<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
KOHL'S CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO OF KOHL'S CORPORATION]
N56 W17000 RIDGEWOOD DRIVE
MENOMONEE FALLS, WISCONSIN 53051
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1997
To Our Shareholders:
The Annual Meeting of Shareholders of Kohl's Corporation, a Wisconsin
corporation (the "Company"), will be held at Davians Banquet & Conference
Center, 16300 West Silver Spring Drive, Menomonee Falls, Wisconsin 53051, on
Wednesday, May 28, 1997, at 10:00 a.m., for the following purposes:
1. To elect three directors to serve for a three-year term.
2. To ratify the appointment of Ernst & Young LLP as independent auditors.
3. To consider and act upon a proposal to adopt the Company's 1997 Stock
Option Plan for Outside Directors.
4. To act upon any other business that may properly come before the meeting or
any adjournment thereof.
Only shareholders of record at the close of business on April 11, 1997, are
entitled to notice of and to vote at the meeting.
You are cordially invited to attend the meeting. Your vote is important no
matter how large or small your holdings may be. PLEASE COMPLETE, SIGN, DATE
AND RETURN YOUR PROXY IN THE REPLY ENVELOPE PROVIDED AS SOON AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING AND
WISH TO VOTE IN PERSON, YOUR PROXY MAY BE REVOKED.
By Order of the Board of Directors
John F. Herma
Secretary
Menomonee Falls, Wisconsin
April 22, 1997
<PAGE>
[LOGO OF KOHL'S CORPORATION]
N56 W17000 RIDGEWOOD DRIVE
MENOMONEE FALLS, WISCONSIN 53051
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1997
----------------
The Board of Directors of Kohl's Corporation (the "Company") solicits the
enclosed proxy for the Annual Meeting of Shareholders to be held on May 28,
1997, or any adjournment(s) thereof, at the time and place and for the
purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. Only holders of record of the 74,020,065 shares of Common Stock
outstanding at the close of business on April 11, 1997, will be entitled to
notice of and to vote at the meeting. Each such shareholder is entitled to one
(1) vote for each share of Common Stock so held and may vote such shares
either in person or by proxy.
The shares represented by each valid proxy received in time will be voted at
the annual meeting in accordance with the directions and specifications
contained therein. A proxy may be revoked at any time before it is exercised
by filing with the Secretary of the Company a proxy dated at a later time or a
written revocation dated after the date of the proxy. A proxy will be revoked
if the shareholder who executed it is present at the meeting and elects to
vote in person.
References herein to a "fiscal year" are to the calendar year in which the
fiscal year begins. For example, the fiscal year ended February 1, 1997 is
referred to herein as "fiscal 1996."
This proxy statement, the accompanying proxy and the Company's Annual Report
for fiscal 1996 are being furnished to shareholders beginning on or about
April 22, 1997.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
Proxies solicited by the Board of Directors will, unless otherwise directed,
be voted for the election of three nominees to serve as Class II directors for
a three-year term expiring in 2000, and until their successors are elected.
The three Class II nominees are Jay H. Baker, Herbert Simon and Peter M.
Sommerhauser.
The Company's Articles of Incorporation provide that the Company's Board of
Directors shall consist of not less than five nor more than fifteen persons.
Directors are divided into three classes (Class I, Class II and Class III),
and each class is elected for a term of three years. The Board of Directors
currently consists of eight members: two of whom are Class I directors whose
terms expire at the 1999 Annual Meeting; three of whom are Class II directors
whose terms expire at this Annual Meeting; and three of whom are Class III
directors whose terms expire at the 1998 Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE ELECTION OF THE NOMINEES TO SERVE AS DIRECTORS.
1
<PAGE>
Following is information regarding the nominees and directors, as furnished
by them. Unless otherwise indicated, the nominees and directors have had the
indicated principal occupation for at least the past five years.
<TABLE>
<CAPTION>
FIRST YEAR
AS DIRECTOR
-----------
<S> <C>
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
(Terms to expire in 2000)
Jay H. Baker, 62................................................. 1988
President of the Company.
Herbert Simon, 62(2)............................................. 1988
Co-Chairman of the Board of Directors of Simon DeBartolo Group,
Inc., a publicly held real estate investment trust engaged in
the development and management of shopping centers and Co-
Chairman of Melvin Simon & Associates, Inc., a real estate
developer and manager.
Peter M. Sommerhauser, 54........................................ 1988
Shareholder of the law firm of Godfrey & Kahn, S.C., Milwaukee,
Wisconsin.
CLASS I DIRECTORS
(Terms to expire in 1999)
William S. Kellogg, 53........................................... 1988
Chairman and Chief Executive Officer of the Company.
R. Elton White, 54(1), (2)....................................... 1994
President, REW Enterprise, a private investment company.
Formerly President (1991-1994) and an Executive Vice President
(1987-1991) of NCR Corporation. Mr. White is a director of
Duriron Corporation, Verifone Corporation and Keithley
Instruments, Inc.
CLASS III DIRECTORS
(Terms to expire in 1998)
John F. Herma, 49................................................ 1988
Chief Operating Officer and Secretary of the Company.
R. Lawrence Montgomery, 48....................................... 1994
Vice Chairman of the Company.
Frank V. Sica, 46(1)............................................. 1988
Managing Director in the Merchant Banking Division of Morgan
Stanley & Co. Incorporated since 1988. Mr. Sica is a director
of ARM Financial Group, Inc., Consolidated Hydro, Inc., CSG
Systems International, Inc., Fort Howard Corporation, PageMart
Wireless, Inc., PageMart, Inc., Sullivan Communications, Inc.
and several private companies.
</TABLE>
- --------
(1) Member of the Compensation and Stock Option Committee.
(2) Member of the Audit Committee.
The Board of Directors has no reason to believe that a nominee is not
available or will not serve if elected. If for any reason a nominee becomes
unavailable for election, the Board of Directors may reduce the number of
directors or may designate a substitute nominee, in which event the shares
represented by the proxies returned to the Company will be voted for such
substitute nominee, unless an instruction to the contrary is indicated on the
proxy.
The Company's Board of Directors held four formal meetings during fiscal
1996. In addition, management confers frequently with its directors on an
informal basis to discuss Company affairs. During fiscal 1996 each director
attended at least 75% of the full board meetings and meetings of committees on
which such director served, except Mr. Simon.
2
<PAGE>
DIRECTOR COMMITTEES AND COMPENSATION
The Company's Board of Directors has two standing committees: a Compensation
and Stock Option Committee and an Audit Committee.
The duties of the Compensation and Stock Option Committee are to provide a
general review of the Company's compensation and benefit plans to ensure that
they meet corporate objectives. The Compensation and Stock Option Committee
has the authority to administer the Company's stock option plans and to grant
options thereunder. In addition, the Compensation and Stock Option Committee
reviews the Chairman's, President's and Chief Operating Officer's
recommendations on (i) compensation of all corporate officers, (ii) granting
of awards under the Company's other compensation and benefit plans and (iii)
adopting and changing major compensation policies and practices, and reports
its recommendations to the whole Board of Directors for approval and to
authorize action. During fiscal 1996, the Compensation and Stock Option
Committee accomplished its business without a formal meeting.
The duties of the Audit Committee are to recommend to the whole Board of
Directors the selection of independent auditors to audit annually the books
and records of the Company, to review the activities and the reports of the
independent auditors and to report the results of such review to the whole
Board of Directors. The Audit Committee met two times during fiscal 1996.
Directors are reimbursed for travel and other expenses related to attendance
at Board and committee meetings, but, other than Mr. White, are not otherwise
compensated for their services. Mr. White receives $15,000 per year for
services as a director, plus $1,000 per day for each committee meeting
attended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, Messrs. Sica and White are currently members of the
Compensation and Stock Option Committee of the Board of Directors. During
parts of fiscal 1996, Messrs. Simon and Sommerhauser served on the committee.
The Company occupies 10 stores that it leases from entities owned or managed
by Mr. Simon, his brother and their immediate families. During fiscal 1996,
the Company incurred rent expense of $3.7 million in connection with such
leases. The Company believes that the terms and conditions of such leases are
at least as favorable to the Company as could be obtained from unaffiliated
parties.
Mr. Sommerhauser is a shareholder of the law firm of Godfrey & Kahn, S.C.,
which performs legal services for the Company. Mr. Sommerhauser beneficially
owns 220,104 shares of Common Stock, excluding 9,725,028 additional shares as
to which Mr. Sommerhauser has sole or shared voting and investment power. See
"Beneficial Ownership of Shares".
3
<PAGE>
BENEFICIAL OWNERSHIP OF SHARES
The following information is furnished as of March 15, 1997 (unless
otherwise noted) to indicate beneficial ownership of shares of the Company's
Common Stock by each director, each executive officer listed in the Summary
Compensation Table, each person who is known to the Company to own
beneficially more than 5% of the Company's Common Stock, and all executive
officers and directors of the Company, as a group. Unless otherwise indicated,
beneficial ownership is direct and the person indicated has sole voting and
investment power. Indicated options are all exercisable within 60 days of
March 15, 1997.
<TABLE>
<CAPTION>
AMOUNT PERCENT
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER OWNED CLASS
------------------------ ------------ -------
<S> <C> <C>
William S. Kellogg................................. 6,405,412(1) 8.5%
Jay H. Baker....................................... 3,147,062(2) 4.2
John F. Herma...................................... 3,927,986(3) 5.2
R. Lawrence Montgomery............................. 358,216(4) *
Kevin B. Mansell................................... 304,216(5) *
Frank V. Sica...................................... 2,000 *
Herbert Simon...................................... 0 --
Peter M. Sommerhauser.............................. 220,104(6) *
780 North Water Street
Milwaukee, WI 53202
R. Elton White..................................... 5,000 *
All directors and executive officers as a group (13
persons).......................................... 14,828,786(7) 19.7
The Prudential Insurance Company of America........ 5,702,620(8) 7.7
Prudential Plaza
Newark, New Jersey 07102
Jennison Associates Capital Corp................... 5,689,200(9) 7.7
466 Lexington Avenue
New York, New York 10017
The Equitable Companies Incorporated............... 5,035,120(10) 6.8
787 Seventh Avenue
New York, NY 10019
</TABLE>
- --------
*Less than 1%.
(1) Includes 5,632,212 shares held in trust for the benefit of Mr. Kellogg's
family but as to which Mr. Sommerhauser has sole voting and investment
power and 25,930 shares held by a charitable foundation for which Mr.
Kellogg serves as a director and president. Excludes 634,446 shares held
in trust for the benefit of Mr. Baker's family and as to which Mr.
Kellogg and Mr. Sommerhauser have shared voting and investment power.
Includes 287,500 shares represented by stock options.
(2) Includes 634,446 shares held in trust for the benefit of Mr. Baker's
family but as to which Mr. Kellogg and Mr. Sommerhauser have shared
voting and investment power and 54,830 shares held by a charitable
foundation for which Mr. Baker serves as a director and president. Also
includes 143,750 shares represented by stock options.
(3) Includes 3,204,236 shares held in trust for the benefit of Mr. Herma's
family but as to which Mr. Sommerhauser has sole voting and investment
power and 13,400 shares held by a charitable foundation for which Mr.
Herma serves as a director and president. Also includes 143,750 shares
represented by stock options.
(4) Includes 62,974 shares held in trust for the benefit of Mr. Montgomery's
family but as to which Mr. Sommerhauser has sole voting and investment
power. Also includes 172,950 shares represented by stock options.
(5) Includes 69,000 shares held in trust for the benefit of Mr. Mansell's
family but as to which Mr. Sommerhauser has sole voting and investment
power. Also includes 118,950 shares represented by stock options.
4
<PAGE>
(6) Excludes 9,630,868 shares held in trust for the benefit of the families
of Executive Officers, as noted in the footnotes above, or held in trust
for the benefit of the family of a retired executive officer of the
Company, as to which Mr. Sommerhauser has sole or shared voting and
investment power. Includes 43,000 shares held in trusts for the benefit
of Mr. Sommerhauser's family as to which Mr. Sommerhauser has no voting
or investment power. Excludes 94,160 shares held by charitable
foundations, as noted in the footnotes above, for which Mr. Sommerhauser
acts as a director and may be deemed to have shared voting and investment
power. Includes 2,000 shares held by a charitable foundation for which
Mr. Sommerhauser acts as president and a director.
(7) Includes 1,229,192 shares represented by stock options.
(8) Based upon information as of December 31, 1996 set forth in Amendment No.
4 to Schedule 13G. According to its filing, The Prudential Insurance
Company of America has sole voting and dispositive power with respect to
555,200 shares, shared voting power with respect to 4,667,120 shares and
shared dispositive power with respect to 5,147,420 shares.
(9) Based upon information as of December 31, 1996 set forth in Amendment No.
4 to Schedule 13G. According to its filing, Jennison Associates Capital
Corp. has sole voting power with respect to 900,100 shares, shared voting
power with respect to 4,308,800 shares, sole dispositive power with
respect to no shares and shared dispositive power with respect to
5,689,200 shares.
(10) Based upon information as of December 31, 1996 set forth in a Schedule
13G. According to their joint filing, The Equitable Companies
Incorporated, AXA, Alpha Assurances I.A.R.D. Mutuelle, Alpha Assurances
Vie Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle and AXA Courtage Assurance Mutuelle, each has sole voting power
with respect to 3,446,260 shares, shared voting power with respect to
172,600 shares, sole dispositive power with respect to 5,035,120 shares
and shared dispositive power with respect to no shares.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon its review of Form 3, 4 and 5 and amendments thereto
furnished to the Company pursuant to Section 16 of the Securities Exchange Act
of 1934, as amended, all of such forms were filed on a timely basis by
reporting persons.
5
<PAGE>
EXECUTIVE COMPENSATION
The table below summarizes information concerning compensation for the last
three fiscal years of those persons who were at February 1, 1997 (i) the chief
executive officer and (ii) the other four most highly compensated executive
officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
--------------------------------- ------------
SHARES
UNDERLYING
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(2) OPTIONS(#) COMPENSATION(3)
------------------ ------ -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
William S. Kellogg...... 1996 $948,916 $327,284 $ 0 100,000 $6,245
Chairman of the Board
and 1995 861,622 91,830 0 100,000 5,604
Chief Executive Officer 1994 813,543 110,537 0 100,000 6,460
Jay H. Baker............ 1996 808,380 278,813 0 50,000 6,155
President 1995 734,014 78,230 0 50,000 5,595
1994 693,056 94,166 0 50,000 6,452
John F. Herma........... 1996 499,106 172,143 0 50,000 5,855
Chief Operating Officer 1995 453,192 48,300 0 50,000 5,226
1994 427,903 58,140 0 50,000 5,950
R. Lawrence Montgomery.. 1996 422,049 132,008 50,383 185,000 5,046
Vice Chairman 1995 341,250 35,000 36,294 40,000 4,440
1994 316,667 41,600 37,493 30,000 4,584
Kevin B. Mansell........ 1996 272,500 92,400 50,316 65,000 3,244
Executive Vice
President 1995 230,833 23,500 36,245 24,000 1,865
General Merchandise 1994 206,667 27,300 37,445 24,000 3,217
Manager
</TABLE>
- --------
(1) None of the named executive officers held restricted stock at the end of
fiscal 1996.
(2) Fiscal 1996 amounts consist of interest expense and related tax
reimbursement payments for Mr. Montgomery and Mr. Mansell made under a
certain agreement described below. See "Executive Compensation--Other
Agreements," below. Perquisites and other personal benefits (valued on the
basis of incremental cost to the Company) did not exceed the lesser of
$50,000 or 10% of the annual salary and bonus for any of the named
executive officers.
(3) Includes matching contributions by the Company for fiscal 1996 under the
Company's savings plan in the following amounts: Mr. Kellogg ($3,775), Mr.
Baker ($3,685), Mr. Herma ($3,485), Mr. Montgomery ($3,427) and Mr.
Mansell ($1,954). Also includes the following amounts paid by the Company
during fiscal 1996 for term life, long term disability and accidental
death and dismemberment insurance under the Company's life insurance plan:
Mr. Kellogg ($2,470), Mr. Baker ($2,470), Mr. Herma ($2,370), Mr.
Montgomery ($1,619) and Mr. Mansell ($1,290).
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company has adopted a 1992 Long-Term Compensation Plan (the "1992 Plan")
and a 1994 Long-Term Compensation Plan (the "1994 Plan"). The 1992 Plan
authorizes awards through May 14, 2002 for up to 5,700,000 shares of Common
Stock, of which 220,149 shares were available for grant as of the end of
fiscal 1996. The 1994 Plan authorizes awards through May 24, 2004 for up to
6,000,000 shares of Common Stock, 5,395,450 shares of which were available for
grant as of the end of fiscal 1996. Awards may be in the form of stock
options; stock appreciation rights; Common Stock, including restricted stock;
Common Stock units; performance units; and performance shares. During fiscal
1996, only stock options were granted under the 1992 Plan and 1994 Plan.
The table below provides information regarding option grants during fiscal
1996 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE
SHARES % OF TOTAL VALUE AT ASSUMED
UNDERLYING OPTIONS GRANTED EXERCISE ANNUAL RATE OF STOCK
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION PRICE APPRECIATION
NAME GRANTED(1),(2) FISCAL YEAR ($/SHARE) DATE FOR OPTION TERM(S)(3)
- ---- -------------- --------------- --------- ---------- ---------------------
5% 10%
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William S. Kellogg...... 50,000 3.5% $28.563 02/07/06 $ 898,156 $2,276,103
50,000 3.5 37.000 01/07/07 1,163,455 2,948,424
Jay H. Baker............ 25,000 1.8 28.563 02/07/06 449,078 1,138,052
25,000 1.8 37.000 01/07/07 581,728 1,474,212
John F. Herma........... 25,000 1.8 28.563 02/07/06 449,078 1,138,052
25,000 1.8 37.000 01/07/07 581,728 1,474,212
R. Lawrence Montgomery.. 40,000 2.8 28.563 02/07/06 718,525 1,820,883
100,000(4) 7.1 28.563 02/07/06 1,796,311 4,552,206
45,000 3.2 37.000 01/07/07 1,047,110 2,653,581
Kevin B. Mansell........ 30,000 2.1 28.563 02/07/06 538,894 1,365,662
35,000 2.5 37.000 01/07/07 814,419 2,063,896
</TABLE>
- --------
(1) All options granted in the fiscal year were awarded with an exercise price
equal to the fair market value of the Common Stock on the date of grant
and, except as otherwise noted, are exercisable in four equal annual
installments commencing one year from date of grant, with full vesting
occurring on the fourth anniversary of the date of grant. Options were
granted on February 7, 1996 and January 7, 1997. Customarily the Company
has granted options to executive officers soon after the commencement of
each fiscal year, even though options granted to all other key associates
are awarded prior to the end of each fiscal year. For ease of
administration, options were granted to executive officers on January 7,
1997 to be contemporaneous with options granted to all other key
associates.
(2) The Compensation and Stock Option Committee retains discretion to, among
other things, accelerate the exercise of an option, modify the terms of
outstanding options (including decreasing the exercise price), and permit
the exercise price and tax withholding obligations related to exercise to
be paid by delivery of already owned shares or by offset of the underlying
shares.
(3) These amounts do not represent the present value of the options. Amounts
shown represent what would be received upon exercise (ten years after the
date of grant) assuming certain rates of stock price appreciation during
the entire period. Actual gains, if any, on stock option exercises are
dependent on future performance of the Common Stock and overall stock
conditions. In addition, actual gains are dependent upon whether, and the
extent to which, the options actually vest.
(4) Options are exercisable in annual installments of unequal size, commencing
five years from date of grant with full vesting occurring on the tenth
anniversary of the date of grant.
7
<PAGE>
AGGREGATE OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
The table below provides information regarding the value of stock options
held at February 1, 1997 by the persons named in the Summary Compensation
Table. During the fiscal year, no stock options were exercised by such
persons.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
------------------------------ -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
William S. Kellogg...... 275,000 225,000 $7,907,813 $4,245,288
Jay H. Baker............ 137,500 112,500 3,953,906 2,122,644
John F. Herma........... 137,500 112,500 3,953,906 2,122,644
R. Lawrence Montgomery.. 145,450 375,000 4,645,350 8,272,743
Kevin B. Mansell........ 100,450 94,000 3,319,968 1,529,045
</TABLE>
PENSION PLAN
The Company froze benefit accruals under the Kohl's Department Stores, Inc.
Pension Plan (the "Pension Plan") effective February 22, 1996 and terminated
the Pension Plan on April 12, 1996. The Company replaced the Pension Plan with
an annual contribution to an additional retirement account within the
Company's 401(k) Savings Plan. Because benefit accruals were frozen and the
Pension Plan was terminated, all Pension Plan participants, including Messrs.
Kellogg, Baker, Herma, Montgomery and Mansell, were entitled to elect to
receive accrued benefits in the form of an annuity or have such amounts
transferred to the additional retirement account under the 401(k) Savings
Plan. Messrs. Kellogg, Baker, Herma, Montgomery, and Mansell elected to
transfer such amounts to the additional retirement account within the
Company's 401(k) Savings Plan. In March, 1997, the Company contributed $2,080
each for Messrs. Kellogg, Baker, Herma, Montgomery and Mansell to the
retirement account under the 401(k) Savings Plan.
EMPLOYMENT AGREEMENTS
The Company has Employment Agreements with Messrs. Kellogg, Baker and Herma.
As of the end of fiscal 1996, Mr. Kellogg's Employment Agreement provided for
an annual base salary of $991,770, Mr. Baker's Employment Agreement provided
for an annual base salary of $844,888, and Mr. Herma's Employment Agreement
provided for an annual base salary of $521,646, in each case subject to
increase by the Company's Board of Directors. Each of Messrs. Kellogg, Baker
and Herma is also entitled to participate in such bonus plans as the Company
may establish from time to time. Each of the Employment Agreements has a
three-year term, and the term is extended on a daily basis until either party
to such contract gives notice that the term shall no longer be so extended.
Under the Employment Agreements, each executive, his spouse and dependents are
entitled to post-retirement health insurance benefits and a supplemental
executive medical plan with coverage similar to that received by the executive
at the time of his retirement. Under each of the Employment Agreements, the
employment of the executive in question may be terminated upon death, as a
result of disability, by the Company for "Cause" (as defined in the Employment
Agreements), by the executive for "Good Reason" (as defined in the Employment
Agreements but which does not include a change-of-control of Kohl's), or by
the executive upon voluntary termination of employment. If the employment of
any of the executives is terminated upon his death, such executive's estate
will receive the executive's then annual base salary for a period of six
months. If the employment of any of the executives is terminated as a result
of disability, such executive will continue to receive his then base salary
(less benefits paid under such disability insurance as the Company may provide
from time to time) for a period of six months. Except for the health insurance
benefits noted above, the Employment Agreements do not provide for any post-
termination payment other than amounts earned through the date of termination
if an executive's employment is terminated by the Company for Cause or as a
result of the voluntary resignation of the executive. If the employment of an
executive is terminated by the executive for Good Reason or by the Company in
violation of the Employment Agreement, the executive will be entitled to a
lump-sum payment within ten days of the date of termination or resignation
equal generally to the sum of the
8
<PAGE>
following: (i) all accrued or deferred amounts not previously paid to the
executive; (ii) a pro rata portion of the anticipated bonus and option awards
for the current year (determined on the basis of awards made over the prior
three years) and (iii) the salary, bonus and incentive compensation payable to
the executive for the then remaining term of the Employment Agreement
(determined on the basis of the executive's then current salary and average
bonus and option awards for the prior three years). If any amount payable
under the Employment Agreements upon the termination of an executive's
employment would be subject to the excise tax imposed by Section 4999 of the
Code, or any interest or penalties would be incurred by the executive with
respect to such excise tax, then such executive would be entitled to receive
an additional amount so that after payment by the executive of all such excise
taxes, interest and penalties, such executive would retain an amount equal to
such excise taxes, interest and penalties. Under the Employment Agreements,
each executive agrees not to compete with the Company for a period of two
years following the termination of his employment.
OTHER AGREEMENTS
During fiscal 1992, certain of the Company's executive officers entered into
agreements with the Company pursuant to which the Company agreed (in
consideration for each executive's agreement not to make a certain election
under Section 83(b) of the Code) to lend the executive sufficient funds to
enable the executive to pay tax on income recognized by the executive
attributable to the lapse or termination of transfer restrictions on shares of
Common Stock owned by the executive, plus an amount equal to 62% of the
proceeds received by the executive from the sale of Common Stock in the
Company's initial public offering. Each executive also agreed to apply all
proceeds received from the sale of Common Stock in the Company's initial
public offering toward payment of the executive's income tax obligations. The
restrictions lapsed on the date of consummation of the initial public
offering. Because each such executive did not make an election under Section
83(b) of the Code at the time of the acquisition of his shares, the Company
received a federal and state income tax deduction in an amount equal to the
difference between the fair market value of the executive's Common Stock on
the date of the initial public offering and the original purchase price.
The executive officers who entered into these agreements, and the largest
amount of indebtedness outstanding during fiscal 1996 in accordance with each,
were: Caryn Blanc ($223,867), Kevin Mansell ($476,887), and R. Lawrence
Montgomery ($477,525). As of April 1, 1997, their respective loan balances
were: Ms. Blanc ($223,867), Mr. Mansell ($476,887), and Mr. Montgomery
($477,525).
The loans which bear interest at 5.65% per annum are payable on December 9,
1998; provided, however, that (1) if the executive's employment terminates for
any reason other than retirement, disability or death, the loans are
immediately payable, (2) if the executive's employment terminates for
retirement, disability or death, the loans are payable the earlier of one year
after such termination of employment or December 9, 1998, and (3) in the event
the executive or trusts established for the executive's family sells any
Common Stock, an agreed upon principal amount of the loan is payable for each
share of Common Stock so sold. The Company will pay each such executive
additional compensation equal to any interest payment on his loan, grossed-up
for any tax payable by the executive by reason of such additional compensation
(but taking into account the tax benefit for interest on the loan which is
deductible by the executive). Each loan is secured by a pledge of Common Stock
owned by the executive having a fair market value of 125% of the unpaid
principal amount of the loan, calculated as of the end of the preceding
calendar quarter.
OTHER TRANSACTIONS
Messrs. Simon and Sommerhauser are directors of the Company and have certain
relationships with the Company. See "Compensation Committee Interlocks and
Insider Participation."
9
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COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors of
Kohl's Corporation (the "Committee") is pleased to present its report on
executive compensation. This Committee report documents the components of the
Company's executive officer compensation programs and describes the basis on
which compensation determinations for fiscal 1996 were made by the Committee
with respect to the executive officers of the Company.
COMPENSATION PHILOSOPHY
It is the philosophy of the Company that executive compensation be directly
linked to corporate performance and increases in shareholder value. The
following objectives have been adopted by the Committee as guidelines for
compensation decisions:
. Provide a competitive total compensation package that enables the Company
to attract and retain key personnel.
. Provide variable compensation opportunities, primarily on an annual
basis, that are directly linked to corporate performance goals.
. Provide long-term compensation opportunities, primarily through stock
options, that align executive compensation with value received by
shareholders.
COMPENSATION PROGRAM COMPONENTS
The particular elements of the Company's compensation program for executive
officers are explained below.
Base Salary. The Committee establishes, in its discretion, increases in
salaries for the Chairman, President, Chief Operating Officer and Vice
Chairman. The Chairman, President, Chief Operating Officer and Vice Chairman
generally determine, in their discretion, based primarily on individual
performance evaluations, increases in salaries for the other executive
officers, but the Committee reviews their decisions. Salary increases
generally range from 0-9%, but in some cases may increase more than 9% to
reflect increased responsibilities or to raise an executive officer's salary
to a level commensurate with the person's position within the Company. The
Committee and Messrs. Kellogg, Baker, Herma and Montgomery rely on certain
information described below under "Summary" and on the judgment of the
Company's Human Resources Department that salary levels of executive officers
are generally competitive.
During fiscal 1996, Mr. Kellogg's base salary increased 8% from $918,300 at
February 4, 1996, to $991,772 at February 1, 1997. Mr. Baker's and Mr. Herma's
salaries also increased 8% to $844,888 and $521,646, respectively. The
percentage increase was the same as in the previous year, and is consistent
with the Committee's current intention generally to award 8% annual increases
to Messrs. Kellogg, Baker and Herma assuming acceptable corporate performance
as determined in the sole discretion of the Committee, without limitation as
to the criteria that the Committee could consider. The fiscal 1996 increases
for Messrs. Kellogg, Baker and Herma were based on the Committee's assessment
of overall corporate performance and were not based on specific criteria.
Under the terms of the employment agreements for Messrs. Kellogg, Baker and
Herma, their base salaries cannot be reduced without their consent. During
fiscal 1996, salaries for executive officers (other than those named in the
Summary Compensation Table) increased 7% on average.
Annual Incentive Compensation. The Company maintains an executive bonus plan
for the benefit of its Management Board members, buyers and store managers.
The Management Board is comprised of the Company's executive officers, senior
vice presidents, vice presidents, directors, district managers and divisional
merchandise managers. Under the plan, the Company's Board of Directors fixes
income (before extraordinary items and non-recurring charges) goals for the
Company for each fiscal year. Participants receive a cash bonus
10
<PAGE>
equal to a predetermined percentage of their base pay depending upon the
income level achieved (up to 22.5% of base pay (33% in the case of the
Company's executive officers)). The income levels are set sufficiently high in
order to link corporate performance with bonus levels, and the plan is
intended to tie compensation levels to increases in shareholder value which
should occur if the income levels are achieved. At the end of the last fiscal
year, approximately 283 associates participated in the plan.
For fiscal 1996, Messrs. Kellogg, Baker and Herma each received bonuses
under the plan aggregating approximately 33% of annual salary at year-end, the
same percentage received by all other executive officers participating in the
plan. The maximum bonus under the plan was earned because the Company achieved
income before extraordinary items and non-recurring charges in excess of the
highest performance goal ($101.2 million) set by the Board.
Long-Term Compensation. The Company's 1992 and 1994 Long-Term Compensation
Plans are intended to motivate key associates to put forth maximum efforts
toward the continued growth, profitability and success of the Company by
providing incentives through the ownership and performance of the Company's
Common Stock. The plans are designed to provide benefits to key associates
only to the extent that shareholders enjoy increases in value. The Company
views stock options as an effective way to motivate key associates and align
their interests with those of shareholders. While the plans permit the grant
of, among other things, stock options, stock appreciation rights and
restricted stock, only stock options were granted during fiscal 1996.
Stock options are granted under the plan at the prevailing market price and
will only have value if the Company's stock price increases after the grant.
Generally, option grants vest in four equal annual increments, and (except for
certain circumstances) participants must be employed by the Company at the
time of vesting in order to exercise the options.
The Committee determines, in its discretion, the number of options to be
granted to executive officers based on individual performance contributions,
the dilutive effect on the Company's other shareholders and potential
realizable value for the participants. Outstanding historical performance and
anticipated future contributions by an individual are recognized in part
through larger option grants. The Committee regularly requests and receives
recommendations from the Chairman, President, Chief Operating Officer and Vice
Chairman regarding option grants for the other executive officers.
In fiscal 1996, options for 786,000 shares of Common Stock were granted by
the Committee to the Company's executive officers, including grants of
100,000, 50,000, and 50,000 shares to Messrs. Kellogg, Baker and Herma,
respectively. The grants to Messrs. Kellogg, Baker and Herma were for the same
number of shares as in the previous year, but represent options granted on
February 7, 1996 and January 7, 1997. Customarily, the Company has granted
options to executive officers soon after the commencement of each fiscal year,
even though options granted to all other key associates are awarded prior to
the end of each fiscal year. For ease of administration, options were granted
to executive officers on January 7, 1997 to be contemporaneous with options
granted to all other key associates and are consistent with the Committee's
current intention generally to continue historical compensation practices for
them. Mr. Montgomery was granted an additional 100,000 options to a level
commensurate with his position as Vice Chairman of the Company.
TAX LAW LIMITATION ON DEDUCTIBILITY OF COMPENSATION
The Committee is aware of the limitations imposed by Section 162(m) of the
Internal Revenue Code of 1986, as amended, on the deductibility of non-
performance based compensation paid to certain executive officers of the
Company to the extent it exceeds $1 million per executive. The Committee
currently intends to recommend compensation amounts and plans which meet the
requirements for deductibility, and the Committee expects that Section 162(m)
will not limit the deductibility of any compensation expense in fiscal 1997.
Messrs. Kellogg and Baker have deferred a portion of their compensation.
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SUMMARY
The Committee has the responsibility for ensuring that the Company's
compensation program continues to be in the best interest of its shareholders.
The Committee regularly reviews the Company's compensation programs to
determine that pay levels and incentive opportunities for executive officers
reflect the performance of the Company and of the individual.
In order to ascertain that compensation levels of executive officers are
generally reasonable and competitive, the Committee reviews compensation
surveys and certain publicly available compensation information disclosed by
other retailers. The base salary and bonus of the chief executive officers of
retail companies participating in an annual compensation study of the retail
industry by Hay Group, Inc. ranged from a low of $550,000 to a high of
$1,250,000 in 1996. The base salary and bonus of the chief executive officers
of retailers that constitute the Standard & Poor's Retail (Department Stores)
Index (the "peer group index" used in the Company's stock price performance
graph) ranged from a low of $344,167 to a high of $2,625,000 in 1995 as
indicated in the retailers' respective proxy statements. The mean salary and
bonus of the companies in the peer group was $1,476,696 and the median was
$1,545,000. Mr. Kellogg's fiscal 1996 salary and bonus were significantly
below these 1995 averages. The fiscal 1996 mean salary and bonus of the other
named executive officers of the Company was also below the 1995 mean salary
and bonus of the other named executive officers of the retailers in the
Company's peer group index. Finally, the Company's compensation programs
providing stock based compensation to executive officers are periodically
submitted to shareholders for review and approval.
After a review of all existing programs, the Committee believes that the
total compensation program for executive officers is consistent with the
Committee's compensation philosophy. Base salaries are set at levels that the
Committee considers to be reasonable. The executive bonus plan provides
variable compensation opportunities to key associates that are directly linked
to annual operating results of the Company. The 1992 and 1994 Long-Term
Compensation Plans provide opportunities to participants that are consistent
with increases in value realized by shareholders. The Committee considers the
overall executive compensation package an important reason for the Company's
success to date.
COMPENSATION AND
STOCK OPTION COMMITTEE
Frank V. Sica
Herbert Simon
Peter M. Sommerhauser
R. Elton White
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STOCK PRICE PERFORMANCE GRAPH
The following graph shows changes since May 19, 1992 (the date that trading
in the Company's stock commenced) and February 1, 1997 (the last day in fiscal
1996) in the value of $100 invested in (1) the Company, (2) the Standard &
Poor's 500 Index and (3) the Retail (Department Stores)-500 Index, as
calculated by Standard & Poor's Compustat Services, Inc. The values of each
investment are based on share price appreciation plus, in the case of the
indices, dividends paid in cash, with the dividends reinvested. The
calculations exclude trading commissions and taxes.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG KOHL'S CORPORATION, RETAIL (DEPT. STORES)--500 AND
S&P 500 INDEX
<TABLE>
<CAPTION>
Measurement Period Retail
(Fiscal Year Covered) Kohl's Corporation (Dept. Stores)--500 S&P 500 INDEX
- --------------------- ------------------ ------------------- -------------
<S> <C> <C> <C>
Measurement Pt-
5/19/92 $100.00 $100.00 $100.00
FYE 01/30/93 $248.21 $113.85 $107.78
FYE 01/29/94 $339.30 $125.53 $119.95
FYE 01/28/95 $313.38 $115.94 $122.25
FYE 02/03/96 $409.81 $136.44 $169.47
FYE 02/01/97 $555.34 $148.04 $213.68
</TABLE>
13
<PAGE>
PROPOSAL NUMBER TWO
RATIFICATION OF AUDITORS
Proxies solicited by the Board of Directors will unless otherwise directed,
be voted to ratify the appointment by the Board of Directors of Ernst & Young
LLP as independent auditors of the Company and its subsidiaries for fiscal
1997. Ernst & Young LLP has been the Company's independent auditors since the
Company's incorporation in 1988. The Company has been advised by Ernst & Young
LLP that they are independent certified public accountants with respect to the
Company within the meaning of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated under such act.
A representative from Ernst & Young LLP is expected to be at the annual
meeting and will have the opportunity to make a statement if such
representative so desires and will be available to respond to appropriate
questions during the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS.
PROPOSAL NUMBER THREE
ADOPTION OF 1997 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
Proxies solicited by the Board of Directors will, unless otherwise directed,
be voted for approval and adoption of the Company's 1997 Stock Option Plan for
Outside Directors (the "Directors' Plan"). The Directors' Plan was approved,
subject to shareholder approval, by the Board of Directors on March 10, 1997.
Under the Directors' Plan, options to purchase up to 100,000 shares of Common
Stock may be granted to directors who are not officers or employees of the
Company or any of its subsidiaries. The description of the Directors' Plan set
forth herein is qualified in its entirety by reference to the text of the
Directors' Plan, a copy of which is attached hereto as Exhibit A.
The purpose of the Directors' Plan is to attract and retain independent
directors and to strengthen the mutuality of interests between such directors
and the Company's shareholders. The Company currently has four directors who
are eligible to receive options under the Directors' Plan: Frank Sica, Herbert
Simon, Peter Sommerhauser and R. Elton White.
The Directors' Plan will be administered by the Board of Directors. The
Board shall have the authority to, among other things, select eligible
directors to receive options under the Plan, determine the number of shares
subject to any option and all the terms, conditions, restrictions and/or
limitations, if any, of any option, including the time and conditions of
exercise or vesting, and the terms of any form of option.
The only grants being contemplated at this time are grants of options to
purchase 4,000 shares of Common Stock to each of the eligible directors. The
exercise price would be 100% of the fair market value of the Common Stock on
the date of grant and the options would expire ten years after grant and vest
over a four-year period. Although directors are reimbursed for travel
expenses, none of the eligible directors is currently compensated for serving
as a director, except Mr. White who receives certain cash compensation.
Following adoption of the Directors' Plan, Mr. White's cash compensation would
be discontinued.
All options granted in the Directors' Plan will be "nonqualified" stock
options. The option exercise price for all options will be determined by the
Board but not less than 50% of the fair market value of a share of the
Company's Common Stock on the date of grant. It is currently anticipated that
the exercise price generally will be 100% of the fair market value of the
Common Stock on the date of grant. On March 31, 1997, the average of
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<PAGE>
the high and low sales prices of the Company's Common Stock on the New York
Stock Exchange, Inc. was $43.125. Upon exercise, the option exercise price
may, at the direction of the Board, be paid in Common Stock or such other
consideration as the Board may deem appropriate.
In the event of a change of control (defined generally as the acquisition by
any person of 20% or more of the outstanding voting power of the Company
(unless the Board determines such acquisition is not a change of control) or a
change in a majority of the Board of Directors other than directors nominated
by the incumbent Board (excluding incumbent directors whose initial assumption
of office occurs as a result of an actual or threatened election contest)),
all options shall become immediately vested and fully exercisable.
The Board may at any time amend, discontinue or terminate the Directors'
Plan in whole or in part; provided, however, that, unless otherwise required
by law, the rights of a director with respect to options granted prior to such
amendment, discontinuance or termination may not be materially impaired
without the consent of such director.
The grant by the Company of a nonqualified stock option is not a taxable
event to the director. Generally, a director recognizes ordinary income on the
date option shares are issued to him pursuant to the exercise of the option in
an amount equal to the "spread" or the excess of the fair market value of the
shares on that date over the exercise price. Any further gain or loss on
disposition of the shares will be capital gain or loss if the shares are held
by the director for investment.
The Company will be entitled to deduct for federal income tax purposes any
amount the director is required to include in ordinary income at the time such
amount is so includable, provided that such amount is not deemed to be an
"excess parachute payment" (i.e., payment payable upon a change of control of
the Company that is in excess of reasonable compensation).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE 1997 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS.
OTHER MATTERS
COST OF SOLICITATION
The entire cost of preparing, assembling, printing and mailing the proxy
material, and the cost of soliciting proxies relating to the meeting, will be
borne by the Company. In addition to use of the mail, proxies may be solicited
by officers, directors, and other regular employees of the Company by
telephone, facsimile or personal solicitation, and no additional compensation
will be paid to such individuals. The Company will, if requested, reimburse
banks, brokerage houses, and other custodians, nominees and certain
fiduciaries for their reasonable expenses incurred in mailing proxy material
to their principals.
SHAREHOLDER PROPOSALS
Proposals that shareholders intend to present at the 1998 Annual Meeting of
Shareholders must be received at the Company's executive offices in Menomonee
Falls, Wisconsin no later than February 28, 1998, in order to be presented at
the meeting (and must otherwise be in accordance with the requirements of the
Bylaws of the Company), and must be received by December 23, 1997 for
consideration for inclusion in the proxy material for that meeting.
OTHER PROPOSED ACTION
If any other matters properly come before the meeting, including any
adjournment or adjournments thereof, proxies received in response to this
solicitation will be voted upon such matters in the discretion of the person
or persons named in the accompanying proxy.
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<PAGE>
VOTING PROCEDURES
The votes of shareholders present in person or represented by proxy at the
meeting will be tabulated by an inspector of elections appointed by the
Company. The nominees for directors of the Company who receive the greatest
number of votes cast by shareholders present in person or represented by proxy
at the meeting and entitled to vote thereon will be elected directors of the
Company. The other proposals will be approved if the affirmative votes exceed
the votes cast against. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered present with respect to that
matter. These so-called "broker non-votes" will have no effect on the outcome
of the voting. Abstentions will also have no effect on the outcome of the
voting.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1996 AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE TO SHAREHOLDERS
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY AT N56
W17000 RIDGEWOOD DRIVE, MENOMONEE FALLS, WISCONSIN 53051. EXHIBITS TO THE FORM
10-K WILL BE FURNISHED UPON PAYMENT OF THE REASONABLE EXPENSES OF FURNISHING
THEM.
By Order of the Board of Directors
John F. Herma,
Secretary
Menomonee Falls, Wisconsin
April 22, 1997
16
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EXHIBIT A
KOHL'S CORPORATION
1997 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
ARTICLE I
Purpose
The purpose of the 1997 Stock Option Plan for Outside Directors (the "Plan")
is to enable Kohl's Corporation (the "Company") to attract and retain outside
directors and to strengthen the mutuality of interests between such directors
and the Companys shareholders.
ARTICLE II
Definitions
For purposes of the Plan, the following terms shall have the following
meanings:
2.1 "Board" shall mean the Board of Directors of the Company.
2.2 "Change of Control" shall mean the occurrence of (1) the acquisition
(other than from the Company) by any person, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the
Company, a subsidiary of the Company, or any employee benefit plan or plans
sponsored by the Company or any subsidiary of the Company, directly or
indirectly, of beneficial ownership (within the meaning of Exchange Act Rule
13d-3) of 20% or more of the then outstanding shares of Common Stock of the
Company or voting securities representing 20% or more of the combined voting
power of the Companys then outstanding voting securities ordinarily entitled
to vote in the election of directors unless the Incumbent Board (as defined
below), before such acquisition or within 30 days thereafter, deems such
acquisition not to be a Change of Control; or (2) individuals who, as of the
Effective Date, constitute the Board (as of such date, the "Incumbent Board")
ceasing for any reason to constitute at least a majority of such Board;
provided, however, that any person becoming a director subsequent to the
Effective Date whose election, or nomination for election by the shareholders
of the Company, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be for purposes of the Plan,
considered as though such person were a member of the Incumbent Board but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest which
was (or, if threatened, would have been) subject to Exchange Act Rule 14a-11.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended, and
rules and regulations under the Internal Revenue Code of 1986, as amended.
2.4 "Common Stock" shall mean the Common Shares, par value $.01 per share,
of the Company.
2.5 "Effective Date" shall mean the date on which the Plan is approved by
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present, or represented, and entitled to vote at a duly held
meeting of the shareholders of the Company.
2.6 "Eligible Director" shall mean any member of the Board who, on the date
on which Options are to be granted, is not an officer or employee of the
Company or any of the Company's subsidiaries, but shall exclude any such
member of the Board who advises the Company in writing of his or her desire
not to participate in the Plan.
2.7 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
A-1
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2.8 "Fair Market Value" for purposes of the Plan, unless otherwise required
by the Code, shall mean, as of any date, the closing sales prices of a share
of Common Stock as reported on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or, if not listed or
traded on any such exchange, on the Nasdaq Stock Market, or, if not so listed
or traded, the fair market value as determined by the Board, which
determination shall be conclusive.
2.9 "Optionee" shall mean an individual to whom a Stock Option has been
granted under the Plan.
2.10 "Stock Option or Option" shall mean any option to purchase shares of
Common Stock granted pursuant to Article VI.
ARTICLE III
Administration
3.1 Administration The Plan shall be administered and interpreted by the
Board.
3.2 Guidelines Subject to Article VII, the Board shall have the authority
to: (a) interpret the Plan; (b) establish such rules and regulations as it
deems necessary for the proper operations and administration of the Plan; (c)
select Eligible Directors to receive Options under the Plan; (d) determine the
number of shares subject to any Option and all the terms, conditions,
restrictions and/or limitations, if any, of any Option, including the time and
conditions of exercise or vesting, and the terms of any form of Option; (e)
determine the performance goals, if any, which will be applicable to the
Option; (f) grant waivers of Plan terms, conditions, restrictions, and
limitations; (g) accelerate the vesting or exercise of an Option or the
performance period of an Option; and (h) take any and all other action it
deems necessary or advisable for the proper operation or administration of the
Plan. The Board may correct any defect, supply any omission, conform the Plan
to any change in law or regulation, or reconcile any inconsistency or
ambiguity in the Plan or in any Option in the manner and to the extent it
shall deem necessary to carry the Plan into effect. Notwithstanding the
foregoing, no action of the Board under this Section 3.2 shall impair the
rights of any Optionee without such persons consent, unless otherwise required
by law.
3.3 Decisions Final Any decision, interpretation or other action made or
taken in good faith by the Board in accordance with the Plan shall be final,
binding and conclusive on the Company, all members of the Board and their
respective heirs, executors, administrators, successors and assigns.
3.4 Delegation The Board may delegate any or all of its administrative
responsibilities under the Plan to officers or employees of the Company.
ARTICLE IV
Share Limitation
4.1 Shares The maximum aggregate number of shares of Common Stock that may
be issued under the Plan shall be 100,000 shares of Common Stock (subject to
any increase or decrease pursuant to Section 4.2), which may be either
authorized and unissued shares of Common Stock or issued shares of Common
Stock that have been reacquired by the Company. If any Option granted under
the Plan shall expire, terminate or be canceled for any reason without having
been exercised in full, the number of unpurchased shares shall again be
available for the purposes of the Plan.
4.1 Changes If there is any change in the number of outstanding shares of
Common Stock through the declaration of stock dividends, stock splits or the
like, the number of shares available for Options, the share subject to any
Option and the exercise prices of Options shall be automatically adjusted. If
there is any change
A-2
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in the number of outstanding shares of Common Stock through any change in the
capital of the Company, or through any other transaction referred to in
Section 424(a) of the Code, the Committee shall make appropriate adjustments
in the maximum number of shares of Common Stock which may be issued under the
Plan and any adjustments and/or modifications to outstanding Options as it
deems appropriate. In the event of any other change in the capital structure
or in the Common Stock of the Company, or in the event of a merger,
consolidation, combination or exchange of shares, or the like, as a result of
which Common Stock is changed into another class, or securities of another
person, cash or other property, the exercise price, consideration to be
received, and other terms of an Option shall be adjusted as deemed equitable
by the Board, in its sole discretion. The Board shall have authority to
provide for, in appropriate cases upon the effectiveness of the transaction,
(a) waiver, in whole or in part, of remaining restrictions for vesting or
earning, and (b) the conversion of outstanding Options into cash or other
property to be received in the transactions immediately or over the periods
the Option would have vested or been earned. Any adjustment, waiver,
conversion or the like carried out by the Board under this Section shall be
conclusive and binding for all purposes of the Plan.
ARTICLE V
Eligibility
5.1 Eligible Directors. Only Eligible Directors shall be granted Options
under the Plan.
ARTICLE VI
Stock Options
6.1 Options. All Stock Options granted under the Plan shall be non-qualified
stock options (i.e., options that do not qualify as incentive stock options
under Section 422 of the Code).
6.2 Grants. All grants of Options to Eligible Directors shall be determined
by the Board. The Board may establish a formula by which Options under the
Plan shall be automatically granted to Eligible Directors from time to time.
6.3 Terms of Options. Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Board shall,
in its discretion, determine:
(a) Stock Option Certificate. Each Stock Option shall be evidenced by,
and subject to the terms of, a Stock Option Certificate executed by the
Company. The Stock Option Certificate shall specify the number of shares of
Common Stock subject to the Stock Option, the option price, the option
term, and the other terms and conditions applicable to the Stock Option.
(b) Option Price. The option price per share of Common Stock purchasable
upon exercise of a Stock Option shall be determined by the Board; provided,
however, the option price shall be no less than 50% of the Fair Market
Value of a share of Common Stock on the date the Option is granted.
(c) Additional Terms and Conditions. The Board may, by way of the Stock
Option Certificate or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, of any Stock Option provided they
are not inconsistent with the Plan.
(d) Exercise Payment. At the option of the Board, upon exercise, the
option price of a Stock Option may be paid in cash, shares of Common Stock,
a combination of the foregoing, or such other consideration as the Board
may deem appropriate. The Board shall establish appropriate methods for
accepting Common Stock and may impose such conditions as it deems
appropriate on the use of such Common Stock to exercise a Stock Option.
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(e) Change of Control. In the event of a Change of Control, all
outstanding Stock Options shall immediately become fully exercisable.
(f) Non-transferability of Option. Unless determined by the Board, no
Stock Option shall be transferable by an Optionee otherwise than by will or
by the laws of descent and distribution, to the extent consistent with the
terms of the Plan and the Option, and all Stock Options shall be
exercisable, during an Optionee's lifetime, only by the Optionee.
ARTICLE VII
Termination or Amendment
7.1 Termination or Amendment of the Plan. The Board may at any time amend,
discontinue or terminate the Plan in whole or in part; provided, however,
that, unless otherwise required by law, the rights of an Optionee with respect
to Options granted prior to such amendment, discontinuance or termination, may
not be materially impaired without the consent of such Optionee.
7.2 Amendment of Options. The Board may amend the terms of any Stock
Options, prospectively or retroactively, but, subject to Article IV, no such
amendment or other action by the Board shall materially impair the rights of
an Optionee without the Optionee's consent.
ARTICLE VIII
Unfunded Plan
8.1 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payment not
yet made to an Optionee by the Company, nothing contained herein shall give
any such individual any rights that are greater than those of a general
creditor of the Company.
ARTICLE IX
General Provisions
9.1 Nonassignment. Except as otherwise provided in the Plan or determined by
the Board, Options granted hereunder and the rights and privileges conferred
thereby shall not be transferred, assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise), and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of such Option, right or
privilege contrary to the provisions hereof, or upon the levy of any
attachment or similar process thereon, such Option and the rights and
privileges conferred thereby shall immediately terminate and the Option shall
immediately be forfeited to the Company.
9.2 Legend. The Board may require each person purchasing shares upon
exercise of an Option to represent to the Company in writing that the Optionee
is acquiring the shares for investment only and not for resale or with a view
to distribution and to make such other representations as the Board may
require. The stock certificates representing such shares may include any
legend which the Board deems appropriate to reflect any restrictions on
transfer.
All certificates representing shares of Common Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Board may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed or traded or the Nasdaq Stock
Market, any applicable Federal or state securities law, and any applicable
corporate law, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
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9.3 Other Plans. Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements; and such arrangements
may be either generally applicable or applicable only in specific cases.
9.4 No Right to Continue Relationship. Neither the Plan nor the grant of an
Option under the Plan shall confer upon any person any right to continue as a
director of the Company or obligate the Company to nominate any director for
reelection by the Company's shareholders.
9.5 Listing and Other Conditions.
(a) The issuance of any shares of Common Stock upon exercise of an Option
shall be conditioned upon such shares being listed on a national securities
exchange or on the Nasdaq Stock Market. The Company shall have no obligation
to issue such shares unless and until such shares are so listed, and the right
to exercise any Option shall be suspended until such listing has been
effected.
(b) If at any time counsel to the Company shall be of the opinion that any
sale or delivery of shares of Common Stock upon exercise of an Option is or
may in the circumstances be unlawful or result in the imposition of a material
amount of excise taxes under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended, or
otherwise with respect to shares of Common Stock, and the right to exercise
any Option shall be suspended until, in the opinion of such counsel, such sale
or delivery shall be lawful or shall not result in the imposition of a
material amount of excise taxes.
(c) Upon termination of any period of suspension under this Section 9.5, any
Option affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available during
the period of such suspension, but no such suspension shall extend the term of
any Option.
9.6 Governing Law. The Plan and actions taken in connection herewith shall
be governed and construed in accordance with the laws of the State of
Wisconsin.
9.6 Construction. Wherever any words are used in the Plan in the masculine
gender they shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as though they were also
used in the plural form in all cases where they would so apply.
9.8 Liability of the Board. No member of the board nor any employee of the
Company or any of its subsidiaries shall be liable for any act or action
hereunder, whether of omission or commission, by any other member of the Board
or employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted
to be done by himself.
9.9 Costs. The Company shall bear all expenses incurred in administering the
Plan, including expenses of issuing Common Stock upon the exercise of Options.
9.10 Severability. If any part of the Plan shall be determined to be invalid
or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall
continue in full force and effect.
9.11 Successors. The Plan shall be binding upon and inure to the benefit of
any successor or successors of the Company.
9.12 Heading. Article and section headings contained in the Plan are
included for convenience only and are not to be used in construing or
interpreting the Plan.
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ARTICLE X
Term of Plan
10.1 Effective Date. The Plan shall be effective as of the Effective Date.
10.2 Termination. The Plan shall continue until terminated by the Board.
Termination of the Plan shall not affect Options granted before such date,
which shall continue to be exercisable, in accordance with the terms of the
Plan, after the Plan terminates.
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[ ]
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<S> <C> <C> <C>
1. Election of directors of the Company for a FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] *EXCEPTIONS
term of office expiring in 2000. listed below for all nominees listed below
Nominees: Jay H. Baker, Herbert Simon and Peter M. Sommerhauser
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name
in the space provided below.)
*Exceptions_______________________________________________________________________________________________________________________
2. Ratify appointment of Ernst & Young LLP as independent auditors. 3. Approve the Company's 1997 Stock Option Plan for Outside
Directors.
FOR [_] AGAINST [_] ABSTAIN [_] FOR [_] AGAINST [_] ABSTAIN [_]
4. In their discretion on such other business as may property come before the meeting.
Change of Address and
or Comments Mark Here [_]
Please sign your name exactly as it appears hereon.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a
partnership, please sign name by authorized person.
Dated_________________________________________, 1997
_______________________________________________
(Signature of Stockholder)
|
| _________________________________________________
_________| (Signature of Additional Stockholder)
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. Votes must be indicated X
(x) in Black or Blue ink.
</TABLE>
<PAGE>
KOHL'S CORPORATION
P R O X Y
Annual Meeting of Shareholders May 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM S. KELLOGG, JAY H. BAKER, JOHN F.
HERMA and R. LAWRENCE MONTGOMERY, and each or any of them, as Proxies of the
undersigned, with full power of substitution, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all of the shares of
Common Stock of KOHL'S CORPORATION, held of record by the undersigned on April
11, 1997, at the Annual Meeting of Shareholders of Kohl's Corporation to be held
May 28, 1997, or at any adjournment thereof.
The Board of Directors recommends a vote FOR Proposal Nos. 1, 2 and 3. This
Proxy, when properly executed, will be voted as specified on the reverse side.
THIS PROXY WILL BE VOTED FOR PROPOSAL NOS. 1, 2 AND 3 IF NO SPECIFICATION IS
MADE.
(Continued, and to be dated and signed on the reverse side.)
KOHL'S CORPORATION
P.O. BOX 11025
NEW YORK, N.Y. 10203-0025
