit Agreement;
- the tax basis of each Preferred Share to an exchanging owner of Depositary
Shares will, upon the exchange, be the same as the aggregate tax basis of
the Depositary Shares exchanged for such Preferred Share; and
- the holding period for the Preferred Shares, in the hands of an exchanging
owner of Depositary Shares who held the Depositary Shares as a capital
asset at the time of the exchange, will include the period that the owner
held such Depositary Shares.
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AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may be amended by agreement between us and
the Depositary at any time. However, any amendment that materially and adversely
alters the rights of the existing holders of Depositary Shares will not be
effective unless approved by the record holders of at least a majority of the
Depositary Shares then outstanding. A Deposit Agreement may be terminated by us
or the Depositary only if:
- all outstanding Depositary Shares relating to the Deposit Agreement have
been redeemed; or
- there has been a final distribution on the Preferred Shares of the
relevant series in connection with our liquidation, dissolution or winding
up of our business and the distribution has been distributed to the
holders of the related Depositary Shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We will pay associated
charges of the Depositary for the initial deposit of the Preferred Shares and
any redemption of the Preferred Shares. Holders of Depositary Shares will pay
transfer and other taxes and governmental charges and any other charges that are
stated to be their responsibility in the Deposit Agreement.
MISCELLANEOUS
We will forward to the holders of Depositary Shares all reports and
communications that we must furnish to the holders of the Preferred Shares.
Neither the Depositary nor we will be liable if the Depositary is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. Our obligations and the Depositary's
obligations under the Deposit Agreement will be limited to performance in good
faith of duties set forth in the Deposit Agreement. Neither the Depositary nor
we will be obligated to prosecute or defend any legal proceeding connected with
any Depositary Shares or Preferred Shares unless satisfactory indemnity is
furnished to us and/or the Depositary. We and the Depositary may rely upon
written advice of counsel or accountants, or information provided by persons
presenting Preferred Shares for deposit, holders of Depositary Shares or other
persons believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering notice to us. We may
also remove the Depositary at any time. Resignations or removals will take
effect upon the appointment of a successor depositary and its acceptance of the
appointment. The successor depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50 million.
DESCRIPTION OF COMMON STOCK
This section describes the general terms and provisions of the shares of our
common stock (the "COMMON STOCK"). The prospectus supplement will describe the
specific terms of the Common Stock offered through that prospectus supplement
and any general terms outlined in this section that will not apply to that
Common Stock.
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We have summarized certain terms and provisions of the Common Stock in this
section. The summary is not complete. We have also filed our Restated Articles
of Incorporation, our bylaws and the Certificate of Designation relating to the
Series A Preferred Stock as exhibits to the registration statement. You should
read our Restated Articles of Incorporation and our bylaws and the Certificate
of Designation relating to the Series A Preferred Stock for additional
information before you buy any Common Stock.
GENERAL
SHARES OUTSTANDING. As of August 1, 1998, our authorized Common Stock was
3,000,000,000 shares, of which 439,944,303 shares were issued and outstanding.
DIVIDENDS. Holders of Common Stock may receive dividends when declared by
our Board of Directors out of our funds that we can legally use to pay
dividends. We may pay dividends in cash, stock or other property. In certain
cases, holders of Common Stock may not receive dividends until we have satisfied
our obligations to any holders of outstanding Preferred Stock.
VOTING RIGHTS. Holders of Common Stock have the exclusive power to vote on
all matters presented to our shareholders unless Minnesota law or the
certificate of designation for an outstanding series of Preferred Stock gives
the holders of that Preferred Stock the right to vote on certain matters. Each
holder of Common Stock is entitled to one vote per share. Holders of Common
Stock have no cumulative voting rights for the election of directors (I.E., a
holder of a single share of Common Stock cannot cast more than one vote for each
position to be filled on our Board of Directors).
OTHER RIGHTS. If we voluntarily or involuntarily liquidate, dissolve or
wind up our business, holders of Common Stock will receive pro rata, according
to shares held by them, any remaining assets distributable to our shareholders
after we have provided for any liquidation preference for outstanding shares of
Preferred Stock. When we issue securities in the future, holders of Common Stock
have no preemptive rights (I.E., the holders of Common Stock have no right, as
holders of Common Stock, to buy any portion of those issued securities). Each
share of Common Stock does include a right to purchase Series A Preferred Stock
if certain conditions occur. The conditions under which a holder may exercise
that purchase right are discussed under the heading "--Rights Agreement" below.
LISTING. Our outstanding shares of Common Stock are listed on the New York
Stock Exchange and Pacific Stock Exchange under the symbol "DH." First Chicago
Trust Company of New York serves as the transfer agent and registrar for the
Common Stock.
FULLY PAID. The outstanding shares of Common Stock are fully paid and
nonassessable (I.E., the full purchase price for the outstanding shares of
Common Stock has been paid and the holders of such shares will not be assessed
any additional monies for such shares). Any additional Common Stock that we may
issue in the future pursuant to an offering under this prospectus or upon the
conversion or exercise of other securities offered under this prospectus will
also be fully paid and nonassessable.
ANTI-TAKEOVER PROVISIONS CONTAINED IN THE ARTICLES OF INCORPORATION AND BYLAWS
Certain provisions of our Restated Articles of Incorporation may make it
less likely that our management would be changed or someone would acquire voting
control of our company without our Board's consent. These provisions may delay,
deter or prevent tender offers or takeover attempts that shareholders may
believe are in their best interests, including tender offers or attempts that
might allow shareholders to receive premiums over the market price of their
Common Stock.
FAIR PRICE PROVISION. Article IV of our Restated Articles of Incorporation
prohibits certain transactions ("BUSINESS COMBINATIONS") between our company and
direct and indirect owners of 10% or more of our voting stock ("INTERESTED
SHAREHOLDERS") unless those transactions are approved by holders of
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at least 75% of our outstanding voting stock, voting together as a single class.
This 75% approval is in addition to any approval required by law. Business
combinations requiring the 75% approval include the following transactions,
among others:
- any merger, consolidation, or statutory exchange of our shares with an
interested shareholder or a corporation affiliated with an interested
shareholder, subject to limited exceptions;
- any sale, lease, pledge, or other transfer or disposition of our assets
valued at 10% or more of the book value of our consolidated assets to an
interested shareholder or person or entity affiliated with an interested
shareholder, or any sale, lease, pledge, or other transfer or disposition
of an interested shareholder's assets with such value to us;
- the issuance or transfer by us of any of our shares to an interested
shareholder or person or entity affiliated with an interested shareholder,
subject to limited exceptions that do not increase the percentage of our
shares owned by the interested shareholder or such affiliated person or
entity;
- the adoption of any plan proposed by or on behalf of an interested
shareholder or a person or entity affiliated with an interested
shareholder to liquidate or dissolve our company; and
- any transaction that increases the proportionate share of our stock owned
directly or indirectly by an interested shareholder or a person or entity
affiliated with an interested shareholder.
Shareholders do not need to approve a business combination under Article IV
of our Restated Articles of Incorporation if a majority of the continuing
directors approve the business combination. Continuing directors are those
directors, other than the interested shareholder or any representative or
affiliate of the interested shareholder, (1) who were members of the Board of
Directors before the interested shareholder involved in the business combination
became an interested shareholder or (2) whose election or nomination was
approved by a majority of such directors.
Shareholders also do not need to approve a business combination under
Article IV of our Restated Articles of Incorporation that meets certain
conditions specified in Article IV of our Restated Articles of Incorporation.
These conditions include, among other things, the following:
- holders of our capital stock receive at least the minimum amount of
consideration in the business combination determined pursuant to Article
IV of our Restated Articles (this condition is designed to assure that the
price received by each shareholder is at least as high as the highest
price paid for our shares by the interested shareholder in becoming an
interested shareholder or in the two years before the business combination
is announced, and also is at least as high as the higher of the fair
market value of our shares when the interested shareholder became an
interested shareholder or the business combination was announced);
- the interested shareholder does not acquire any additional shares of our
stock after becoming an interested shareholder (unless the additional
acquisition is approved by a majority of the continuing directors); and
- a proxy or information statement describing the proposed business
combination is mailed to all holders of our stock at least 30 days before
the business combination is completed.
Holders of at least 75% of our outstanding voting stock, voting together as one
class, must approve a proposal to amend or repeal, or adopt provisions
inconsistent with, Article IV of our Restated Articles of Incorporation.
PREFERRED STOCK. Our Board of Directors can at any time, under our Restated
Articles of Incorporation and without shareholder approval, issue one or more
new series of Preferred Stock. In some cases, the issuance of Preferred Stock
without shareholder approval could discourage or make more difficult attempts to
take control of our company through a merger, tender offer, proxy contest or
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otherwise. Preferred Stock with special voting rights or other features issued
to persons favoring our management could stop a takeover by preventing the
person trying to take control of our company from acquiring enough voting shares
necessary to take control.
CLASSIFIED BOARD. Members of our Board of Directors are divided into three
classes and serve staggered three-year terms under Article VI of our Restated
Articles of Incorporation. This means that only approximately one-third of our
directors are elected at each annual meeting of shareholders and that it would
take two years to replace a majority of the directors unless they are removed.
Under Article VI of our Restated Articles of Incorporation, directors can be
removed from office during their terms only if holders of at least 75% of our
outstanding voting stock, voting together as one class, approve the removal. At
least 75% of our outstanding voting stock, voting together as one class, must
approve any proposal to amend or repeal, or adopt any provisions inconsistent
with, this provision of our Restated Articles of Incorporation.
NOMINATION PROCEDURES. In addition to our Board of Directors, shareholders
can nominate candidates for our Board of Directors. However, a shareholder must
follow the advance notice procedures described in Article VI of our Restated
Articles of Incorporation. In general, a shareholder must submit a written
notice of the nomination to our corporate secretary at least 60 days before a
scheduled meeting of our shareholders. At least 75% of our outstanding voting
stock, voting together as one class, must approve any proposal to amend or
repeal, or adopt any provisions inconsistent with, this provision of our
Restated Articles of Incorporation.
PROPOSAL PROCEDURES. Shareholders can propose that business other than
nominations to our Board of Directors be considered at an annual meeting of
shareholders only if a shareholder follows the advance notice procedures
described in our bylaws. In general, a shareholder must submit a written notice
of the proposal and the shareholder's interest in the proposal at least 60 days
before the date set for the annual meeting of our shareholders.
AMENDMENT OF BYLAWS. Under our bylaws, our Board of Directors can adopt,
amend or repeal the bylaws, subject to limitations under the Minnesota Business
Corporation Act. Our shareholders also have the power to change or repeal our
bylaws.
RIGHTS AGREEMENT
Each share of our Common Stock, including those that may be issued in an
offering under this prospectus or upon the conversion or exercise of other
securities offered under this prospectus, carries with it one preferred share
purchase right (a "RIGHT"). If the Rights become exercisable, each Right
entitles the registered holder to purchase one six-hundredth of a share of the
Series A Preferred Stock (subject to a proportionate decrease in the fractional
number of shares of Series A Preferred Stock that may be purchased if a stock
split, stock dividend or similar transaction occurs with respect to the Common
Stock and a proportionate increase in the event of a reverse stock split). Until
a Right is exercised, the holder of the Right has no right to vote or receive
dividends or any other rights as a shareholder as a result of holding the Right.
The description and terms of the Rights are described in the Rights Agreement,
dated as of September 11, 1996, between us and First Chicago Trust Company of
New York, as Rights Agent, that has been filed with the SEC.
The Rights trade automatically with shares of Common Stock. A holder of
Common Stock may exercise the Rights only under the circumstances described
below. The Rights are designed to protect the interests of our company and
shareholders against coercive takeover tactics. The Rights are also designed to
encourage potential acquirors to negotiate with our Board of Directors before
attempting a takeover and to increase the ability of our Board to negotiate
terms of any proposed takeover that benefit our shareholders. The Rights may,
but are not intended to, deter takeover proposals that may be in the interests
of our shareholders.
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Shares of Series A Preferred Stock will rank junior to all other series of
our Preferred Stock, including the Preferred Shares offered under this
prospectus, if our Board, in creating such Preferred Stock, provides that they
will rank senior to the Series A Preferred Stock. If our shareholders purchase
Series A Preferred Stock, we cannot repurchase such stock from shareholders who
do not want to resell it. Subject to the rights of our senior securities, a
holder of the Series A Preferred Stock will be entitled, for each such share
owned, to:
- a quarterly dividend payment equal to the greater of (1) $3.00 per share
or (2) 600 times the quarterly dividend declared per share of Common
Stock, before any amounts are distributed to holders of Common Stock (if
the dividend is not paid on the Series A Preferred Stock in one or more
quarters, no dividend may be paid on Common Stock until all previously
unpaid dividends on Series A Preferred Stock have been paid);
- a liquidation payment equal to the greater of (1) $300 per share plus all
accrued and unpaid dividends or (2) 600 times the payment made per share
of Common Stock, if we liquidate our company, before any amounts are
distributed to holders of Common Stock;
- receive 600 times the amount received per share of Common Stock in the
event of any merger, consolidation, statutory share exchange or other
similar transaction; and
- 600 votes per share and will vote together with the Common Stock unless
applicable law requires otherwise.
These rights of the Series A Preferred Stock are protected by customary
antidilution provisions which automatically increase dividend, liquidation,
merger and voting rights in proportion to increases in Common Stock resulting
from stock dividends, stock splits and similar transactions. These rights are
proportionately decreased in the event of decreases in Common Stock resulting
from reverse stock splits and similar transactions.
The purchase price for each one six-hundredth of a share of Series A
Preferred Stock is $50. We must adjust the purchase price if certain events
occur, such as:
- if we pay stock dividends on the Series A Preferred Stock or split the
Series A Preferred Stock; or
- if we issue warrants for shares of Series A Preferred Stock to holders of
Series A Preferred Stock or other securities that could be converted into
shares of Series A Preferred Stock at less than the then current market
price of the Series A Preferred Stock.
Holders may exercise their Rights only following a "DISTRIBUTION DATE." A
distribution date will occur 15 days after (1) a person or group acquires 20% or
more of the outstanding shares of Common Stock or (2) a person or group makes or
announces an offer to purchase Common Stock, which, if successful, would result
in the acquisition of 30% or more of the outstanding shares of Common Stock (but
our Board may delay the distribution date following such an offer until the
person or group actually acquires at least 20% of the outstanding shares of
Common Stock). However, a distribution date will not occur, and the Rights
cannot be exercised, as long as our Board has the ability to redeem the Rights,
as described below.
The Rights have certain additional features that will be triggered upon the
occurrence of specified events, including:
- if a person or group acquires 20% or more of the outstanding shares of
Common Stock, holders of the Rights, other than such person or group, may
purchase our Common Stock (instead of our Series A Preferred Stock) at 50%
of the market value of the purchased Common Stock;
- if a person or group acquires 20% or more of the outstanding shares of
Common Stock, our Board of Directors may, at any time before the person or
group acquires 50% or more of the
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outstanding shares of Common Stock, exchange all or part of the Rights
(other than Rights held or previously held by the 20% or greater
shareholder) for Common Stock or equivalent securities at an exchange
ratio per Right equal to the exercise price of a Right divided by the
current per share market price of the Common Stock, subject to adjustment;
and
- if our company is involved in certain business combinations or the sale of
50% or more of our assets or earning power, the holders of the Rights may
purchase common stock of the acquiror or an affiliated company at 50% of
market value.
Any time before a person or group acquires 20% or more of the outstanding
shares of Common Stock and in certain circumstances within 20 days after such an
event, our Board of Directors may redeem the Rights in whole, but not in part,
at a price of $.005 per Right, subject to adjustment for stock dividends, stock
splits and similar transactions (the "RIGHTS REDEMPTION PRICE"). Our Board of
Directors in its sole discretion may establish the effective time, basis and
conditions of the redemption. Immediately upon redemption of the Rights, the
holder (1) can no longer exercise such Rights and (2) can only receive the
Rights Redemption Price.
In addition, our shareholders can, under certain circumstances, compel our
Board of Directors to redeem the Rights even if our Board of Directors believes
that a tender offer of the nature described in the following sentence is not in
our shareholders' best interests. A person making a cash tender offer for all of
our outstanding capital stock and satisfying certain other conditions can demand
a shareholders meeting to vote upon a resolution requesting our Board of
Directors to redeem the Rights and allow the completion of that tender offer, or
another cash tender offer for all of our capital stock at a price that is at
least as high as that contained in the original tender offer, without being
affected by the Rights. If two-thirds of the outstanding shares of our voting
stock approve such a resolution and certain other conditions are satisfied, our
Board must redeem the Rights and the Rights would not affect the completion of
the tender offer.
The Rights will expire on September 26, 2001, unless we redeem them before
then. Our Board of Directors may amend the terms of the Rights without the
consent of the holders of the Rights at any time before the distribution date in
any manner our Board deems desirable, except that amendments described below
that expressly require a shareholder vote must receive that vote. Our Board of
Directors may amend the terms of the Rights without the consent of the holders
of the Rights after the distribution date only if the amendment cures
ambiguities, corrects or supplements defective or inconsistent provisions, or
does not adversely affect the interests of the holders of the Rights. The
affirmative vote of holders of a majority of the shares of Common Stock voting
for or against a proposed amendment at a shareholders meeting is required to
amend the terms of the Rights to change the purchase price of the Rights, the
Rights Redemption Price, the number or type of shares for which the Rights are
exercisable, their expiration date, the percentage stock ownership by a person
or group that triggers the exercise of the Rights, or the shareholder voting
requirements for compelling redemption of the Rights.
DESCRIPTION OF SECURITIES WARRANTS
This section describes the general terms and provisions of the Securities
Warrants (as defined below). The prospectus supplement will describe the
specific terms of the Securities Warrants offered through that prospectus
supplement and any general terms outlined in this section that will not apply to
those Securities Warrants.
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We may issue warrants for the purchase of Debt Securities, Preferred Shares,
Depositary Shares or Common Stock (the "SECURITIES WARRANTS"). Securities
Warrants may be issued alone or together with Debt Securities, Preferred Shares,
Depositary Shares or Common Stock offered by any prospectus supplement and may
be attached to or separate from those securities. Each series of Securities
Warrants will be issued under a separate warrant agreement (a "SECURITIES
WARRANT AGREEMENT") between us and a bank or trust company, as warrant agent
(the "SECURITIES WARRANT AGENT"), which will be described in the applicable
prospectus supplement. The Securities Warrant Agent will act solely as our agent
in connection with the Securities Warrants and will not act as an agent or
trustee for any holders of Securities Warrants.
We have summarized certain terms and provisions of the Securities Warrant
Agreements and Securities Warrants in this section. The summary is not complete.
We have also filed the forms of Securities Warrant Agreements and the
certificates representing the Securities Warrants ("SECURITIES WARRANT
CERTIFICATES") as exhibits to the registration statement. You should read the
applicable forms of Securities Warrant Agreement and Securities Warrant
Certificate for additional information before you buy any Securities Warrants.
GENERAL
If we offer Securities Warrants, the applicable prospectus supplement will
describe their terms. If Securities Warrants for the purchase of Debt Securities
are offered, the applicable prospectus supplement will describe the terms of
such Securities Warrants, including the following if applicable:
- the offering price;
- the currencies in which such Securities Warrants are being offered;
- the designation, aggregate principal amount, currencies, denominations and
terms of the series of the Debt Securities that can be purchased if a
holder exercises such Securities Warrants;
- the designation and terms of any series of Debt Securities, Preferred
Shares or Depositary Shares with which such Securities Warrants are being
offered and the number of Securities Warrants offered with each Debt
Security, Preferred Share, Depositary Share or share of Common Stock;
- the date on and after which the holder of such Securities Warrants can
transfer them separately from the related Common Stock or series of Debt
Securities, Preferred Shares or Depositary Shares;
- the principal amount of the series of Debt Securities that can be
purchased if a holder exercises such Securities Warrant and the price at
which and currencies in which such principal amount may be purchased upon
exercise;
- the date on which the right to exercise such Securities Warrants begins
and the date on which such right expires;
- United States federal income tax consequences; and
- any other terms of such Securities Warrants.
Securities Warrants for the purchase of Debt Securities will be in registered
form only.
If Securities Warrants for the purchase of Preferred Shares, Depositary
Shares or Common Stock are offered, the applicable prospectus supplement will
describe the terms of such Securities Warrants, including the following where
applicable:
- the offering price;
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- the total number of shares that can be purchased if a holder of such
Securities Warrants exercises them and, in the case of Securities Warrants
for Preferred Shares or Depositary Shares, the designation, total number
and terms of the series of Preferred Shares that can be purchased upon
exercise or that are underlying the Depositary Shares that can be
purchased upon exercise;
- the designation and terms of the series of Debt Securities, Preferred
Shares or Depositary Shares with which such Securities Warrants are being
offered and the number of Securities Warrants being offered with each Debt
Security, Preferred Share, Depositary Share or share of Common Stock;
- the date on and after which the holder of such Securities Warrants can
transfer them separately from the related Common Stock or series of Debt
Securities, Preferred Shares or Depositary Shares;
- the number of Preferred Shares, Depositary Shares or shares of Common
Stock that can be purchased if a holder exercises such Securities Warrant
and the price at which such Preferred Shares, Depositary Shares or Common
Stock may be purchased upon each exercise;
- the date on which the right to exercise such Securities Warrants begins
and the date on which such right expires;
- United States federal income tax consequences; and
- any other terms of such Securities Warrants.
Securities Warrants for the purchase of Preferred Shares, Depositary Shares or
Common Stock will be in registered form only.
A holder of Securities Warrant Certificates may (1) exchange them for new
certificates of different denominations, (2) present them for registration of
transfer and (3) exercise them at the corporate trust office of the Securities
Warrant Agent or any other office indicated in the applicable prospectus
supplement. Until any Securities Warrants to purchase Debt Securities are
exercised, the holder of such Securities Warrants will not have any of the
rights of Holders of the Debt Securities that can be purchased upon exercise,
including any right to receive payments of principal, premium or interest on the
underlying Debt Securities or to enforce covenants in the Indenture. Until any
Securities Warrants to purchase Preferred Shares, Depositary Shares or Common
Stock are exercised, holders of such Securities Warrants will not have any
rights of holders of the underlying Preferred Shares, Depositary Shares or
Common Stock, including any right to receive dividends or to exercise any voting
rights.
EXERCISE OF SECURITIES WARRANTS
Each holder of a Securities Warrant is entitled to purchase the principal
amount of Debt Securities or number of Preferred Shares, Depositary Shares or
shares of Common Stock, as the case may be, at the exercise price described in
the applicable prospectus supplement. After the close of business on the day
when the right to exercise terminates (or a later date if we extend the time for
exercise), unexercised Securities Warrants will become void.
A holder of Securities Warrants may exercise them by following the general
procedure outlined below:
- delivering to the Securities Warrant Agent the payment required by the
applicable prospectus supplement to purchase the underlying security;
- properly completing and signing the reverse side of the Securities Warrant
Certificate representing the Securities Warrants; and
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- delivering the Securities Warrant Certificate representing the Securities
Warrants to the Securities Warrant Agent within five business days of the
Securities Warrant Agent receiving payment of the exercise price.
If you comply with the procedures described above, your Securities Warrants
will be considered to have been exercised when the Securities Warrant Agent
receives payment of the exercise price. After you have completed those
procedures, we will, as soon as practicable, issue and deliver to you the Debt
Securities, Preferred Shares, Depositary Shares or Common Stock that you
purchased upon exercise. If you exercise fewer than all of the Securities
Warrants represented by a Securities Warrant Certificate, a new Securities
Warrant Certificate will be issued to you for the unexercised amount of
Securities Warrants. Holders of Securities Warrants will be required to pay any
tax or governmental charge that may be imposed in connection with transferring
the underlying securities in connection with the exercise of the Securities
Warrants.
AMENDMENTS AND SUPPLEMENTS TO SECURITIES WARRANT AGREEMENTS
We may amend or supplement a Securities Warrant Agreement without the
consent of the holders of the applicable Securities Warrants if the changes are
not inconsistent with the provisions of the Securities Warrants and do not
materially adversely affect the interests of the holders of the Securities
Warrants. We, along with the Securities Warrant Agent, may also modify or amend
a Securities Warrant Agreement and the terms of the Securities Warrants if a
majority of the then outstanding unexercised Securities Warrants affected by the
modification or amendment consent. However, no modification or amendment that
accelerates the expiration date, increases the exercise price, reduces the
majority consent requirement for any such modification or amendment, or
otherwise materially adversely affects the rights of the holders of the
Securities Warrants may be made without the consent of each holder affected by
the modification or amendment.
COMMON STOCK WARRANT ADJUSTMENTS
Unless the applicable prospectus supplement states otherwise, the exercise
price of, and the number of shares of Common Stock covered by, a Common Stock
Warrant will be adjusted in the manner set forth in the applicable prospectus
supplement if certain events occur, including:
- if we issue capital stock as a dividend or distribution on the Common
Stock;
- if we subdivide, reclassify or combine the Common Stock;
- if we issue rights or warrants to all holders of Common Stock entitling
them (for a period expiring 45 days after the date fixed for determining
the shareholders entitled to receive such rights or warrants) to purchase
Common Stock at less than the current market price (as defined in the
Warrant Agreement for such series of Common Stock Warrants); or
- if we distribute to all holders of Common Stock evidences of our
indebtedness or our assets (excluding certain cash dividends and
distributions described below) or rights or warrants (excluding those
referred to above).
Except as stated above, the exercise price and number of shares of Common
Stock covered by a Common Stock Warrant will not be adjusted if we issue Common
Stock or any securities convertible into or exchangeable for Common Stock, or
securities carrying the right to purchase Common Stock or securities convertible
into or exchangeable for Common Stock.
Holders of Common Stock Warrants may have additional rights under the
following circumstances:
- a reclassification or change of the Common Stock;
- a consolidation or merger involving our company; or
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- a sale or conveyance to another corporation of all or substantially all of
our property and assets.
If one of the above transactions occurs and holders of our Common Stock are
entitled to receive stock, securities, other property or assets (including cash)
with respect to or in exchange for such Common Stock, the holders of the Common
Stock Warrants then outstanding will be entitled to receive upon exercise of
their Common Stock Warrants the kind and amount of shares of stock and other
securities or property that they would have received upon the reclassification,
change, consolidation, merger, sale or conveyance if they had exercised their
Common Stock Warrants immediately before the transaction.
PLAN OF DISTRIBUTION
We may sell the securities offered pursuant to this prospectus through
agents, through underwriters or dealers or directly to one or more purchasers.
Underwriters, dealers and agents that participate in the distribution of the
securities offered pursuant to this prospectus may be underwriters as defined in
the Securities Act of 1933 and any discounts or commissions received by them
from us and any profit on the resale of the offered securities by them may be
treated as underwriting discounts and commissions under the Securities Act. Any
underwriters or agents will be identified and their compensation (including
underwriting discount) will be described in the applicable prospectus
supplement. The prospectus supplement will also describe other terms of the
offering, including any discounts or concessions allowed or reallowed or paid to
dealers and any securities exchanges on which the offered securities may be
listed.
The distribution of the securities offered under this prospectus may occur
from time to time in one or more transactions at a fixed price or prices, which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
If the applicable prospectus supplement indicates, we will authorize dealers
or our agents to solicit offers by certain institutions to purchase offered
securities from us pursuant to contracts that provide for payment and delivery
on a future date. We must approve all institutions, but they may include, among
others:
- commercial and savings banks;
- insurance companies;
- pension funds;
- investment companies; and
- educational and charitable institutions.
The institutional purchaser's obligations under the contract are only subject to
the condition that the purchase of the offered securities at the time of
delivery is allowed by the laws that govern the purchaser. The dealers and our
agents will not be responsible for the validity or performance of the contracts.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make as a result of those
certain civil liabilities.
When we issue the securities offered by this prospectus (except for shares
of Common Stock), they may be new securities without an established trading
market. If we sell a security offered by this prospectus to an underwriter for
public offering and sale, the underwriter may make a market for that security,
but the underwriter will not be obligated to do so and could discontinue any
market making
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without notice at any time. Therefore, we cannot give any assurances to you
concerning the liquidity of any security offered by this prospectus.
Underwriters and agents and their affiliates may be customers of, engage in
transactions with, or perform services for us or our subsidiaries in the
ordinary course of their businesses.
LEGAL OPINIONS
James T. Hale, Esq., who is our General Counsel, or another of our lawyers,
will issue an opinion about the legality of the securities offered by this
prospectus. Mr. Hale owns, or has the right to acquire, a number of shares of
our Common Stock which represents less than 1% of the total outstanding Common
Stock. Any underwriters will be represented by their own legal counsel.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended January 31, 1998, as set forth in their report, which is incorporated in
this prospectus by reference. Our consolidated financial statements are, and
consolidated financial statements included in subsequent filings with the SEC
will be, incorporated by reference in this prospectus in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing (to the extent consolidated financial statements included in such
subsequent filings are covered by consents executed by such firm and filed with
the SEC).
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$200,000,000
DAYTON HUDSON CORPORATION
5.875% NOTES DUE 2008
[LOGO]
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PROSPECTUS SUPPLEMENT
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SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
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