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
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(c)(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Pursuant to (S) 240.14a-11(c) or
(S)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):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1)(2) or Item
22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[_] 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:
[X] 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 of Schedule
and the date of its filing.
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4) Date Filed:
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N56 W17000 Ridgewood Drive
Menomonee Falls, Wisconsin 53051
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 1999
To Our Shareholders:
The Annual Meeting of Shareholders of Kohl's Corporation, a Wisconsin
corporation (the "Company"), will be held at Four Points Sheraton Hotel
Milwaukee-Airport, 4747 South Howell Avenue, Milwaukee, Wisconsin 53207, on
Tuesday, May 25, 1999, 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 amend the Company's Articles of Incorporation to increase the number of
shares of common stock authorized for issuance.
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 5, 1999, 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 19, 1999
[LOGO OF KOHL'S APPEARS HERE]
N56 W17000 Ridgewood Drive
Menomonee Falls, Wisconsin 53051
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS
May 25, 1999
----------------
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 25,
1999, 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 162,712,408 shares of Common Stock
outstanding at the close of business on April 5, 1999, 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 January 30, 1999 is
referred to herein as "fiscal 1998."
This proxy statement, the accompanying proxy and the Company's Annual Report
for fiscal 1998 are being furnished to shareholders beginning on or about
April 19, 1999.
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 I directors for
a three-year term expiring in 2002, and until their successors are elected.
The three Class I nominees are James D. Ericson, William S. Kellogg and R.
Elton White.
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 ten members: three of whom are Class I directors whose
terms expire at this Annual Meeting; four of whom are Class II directors whose
terms expire at the 2000 Annual Meeting; and three of whom are Class III
directors whose terms expire at the 2001 Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE ELECTION OF THE NOMINEES TO SERVE AS DIRECTORS.
1
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.
First
Year As
Director
--------
Nominees for Election as Class I Directors
(Terms to expire in 2002)
James D. Ericson, 63 (1)............................................ 1997
President and Chief Executive Officer of The Northwestern Mutual
Life Insurance Company. Mr. Ericson is a Trustee of The
Northwestern Mutual Life Insurance Company and ex-officio member
of all standing committees of the Board of Trustees (except Audit
Committee). Mr. Ericson is a director of MGIC Investment
Corporation, Green Bay Packaging and Consolidated Papers, Inc.
William S. Kellogg, 55.............................................. 1988
Chairman of the Company.
R. Elton White, 56 (1) (2).......................................... 1994
Formerly President (1991-1994) and an Executive Vice President
(1987-1991) of NCR Corporation. Mr. White is a director of
Flowserve Corporation and Keithley Instruments, Inc.
Class II Directors
(Terms to expire in 2000)
Jay H. Baker, 64.................................................... 1988
Formerly President of the Company. Mr. Baker has announced his
retirement from the Company, effective December 31, 1999.
Kevin B. Mansell, 46 ............................................... 1999
President of the Company.
Herbert Simon, 64 .................................................. 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, 56........................................... 1988
Shareholder of the law firm of Godfrey & Kahn, S.C., Milwaukee,
Wisconsin.
Class III Directors
(Terms to expire in 2001)
John F. Herma, 51................................................... 1988
Chief Operating Officer and Secretary of the Company.
R. Lawrence Montgomery, 50.......................................... 1994
Vice Chairman and Chief Executive Officer of the Company.
Frank V. Sica, 48 (2)............................................... 1988
Mr. Sica is Managing Director of Soros Fund Management LLC and
Managing Partner of Soros Private Equity Partners; director of CSG
Systems International, Inc., Emmis Broadcasting, Global
TeleSystems Group, Inc. and Outboard Marine Corporation. Formerly
Managing Director of Morgan Stanley Dean Witter & Co. from 1988 to
1998.
- - --------
(1) Member of the Compensation and Stock Option Committee.
(2) Member of the Audit Committee.
2
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
1998. In addition, management confers frequently with its directors on an
informal basis to discuss Company affairs. During fiscal 1998 each director
attended at least 75% of the full board meetings and meetings of committees on
which such director served, except Mr. Simon.
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, Chief Operating Officer's and Vice
Chairman'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 1998, the Compensation and Stock Option
Committee formally met one time and otherwise accomplished its business
without formal meetings.
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 1998.
Directors are reimbursed for travel and other expenses related to attendance
at Board and committee meetings. During fiscal 1997, directors who were not
officers or employees of the Company or any of its subsidiaries were each
awarded options to purchase 8,000 shares of Common Stock pursuant to the
Company's 1997 Stock Option Plan for Outside Directors. Directors are not
otherwise compensated for their services.
Compensation Committee Interlocks and Insider Participation
As noted above, Messrs. Ericson and White are currently members of the
Compensation and Stock Option Committee of the Board of Directors.
3
BENEFICIAL OWNERSHIP OF SHARES
The following information is furnished as of March 31, 1999 (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 31, 1999.
Amount Percent
Beneficially of
Name of Beneficial Owner Owned Class
------------------------ ------------ -------
William S. Kellogg................................ 11,827,745(1) 7.3%
Jay H. Baker...................................... 4,968,718(2) 3.1
John F. Herma..................................... 6,506,173(3) 4.0
R. Lawrence Montgomery............................ 818,960(4) *
Kevin B. Mansell.................................. 607,810(5) *
James D. Ericson.................................. 7,000(6) *
Frank V. Sica..................................... 8,000(6) *
Herbert Simon..................................... 4,000(6) *
Peter M. Sommerhauser............................. 16,721,173(7) 10.3
R. Elton White.................................... 14,000(6) *
All directors and executive officers
as a group (18 persons).......................... 25,350,263(8) 15.3
The Equitable Companies Incorporated.............. 23,971,171(9) 14.8
1290 Avenue of the Americas
New York, New York 10104
Putnam Investments, Inc........................... 9,112,158(10) 5.6
One Post Office Square
Boston, Massachusetts 02109
The Prudential Insurance Company of America....... 9,471,260(11) 5.8
751 Broad Street
Newark, New Jersey 07102
- - --------
*Less than 1%.
(1) Includes 9,337,245 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 43,260 shares held by a charitable foundation for which Mr.
Kellogg serves as a director and president. Includes 1,158,900 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, but
no pecuniary interest. Includes 390,700 shares represented by stock
options.
(2) Includes 1,158,900 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 125,660 shares held by a charitable
foundation for which Mr. Baker serves as a director and president. Also
includes 175,000 shares represented by stock options.
(3) Includes 5,351,703 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 25,150 shares held by a charitable foundation for which Mr.
Herma serves as a director and president. Also includes 133,900 shares
represented by stock options.
(4) Includes 125,948 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 540,328 shares represented by stock options.
4
(5) Includes 138,000 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 311,078 shares represented by stock options.
(6) Includes 4,000 shares represented by stock options.
(7) Includes 16,361,866 shares held in trust for the benefit of the families
of current and former executive officers of the Company or in charitable
foundations established by executive officers of the Company for which
Mr. Sommerhauser has sole or shared voting and investment power but no
pecuniary interest. Includes 81,042 shares held in trusts for the benefit
of Mr. Sommerhauser's family as to which Mr. Sommerhauser has no voting
or investment power. Includes 5,500 shares held by a charitable
foundation for which Mr. Sommerhauser acts as president and a director,
and 4,000 shares represented by stock options.
(8) Includes 2,799,460 shares represented by stock options.
(9) Based upon information as of December 31, 1998 set forth an Amendment No.
3 to Schedule 13G. According to their joint filing, The Equitable
Companies Incorporated; four French mutual insurance companies, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Conseil
Vie Assurance Mutuelle, and AXA Courtage Assurance Mutuelle; AXA and
their subsidiaries each has sole voting power with respect to 14,461,286
shares, shared voting power with respect to 2,860,770 shares, sole
dispositive power with respect to 23,963,401 shares and shared
dispositive power with respect to 770 shares.
(10) Based on information as of December 31, 1998 as set forth in Schedule
13G. According to its filing, Putnam Investments, Inc. ("Putnam") has
shared voting power with respect to 23,249 shares, shared dispositive
power with respect to 9,112,158 shares and sole voting or dispositive
power with respect to no shares. Putnam is a wholly-owned subsidiary of
Marsh & McLennan Companies, Inc., 1166 Avenue of the Americas, New York,
New York 10036.
(11) Based upon information as of December 31, 1998 set forth in Amendment No.
6 to Schedule 13G. According to its filing, The Prudential Insurance
Company of America ("Prudential") has sole voting and dispositive power
with respect to 787,200 shares, shared voting power with respect to
8,163,260 shares and shared dispositive power with respect to 8,684,060
shares. Jennison Associates LLC, 466 Lexington Avenue, New York, New
York, 10017, a subsidiary of Prudential, has filed its own Schedule 13G
indicating beneficial ownership of 9,068,550 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, except as noted below, all of such forms were filed on a
timely basis by reporting persons. Messrs. Rusinow and Sharpin each filed one
late Form 3.
5
EXECUTIVE COMPENSATION
The table below summarizes information concerning compensation for the last
three fiscal years of those persons who were at January 30, 1999 (i) the chief
executive officer and (ii) the other four most highly compensated executive
officers of the Company. The number of shares underlying stock options
indicated in this table and those that follow are adjusted to reflect the two-
for-one stock splits effected in April 1996 and April 1998.
Summary Compensation Table
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)
- - ------------------ ------ ---------- -------- --------------- ------------ ---------------
William S. Kellogg...... 1998 $1,112,769 $369,963 $ 0 50,000 $7,949
Chairman of the Board 1997 1,024,831 353,468 0 100,000 7,824
1996 948,916 327,284 0 200,000 6,245
Jay H. Baker............ 1998 947,913 315,170 0 0 7,939
Formerly President 1997 873,050 301,118 0 50,000 7,808
1996 808,380 278,813 0 100,000 6,155
John F. Herma........... 1998 585,288 194,591 0 25,000 7,916
Chief Operating Officer 1997 539,034 185,915 0 50,000 7,771
1996 499,106 172,143 0 100,000 5,855
R. Lawrence Montgomery.. 1998 522,504 176,550 40,651 100,000 7,984
Vice Chairman and 1997 460,024 151,808 48,293 120,000 7,528
Chief Executive Officer 1996 422,049 132,008 50,383 370,000 5,046
Kevin B. Mansell........ 1998 412,500 135,300 42,872 80,000 6,986
President 1997 335,000 115,500 48,597 70,000 6,578
1996 272,500 92,400 50,316 130,000 3,244
- - --------
(1) None of the named executive officers held restricted stock at the end of
fiscal 1998.
(2) Fiscal 1998 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 1998 under the
Company's savings plan in the following amounts: Mr. Kellogg $(3,399), Mr.
Baker $(3,389), Mr. Herma $(3,366), Mr. Montgomery $(3,434) and Mr.
Mansell $(3,413). Also includes a contribution of $2,080 by the Company
for fiscal 1998 to the Kohl's retirement plan account under the Company's
savings plan for each executive listed. Also includes the following
amounts paid by the Company during fiscal 1998 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 $(2,470), Mr. Montgomery $(2,470) and Mr. Mansell $(1,493).
6
Option Grants In Last Fiscal Year
The Company has adopted a 1992 Long-Term Compensation Plan (the "1992
Plan"), a 1994 Long-Term Compensation Plan (the "1994 Plan") and a 1997 Stock
Option Plan for Outside Directors (the "1997 Plan"). The 1992 Plan authorizes
awards through May 14, 2002 for up to 11,400,000 shares of Common Stock, of
which 52,739 shares were available for grant as of the end of fiscal 1998. The
1994 Plan authorizes awards through May 24, 2004 for up to 12,000,000 shares
of Common Stock, 7,727,525 shares of which were available for grant as of the
end of fiscal 1998. The 1997 Plan authorizes awards for up to 200,000 shares
of Common Stock, of which 160,000 shares were available for grant as of the
end of fiscal 1998. Awards under the 1992 Plan and the 1994 Plan may be in the
form of stock options; stock appreciation rights; Common Stock, including
restricted stock; Common Stock units; performance units; and performance
shares. Awards under the 1997 Plan may be in the form of stock options only.
During fiscal 1998, only stock options were granted under the 1992 Plan and
1994 Plan.
The table below provides information regarding option grants during fiscal
1998 to the persons named in the Summary Compensation Table.
Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rate of Stock
Shares Granted to Price Appreciation for
Underlying Employees Exercise Option Term(s)(3)
Options in Fiscal Price Expiration ----------------------
Name Granted(1)(2) Year ($/Share) Date 5% 10%
- - ---- ------------- ---------- --------- ---------- -- -----------
William S. Kellogg...... 50,000 2.9% $61.000 01/22/14 $3,290,731 $ 9,690,607
Jay H. Baker............ -- -- -- -- -- --
John F. Herma........... 25,000 1.5 61.000 01/22/14 1,645,365 4,845,303
R. Lawrence Montgomery.. 100,000 5.9 61.000 01/22/14 6,581,462 19,381,214
Kevin B. Mansell........ 30,000 1.8 47.812 10/30/13 1,547,588 4,557,365
50,000 2.9 61.000 01/22/14 3,290,731 9,690,607
- - --------
(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 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.
(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 (fifteen 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.
7
Aggregate Option Exercises and Fiscal Year End Option Values
The table below provides information regarding exercises of stock options
during fiscal 1998 and the value of stock options held at January 30, 1999 by
the persons named in the Summary Compensation Table.
Number of Shares Underlying Value of Unexercised
Unexercised In-the-Money Options
Shares Options at Fiscal Year End at Fiscal Year End
Acquired Value ------------------------------ -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- - ---- ----------- -------- ----------- -------------- ----------- -------------
William S. Kellogg...... 0 0 925,000 225,000 $52,610,925 $ 8,004,675
Jay H. Baker............ 0 0 462,500 87,500 26,305,463 3,833,588
John F. Herma........... 0 0 462,500 112,500 26,305,463 4,002,338
R. Lawrence Montgomery.. 0 0 500,828 725,000 28,294,739 33,675,253
Kevin B. Mansell........ 0 0 312,078 197,500 17,631,169 6,035,305
Employment Agreements
The Company has Employment Agreements with Messrs. Kellogg, Baker, Herma and
Montgomery. As of the end of fiscal 1998, Mr. Kellogg's Employment Agreement
provided for an annual base salary of $1,121,100, Mr. Baker's Employment
Agreement provided for an annual base salary of $955,060, Mr. Herma's
Employment Agreement provided for an annual base salary of $589,670, and Mr.
Montgomery's Employment Agreement provided for an annual base salary of
$535,000, in each case subject to increase by the Company's Board of
Directors. Each of Messrs. Kellogg, Baker, Herma and Montgomery 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 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 Internal Revenue Code of 1986, as amended (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.
8
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 1998 in accordance with each,
were: Caryn Blanc $(182,948), Kevin Mansell $(399,369), and R. Lawrence
Montgomery $(380,628). As of April 1, 1999, their respective loan balances
were: Ms. Blanc $(140,942), Mr. Mansell $(358,505), and Mr. Montgomery
$(328,460).
The loans which bore interest at 5.65% per annum and were payable on
December 9, 1998, were extended by the Company until December 9, 2001 at an
interest rate of 4.33% per annum; provided, however, that (1) if the
executive's employment terminates for any reason other than disability or
death, the loans are immediately payable, (2) if the executive's employment
terminates for disability or death, the loans are payable the earlier of one
year after such termination of employment or December 9, 2001, 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.
The Company occupies 13 stores that it leases from entities owned or managed
by Mr. Simon, his brother and their immediate families. During fiscal 1998,
the Company incurred rent expense of $4.3 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 359,307 shares of Common Stock, excluding 16,361,866 additional shares as
to which Mr. Sommerhauser has sole or shared voting and investment power. See
"Beneficial Ownership of Shares".
9
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 1998 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, Vice Chairman, President, and Chief Operating
Officer. The Chairman, Vice Chairman, President and Chief Operating Officer
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 for
executive officers generally range from 4%-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, Montgomery, Baker, Mansell and
Herma 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 1998, Mr. Kellogg's base salary increased 4.7% from $1,071,114
to $1,121,100 effective April 1, 1998. Mr. Baker's and Mr. Herma's salaries
increased 4.7% to $955,060 and $589,670, respectively. Customarily the Company
has increased the salaries of Messrs. Kellogg, Baker and Herma effective
September 1st of each year, even though salary increases for all other key
associates are increased April 1st of each year. For ease of administration,
the salaries of Messrs. Kellogg, Baker and Herma were increased effective
April 1, 1998 to be contemporaneous with salary increases for all other key
associates. As a result, the 4.7% percentage increases for Messrs. Kellogg,
Baker and Herma after seven months were equivalent to annual 8% increases
which is consistent with the Committee's past practice 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. Mr.
Montgomery's salary increased from $460,024 to $535,000 and Mr. Mansell's
salary increased from $350,000 to $460,000, each in recognition of his
increased responsibilities. The fiscal 1998 increases for Messrs. Kellogg,
Montgomery, Baker, Mansell 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, Montgomery,
Baker and Herma, their base salaries cannot be reduced without their consent.
During fiscal 1998, salaries for all executive officers increased 9.8% on
average including merit and recognition for increased responsibilities.
10
Annual Incentive Compensation. The Company maintains an executive bonus plan
for the benefit of its Management Board members, buyers, store managers and
other key executives such as sales support managers and merchandise planners.
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 equal to a
predetermined percentage of their base pay depending upon the income level
achieved (up to 22.5% of base pay (28% in the case of the Company's Senior
Vice Presidents and 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 422 associates
participated in the plan.
For fiscal 1998, Messrs. Kellogg, Montgomery, Baker, Mansell 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 ($186.5 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 1998.
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, Vice Chairman, President and Chief
Operating Officer regarding option grants for the other executive officers.
In fiscal 1998, options for 552,000 shares of Common Stock were granted by
the Committee to the Company's executive officers, including grants of 50,000,
and 25,000 shares to Messrs. Kellogg and Herma, respectively. Mr. Montgomery
was granted 100,000 shares and Mr. Mansell was granted 80,000 shares, each in
recognition of his increased responsibilities. Mr. Baker did not receive stock
options in fiscal 1998 in light of his retirement plans.
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 1998.
Messrs. Kellogg and Baker have deferred a portion of their compensation.
11
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 in their proxy statements. Mr. Kellogg's fiscal 1998 salary
and bonus were below the average compensation of base salary and bonus
received by chief executive officers in the retail companies reviewed by the
Committee. The fiscal 1998 mean salary and bonus of the other named executive
officers of the Company was also below the 1997 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
James D. Ericson
R. Elton White
12
STOCK PRICE PERFORMANCE GRAPH
The following graph shows changes from January 29, 1994 through January 30,
1999 (the last day in fiscal 1998) 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.
INDEXED RETURNS
Years Ending
Base
Period
Company / Index 29Jan94 27Jan95 2Feb96 1Feb97 31Jan98 30Jan99
- - ---------------------------------------------------------------------------------------------
KOHLS CORP 100 92.36(a) 120.78(b) 163.67(c) 292.08(d) 570.48(e)
S&P 500 INDEX 100 102.60 142.23 179.34 227.17 300.51
RETAIL (DEPT STORES)-500 100 92.36 108.69 117.93 154.31 152.33
13
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
1999. 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 auditors 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
AMENDMENT TO ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has recommended amendment of the Company's Articles
of Incorporation to increase the authorized Common Stock from 400,000,000
shares to 800,000,000 shares. The presently authorized capital stock of the
Company is 400,000,000 common shares, $0.01 par value, and 10,000,000
preferred shares, $0.01 par value.
As of April 5, 1999, 162,712,408 shares of Common Stock were issued and
outstanding and an additional 7,616,789 shares of Common Stock were reserved
for issuance under the Company's stock plans. None of the preferred stock is
outstanding.
The proposed increase in the number of shares of authorized Common stock
will make additional shares available, if needed, for issuance in connection
with future financings, stock splits, stock dividends, acquisitions, and other
corporate purposes. No further action or authorization by the Company's
shareholders would be necessary prior to the issuance of the additional shares
of Common Stock unless required by applicable law or regulatory agencies or by
the rules of any stock exchange on which the Company's securities may then be
listed. The Board of Directors believes that the availability of the
additional shares without delay or the necessity for a special shareholders'
meeting would be beneficial to the Company. The Company does not have any
immediate plans, arrangements, commitments, or understandings with respect to
the issuance of any of the additional shares of Common Stock which would be
authorized by the proposed amendment.
The proposal to increase the number of authorized shares of Common Stock has
been made to facilitate the Company's normal conduct of its business and not
to deter or prevent a change in control of the Company. If the proposed
amendment is adopted, however, the Board of Directors will have the ability
(to the extent consistent with its duty to the Company and its shareholders)
to cause the Company to issue a substantial number of additional shares of
Common Stock, without further action by the shareholders, for the purpose of
discouraging takeover attempts by diluting the stock ownership and voting
power of persons seeking to obtain control of the Company. There has been no
attempt to take control of the Company in the past, and the Company is not
aware of any current attempt to take it over.
14
The holders of any of the additional shares of Common Stock issued in the
future would have the same rights and privileges as the holders of the shares
of Common Stock currently authorized and outstanding. Those rights do not
include preemptive rights with respect to the future issuance of any
additional shares.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE.
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 2000 Annual Meeting of
Shareholders must be received at the Company's executive offices in Menomonee
Falls, Wisconsin no later than February 25, 2000, 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 21, 1999 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.
A shareholder has indicated his intention to present a proposal concerning
preparation of a report to shareholders describing the Company's actions to
ensure that the Company does not and will not do business with foreign
suppliers who manufacture items for sale in the United States using forced
labor, convict labor or illegal child labor, or who fail to satisfy all laws
and standards protecting their employee's wages, benefits, working conditions,
freedom of association and other rights. If the proposal is presented, the
Company intends to exercise its discretionary authority to vote the proxies
against adoption of this proposal.
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.
15
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL 1998 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 19, 1999
16
KOHL'S CORPORATION
PROXY
Annual Meeting of Shareholders May 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM S. KELLOGG, KEVIN B. MANSELL, 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
5, 1999 at the Annual meeting of Shareholders of Kohl's Corporation to be held
May 25, 1999, 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 11011
NEW YORK, N.Y. 10203-0011
1. Election of directors of the Company for a
term of office expiring in 2002.
FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS
listed below [_] for all nominees listed below [_] [_]
Nominees: James D. Ericson, William S. Kellog and R. Elton White.
(INSTRUCTIONS: To withhold authority is 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.
FOR [_] AGAINST [_] ABSTAIN [_]
3. Amend the Company's Articles of Incorporation to Increase the number of
shares of Common Stock authorized for issuance.
FOR [_] AGAINST [_] ABSTAIN [_]
4. In their discretion on such other business as may properly come before the
meeting.
Change of Address and or Comments Mark Here [_]
Please sign your name exactly as it appears above. 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 ,1999
-----------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Signature of Stockholder)
- - --------------------------------------------------------------------------------
(Signature of Additional Stockholder)
Votes must be indicated
(x) in Black or Blue Ink. [_]
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.