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<SEC-DOCUMENT>0000950131-01-500717.txt : 20010418
<SEC-HEADER>0000950131-01-500717.hdr.sgml : 20010418
ACCESSION NUMBER: 0000950131-01-500717
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20010203
FILED AS OF DATE: 20010417
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: KOHLS CORPORATION
CENTRAL INDEX KEY: 0000885639
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311]
IRS NUMBER: 391630919
STATE OF INCORPORATION: WI
FISCAL YEAR END: 0130
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-11084
FILM NUMBER: 1603947
BUSINESS ADDRESS:
STREET 1: N56 W17000 RIDGEWOOD DR
CITY: MENOMONEE FALLS
STATE: WI
ZIP: 53051
BUSINESS PHONE: 4147835800
MAIL ADDRESS:
STREET 1: N54 W13600 WOODALE DR
CITY: MENOMONEE FALLS
STATE: WI
ZIP: 53051
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d10k405.txt
<DESCRIPTION>FORM 10-K405 YEAR ENDING 02/03/2001
<TEXT>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[X]
For the fiscal year ended February 3, 2001
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[_]
For the Transition period from to
Commission File No. 1-11084
KOHL'S CORPORATION
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1630919
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
N56 W17000 Ridgewood Drive, 53051
Menomonee Falls, Wisconsin (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code (262) 703-7000
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which
Common Stock, $.01 Par Value registered
New York Stock Exchange
Securities registered pursuant to Section NONE
12(g) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
At April 6, 2001 the aggregate market value of the voting stock of the
registrant held by stockholders who were not affiliates of the registrant was
$16,760,947,853, (based upon the closing price of Registrant's Common Stock on
the New York Stock Exchange on such date). At April 6, 2001, the registrant
had issued and outstanding an aggregate of 333,112,720 shares of its Common
Stock.
Documents Incorporated by Reference:
1. Portions of Registrant's Proxy Statement dated April 17, 2001 are
incorporated into Part III.
<PAGE>
PART I
Item 1. Business
The Company currently operates 354 family oriented, specialty department
stores that feature quality, national brand merchandise priced to provide
exceptional value to customers. The Company's stores sell moderately priced
apparel, shoes, accessories and home products targeted to middle-income
customers shopping for their families and homes. Kohl's offers a convenient
shopping experience through easily accessible locations, well laid out stores,
central checkout and good in-stock position which allows the customer to get
in and out quickly. Kohl's stores have fewer departments than traditional,
full-line department stores, but offer customers dominant assortments of
merchandise displayed in complete selections of styles, colors and sizes.
Central to the Company's pricing strategy and overall profitability is a
culture focused on maintaining a low cost structure. Critical elements of this
low cost structure are the Company's unique store format, lean staffing
levels, sophisticated management information systems and operating
efficiencies resulting from centralized buying, advertising and distribution.
As used herein, the term the "Company" and "Kohl's" refer to Kohl's
Corporation, its consolidated subsidiaries and predecessors. The Company's
fiscal year ends on the Saturday closest to January 31. Fiscal 2000 ended on
February 3, 2001, and was a 53 week year.
Expansion
Since 1992, the Company has expanded from 79 stores in six states located
solely in the Midwest to a current total of 354 stores in 28 states with a
presence in six regions of the country: The Midwest, Mid-Atlantic, Northeast,
Southcentral, Southeast and Southwest. Kohl's objective is to be a national
retailer. The Company's approach is very deliberate, expanding step-by-step
into contiguous states and filling in existing markets. Kohl's enters major
new markets with critical mass of stores that enables the Company to establish
a presence and leverage marketing, regional management and distribution
expenses. Once established, the Company adds additional stores to further
strengthen market share.
In fiscal 2000, Kohl's opened 61 new stores including a major entry into
the Northeast with the opening of 35 stores in New York, New Jersey and
Connecticut. Ten stores were added to the Southcentral region including five
fill-in stores in the Dallas/Fort Worth market, and an initial entry into
Oklahoma with three stores in Tulsa. In addition, four stores were added to
the Denver market, seven stores were added to the Midwest region and five
stores were added to the Mid-Atlantic and Southeast regions.
Management believes there is substantial opportunity for further growth and
intends to open approximately 60 new stores in fiscal 2001. In the first
quarter, Kohl's opened 34 stores including entering the Atlanta, GA market
with 15 stores and the Fayetteville/Ft. Smith market in Arkansas with three
stores. The remaining 16 stores included the addition of four stores in the
Northeast in the Hartford/New Haven, CT market and 12 new stores in other
existing regions. In the fall of 2001, Kohl's plans to open approximately 26
stores including three stores in the Atlanta, GA market; four stores in the
Oklahoma City, OK market; three stores in the Austin, TX market; two stores in
the El Paso, TX market; approximately seven stores in the Midwest region and
seven additional stores in other existing regions. A fifth distribution center
is scheduled to open in New York in fiscal 2001 to support Northeast
expansion.
2
<PAGE>
The Kohl's concept has proven to be transferable to markets across the
country. The following table summarizes Kohl's regional expansion at key
intervals since the Company went public in 1992.
<TABLE>
<CAPTION>
Number of Stores at Fiscal
Year End
-----------------------------
Actual
------------------- Projected
1992 1997 1999 2000 2001
---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C>
Midwest..................................... 79 136 156 163 176
Mid-Atlantic................................ -- 28 46 50 55
Northeast................................... -- 4 7 42 47
Southcentral................................ -- 8 28 38 51
Southeast................................... -- 6 16 17 40
Southwest................................... -- -- 6 10 11
--- --- --- --- ---
Total................................... 79 182 259 320 380
=== === === === ===
</TABLE>
Additionally, Kohl's retailing strategy has proven to be successful in
various sized markets. For example, Kohl's successfully operates stores in
small single store markets such as Rochester, MN with a population of 120,000
people as well as large markets including the greater New York market with a
population in excess of 20 million people. At the end of fiscal 2000, Kohl's
operated stores in the following large and intermediate sized markets.
<TABLE>
<CAPTION>
Number of Stores at
February 3, 2001
-------------------
<S> <C>
Greater New York metropolitan area.................... 35
Chicago............................................... 33
Greater Philadelphia metropolitan area................ 20
Dallas/Fort Worth..................................... 18
Washington DC/Baltimore............................... 18
Milwaukee............................................. 16
Detroit............................................... 13
Minneapolis/St. Paul.................................. 13
Cleveland............................................. 10
Denver................................................ 10
Indianapolis.......................................... 9
Columbus.............................................. 8
St. Louis............................................. 8
Charlotte............................................. 6
Cincinnati............................................ 6
Kansas City........................................... 6
Pittsburgh............................................ 6
</TABLE>
Kohl's plans to continue expansion across the country through a combination
of new market entry and fill-in stores in existing regions. During 2002,
Kohl's plans to open approximately 70 stores including continued expansion in
the Northeast and additional expansion in Texas with a significant entry into
Houston. The Northeast expansion includes the acquisition of 15 former
Bradlees stores of which 12 stores will be an initial entry into the Boston,
MA market and three stores are planned to be added as fill-in locations in New
Jersey. In 2003, Kohl's plans to begin a major expansion into the Southwest
region of the country with an entry into the Los Angeles, CA market. Further
expansion into Southern California, Arizona and Nevada is planned for 2003 and
2004. A distribution center will be built to support the Company's growth in
the Southwest region.
Management believes the transferability of the Kohl's retailing strategy,
the Company's experience in acquiring and converting pre-existing stores and
in building new stores, combined with the Company's substantial investment in
management information systems, centralized distribution and headquarters
functions provide a solid foundation for further expansion.
3
<PAGE>
Merchandising
Kohl's stores feature moderately priced, department store national brand
names which provide exceptional value to customers. Kohl's merchandise is
targeted to appeal to middle-income customers shopping for their families and
homes. The Company's stores generally carry a consistent merchandise
assortment with some differences attributable to regional preferences. The
Company's stores emphasize apparel and shoes for women, men and children, soft
home products, such as towels, sheets and pillows, and housewares. The
Company's merchandise mix is reflected by the following table:
Merchandise Mix (percent of net sales)
<TABLE>
<CAPTION>
Fiscal Year
----------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Womens.................................................. 30.1% 28.8% 27.9%
Mens.................................................... 20.8% 21.0% 21.3%
Home.................................................... 18.8% 19.3% 18.9%
Childrens............................................... 12.7% 12.9% 13.6%
Footwear................................................ 9.4% 9.8% 10.2%
Accessories............................................. 8.2% 8.2% 8.1%
</TABLE>
Convenience
Convenience is another important cornerstone of Kohl's business model. At
Kohl's, convenience begins before the customer enters the store, with a
neighborhood location close to home. Other aspects of convenience include
easily accessible entry, knowledgeable and friendly associates, wide aisles, a
functional store layout, shopping carts/strollers and fast, centralized
checkouts. The physical store layout coupled with the Company's focus on
strong in-stock position on color and size are aimed at providing a convenient
shopping experience for an increasingly time starved customer. In addition,
Kohl's plans to introduce on-line shopping on the Company's existing web-site
in 2001. Designed as an added service for customers who prefer to shop from
their homes, the web-site will offer popular key items, best selling family
apparel and home merchandise. The site is designed to provide an easy-to-
navigate, on-line shopping environment that compliments the Company's in-store
focus on convenience.
Distribution
The Company receives substantially all of its merchandise at four
distribution centers, with the balance delivered directly to the stores by
vendors or their distributors. The distribution centers ship merchandise to
each store by contract carrier several times a week.
The Menomonee Falls, Wisconsin distribution center opened in 1981. This
500,000 square foot facility services the Company's stores in northern
Illinois, Wisconsin, Minnesota and North Dakota.
The Company opened a 650,000 square foot distribution center in Findlay,
Ohio in 1994. This facility services stores in Ohio, Michigan, Indiana,
Kentucky, Tennessee, and West Virginia. This facility is currently being
expanded by approximately 100,000 square feet to increase capacity.
The Company opened a distribution center in Winchester, Virginia in 1997.
This 400,000 square foot facility services the Company's stores in North
Carolina, Pennsylvania, Virginia, Maryland, Connecticut, New York, Delaware
and New Jersey.
4
<PAGE>
The Company opened a 540,000 square foot distribution center in Blue
Springs, Missouri in December 1999. The facility services the Company's stores
in Iowa, Kansas, Missouri, Nebraska, South Dakota, Texas, Oklahoma, southern
Illinois, Colorado, Arkansas and Georgia.
These four facilities are capable of supporting approximately 400 stores.
The Company plans to open its fifth distribution center in New York in fiscal
2001.
The Company opened a 500,000 square foot fulfillment center in Monroe, Ohio
in March 2001. The facility will service the Company's e-commerce business.
Employees
As of February 3, 2001, the Company had approximately 54,000 employees,
including approximately 16,800 full-time and approximately 37,200 part-time
associates. The number of associates varies during the year, peaking during
the "back-to-school" and Christmas holiday seasons. None of the Company's
associates are represented by a collective bargaining unit. The Company
believes its relations with its associates are very good.
Competition
The retail industry is highly competitive. Management considers quality,
value, merchandise mix, service and convenience to be the most significant
competitive factors in the industry. The Company's primary competitors are
traditional department stores, up-scale mass merchandisers and specialty
stores. The Company's specific competitors vary from market to market.
Seasonality
The Company's business, like that of most retailers, is subject to seasonal
influences, with the major portion of sales and income realized during the
last half of each fiscal year, which includes the back-to-school and holiday
seasons. Approximately 16% and 30% of sales occur during the back-to-school
and holiday seasons, respectively. Because of the seasonality of the Company's
business, results for any quarter are not necessarily indicative of the
results that may be achieved for a full fiscal year. In addition, quarterly
results of operations depend significantly upon the timing and amount of
revenues and costs associated with the opening of new stores.
Trademarks and Service Marks
The name "Kohl's", written in its distinctive block style, is a registered
service mark of a wholly-owned subsidiary of the Company, and the Company
considers this mark and the accompanying name recognition to be valuable to
its business. This subsidiary has approximately 40 additional trademarks,
trade names and service marks, most of which are used in its private label
program.
Item 2. Properties
As of February 3, 2001, the Company operated 320 stores in 26 states. The
Company owned 76 stores, owned 59 stores with ground leases and leased 185
stores under operating leases. The typical ground lease has an initial term of
between 20 and 25 years, with 2 to 6 renewal periods of 5 to 10 years each,
exercisable at the Company's option. The typical operating lease has an
initial term of 20 years, with 2 to 8 renewal periods of 5 to 10 years each,
exercisable at the Company's option.
Substantially all of the Company's leases provide for a minimum annual rent
that is fixed or adjusts to set levels during the lease term, including
renewals. Approximately 52% of the leases provide for additional rent based on
a percentage of sales to be paid when designated sales levels are achieved. At
February 3, 2001, the average minimum annual rent of the 185 leased stores was
$6.65 per square foot, and the average minimum annual rent of the 59 stores
operated under ground leases was $3.72 per square foot.
5
<PAGE>
The Company's stores are located in strip shopping centers (209), community
and regional malls (44), and as free standing units (67). Of the Company's
stores, 284 are one story facilities and 36 are two story facilities.
<TABLE>
<CAPTION>
Number of
Stores at
February 3,
2001
-----------
<S> <C>
Illinois...................................................... 40
Ohio.......................................................... 31
Wisconsin..................................................... 28
Pennsylvania.................................................. 24
Michigan...................................................... 22
New Jersey.................................................... 20
Texas......................................................... 18
Indiana....................................................... 17
Minnesota..................................................... 15
New York...................................................... 14
Virginia...................................................... 12
Colorado...................................................... 10
Maryland...................................................... 10
Missouri...................................................... 10
North Carolina................................................ 10
Connecticut................................................... 8
Kansas........................................................ 7
Iowa.......................................................... 4
Kentucky...................................................... 4
Nebraska...................................................... 4
Oklahoma...................................................... 3
Tennessee..................................................... 3
Delaware...................................................... 2
West Virginia................................................. 2
North Dakota.................................................. 1
South Dakota.................................................. 1
---
Total..................................................... 320
===
</TABLE>
The Company owns its distribution centers in Menomonee Falls, Wisconsin;
Findlay, Ohio; Winchester, Virginia and Blue Springs, Missouri. The Company
also owns its corporate headquarters in Menomonee Falls, Wisconsin and will
own the New York distribution center scheduled to open in fiscal 2001. The
Company leases the e-commerce fulfillment center in Monroe, OH.
Item 3. Legal Proceedings
The Company is involved in various legal matters arising in the normal
course of business. In the opinion of management, the outcome of such
proceedings and litigation will not have a material adverse impact on the
Company's financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the last quarter of fiscal 2000.
6
<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
(a) Market information
The Common Stock has been traded on the New York Stock Exchange since May
19, 1992, under the symbol "KSS." On March 6, 2000, the Company's Board of
Directors declared a 2 for 1 stock split effected in the form of a stock
dividend on the Company's common stock. The record date for the stock split
was April 7, 2000. The prices in the table set forth below indicate the high
and low prices of the Common Stock for each quarter in fiscal 2000 and 1999,
adjusted to give effect to the stock split.
<TABLE>
<CAPTION>
Price Range
-------------
High Low
------ ------
<S> <C> <C>
Fiscal 2000
First Quarter..................................................... $54.78 $34.06
Second Quarter.................................................... 66.50 44.00
Third Quarter..................................................... 64.75 49.06
Fourth Quarter.................................................... 72.20 48.44
Fiscal 1999
First Quarter..................................................... $39.00 $31.38
Second Quarter.................................................... 40.63 31.75
Third Quarter..................................................... 39.97 30.75
Fourth Quarter.................................................... 39.22 31.47
</TABLE>
(b) Holders
At April 6, 2001, there were 6,128 holders of record of the Common Stock.
(c) Dividends
The Company has never paid a cash dividend, has no current plans to pay
dividends on its Common Stock and intends to retain all earnings for
investment in and growth of the Company's business. In addition, financial
covenants and other restrictions in the Company's financing agreements limit
the payment of dividends on the Common Stock. The payment of future dividends,
if any, will be determined by the Board of Directors in light of existing
business conditions, including the Company's earnings, financial condition and
requirements, restrictions in financing agreements, and other factors deemed
relevant by the Board of Directors.
7
<PAGE>
Item 6. Selected Consolidated Financial Data
The selected consolidated financial data presented below should be read in
conjunction with the consolidated financial statements of the Company and
related notes included elsewhere in this document. The selected consolidated
financial data, except for the operating data, has been derived from the
audited consolidated financial statements of the Company, which have been
audited by Ernst & Young LLP, independent auditors.
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------
January January January February
February 3, 29, 30, 31, 1,
2001(a) 2000 1999 1998 1997
----------- ---------- ---------- ---------- ----------
(Dollars in Thousands, Except Per Share and Per Square
Foot Data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $6,151,996 $4,557,112 $3,681,763 $3,060,065 $2,388,221
Cost of merchandise
sold................... 4,056,139 3,014,073 2,447,301 2,046,468 1,608,688
---------- ---------- ---------- ---------- ----------
Gross margin............ 2,095,857 1,543,039 1,234,462 1,013,597 779,533
Selling, general and
administrative
expenses(b)............ 1,282,367 975,269 810,162 678,793 536,226
Depreciation and
amortization........... 126,986 88,523 70,049 57,380 44,015
Preopening expenses..... 35,189 30,972 16,388 18,589 10,302
---------- ---------- ---------- ---------- ----------
Operating income........ 651,315 448,275 337,863 258,835 188,990
Interest expense,
net(b)................. 46,201 27,163 21,114 23,772 17,622
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 605,114 421,112 316,749 235,063 171,368
Provision for income
taxes.................. 232,966 162,970 124,483 93,790 68,890
---------- ---------- ---------- ---------- ----------
Net income.............. $ 372,148 $ 258,142 $ 192,266 $ 141,273 $ 102,478
========== ========== ========== ========== ==========
Per share(c):
Basic................. $ 1.13 $ 0.80 $ 0.61 $ 0.46 $ 0.35
Diluted............... $ 1.10 $ 0.77 $ 0.59 $ 0.45 $ 0.34
Operating Data:
Comparable store sales
growth(d).............. 9.0% 7.9% 7.9% 10.0% 11.3%
Net sales per selling
square foot(e)......... $ 281 $ 270 $ 265 $ 267 $ 261
Total square feet of
selling space
(in thousands; end of
period)................ 23,610 18,757 15,111 12,533 10,064
Number of stores open
(end of period)........ 320 259 213 182 150
Balance Sheet Data (end
of period):
Working capital......... $1,198,600 $ 732,111 $ 559,207 $ 525,251 $ 229,339
Property and equipment,
net.................... 1,726,450 1,352,956 933,011 749,649 596,227
Total assets............ 3,855,154 2,931,047 1,936,095 1,619,721 1,122,483
Total long-term debt.... 803,081 494,993 310,912 310,366 312,031
Shareholders' equity.... 2,202,639 1,685,503 1,162,779 954,782 517,471
</TABLE>
- --------
(a) Fiscal 2000 contained 53 weeks.
(b) Fiscal 2000 interest expense related to the sale of accounts receivable
totaling $7.6 million was included in selling, general and administrative
expenses in the Company's quarterly financial statements and was
reclassified to interest expense at fiscal year end (See Footnote 10 to
the Company's consolidated financial statements).
(c) All per share data has been adjusted to reflect the 2 for 1 stock splits
effected in April 2000, April 1998 and April 1996.
(d) Comparable store sales for each period are based on sales of stores
(including relocated or expanded stores) open throughout the full period
and throughout the full prior period. Comparable store sales growth for
fiscal 2000 was calculated based on the comparable 52 week period.
(e) Net sales per selling square foot is calculated using net sales of stores
that have been open for the full year divided by their square footage of
selling space.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 7. Results of Operations
The Company's net income increased $114.0 million or 44.2% from $258.1
million in fiscal 1999 to $372.1 million in fiscal 2000. This represented the
fifth consecutive year of earnings growth over 30%. Net income increased $65.9
million or 34.3% in fiscal 1999 and $51.0 million or 36.1% in fiscal 1998.
Net Sales
Net sales for the last three years, number of stores, sales growth and net
sales per selling square foot by year were as follows:
<TABLE>
<CAPTION>
Fiscal Year
----------------------------------
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net sales (in thousands).................... $6,151,996 $4,557,112 $3,681,763
Number of stores open (end of period)....... 320 259 213
Sales growth--all stores.................... 35.0% 23.8% 20.3%
Sales growth--comparable stores(a).......... 9.0% 7.9% 7.9%
Net sales per selling square foot(b)........ $281 $270 $265
</TABLE>
- --------
(a) Comparable store sales growth for each period is based on sales of stores
(including relocated or expanded stores) open throughout the full period
and throughout the full prior period. Fiscal 2000 comparable sales growth
was calculated based on the comparable 52 week period.
(b) Net sales per selling square foot is calculated using net sales of stores
that have been open for the full year divided by their square footage of
selling space.
Increases in net sales primarily reflect new store openings and comparable
stores sales growth. Net sales increased $1,594.9 million, or 35.0%, from
$4,557.1 million in fiscal 1999 to $6,152.0 million in fiscal 2000. The
increase in sales is attributable to the opening of 61 new stores in fiscal
2000, to the inclusion of a full year of operating results for the 46 stores
opened in fiscal 1999, comparable store sales growth of 9.0% and the impact of
the 53rd week.
Net sales increased $875.3 million, or 23.8%, from $3,681.8 million in
fiscal 1998 to $4,557.1 million in fiscal 1999. The increase in sales is
attributable to the opening of 46 new stores in fiscal 1999, to the inclusion
of a full year of operating results for 32 stores opened in fiscal 1998 and
comparable store sales growth of 7.9%.
Components of Earnings
The following table sets forth statement of operations data as a percentage
of net sales for each of the last three years:
<TABLE>
<CAPTION>
Fiscal Year
-------------------
2000 1999 1998
----- ----- -----
<S> <C> <C> <C>
Net sales.................................................. 100.0% 100.0% 100.0%
Cost of merchandise sold................................... 65.9 66.1 66.5
----- ----- -----
Gross margin............................................... 34.1 33.9 33.5
Selling, general and administrative expenses............... 20.8 21.4 22.0
Depreciation and amortization.............................. 2.1 1.9 1.9
Preopening expenses........................................ 0.6 0.7 0.4
----- ----- -----
Operating income........................................... 10.6 9.9 9.2
Interest expense, net...................................... 0.8 0.6 0.6
----- ----- -----
Income before income taxes................................. 9.8 9.3 8.6
Provision for income taxes................................. 3.8 3.6 3.4
----- ----- -----
Net income................................................. 6.0% 5.7% 5.2%
===== ===== =====
</TABLE>
9
<PAGE>
Gross Margin. The Company's gross margin has increased from 33.5% in fiscal
1998 to 34.1% in fiscal 2000. This increase is primarily attributable to a
change in merchandise mix and improvements related to inventory management.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include all direct store expenses such as payroll,
occupancy and store supplies and all costs associated with the Company's
distribution centers, advertising and headquarters functions, but exclude
depreciation and amortization. Although the total amount of selling, general,
and administrative expenses increased from fiscal 1998 to fiscal 2000 due to
the addition of new stores, such expenses decreased as a percent of net sales
expenses from 22.0% in fiscal 1998 to 20.8% in fiscal 2000. The decline is
primarily attributable to the leveraging of store, distribution and
headquarters expenses as a result of the increased sales. At the end of fiscal
2000, $7.6 million of interest expense related to the sale of accounts
receivable that had been included in selling, general and administrative
expenses in the Company's quarterly financial statements was reclassified to
interest expense (See Footnote 10 to the Company's consolidated financial
statements).
Depreciation and Amortization. The total amount of depreciation and
amortization increased from fiscal 1998 to fiscal 2000 due to the addition of
new stores, the remodeling of existing stores and the mix of owned versus
leased stores. Depreciation and amortization increased as a percentage of net
sales from 1.9% in fiscal 1998 to 2.1% in fiscal 2000.
Preopening Expenses. Effective January 30, 1999, the Company implemented
SOP 98-5, "Reporting on the Costs of Start-Up Activities", which requires
preopening costs to be expensed as incurred. The Company incurred $35.2
million of preopening expenses in fiscal 2000 of which approximately $30.1
million related to the opening of 61 stores in fiscal 2000 and the remaining
$5.1 million was associated with the opening of 34 stores in the spring of
2001. The Company incurred $31.0 million of preopening expenses in fiscal 1999
of which approximately $23.6 million related to the opening of 46 stores in
fiscal 1999 and the remaining $7.4 million was associated with the opening of
39 stores in the spring of 2000. The Company incurred $16.4 million of
preopening expenses in fiscal 1998 of which approximately $15.4 million
related to the opening of 32 stores in fiscal 1998 and the remaining $1.0
million was associated with the opening of 18 stores in spring of 1999. These
expenses relate to the costs associated with new store openings, including
advertising, hiring and training costs for new employees and processing and
transporting initial merchandise.
Operating Income. Operating income increased $203.0 million or 45.3% in
fiscal 2000, $110.4 million or 32.7% in fiscal 1999 and $79.0 million or 30.5%
in fiscal 1998 due to the factors described above.
Interest Expense. Net interest expense increased $19.0 million to $46.2
million in fiscal 2000. The increase was primarily attributable to the $554.4
million Liquid Yield Option Subordinated Notes issued in June 2000 (see
Liquidity discussion below) and the $200 million of non-callable unsecured
debentures issued in June 1999 outstanding for a full year. At the end of
fiscal 2000, $7.6 million of interest expense related to the sale of accounts
receivable that had been included in selling, general and administrative
expenses in the Company's quarterly financial statements was reclassified to
interest expense (see Footnote 10 to the Company's consolidated financial
statements). Net interest expense increased $6.1 million to $27.2 million in
fiscal 1999. The increase in fiscal 1999 was primarily due to the $200 million
of non-callable unsecured debentures issued in June 1999. Net interest
decreased $2.7 million to $21.1 million in fiscal 1998. The decrease in fiscal
1998 was primarily due to a reduction in borrowings under its revolving credit
facility and increased interest income on short-term investments that resulted
from cash generated from a 1997 public equity offering.
Income Taxes. The Company's effective tax rate was 38.5% in fiscal 2000,
38.7% in fiscal 1999 and 39.3% in fiscal 1998. The overall decline in the
effective tax rates in fiscal 2000, 1999 and 1998 was primarily due to the
decrease in state income taxes, net of federal tax benefits and non-deductible
goodwill amortization as a percentage of income before taxes.
10
<PAGE>
Inflation
The Company does not believe that inflation has had a material effect on
the results of operations during the periods presented. However, there can be
no assurance that the Company's business will not be affected in the future.
Liquidity and Capital Resources
The Company's primary ongoing cash requirements are for seasonal and new
store inventory purchases, the growth in credit card accounts receivable and
capital expenditures in connection with expansion and remodeling programs. The
Company's primary sources of funds for its business activities are cash flow
from operations, financing secured by its proprietary accounts receivable,
borrowings under its revolving credit facility and short-term trade credit.
Short-term trade credit, in the form of extended payment terms for inventory
purchases or third-party factor financing, represents a significant source of
financing for merchandise inventories. The Company's working capital and
inventory levels typically build throughout the fall, peaking during the
holiday selling season. In addition, the Company periodically accesses the
capital markets, as needed, to finance its growth.
The Company's working capital increased to $1,198.6 million at February 3,
2001, from $732.1 million at January 29, 2000. The increase was primarily
attributable to an increase in inventory, offset in part by increased accounts
payable, and an increase in accounts receivable.
The Company's merchandise inventories increased $208.9 million over the
January 29, 2000 balance. The increase was primarily the result of higher
merchandise levels required to support existing stores and incremental new
store locations. Accounts payable increased $63.5 million from January 29,
2000. Fluctuations in the level of accounts payable are primarily attributable
to the timing and number of new store openings and invoice dating arrangements
with vendors.
The Company's accounts receivable increased $176.2 million over the January
29, 2000 balance. The increase is due to an increase in proprietary credit
card sales.
In December 1999, the Company entered into a $225 million Receivable
Purchase Agreement (RPA) with Preferred Receivables Funding Corporation,
certain investors and Bank One as agent. The RPA is renewable at the Company's
request and investors option, under which it periodically sells, generally
with recourse, an undivided interest in the Company's private label credit
card receivables. At February 3, 2001, no receivables were sold. At January
29, 2000, proceeds received upon the sale of $85 million of receivables under
the RPA are reflected as short-term debt.
Prior to entering into the RPA in December 1999, the Company's subsidiary,
Kohl's Receivables Corporation, had a similar agreement with the same parties
pursuant to which it sold an undivided interest in its receivables which met
the true sale requirements of SFAS No. 125. Accordingly, the $113.0 million
interest sold at January 30, 1999 is reflected as a reduction of accounts
receivable.
Cash provided by operating activities was $372.1 million for fiscal 2000 as
compared to $157.5 million for fiscal 1999, and $240.5 million for fiscal
1998. Excluding changes in operating assets and liabilities, cash provided by
operating activities was $609.6 million for fiscal 2000, $402.7 million for
fiscal 1999 and $275.6 million for fiscal 1998.
Capital expenditures include costs for new store openings, store remodels,
distribution center openings and other base capital needs. These expenditures
fluctuate from year to year as a result of the timing of new store capital
spending, the mix of owned, leased or acquired stores, the number of stores
remodeled and the timing of opening distribution centers. The Company's
capital expenditures were $481.0 million during fiscal 2000, $625.4 million
during fiscal 1999 and $248.9 million during fiscal 1998.
11
<PAGE>
Total capital expenditures for fiscal 2001 are currently expected to be
approximately $700 million. This estimate includes the purchase of favorable
lease rights for 15 stores from Bradlees Inc., the renovation and refixturing
of the properties, the capital required to open the New York distribution
facility, new store spending as well as base capital needs. The Company plans
to open approximately 60 new stores in fiscal 2001. The Company does not
anticipate that its planned expansion will be limited by any restrictive
covenants in its financing agreements.
In June 2000, the Company issued $554.4 million aggregate principal amount
of Liquid Yield Option Subordinated Notes (LYONs). The LYONs were issued at a
discount to yield an effective interest rate of 2.75% per year and are
subordinated to all existing and future senior indebtedness of the Company.
Net proceeds, excluding expenses, were $319.4 million. Each $1,000 principal
amount of LYON is convertible at anytime into 7.156 shares of the Company's
common stock. The debt is callable by the Company beginning June 12, 2003, for
cash. The holders of the securities can "put" the LYONs back to the Company
after three and ten years during specified 30-day windows. The proceeds were
initially used to pay off borrowings under the Company's outstanding revolving
credit facility and accounts receivables program and for general corporate
purposes, including store expansion.
In March 2001, the Company issued $300 million aggregate principal amount
of 6.30% unsecured notes due March 1, 2011. The proceeds will be used for
general corporate purposes, including continued store growth.
The Company anticipates that it will be able to satisfy its working capital
requirements, planned capital expenditures and debt service requirements with
proceeds from cash flows from operations, short-term trade credit, $225
million of available financing secured by its proprietary credit card accounts
receivable, seasonal borrowings under its $300 million revolving credit
facility and other sources of financing. The Company expects to generate
adequate cash flows from operating activities to sustain current levels of
operations. The Company maintains favorable banking relations and anticipates
that the necessary credit agreements will be extended or new agreements will
be entered into in order to provide future borrowing requirements as needed.
Forward-Looking Information/Risk Factors
Items 1, 2, 5 and 7 of this Form 10-K contain "forward-looking statements,"
subject to protections under federal law. The Company intends words such as
"believes," "anticipates," " plans," "may," "will," "should," "expects" and
similar expressions to identify forward-looking statements. In addition,
statements covering the Company's future sales or financial performance and
the Company's plans, objectives, expectations or intentions are forward-
looking statements, such as statements regarding the Company's liquidity, debt
service requirements, planned capital expenditures, future store openings and
adequacy of capital resources. There are a number of important factors that
could cause the Company's results to differ materially from those indicated by
the forward-looking statements, including among others, those risk factors
described in Exhibit 99.1 attached to this 10-K and incorporated herein by
this reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary exposure to market risk consists of changes in
interest rates or borrowings. At February 3, 2001, the Company's long-term
debt excluding capital leases was $773.7 million, all of which is fixed rate
debt.
Long-term fixed rate debt is utilized as a primary source of capital. When
these debt instruments mature, the Company intends to refinance such debt at
then existing market interest rates which may be more or less than interest
rates on the maturing debt. If interest rates on the existing fixed rate debt
outstanding at February 3, 2001, changed by 100 basis points, the Company's
annual interest expense would change by $7.7 million.
During fiscal 2000, average borrowings under the Company's variable rate
revolving credit facility and its short term financing of its proprietary
accounts receivable were $129.4 million. If interest rates on the average
fiscal 2000 variable rate debt changed by 100 basis points, the Company's
annual interest expense would change by $1.3 million, assuming comparable
borrowing levels.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
The financial statements are included in this report beginning on page F-3.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None
13
<PAGE>
PART III
Item 10. Executive Officers of Registrant
The information set forth under "Election of Directors" on pages 1-2 and
under "Compliance with Sec. 16(a) of the Exchange Act" on page 7 of
Registrant's Proxy Statement dated April 17, 2001 is incorporated herein by
reference. The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
R. Lawrence Montgomery 52 Chief Executive Officer and Director
Kevin Mansell 48 President and Director
Chief Operating Officer, Treasurer and
Arlene Meier 49 Director
John Lesko 48 Executive Vice President--Administration
Richard Leto 49 Executive Vice President--General Merchandise
Manager and Product Development
Jack Moore 46 Executive Vice President--General Merchandise
Manager
Don Sharpin 52 Executive Vice President--Human Resources
Gary Vasques 53 Executive Vice President--Marketing
</TABLE>
Mr. Montgomery was promoted to Chief Executive Officer in February 1999. He
was appointed to the Board of Directors in 1994 and served as Vice Chairman
from March 1996 to November 2000. Mr. Montgomery served as Executive Vice
President of Stores from February 1993 to February 1996 after joining the
Company as Senior Vice President--Director of Stores in 1988. Mr. Montgomery
has 30 years of experience in the retail industry.
Mr. Mansell served as President and Director since February 1999. Mr.
Mansell served as Executive Vice President--General Merchandise Manager from
1987 to 1998. Mr. Mansell joined the Company as a Divisional Merchandise
Manager in 1982, and has 26 years of experience in the retail industry.
Ms. Meier was promoted to Chief Operating Officer in November 2000. Ms.
Meier served as Executive Vice President--Chief Financial Officer from October
1994 to November 2000 and was appointed to the Board of Directors in March
2000. Ms. Meier joined the Company as Vice President--Controller in 1989. Ms.
Meier has 25 years of experience in the retail industry.
Mr. Lesko served as Executive Vice President--Administration since November
2000 and in other management positions since joining the Company in November
1997. Prior to joining the Company, Mr. Lesko served as Senior Vice President,
Information Systems of Jack Eckerd Corporation, a division of the J.C. Penney
Company from January 1997 to November 1997. Prior to 1997, Mr. Lesko served as
Executive Vice President, Marketing and Information Systems for Thrift Drug, a
wholly owned subsidiary of J.C. Penney Company. Mr. Lesko has 26 years of
experience in the retail industry.
Mr. Leto served as Executive Vice President--General Merchandise Manager
since July 1996 and added Product Development to his existing responsibilities
in February 1999. Prior to joining the Company, Mr. Leto served as Executive
Vice President, Merchandising for the R. H. Macy Corporation. Mr. Leto has 28
years of experience in the retail industry.
Mr. Moore served as Executive Vice President--General Merchandise Manager
since February 1999. Mr. Moore served as Senior Vice President of Merchandise
Planning and Allocation in 1998. He joined the Company in 1997 as a Vice
President--Divisional Merchandise Manager. Prior to joining the Company, Mr.
Moore served in various management positions at Dayton Hudson Department
Stores. Mr. Moore has 24 years of experience in the retail industry.
14
<PAGE>
Mr. Sharpin served as Executive Vice President--Human Resources since
August 1998 and in other management positions since joining the Company in
1988. Mr. Sharpin has 22 years of experience in the retail industry.
Mr. Vasques served as Executive Vice President--Marketing since 1997. He
joined the Company in December 1995 as Senior Vice President, Marketing. Mr.
Vasques has 31 years of experience in the retail industry.
Item 11. Executive Compensation
The information set forth under "Executive Compensation" on pages 6-9 of
Registrant's Proxy Statement dated April 17, 2001, is incorporated herein by
reference. Compensation of directors as set forth under "Director Committees
and Compensation" on page 3 of Registrant's Proxy Statement dated April 17,
2001 is incorporated herein by reference.
Item 12. Beneficial Ownership of Stock
The information set forth under "Beneficial Ownership of Shares" on page 4
of Registrant's Proxy Statement dated April 17, 2001, is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
The information set forth under "Other Transactions" on page 9 of
Registrant's Proxy Statement dated April 17, 2001, is incorporated herein by
reference.
15
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report:
1. Consolidated Financial Statements:
See "Index to Consolidated Financial Statements and Schedule of
Kohl's Corporation" on page F-1, the Report of Independent Auditors on
page F-2 and the Consolidated Financial Statements and Schedule on
pages F-3 to F-18, all of which are incorporated herein by reference.
2. Financial Statement Schedule:
See "Index to Consolidated Financial Statements and Schedule of
Kohl's Corporation" on page F-1 and the "Financial Statement Schedule"
on page F-18, all of which are incorporated herein by reference.
3. Exhibits:
See "Exhibit Index" of this Form 10-K, which is incorporated herein
by reference.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K in the fourth fiscal
quarter.
The Exhibit Index has been omitted from this Form 10-K. Shareholders may
obtain the Exhibit Index without charge by calling Kohl's investor relations
at 262-703-1440.
16
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE OF KOHL'S CORPORATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Financial Statements
Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Income.......................................... F-4
Consolidated Statements of Changes in Shareholders' Equity................. F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts............................. F-18
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Kohl's Corporation
We have audited the accompanying consolidated balance sheets of Kohl's
Corporation and subsidiaries (the Company) as of February 3, 2001 and January
29, 2000, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended February 3, 2001. Our audits also included the financial statement
schedule listed in the Index. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company
at February 3, 2001 and January 29, 2000, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended February 3, 2001, in conformity with accounting practices
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
March 9, 2001, except for Note 12, as to which the date is March 16, 2001
F-2
<PAGE>
KOHL'S CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
January
February 3, 29,
2001 2000
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 123,621 $ 12,608
Short-term investments................................ 48,600 27,500
Accounts receivable trade, net of allowance for
doubtful accounts of $9,282 and $7,171 in 2000 and
1999, respectively................................... 681,256 505,010
Merchandise inventories............................... 1,003,290 794,439
Deferred income taxes................................. 39,531 22,184
Other................................................. 25,599 21,167
---------- ----------
Total current assets................................ 1,921,897 1,382,908
Property and equipment, net............................. 1,726,450 1,352,956
Other assets............................................ 65,634 42,422
Favorable lease rights.................................. 126,635 133,023
Goodwill................................................ 14,538 19,738
---------- ----------
Total assets........................................ $3,855,154 $2,931,047
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 399,939 $ 336,432
Accrued liabilities................................... 188,863 153,821
Income taxes payable.................................. 112,927 63,955
Short-term debt....................................... 5,000 85,000
Current portion of long-term debt..................... 16,568 11,589
---------- ----------
Total current liabilities........................... 723,297 650,797
Long-term debt.......................................... 803,081 494,993
Deferred income taxes................................... 84,256 66,482
Other long-term liabilities............................. 41,881 33,272
Shareholders' equity:
Common stock--$.01 par value, 800,000,000 shares
authorized, 332,167,129 and 326,197,268 shares issued
at February 3, 2001 and January 29, 2000
respectively......................................... 3,322 3,262
Paid-in capital....................................... 912,107 767,179
Retained earnings..................................... 1,287,210 915,062
---------- ----------
Total shareholders' equity.......................... 2,202,639 1,685,503
---------- ----------
Total liabilities and shareholders' equity.......... $3,855,154 $2,931,047
========== ==========
</TABLE>
See accompanying notes
F-3
<PAGE>
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------
February January January
3, 29, 30,
2001 2000 1999
---------- ---------- ----------
(In Thousands, Except Per Share
Data)
<S> <C> <C> <C>
Net sales................................... $6,151,996 $4,557,112 $3,681,763
Cost of merchandise sold.................... 4,056,139 3,014,073 2,447,301
---------- ---------- ----------
Gross margin................................ 2,095,857 1,543,039 1,234,462
Operating expenses:
Selling, general and administrative....... 1,282,367 975,269 810,162
Depreciation and amortization............. 121,786 83,323 64,849
Goodwill amortization..................... 5,200 5,200 5,200
Preopening expenses....................... 35,189 30,972 16,388
---------- ---------- ----------
Total operating expenses.................... 1,444,542 1,094,764 896,599
---------- ---------- ----------
Operating income............................ 651,315 448,275 337,863
Other expense (income):
Interest expense.......................... 49,332 29,470 22,872
Interest income........................... (3,131) (2,307) (1,758)
---------- ---------- ----------
Income before income taxes.................. 605,114 421,112 316,749
Provision for income taxes.................. 232,966 162,970 124,483
---------- ---------- ----------
Net income.................................. $ 372,148 $ 258,142 $ 192,266
========== ========== ==========
Net income per share:
Basic..................................... $1.13 $0.80 $0.61
Diluted................................... $1.10 $0.77 $0.59
</TABLE>
See accompanying notes
F-4
<PAGE>
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Total
-------------- Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
------- ------ -------- ---------- -------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 31, 1998.. 315,515 $3,155 $486,973 $ 464,654 $ 954,782
Exercise of stock options.... 1,274 13 5,873 -- 5,886
Income tax benefit from
exercise of stock options... -- -- 9,845 -- 9,845
Net income................... -- -- -- 192,266 192,266
------- ------ -------- ---------- ----------
Balance at January 30, 1999.. 316,789 3,168 502,691 656,920 1,162,779
Issuance of common shares.... 5,600 56 199,570 -- 199,626
Exercise of stock options.... 3,808 38 17,610 -- 17,648
Income tax benefit from
exercise of stock options... -- -- 47,308 -- 47,308
Net income................... -- -- -- 258,142 258,142
------- ------ -------- ---------- ----------
Balance at January 29, 2000.. 326,197 3,262 767,179 915,062 1,685,503
Exercise of stock options.... 5,970 60 45,819 -- 45,879
Income tax benefit from
exercise of stock options... -- -- 99,109 -- 99,109
Net income................... -- -- -- 372,148 372,148
------- ------ -------- ---------- ----------
Balance at February 3,
2001........................ 332,167 $3,322 $912,107 $1,287,210 $2,202,639
======= ====== ======== ========== ==========
</TABLE>
See accompanying notes
F-5
<PAGE>
KOHL'S CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Operating activities
Net income................................ $ 372,148 $ 258,142 $ 192,266
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 127,491 88,776 70,249
Deferred income taxes................... 427 4,923 886
Other noncash charges................... 4,624 3,536 2,353
Income tax benefit from exercise of
stock options.......................... 99,109 47,308 9,845
Amortization of debt discount........... 5,782 61 --
Changes in operating assets and
liabilities:
Accounts receivable trade............. (176,246) (232,391) (30,647)
Merchandise inventories............... (208,851) (177,077) (101,572)
Other current assets.................. (4,432) (2,527) (1,937)
Accounts payable...................... 63,507 118,447 60,210
Accrued and other long-term
liabilities.......................... 39,544 32,932 28,793
Income taxes payable.................. 48,972 15,383 10,090
--------- --------- ---------
Net cash provided by operating
activities............................... 372,075 157,513 240,536
Investing activities
Acquisition of property and equipment and
favorable lease rights, net.............. (480,981) (625,392) (248,878)
Proceeds from sale of property and
equipment................................ -- 4,350 1,292
Net purchase of short-term investments.... (21,100) (764) (26,736)
Other..................................... (25,036) (20,151) (14,587)
--------- --------- ---------
Net cash used in investing activities..... (527,117) (641,957) (288,909)
Financing activities
Net (repayments of) proceeds from short-
term debt................................ (80,000) 85,000 --
Proceeds from public debt offering, net... 319,379 197,258 --
Net borrowings (repayments) under credit
facilities............................... -- (1,600) 1,600
Repayment of other long-term debt, net.... (12,094) (1,582) (416)
Payment of financing fees on debt......... (7,109) (2,156) --
Net proceeds from issuance of common
shares................................... 45,879 217,274 5,886
--------- --------- ---------
Net cash provided by financing
activities............................... 266,055 494,194 7,070
--------- --------- ---------
Net increase (decrease) in cash and cash
and equivalents.......................... 111,013 9,750 (41,303)
Cash and cash equivalents at beginning of
year..................................... 12,608 2,858 44,161
--------- --------- ---------
Cash and cash equivalents at end of year.. $ 123,621 $ 12,608 $ 2,858
========= ========= =========
</TABLE>
See accompanying notes
F-6
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Summary of Accounting Policies
Business
As of February 3, 2001, Kohl's Corporation (the Company) operated 320
family oriented, specialty department stores located in 26 states that feature
national brand apparel, shoes, accessories, soft home products and housewares
targeted to middle-income customers.
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany accounts and transactions
have been eliminated.
Accounting Period
The Company's fiscal year end is the Saturday closest to January 31. The
financial statements reflect the results of operations and cash flows for the
fiscal years ended February 3, 2001 (fiscal 2000), January 29, 2000 (fiscal
1999) and January 30, 1999 (fiscal 1998). Fiscal 2000 includes 53 weeks and
fiscal 1999 and 1998 include 52 weeks.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to prior year's financial
statements to conform to the fiscal 2000 presentation.
Cash Equivalents
Cash equivalents represent debt securities with a maturity of three months
or less when purchased, which are held to maturity. Debt securities owned are
stated at cost which approximates market value.
Short-term Investments
Short-term investments are classified as available-for-sale securities and
are highly liquid debt instruments. These securities have a put option feature
that allows the Company to liquidate the investments at its discretion. These
investments are stated at cost, which approximates market value.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market, with
cost determined by the last-in, first-out (LIFO) method. Inventories would
have been $4,851,000 higher at February 3, 2001, and $2,983,000 higher at
January 29, 2000, if they had been valued using the first-in, first-out (FIFO)
method.
F-7
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Business and Summary of Accounting Policies (continued)
Property and Equipment
Property and equipment is carried at cost and generally depreciated on a
straight-line basis over the estimated useful lives of the assets. Property
rights under capital leases and improvements to leased property are amortized
on a straight-line basis over the term of the lease or useful life of the
assets, whichever is less. The annual provisions for depreciation and
amortization have been principally computed using the following ranges of
useful lives:
<TABLE>
<S> <C>
Buildings and improvements.................................... 20-40 years
Store fixtures and equipment.................................. 3-20 years
Property under capital leases................................. 20-40 years
</TABLE>
Construction in progress includes land and improvements for locations not
yet opened at the end of each fiscal year.
Capitalized Interest
The Company capitalizes interest on the acquisition and construction of new
locations and depreciates that amount over the lives of the related assets.
The total interest capitalized was $3,478,000, $4,405,000 and $1,878,000 in
2000, 1999 and 1998, respectively.
Favorable Lease Rights
Favorable lease rights are generally amortized on a straight-line basis
over the remaining base lease term including options. Accumulated amortization
was $25,259,000 at February 3, 2001, and $19,327,000 at January 29, 2000.
Goodwill
Goodwill is being amortized on a straight-line basis over 15 years.
Accumulated amortization was $62,866,000 at February 3, 2001, and $57,666,000
at January 29, 2000.
Long-Lived Assets
The Company annually considers whether indicators of impairment of long-
lived assets held for use (including favorable lease rights and goodwill) are
present and determines that if such indicators are present whether the sum of
the estimated undiscounted future cash flows attributable to such assets is
less than their carrying amounts. The Company evaluated the ongoing value of
its property and equipment and other long-lived assets as of February 3, 2001,
and January 29, 2000, and determined that there was no significant impact on
the Company's results of operations.
Comprehensive Income
Net income for all years presented is the same as comprehensive income.
Revenue Recognition
Revenue from sales of the Company's merchandise is recognized at the time
of sale, net of any returns.
Advertising
Advertising costs, included in selling, general and administrative
expenses, are expensed as incurred and totaled $223,717,000, $176,009,000 and
$147,619,000 in fiscal 2000, 1999, and 1998, respectively.
F-8
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1. Business and Summary of Accounting Policies (continued)
Preopening Costs
Preopening expenses, which are expensed as incurred, relate to the costs
associated with new store openings, including advertising, hiring and training
costs for new employees, and processing and transporting initial merchandise.
All previously deferred preopening costs were written-off effective January
30, 1999.
Income Taxes
Deferred income taxes reflect the impact of temporary differences between
the amounts of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for income tax purposes.
Net Income Per Share
The numerator for the calculation of basic and diluted net income per share
is net income. The denominator is summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------------------
2000 1999 1998
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Denominator for basic earnings per share--weighted
average shares....................................... 330,204 324,628 316,134
The impact of dilutive employee stock options......... 7,871 9,228 9,132
------- ------- -------
Denominator for diluted earnings per share............ 338,075 333,856 325,266
======= ======= =======
</TABLE>
Debt securities that are convertible into 3,967,000 shares of common stock
are not included in the computation of diluted earnings per share for the
fiscal year as their impact is antidilutive (See Footnote 10 to the Company's
consolidated financial statements for quarterly information).
2. Selected Balance Sheet Information
Property and equipment consist of the following:
<TABLE>
<CAPTION>
January
February 3, 29,
2001 2000
----------- ----------
(In Thousands)
<S> <C> <C>
Land.................................................... $ 175,892 $ 137,900
Buildings and improvements.............................. 1,097,343 726,846
Store fixtures and equipment............................ 609,736 469,247
Property under capital leases........................... 54,862 54,862
Construction in progress................................ 174,105 243,042
---------- ----------
Total property and equipment............................ 2,111,938 1,631,897
Less accumulated depreciation........................... 385,488 278,941
---------- ----------
$1,726,450 $1,352,956
========== ==========
</TABLE>
Depreciation expense for property and equipment totaled $107,083,000,
$76,851,000 and $60,994,000 for fiscal 2000, 1999 and 1998, respectively.
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
February 3, January 29,
2001 2000
----------- -----------
(In Thousands)
<S> <C> <C>
Payroll and related fringe benefits..................... $ 35,592 $ 31,157
Sales and property taxes................................ 54,478 45,429
Other accruals.......................................... 98,793 77,235
-------- --------
$188,863 $153,821
======== ========
</TABLE>
F-9
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Accounts Receivable Financing
On December 23, 1999, the Company entered into an agreement with Preferred
Receivables Funding Corporation, certain investors and Bank One as agent,
under which the Company periodically sells, generally with recourse, an
undivided interest in the revolving pool of its private label credit card
receivables up to a maximum of $225 million. The agreement is renewable at the
Company's request and the investors' option. No receivables were sold as of
February 3, 2001.
Prior to December 23, 1999, the Company's private label credit card
receivables were sold without recourse or were contributed to its wholly owned
subsidiary and special purpose entity, Kohl's Receivables Corporation (KRC).
Under an agreement, similar to the Company's current agreement, KRC then
periodically sold, generally with recourse, an undivided interest in the
revolving pool of these receivables to the same investors. Based on this two-
tier structure of selling receivables, and a supporting legal opinion, the
true sale accounting requirements were met, as defined by SFAS No. 125.
Accordingly, interests sold prior to December 23, 1999, were reflected as a
reduction of accounts receivable. On December 31, 1999, KRC was merged into
the Company. The proceeds received upon sale of $85 million of receivables as
of January 29, 2000, are recorded as short-term debt in the accompanying
consolidated balance sheet.
The cost of the financing program is based on the bank's A1/P-1 commercial
paper rate, approximately 6.5% and 6.0% at February 3, 2001 and January 29,
2000, respectively, plus certain fees. The agreement is secured by interests
in the receivables and contains covenants which require the Company to
maintain a minimum portfolio quality and meet certain financial tests.
Average accounts receivable balances both on and off balance sheet are
summarized below:
<TABLE>
<CAPTION>
Fiscal Year
--------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Average accounts receivable trade:
Gross accounts receivable......................... $595,000 $443,000 $328,000
Receivables off balance sheet..................... -- 86,000 120,000
-------- -------- --------
Receivables on balance sheet...................... $595,000 $357,000 $208,000
======== ======== ========
</TABLE>
In the table above, the receivables off balance sheet met the true sale
requirements of SFAS No. 125 and therefore the Company had no exposure to bad
debts and retained no rights to finance charge income for financial statement
purposes. For the receivables on balance sheet, the revenue from the credit
program, net of operating expenses is summarized below.
<TABLE>
<CAPTION>
Fiscal Year
------------------------
2000 1999 1998
-------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Finance charges and other income..................... $103,018 $63,879 $38,744
Operating expenses:
Provision for doubtful accounts.................... 22,677 13,402 7,831
Other credit and collection expenses............... 29,561 18,264 10,762
-------- ------- -------
Total operating expenses........................... 52,238 31,666 18,593
-------- ------- -------
Net revenue of credit program included in selling,
general and administrative expenses................. $ 50,780 $32,213 $20,151
======== ======= =======
</TABLE>
F-10
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Debt
Short-term debt at February 3, 2001, consists of a $5 million bank note
which matures on February 2, 2002, and bears interest at 2.9%.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
February 3, 2001 January 29, 2000
---------------------- ----------------------
Maturing Rate Amount Rate Amount
-------- ------- ---------- ------- ----------
($ In Thousands)
<S> <C> <C> <C> <C>
Notes and debentures:
Senior debt
Through 2004............ 6.57% $ 50,000 6.57% $ 60,000
2006 (a)................ 6.70% 100,000 6.70% 100,000
2011 (a)................ 7.38% 100,000 7.38% 100,000
2029 (b)................ 7.36% 197,411 7.36% 197,319
Subordinated debt
2020 (c)................ 2.75% 325,069 --
---------- ----------
Total notes and debentures...... 5.29% (d) 772,480 7.12% (d) 457,319
Capital lease obligations....... 45,937 47,160
Other........................... 1,232 2,103
Less: current portion........... (16,568) (11,589)
---------- ----------
Long-term debt.................. $ 803,081 $ 494,993
========== ==========
</TABLE>
- --------
(a) Noncallable and unsecured.
(b) In 1999, the Company issued $200 million of non-callable 7.25% unsecured
debentures, which were issued at a discount with a yield to maturity of
7.36%. At February 3, 2001, and January 29, 2000, the net discount was
$2.6 million and $2.7 million, respectively.
(c) In June, 2000, the Company issued $554.4 million aggregate principal
amount of unsecured Liquid Yield Option Subordinated Notes (LYONs). The
zero coupon LYONs were issued at a discount to yield an effective interest
rate of 2.75% per year and are subordinated to all existing and future
senior indebtedness of the Company. Net proceeds, excluding expenses, were
approximately $319.4 million. At February 3, 2001, the net discount was
$229.3 million. Each $1,000 principal amount of LYON is convertible at the
holder's option, at any time, into 7.156 shares of the Company's common
stock. The debt is callable by the Company beginning June 12, 2003 for
cash at the issue price, plus all accreted original issue discount. The
holders of the securities can "put" the LYONs back to the Company after
three years and ten years during specified 30-day windows at specified
amounts reflective of the accretion of the original issue discount. The
Company has the option to redeem these putted securities for either cash
or the Company's common stock, or any combination thereof.
(d) Reflects the weighted-average effective interest rate as of year end.
The Company, using discounted cash flow analyses based upon the Company's
current incremental borrowing rates for similar types of borrowing
arrangements, estimates the fair value of long-term debt, including current
portion and excluding capital leases, to be approximately $807.5 million at
February 3, 2001, and $432 million at January 29, 2000.
The Company has a $300 million unsecured revolving bank credit facility
which matures on June 13, 2003. Depending on the type of advance, amounts
borrowed bear interest at competitive bid rates; the LIBOR plus a margin,
based on the Company's long-term unsecured debt rating; or the agent bank's
base rate. No amounts were outstanding under this facility at February 3,
2001, or January 29, 2000.
F-11
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Debt (continued)
The various debt agreements contain certain covenants that limit, among
other things, additional indebtedness and payment of dividends, as well as
requiring the Company to meet certain financial tests.
Interest payments, net of amounts capitalized, were $46,450,000,
$27,038,000 and $22,950,000 in fiscal 2000, 1999 and 1998, respectively.
Annual maturities of long-term debt, excluding capital lease obligations,
for the next five years are: $15,333,000 in 2001; $15,340,000 in 2002;
$10,138,000 in 2003; $10,056,000 in 2004 and $58,000 in 2005. The annual
maturity amounts do not include the amount of convertible debt securities that
could be "put" back to the Company in 2003.
5. Commitments
The Company leases property and equipment. Many of the store leases
obligate the Company to pay real estate taxes, insurance and maintenance
costs, and contain multiple renewal options, exercisable at the Company's
option, that generally range from two additional five-year periods to eight
ten-year periods. Rent expense charged to operations was $145,617,000,
$111,863,000, and $89,508,000 in fiscal 2000, 1999 and 1998, respectively.
Rent expense includes contingent rents, based on sales, of $3,521,000,
$3,487,000 and $4,209,000 in fiscal 2000, 1999 and 1998, respectively.
Property under capital leases consists of the following:
<TABLE>
<CAPTION>
February 3, January 29,
2001 2000
----------- -----------
(In Thousands)
<S> <C> <C>
Buildings and improvements.............................. $54,862 $54,862
Less accumulated amortization........................... 18,209 16,342
------- -------
$36,653 $38,520
======= =======
</TABLE>
Amortization expense related to capital leases totaled $1,867,000,
$2,004,000 and $2,266,000 for fiscal 2000, 1999 and 1998, respectively.
Future minimum lease payments at February 3, 2001, under leases that have
initial or remaining noncancellable terms in excess of one year, are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ----------
(In Thousands)
<S> <C> <C>
Fiscal year:
2001........................................................ $ 5,852 $ 162,517
2002........................................................ 5,872 171,177
2003........................................................ 5,773 164,867
2004........................................................ 6,002 160,790
2005........................................................ 6,063 160,390
Thereafter.................................................. 62,123 2,026,654
------- ----------
91,685 $2,846,395
==========
Less amount representing interest........................... 45,748
-------
Present value of minimum lease payments..................... $45,937
=======
</TABLE>
Included in the operating lease schedule above is $619,977,000 of minimumn
lease payments for stores that will open in 2001 and 2002.
F-12
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Benefit Plans
The Company has an Employee Stock Ownership Plan (ESOP) for the benefit of
its associates other than executive officers. Contributions are made at the
discretion of the Board of Directors. The Company recorded expenses of
$6,315,000, $4,408,000 and $3,300,000 in fiscal 2000, 1999 and 1998,
respectively. Shares of Company common stock held by the ESOP are included as
shares outstanding for purposes of the net income per share computations.
The Company also has a defined contribution savings plan covering all full-
time and certain part-time associates which provides for monthly employer
contributions based on a percentage of qualifying contributions made by
participating associates. Total expense was $3,670,000, $3,020,000 and
$2,531,000 in fiscal 2000, 1999 and 1998, respectively. In addition, the
Company made defined annual contributions to the savings plan on the behalf of
all qualifying full-time and part-time associates based on a percentage of
qualifying payroll earnings. Total expense was $5,198,000, $4,168,000 and
$3,629,000 in fiscal 2000, 1999 and 1998, respectively.
7. Income Taxes
Deferred income taxes consist of the following:
<TABLE>
<CAPTION>
February 3, January 29,
2001 2000
----------- -----------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities:
Property and equipment................................ $103,091 $80,371
Deferred tax assets:
Merchandise inventories............................... 34,094 18,080
Accrued and other liabilities......................... 15,764 11,273
Accrued rent liability................................ 8,508 6,720
-------- -------
58,366 36,073
-------- -------
Net deferred tax liability.............................. $ 44,725 $44,298
======== =======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Fiscal Year
--------------------------
2000 1999 1998
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Current Federal...................................... $204,989 $135,586 $104,336
Current State........................................ 27,550 22,461 19,261
Deferred............................................. 427 4,923 886
-------- -------- --------
$232,966 $162,970 $124,483
======== ======== ========
</TABLE>
The provision for income taxes differs from the amount that would be
provided by applying the statutory U.S. corporate tax rate due to the
following items:
<TABLE>
<CAPTION>
Fiscal Year
--------------------------
2000 1999 1998
------- ------- --------
<S> <C> <C> <C>
Provision at statutory rate........................ 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit..... 3.4 3.6 3.9
Goodwill amortization.............................. 0.3 0.4 0.6
Other.............................................. (0.2) (0.3) (0.2)
------- ------- --------
Provision for income taxes......................... 38.5% 38.7% 39.3%
======= ======= ========
Amounts paid for income taxes (in thousands)....... $85,063 $95,075 $103,628
======= ======= ========
</TABLE>
F-13
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Preferred and Common Stock
The Company's authorized capital stock includes 10,000,000 shares of $.01
par value preferred stock of which none have been issued.
On March 6, 2000 and March 9, 1998, the Company's Board of Directors
declared 2 for 1 stock splits which were effected in the form of a stock
dividend on the Company's common stock. Shareholders' equity and all share and
per share amounts have been retroactively adjusted to reflect these dividends.
The 1992 and 1994 Long-Term Compensation Plans provide for the granting of
options to purchase shares of the Company's common stock to officers and key
employees. The 1997 Stock Option Plan provides for granting of similar stock
options to outside directors. The following table presents the number of
options initially authorized and options available to grant under each of the
plans:
<TABLE>
<CAPTION>
1992 Plan 1994 Plan 1997 Plan Total
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Options initially authorized........ 22,800,000 24,000,000 400,000 47,200,000
Options available for grant:
January 29, 2000.................. 179,216 11,464,950 320,000 11,964,166
February 3, 2001.................. 238,597 9,732,811 308,000 10,279,408
</TABLE>
The majority of options granted vest in four equal annual installments.
Remaining options granted vest in five to ten year increments. Options which
are surrendered or terminated without issuance of shares are available for
future grants.
The following table summarizes the Company's stock options at February 3,
2001, January 29, 2000 and January 30, 1999 and the changes for the years then
ended:
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
---------- ----------------
<S> <C> <C>
Balance at January 31, 1998........................ 24,224,748 $ 7.79
Granted.......................................... 3,418,250 28.85
Surrendered...................................... (329,582) 13.28
Exercised........................................ (1,273,558) 5.00
---------- ------
Balance at January 30, 1999........................ 26,039,858 10.64
Granted.......................................... 4,434,750 35.13
Surrendered...................................... (518,388) 14.95
Exercised........................................ (3,807,798) 5.04
---------- ------
Balance at January 29, 2000........................ 26,148,422 15.53
Granted.......................................... 2,592,975 63.49
Surrendered...................................... (908,217) 23.78
Exercised........................................ (5,969,861) 7.68
---------- ------
Balance at February 3, 2001........................ 21,863,319 $23.01
========== ======
Options exercisable at:
<CAPTION>
Weighted Average
Shares Exercise Price
---------- ----------------
<S> <C> <C>
February 3, 2001................................. 11,508,871 $13.20
January 29, 2000................................. 13,628,550 $ 8.60
January 30, 1999................................. 14,029,610 $ 6.06
</TABLE>
F-14
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Preferred and Common Stock (continued)
Exercise prices for options outstanding at February 3, 2001, ranged from
$1.75-$70.74. Additional information related to these options segregated by
exercise price range is as follows:
<TABLE>
<CAPTION>
Exercise Price Range
-----------------------------
$1.75 to $8.00 to $30.75 to
$7.99 $30.74 $70.74
--------- --------- ---------
<S> <C> <C> <C>
Options outstanding............................. 7,281,912 7,788,132 6,793,275
Weighted average exercise price of options
outstanding.................................... $5.70 $19.19 $45.93
Weighted average remaining contractual life of
options outstanding............................ 3.9 10.5 14.2
Options exercisable............................. 5,276,562 5,264,562 967,747
Weighted average exercise price of options
exercisable.................................... $5.37 $17.02 $35.05
</TABLE>
The Company continues to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), and related Interpretations
in accounting for its employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
As required by SFAS No. 123, Accounting for Stock-Based Compensation, the
Company calculated the pro forma effect on net income and net income per share
of accounting for employee stock options under the fair value method
prescribed by SFAS No. 123 in the table below. The weighted-average fair
values of options granted during fiscal 2000, 1999 and 1998 were estimated
using a Black-Scholes option pricing model to be $30.00, $17.27 and $13.42,
respectively. The model used the following assumptions for all years: risk
free interest rate between 5.0%-6.0%; dividend yield of 0%; volatility factors
of the Company's common stock of 30%; and a 7-8 year expected life of the
option.
<TABLE>
<CAPTION>
Fiscal Year
--------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Pro forma net income (in thousands)................. $348,618 $246,513 $183,785
Pro forma net income per share:
Basic............................................. $1.06 $0.76 $0.58
Diluted........................................... $1.04 $0.74 $0.57
</TABLE>
The SFAS No. 123 expense reflected above only includes options granted
since fiscal 1995 and, therefore, may not be representative of future expense.
9. Contingencies
The Company is involved in various legal matters arising in the normal
course of business. In the opinion of management, the outcome of such
proceedings and litigation will not have a material adverse impact on the
Company's financial position or results of operations.
F-15
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Quarterly Financial Information (Unaudited)
Financial Information
<TABLE>
<CAPTION>
Fiscal Year 2000
---------------------------------------------------------
First Second Third Fourth Total
---------- ---------- ---------- ---------- ----------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Net sales............... $1,228,666 $1,255,360 $1,444,929 $2,223,041 $6,151,996
Gross margin............ 425,920 437,953 495,320 736,664 2,095,857
Net income.............. 52,618 64,290 76,746 178,494 372,148
Basic shares............ 327,806 329,848 331,196 331,859 330,204
Basic net income per
share.................. $0.16 $0.19 $0.23 $0.54 $1.13
Diluted shares.......... 336,353 338,973 339,693 344,055(a) 338,075
Diluted net income per
share.................. $0.16 $0.19 $0.23 $0.52(b) $1.10
</TABLE>
- --------
(a) Diluted shares include 3,967,000 shares related to the assumed conversion
of convertible debt securities.
(b) The convertible debt securities have a dilutive impact on net income per
share for the fourth quarter. In the calculation of diluted net income per
share, the numerator is $179,956,000 which includes $1,462,000 of interest
on convertible debt securities. The denominator is 344,055,000 diluted
shares which includes 3,967,000 shares related to the assumed conversion
of the convertible debt securities.
<TABLE>
<CAPTION>
Fiscal Year 1999
--------------------------------------------------
First Second Third Fourth Total
-------- -------- ---------- ---------- ----------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Net sales.................. $910,256 $939,503 $1,099,852 $1,607,501 $4,557,112
Gross margin............... 313,128 325,304 375,659 528,948 1,543,039
Net income................. 39,319 45,233 53,014 120,576 258,142
Basic shares............... 320,871 325,647 325,906 326,075 324,628
Basic net income per
share..................... $0.12 $0.14 $0.16 $0.37 $0.80
Diluted shares............. 330,752 335,097 335,350 335,124 333,856
Diluted net income per
share..................... $0.12 $0.13 $0.16 $0.36 $0.77
</TABLE>
Due to changes in stock prices during the year and timing of issuance of
shares, the cumulative total of quarterly net income per share amounts may not
equal the net income per share for the year.
LIFO
The Company uses the LIFO method of accounting for merchandise inventories
because it results in a better matching of costs and revenues. The following
information is provided to show the effects of the LIFO provision on each
quarter, as well as to provide users with the information to compare to other
companies not on LIFO.
<TABLE>
<CAPTION>
Fiscal Year
--------------
LIFO Expense (Credit) 2000 1999
- --------------------- ------ ------
(In
Thousands)
<S> <C> <C>
First........................................................... $1,844 $1,363
Second.......................................................... 1,884 1,409
Third........................................................... 2,168 1,651
Fourth.......................................................... (4,028) (3,361)
------ ------
Total year...................................................... $1,868 $1,062
====== ======
</TABLE>
The Company estimates its LIFO provision throughout the year based on
expected inflation. The provision is adjusted to actual inflation indices at
year-end.
F-16
<PAGE>
KOHL'S CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Quarterly Financial Information (Unaudited) (continued)
Interest Reclassification
At February 3, 2001, the Company reclassified fiscal 2000 interest related
to the sale of accounts receivable that had been included in selling, general
and administrative expenses in the Company's quarterly financial statements to
interest expense. The impact by quarter is shown in the following table.
<TABLE>
<CAPTION>
Fiscal Year 2000
-------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter Total
--------------- --------------- --------------- --------------- -----------------
% of % of % of % of % of
Net Net Net Net Net
Amount Sales Amount Sales Amount Sales Amount Sales Amount Sales
-------- ----- -------- ----- -------- ----- -------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selling, general and
administrative expense:
As previously reported.. $284,256 23.1% $289,331 23.0% $317,790 22.0% $398,576 17.9% $1,289,953 21.0%
Reclassification........ (2,222) (1,876) (1,831) (1,657) (7,586)
-------- -------- -------- -------- ----------
$282,034 23.0% $287,455 22.9% $315,959 21.9% $396,919 17.9% $1,282,367 20.8%
======== ======== ======== ======== ==========
Interest expense, net:
As previously reported.. $ 8,232 0.7% $ 9,962 0.8% $ 10,981 0.8% $ 9,440 0.4% $ 38,615 0.6%
Reclassification........ 2,222 1,876 1,831 1,657 7,586
-------- -------- -------- -------- ----------
$ 10,454 0.9% $ 11,838 0.9% $ 12,812 0.9% $ 11,097 0.5% $ 46,201 0.8%
======== ======== ======== ======== ==========
</TABLE>
11. Related Parties
A director of the Company is also a shareholder of a law firm which
performs legal services for the Company.
Rent expense incurred on store leases with various entities owned or
controlled by a director of the Company and his affiliates, which is included
in the total rent expense above, was $4,253,000, $4,353,000 and $4,323,000 in
fiscal 2000, 1999 and 1998, respectively.
12. Subsequent Events
On March 8, 2001, the Company issued $300 million aggregate principal
amount of non-callable 6.30% unsecured senior notes due March 1, 2011. Net
proceeds, excluding expenses, were $297.4 million. The proceeds will be used
for general corporate purposes, including continued store growth.
On March 16, 2001, the Company purchased the right to occupy 15 store
locations previously operated by Bradlees, Inc. The Company is currently
converting the stores into prototypical Kohl's stores and expects that the
stores will be open for business in spring 2002.
F-17
<PAGE>
KOHL'S CORPORATION
SCHEDULE II
Valuation and Qualifying Accounts
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended
-----------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Accounts Receivable--Allowances:
Balance at Beginning of Year............. $ 7,171 $ 4,069 $ 4,669
Charged to Costs and Expenses............ 22,677 13,402 7,831
Deductions--Bad Debts Written off,
Net of Recoveries and Other Allowances.. (20,566) (12,277) (7,668)
Other (1)................................ -- 1,977 (763)
-------- -------- -------
Balance at End of Year................... $ 9,282 $ 7,171 $ 4,069
======== ======== =======
</TABLE>
- --------
(1) Adjustments to the accounts receivable allowance for receivables sold
pursuant to SFAS No. 125
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned,
Kohl's Corporation
By: _________________________________
R. Lawrence Montgomery
Chief Executive Officer and
Director
Dated: ______________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
_____________________________________
William S. Kellogg _____________________________________
Chairman and Director Frank Sica
Director
_____________________________________
Jay H. Baker
Director _____________________________________
Herbert Simon
Director
_____________________________________
John F. Herma
Director _____________________________________
Peter M. Sommerhauser
Director
_____________________________________
R. Lawrence Montgomery
Chief Executive Officer and Director _____________________________________
R. Elton White
Director
_____________________________________
Kevin Mansell
President and Director _____________________________________
James D. Ericson
Director
_____________________________________
Arlene Meier
Chief Operating Officer (Principal _____________________________________
Financial and Wayne Embry
Accounting Officer), Treasurer and Director
Director
S-1
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- --------------------------------------------------------------------------------
3.1 Articles of Incorporation of the Company, as amended, incorporated
herein by reference to Exhibit 3.1 of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended July 31, 1999.
3.2 Bylaws of the Company, incorporated herein by reference to Exhibit
3.2 of the Company's Annual Report on Form 10-K for the fiscal year
ended January 29, 2000.
4.1 Revolving Credit Agreement dated as of June 13, 1997 among Kohl's
Corporation, Kohl's Department Stores,Inc., various commercial
Banking institutions, The Bank of New York, as Administrative Agent,
And The First National Bank of Chicago, as Syndication Agent,
incorporated herein by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended August 2,
1997.
4.2 Amendment to Revolving Credit Agreement dated as of June 5, 1998,
incorporated herein by reference to Exhibit 4.1 of the Company's
registration statement on Form S-3 (File No. 333-73257).
4.3 Indenture dated as of December 1, 1995 between the Company and The
Bank of New York as trustee, incorporated herein by reference to
Exhibit 4.3 of the Company's Annual Report on Form 10-K for the
fiscal year ended February 3, 1996.
4.4 First Supplemental Indenture dated as of June 1, 1999 between the
Company and The Bank of New York, incorporated herein by reference to
Exhibit 4.2 of the Company's Registration Statement on Form S-4 (Reg.
No. 333- 83031).
4.5 Second Supplemental Indenture dated as of March 8, 2001 between the
Company and The Bank of New York, as trustee.
4.6 Indenture dated as of June 12, 2000, between the Company and The Bank
of New York, as trustee, incorporated herein by reference to Exhibit
4.1 of the Company's registration statement on Form S-3 (Reg. No.
333-43988).
4.7 Registration Rights Agreement dated June 12, 2000 between the Company
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, incorporated herein by reference to Exhibit 4.2 of the
Company's registration statement on Form S-3 (Reg. No. 333-43988).
4.8 Certain other long-term debt is described in Note 4 of the Notes to
Consolidated Financial Statements. The Company agrees to furnish to
The Commission, upon request, copies of any instruments defining the
Rights of holders of any such long-term debt described in Note 4 and
not filed herewith.
10.1 Amended and Restated Executive Deferred Compensation Plan .*
10.2 Employment Agreement between the Company and R. Lawrence Montgomery,
incorporated herein by reference to Exhibit 10.4 of the Company's
Annual Report on Form 10-K for the fiscal year ended January 31,
1998.*
10.3 Employment Agreement between the Company and Kevin Mansell,
incorporated herein by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended May 1,
1999.*
10.4 Executive Medical Plan, incorporated herein by reference to Exhibit
10.9 of the Company's registration statement on Form S-1 (File No.
33- 46883).*
1
<PAGE>
10.5 Executive Life Insurance Plan, incorporated herein by reference to
Exhibit 10.10 of the Company's registration statement on Form S-1
(File No. 33-46883).*
10.6 Executive Accidental Death and Dismemberment Plan, incorporated
herein by reference to Exhibit 10.11 of the Company's registration
statement on Form S-1 (File No. 33-46883).*
10.7 Executive Bonus Plan, incorporated herein by reference to Exhibit
10.12 of the Company's registration statement on Form S-1 (File No.
33- 46883).*
10.8 1992 Long Term Compensation Plan, incorporated herein by reference to
Exhibit 10.13 of the Company's registration statement on Form S-1
(File No. 33-46883).*
10.9 1994 Long-Term Compensation Plan, incorporated herein by reference to
Exhibit 10.15 of the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended May 4, 1996.*
10.10 1997 Stock Option Plan for Outside Directors, incorporated herein by
reference to Exhibit 4.4 of the Company's registration statement on
Form S- 8 (File No. 333-26409), filed on May 2, 1997.*
10.11 Amended and Restated Agreements dated December 10, 1998 between the
Company and Mr. Mansell, incorporated herein by reference to Exhibit
10.13 of the Company's Annual Report on Form 10-K for the fiscal year
ended January 30, 1999.*
10.12 Amended and Restated Agreements dated December 10, 1998 between the
Company and Mr. Montgomery, incorporated herein by reference to
Exhibit 10.14 of the Company's Annual Report on Form 10-K for the
Fiscal year ended January 30, 1999.*
10.13 First Amendment to Employment Agreement between the Company and Mr.
Montgomery, dated November 15, 2000. *
10.14 Employment Agreement between the Company and Arlene Meier dated
November 15, 2000. *
10.15 Receivables Purchase Agreement dated December 23, 1999 by and among
the Company, Kohl's Department Stores, Inc., PREFCO, various
Investors and Bank One, NA, as agent, incorporated herein by
reference to Exhibit 10.16 of the Company's Annual Report on Form
10-K for the Fiscal year ended January 29, 2000.
10.16 Amendment No. 1 to Receivables Purchase Agreement dated December 21,
2000 by and among the Company, Kohl's Department Stores, Inc.,
PREFCO, various Investors and Bank One, NA, as agent.
12.1 Statement regarding calculation of ratio of earnings to fixed
charges.
13.1 2000 Annual Report.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
99.1 Cautionary Statements Regarding Forward Looking Information and Risk
Factors.
* A management contract or compensatory plan or arrangement.
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.5
<SEQUENCE>2
<FILENAME>dex45.txt
<DESCRIPTION>2ND SUPP INDENTURE
<TEXT>
<PAGE>
EXHIBIT 4.5
- --------------------------------------------------------------------------------
KOHL'S CORPORATION
AND
THE BANK OF NEW YORK,
Trustee
_______________________
Second Supplemental Indenture
Dated as of March 8, 2001
To
Indenture
Dated as of December 1, 1995
_______________________
- --------------------------------------------------------------------------------
<PAGE>
SECOND SUPPLEMENTAL INDENTURE, dated as of March 8, 2001 (this "Second
Supplemental Indenture"), between Kohl's Corporation, a corporation duly
organized and existing under the laws of the State of Wisconsin (herein called
the "Company"), having its principal office at N56 W17000 Ridgewood Drive,
Menomonee Falls, Wisconsin 53051, and The Bank of New York, a New York banking
corporation, as Trustee (herein called the "Trustee") under the Indenture dated
as of December 1, 1995 between the Company and the Trustee (the "Original
Indenture").
Recitals of the Company
The Company has executed and delivered the Original Indenture to the
Trustee to provide for the issuance from time to time of its unsecured
debentures, notes or other debt instruments (the "Securities"), to be issued in
one or more series as provided in the Indenture.
Pursuant to the terms of the Original Indenture, the Company desires
to provide for the establishment of a new series of its Securities to be known
as its 6.3% Notes due 2011 (herein called the "Notes"), in this Second
Supplemental Indenture.
All things necessary to make this Second Supplemental Indenture a
valid agreement of the Company have been done.
Now, Therefore, This Second Supplemental Indenture Witnesseth:
For consideration, the adequacy and sufficiency of which are hereby
acknowledged by the parties hereto, each party agrees as follows, for the
benefit of the other parties and for the equal and proportionate benefit of all
Holders of the Notes, as follows:
ARTICLE ONE
DEFINED TERMS
Section 101. Defined Terms . Except as otherwise expressly provided in
this Second Supplemental Indenture or in the form of Note or otherwise clearly
required by the context hereof or thereof, all capitalized terms used and not
defined herein or in said form of Note that are defined in the Original
Indenture shall have the meanings assigned to them in the Original Indenture.
The Original Indenture, as supplemented from time to time, including by this
Second Supplemental Indenture, is hereafter referred to as the "Indenture". For
all purposes of this Second Supplemental Indenture:
"Closing Date" means March 8, 2001.
"Commission" means the Securities and Exchange Commission.
"Exchange Notes" means any securities of the Company containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act and shall not include the restrictions on
transfer) that are issued and
<PAGE>
exchanged for the Notes pursuant to the Registration Rights Agreement and
the Indenture.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Non-U.S. Person" means a person who is not a U.S. Person (as defined
in Regulation S).
"Notes" means any of the securities, as defined in the second
paragraph of the recitals hereof, that are authenticated and delivered
under the Indenture. For all purposes of the Indenture, the term "Notes"
shall include the Notes initially issued on the Closing Date, any Exchange
Notes to be issued and exchanged for any Notes pursuant to the Registration
Rights Agreement and the Indenture and any other Notes issued after the
Closing Date under the Indenture. For purposes of the Indenture, all Notes
shall vote together as one series of Notes under the Indenture.
"Private Placement Legend" has the meaning set forth in Section 601.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated March 8, 2001, between the Company and Morgan Stanley &
Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith, Incorporated and
Lehman Brothers Inc. and certain permitted assigns specified therein.
"Registration Statement" means the Registration Statement as defined
and described in the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Security" means any Note bearing the Private Placement
Legend.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
ARTICLE TWO
TERMS OF THE NOTES
Section 201. Establishment of the Notes. There is hereby authorized
--------------------------
a series of Securities designated the 6.3% Notes due 2011, initially limited in
aggregate principal amount to
<PAGE>
$300,000,000 (except as provided in Section 2.3.2 of the Original Indenture, and
except that the Company may issue additional Notes of this Series). The Notes
shall be substantially in the form set forth in Exhibit A hereto and shall
include the Private Placement Legend, until it is removed in accordance with
Section 601.
Section 202. Terms of the Notes. The Stated Maturity of the Notes
------------------
shall be March 1, 2011, and they shall bear interest at the rate of 6.3% per
annum, from March 8, 2001 or from the most recent interest payment date to which
interest has been paid or duly provided for, as the case may be, payable
semiannually (to holders of record of the Notes at the close of business on the
February 15 and August 15 immediately preceding the interest payment date) on
March 1 and September 1, commencing September 1, 2001 until payment of the
principal amount shall have been made or duly provided for.
The principal of and interest on the Notes shall be payable at the
office or agency of the Trustee in New York, New York maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose; provided, however, that at the option of the Company payment of
interest may be made by wire transfer or by check mailed to the address of the
Person entitled thereto as such address shall appear in the list of
Securityholders.
The Notes are redeemable prior to maturity as provided in Article Five
hereof and shall not have the benefit of a sinking fund.
The Notes shall rank equal with all other unsecured and unsubordinated
debt of the Company.
The Notes shall be subject to defeasance at the option of the Company
as provided in Sections 8.3 and 8.4 of the Original Indenture.
Section 203. Denominations. The Notes shall be issued in denominations
-------------
of $100,000 and integral multiples of $1,000.
Section 204. Form. Notes offered and sold in reliance on Rule 144A
----
shall be issued initially in the form of one or more permanent global Notes in
registered form, substantially in the form set forth in Exhibit A (the "U.S.
Global Notes"), registered in the name of the nominee of The Depository Trust
Company (the "Depositary" or "DTC"), deposited with the Trustee, as custodian
for the Depositary, duly executed by the Company and authenticated by the
Trustee as provided in Section 2.4 of the Original Indenture. The aggregate
principal amount of the U.S. Global Notes may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, in accordance with the instructions given by the
Holder thereof, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form substantially in the form set forth in Exhibit A
(the "Offshore Global Notes"), registered in the name of the nominee of the
Depositary, deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as provided in Section
2.4 of the Original Indenture. The aggregate principal amount of the Offshore
Global
<PAGE>
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Notes offered and sold to Institutional Accredited Investors that are
not QIBs (excluding non-U.S. Persons) shall be issued in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "Physical Notes").
The U.S. Global Notes and the Offshore Global Notes are sometimes
referred to herein as the "Global Notes".
The definitive Notes shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.
ARTICLE THREE
AMENDMENTS
Section 301. Article One of the Original Indenture shall be amended by
deleting the definition of "Officer" in Section 1.1 and replacing it in its
entirety with the following:
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Operating Officer, the President, any Vice
President, the Treasurer, the Secretary or the Controller of the
Company."
ARTICLE FOUR
REDEMPTION
Subject to the terms of Article Three of the Original Indenture, the
Company shall have the right to redeem the Notes, in whole or in part, from time
to time and at any time (such redemption, an "Optional Redemption", and the date
thereof, the "Optional Redemption Date") upon at least 30 days' notice mailed to
the registered address of each holder of the Notes, at a redemption price equal
to the sum of (A) the greater of (1) 100% of the principal amount of the Notes
to be redeemed or (2) the sum of the present values of the Remaining Scheduled
Payments thereon discounted to the Optional Redemption Date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at a rate
equal to the sum of the Treasury Rate plus twenty basis points, less the
Applicable Accrued Interest Amount plus (B) the Applicable Accrued Interest
Amount.
"Applicable Accrued Interest Amount" means, at the Optional Redemption
Date, the amount of interest accrued and unpaid from the prior interest payment
date to the Optional Redemption Date on the Notes subject to the Optional
Redemption computed on the basis of a 360-day year of twelve 30-day months.
<PAGE>
"Comparable Treasury Issue" means the United States Treasury security,
selected by a Reference Treasury Dealer appointed by the Company, as having a
maturity comparable to the remaining term of the Notes to be redeemed that would
be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Notes to be redeemed pursuant to the
Optional Redemption.
"Comparable Treasury Price" means, with respect to the Optional
Redemption Date, (1) the average of the Reference Treasury Dealer Quotations for
such Optional Redemption Date after excluding the highest and lowest of those
Reference Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than
five Reference Treasury Dealer Quotations, the average of all quotations.
"Reference Treasury Dealer" means any nationally recognized investment
banking firm that is a primary U.S. Government securities dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Optional Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m.,
New York City time, on the third business day preceding such Optional Redemption
Date.
"Remaining Scheduled Payments" means, for each Note to be redeemed,
the remaining scheduled payments of principal and interest on that Note that
would be due after the related Optional Redemption Date but for that Optional
Redemption. If the Optional Redemption Date is not an interest payment date
with respect to that Note, the amount of the next succeeding scheduled interest
payment on that Note will be reduced by the amount of interest accrued on the
Note to the Optional Redemption Date.
"Treasury Rate" means, with respect to the Optional Redemption Date
(if any), the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Optional Redemption Date.
ARTICLE FIVE
ORIGINAL ISSUE OF NOTES
Section 501. Notes in the aggregate principal amount of $300,000,000,
or in such additional principal amount as the Company may issue pursuant to
Section 201 of this Second Supplemental Indenture, may, upon execution of this
Second Supplemental Indenture, or from time to time thereafter, be executed by
the Company and delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and deliver said Notes upon a Company Order without
any further action by the Company.
<PAGE>
Section 502. Exchange Notes. Exchange Notes may from time to time be
--------------
executed by the Company and delivered to the Trustee for authentication and the
Trustee shall thereupon authenticate and deliver said Exchange Notes, upon
cancellation of an equal amount of Restricted Securities tendered in exchange,
upon a Company Order without further action by the Company.
ARTICLE SIX
SPECIAL TRANSFER PROVISIONS
Section 601. Legend on Restricted Securities. Upon the transfer,
-------------------------------
exchange or replacement of Notes not bearing the private placement legend set
forth on the face of the Notes (the "Private Placement Legend"), the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of any Note bearing the Private Placement
Legend, the Registrar shall deliver only Notes that bear the Private Placement
Legend unless and until (i) such Note is exchanged for an Exchange Note or sold
in connection with an effective Registration Statement pursuant to the
Registration Rights Agreement, (ii) with respect to the Offshore Global Notes
(A) at least the 41st day after the Closing Date and (B) receipt by the Company
and the Trustee of a certificate substantially in the form of Appendix B hereto,
(iii) the circumstances contemplated by paragraph (b)(i)(x) or (d)(i) of Section
603 exist or (iv) there is delivered to the Registrar an opinion of counsel
acceptable to the Company and the Trustee to the effect that neither such legend
nor the related restrictions on transfer are required in order to maintain
compliance with the Securities Act.
Section 602. Book-Entry Provisions for Global Notes (i) be registered
--------------------------------------
in the name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends, in addition to the Private Placement Legend, as set
forth on the face of the form of the Note.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under such
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited as specified in
Section 2.15.2 of the Original Indenture and the provisions of Section 603.
Interests of beneficial owners in Global Notes may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
603. In addition, Physical Notes shall be transferred to all beneficial owners
in exchange for their beneficial interests in the U.S. Global Notes or Offshore
Global Notes, as the case may be, as specified in Section 2.15.2 of the Original
Indenture.
<PAGE>
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in another
Global Note will, upon transfer, cease to be an interest in such Global Note and
become an interest in such other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions, if any, and other procedures applicable
to beneficial interests in such other Global Note for as long as it remains such
an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in a Global Note to beneficial owners pursuant to paragraph (b) of
this Section 602, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of such Global Note in an amount equal to
the principal amount of the beneficial interest in such Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Notes of like tenor and amount.
(e) In connection with the transfer of the U.S. Global Notes or the
Offshore Global Notes, in whole, to beneficial owners pursuant to paragraph (b)
of this Section 602, the U.S. Global Notes or Offshore Global Notes, as the case
may be, shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the U.S. Global Notes or Offshore Global Notes, as the
case may be, an equal aggregate principal amount of Physical Notes of authorized
denominations.
(f) Any Physical Note delivered in exchange for an interest in the
U.S. Global Notes pursuant to paragraph (b), (d) or (e) of this Section 602
shall, except as otherwise provided by Section 601, bear the Private Placement
Legend.
(g) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
Section 603. (a) Transfers to QIBs. The following provisions shall
-----------------
apply with respect to the registration of any proposed transfer of a Note
constituting a Restricted Security to a qualified institutional buyer as defined
in Rule 144A (a "QIB"):
(i) If the Note to be transferred consists of (x) Physical Notes, the
Registrar shall register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on the Note
stating, or has otherwise advised the Company and the Registrar in writing,
that the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the Note
stating, or has otherwise advised the Company and the Registrar in writing,
that it is purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information
<PAGE>
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A or (y) an interest in the U.S. Global Notes, the transfer of
such interest may be effected through the book entry system maintained by
the Depositary; and
(ii) (a) If the proposed transferee is an Agent Member and the Notes
to be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the U.S. Global Notes, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the U.S. Global
Notes in an amount equal to the principal amount of the Physical Notes to
be transferred, and the Trustee shall cancel the Physical Notes so
transferred and (b)(1) if the proposed transferor is an Agent Member
holding a beneficial interest in the Offshore Global Notes, upon receipt by
the Registrar of instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the Offshore
Global Notes in an amount equal to the principal amount of the beneficial
interest in the Offshore Global Notes to be transferred, and (b)(2) if the
proposed transferee is an Agent Member, upon receipt by the Registrar of
instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of the U.S. Global Notes in an
amount equal to the principal amount of the Offshore Global Notes to be
transferred and the Trustee shall decrease the amount of the Offshore
Global Notes.
(b) Transfers to Non-QIB Institutional Accredited Investors. The
-------------------------------------------------------
following provisions shall apply with respect to the registration of any
proposed transfer of a Note constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB (excluding Non-U.S.
Persons):
(i) The Registrar shall register the transfer of any Note, if (x) the
requested transfer is after the time period referred to in Rule 144(k)
under the Securities Act as in effect with respect to such transfer or (y)
the proposed transferee has delivered to the Registrar (A) a certificate
substantially in the form of Appendix A hereto and (B) an opinion of
counsel acceptable to the Company that such transfer is in compliance with
the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of (x)
the documents, if any, required by paragraph (i) above and (y) instructions
given in accordance with the Depositary's and the Registrar's procedures,
the Registrar shall reflect on its books and records the date and a
decrease in the principal amount of the Global Note in an amount equal to
the principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and
amount.
<PAGE>
(c) Transfers of Interests in the Offshore Global Notes. The
---------------------------------------------------
following provisions shall apply with respect to any transfer of interests in
Offshore Global Notes:
(i) until the expiration of the 40-day distribution compliance
period within the meaning of Rule 903 of Regulation S, any offer or sale of
interests in the Offshore Global Note shall be made (a) outside the United
States in compliance with Rule 903 or 904 under the Securities Act or to a
QIB in compliance with Rule 144A and (b) in accordance with all applicable
securities laws of the states of the United States or any other applicable
jurisdiction;
(ii) prior to the removal of the Private Placement Legend from the
Offshore Global Notes pursuant to Section 601, the Registrar shall refuse
to register such transfer unless such transfer complies with Section
603(c)(i); and
(iii) after such removal, the Registrar shall register the transfer
of any such Note without requiring any additional certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
-----------------------------------------
provisions shall apply with respect to any transfer of a Restricted
Security to a Non-U.S. Person:
(i) The Registrar shall register any proposed transfer to any Non-
U.S. Person if (A) the Note to be transferred is a Physical Note or an
interest in the U.S. Global Notes, and (B) the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Appendix B hereto and (C) the proposed transferee has delivered to the
Registrar an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act.
(ii) (a) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Notes, upon receipt by the Registrar
of (x) the documents, required by paragraph (i) and (y) instructions in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and a decrease in
the principal amount of the U.S. Global Notes in an amount equal to the
principal amount of the beneficial interest in the U.S. Global Notes to be
transferred, and (b) if the proposed transferee is an Agent Member, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Offshore Global Notes in an amount equal to the principal amount of the
Physical Notes or the U.S. Global Notes, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Note, if any, so
transferred or decrease the amount of the U.S. Global Notes.
Section 604. General. By its acceptance of any Note bearing the
-------
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in the Indenture and in such
legend and agrees that it will transfer such Note only as provided in the
Indenture.
<PAGE>
The Registrar shall not register the transfer of any Note unless such
transfer complies with the restrictions on transfer set forth in the Indenture.
The Registrar shall retain, in accordance with its customary procedures, copies
of all letters, notices and other written communications received pursuant to
this Section 604. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Registrar.
ARTICLE SEVEN
SUNDRY PROVISIONS
Section 701. No exchange of Notes for Exchange Notes pursuant to
Section 2.8 of the Original Indenture shall occur until a Registration Statement
shall have been declared effective by the Commission and any Notes that are
exchanged for Exchange Notes shall be canceled by the Trustee.
Section 702. The Original Indenture, as supplemented by this Second
Supplemental Indenture, is in all respects ratified and confirmed, and this
Second Supplemental Indenture shall be deemed part of the Indenture in the
manner and to the extent herein and therein provided.
<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
In Witness Whereof, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year first above
written.
KOHL'S CORPORATION
By: /s/ R. Lawrence Montgomery
-------------------------------
Name: R. Lawrence Montgomery
Title Chief Executive Officer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Barbara A. Bevelaqua
-------------------------------
Name: Barbara A. Bevelaqua
Title Vice President
<PAGE>
EXHIBIT A
---------
[FORM OF NOTE]
[Each Global Security, whether or not an Exchange Note, shall bear the following
legend: Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Kohl's
Corporation or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or to such other
entity or in such other name as is requested by an authorized representative of
DTC (and any payment hereon is made to Cede & Co. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.]
[Any Global Security issued hereunder shall bear a legend in substantially the
following form: This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of the
Depositary or a nominee of the Depositary. This Security is exchangeable for
Securities registered in the name of a person other than the Depositary or its
nominee only in the limited circumstances described in the Indenture, and may
not be transferred except as a whole by the Depositary to a nominee of the
Depositary by a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any such
nominee to a successor Depositary or a nominee of such a successor Depositary.]
[Private Placement Legend: THE NOTES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A")), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPHS (a)(1), (2), (3) or (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE NOTES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR" FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR
904 OF REGULATION S, (2) AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER
<PAGE>
SUCH NOTE PRIOR TO THE DATE WHICH IS THE LATER OF (X) TWO YEARS (OR SUCH SHORTER
PERIOD OF TIME AS PERMITTED BY RULE 144(k) OF THE SECURITIES ACT) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF THIS NOTE) AND
THE LAST DATE ON WHICH KOHL'S CORPORATION OR ANY AFFILIATE OF KOHL'S CORPORATION
WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER
DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION
TERMINATION DATE") EXCEPT (A) TO KOHL'S CORPORATION OR ANY SUBSIDIARY THEREOF,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) OUTSIDE THE UNITED STATES PURSUANT TO OFFERS AND SALES TO NON-
U.S. PERSONS IN AN OFFSHORE TRANSACTION WITHIN THE MEANING AND CONSISTENT WITH
THE TERMS AND CONDITIONS OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1),
(2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR" FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND;
PROVIDED THAT KOHL'S CORPORATION, AND THE TRUSTEE SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO KOHL'S
CORPORATION AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"UNITED STATES", "OFFSHORE TRANSACTION" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.]
[Each Offshore Global Note shall bear the following legend: PRIOR TO EXPIRATION
OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF
A-2
<PAGE>
REGULATION S, THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO A U.S. PERSON OR FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON.]
A-3
<PAGE>
KOHL'S CORPORATION
6.3% Notes Due 2011
CUSIP No. _________
No. _____
$
Principal Amount
Kohl's Corporation, a corporation duly organized and existing under
the laws of the State of Wisconsin (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to [________] [Cede & Co.] or registered
assigns, the principal sum of ($ ) on March 1, 2011, and to pay
interest thereon semiannually (to holders of record of the Notes at the close of
business on the February 15 and August 15 immediately preceding the interest
payment date) on March 1 and September 1 in each year, commencing September 1,
2001, at the rate of 6.3% per annum, until the principal hereof is paid or made
available for payment.
The interest so payable, and punctually paid or duly provided for, on
any interest payment date, as provided in the Indenture, shall be paid to the
Person in whose name this Note (or one or more predecessor Notes) is registered
at the close of business on the February 15 or August 15 (whether or not a
business day), as the case may be, next preceding such interest payment date.
If the Company defaults in a payment of interest, it will pay the defaulted
interest plus, to the extent permitted by law, any interest payable on the
defaulted interest, to the persons who are Securityholders on a subsequent
special record date, determined in accordance with the Indenture. The Company
may pay the defaulted interest in any other lawful manner.
The statements set forth in the restrictive legend above are an
integral part of the terms of this Note and by acceptance hereof each holder of
this Note agrees to be subject to and bound by the terms and provisions set
forth in such legend.
Payments of principal and interest on this Note will be made at the
office or agency of the Company maintained for that purpose in New York, New
York, in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made by
wire transfer or by check mailed on or prior to an interest payment date to the
address of the Person entitled thereto as such address shall appear in the list
of Securityholders.
Any payment of this Note due on any day which is not a business day in
New York, New York need not be made on such day, but may be made on the next
succeeding business day with the same force and effect as if made on the due
date and no interest shall
A-4
<PAGE>
accrue for the period from and after such date, unless such payment is a payment
at maturity or upon redemption, in which case interest shall accrue thereon at
the stated rate for such additional days.
This Note is one of a duly authorized issue of securities of the
Company, designated 6.3% Notes due 2011 (the "Notes"), issued and to be issued
in one or more series under an Indenture, dated as of December 1, 1995, as
supplemented by the Second Supplemental Indenture, dated as of March 8, 2001
(the "Indenture"), between the Company and The Bank of New York, as Trustee (the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the Notes
and of the terms upon which the Notes are, and are to be, authenticated and
delivered. This Note is one of a series designated on the face hereof, issued
initially in the aggregate principal amount of $300,000,000.
[INCLUDE IF SECURITY IS A GLOBAL NOTE -- This Note is a "book-entry"
Note and is being registered in the name of Cede & Co. as nominee of The
Depository Trust Company ("DTC"), a clearing agency. Subject to the terms of the
Indenture, this Note will be held by a clearing agency or its nominee, and
beneficial interests will be held by beneficial owners through the book-entry
facilities of such clearing agency or its nominee in minimum denominations of
$100,000 and integral multiples of $1,000. As long as this Note is registered in
the name of DTC or its nominee, the Trustee will make payments of principal of
and interest on this Note by wire transfer of immediately available funds to DTC
or its nominee. Notwithstanding the above, the final payment on this Note will
be made after due notice by the Trustee of the pendency of such payment and only
upon presentation and surrender of this Note at its principal corporate trust
office or such other offices or agencies appointed by the Trustee for that
purpose and such other locations provided in the Indenture.]
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of March 8, 2001. In the event that (i)
the Company fails to file an Exchange Offer Registration Statement with respect
to the Notes with the Commission on or prior to the 135th calendar day following
the Closing Date, (ii) the Commission does not declare such Exchange Offer
Registration Statement effective on or prior to the 180th calendar day following
the Closing Date, (iii) the Exchange Offer is not consummated on or prior to the
45th calendar day following the effective date of the Exchange Offer
Registration Statement or (iv) if required, a Shelf Registration Statement with
respect to the Notes is not declared effective by the Commission on or prior to
the 210th calendar day following the Closing Date (each, a "Registration
Default"), the per annum interest rate borne by the Notes shall be increased by
one-quarter of one percent (0.25%) per annum from the end of the applicable
period giving rise to such Registration Default. The interest rate borne by the
Notes will be increased by an additional one-quarter of one percent (0.25%) per
annum for each subsequent 90-day period (or portion thereof) during which any
such Registration Default continues up to a maximum aggregate increase in the
annual interest rate of one-half of one percent (0.50%) per annum. Following
the cure of all Registration Defaults, the interest rate borne by the Notes
shall be reduced to the original interest rate borne by the Notes. No increase
in the rate shall be payable
A-5
<PAGE>
for any period during which a Shelf Registration is effective. All accrued
additional interest shall be paid to Holders by the Company in the same manner
as interest is paid pursuant to the Indenture. All terms used in this Note that
are defined in the Registration Rights Agreement shall have the meanings
assigned to them in the Registration Rights Agreement.
The Notes do not have the benefit of any sinking fund obligations.
Subject to the terms of Article Three of the Indenture, the Company
shall have the right to redeem the Notes, in whole or in part, from time to time
and at any time (such redemption, an "Optional Redemption", and the date
thereof, the "Optional Redemption Date") upon at least 30 days' notice mailed to
the registered address of each holder of the Notes, at a redemption price equal
to the sum of (A) the greater of (1) 100% of the principal amount of the Notes
to be redeemed or (2) the sum of the present values of the Remaining Scheduled
Payments thereon discounted to the Optional Redemption Date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at a rate
equal to the sum of the Treasury Rate plus twenty basis points, less the
Applicable Accrued Interest Amount plus (B) the Applicable Accrued Interest
Amount.
"Applicable Accrued Interest Amount" means, at the Optional Redemption
Date, the amount of interest accrued and unpaid from the prior interest payment
date to the Optional Redemption Date on the Notes subject to the Optional
Redemption determined at the rate per annum, computed on the basis of a 360-day
year of twelve 30-day months.
"Comparable Treasury Issue" means the United States Treasury security,
selected by a Reference Treasury Dealer appointed by the Company, as having a
maturity comparable to the remaining term of the Notes to be redeemed that would
be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Notes to be redeemed pursuant to the
Optional Redemption.
"Comparable Treasury Price" means, with respect to the Optional
Redemption Date, (1) the average of the Reference Treasury Dealer Quotations for
such Optional Redemption Date after excluding the highest and lowest of those
Reference Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than
five Reference Treasury Dealer Quotations, the average of all quotations.
"Reference Treasury Dealer" means any nationally recognized investment
banking firm that is a primary U.S. Government securities dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Optional Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m.,
New York City time, on the third business day preceding such Optional Redemption
Date.
A-6
<PAGE>
"Remaining Scheduled Payments" means, for each Note to be redeemed,
the remaining scheduled payments of principal and interest on that Note that
would be due after the related Optional Redemption Date but for that Optional
Redemption. If the Optional Redemption Date is not an interest payment date
with respect to that Note, the amount of the next succeeding scheduled interest
payment on that Note will be reduced by the amount of interest accrued on the
Note to the Optional Redemption Date.
"Treasury Rate" means, with respect to the Optional Redemption Date
(if any), the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such Optional Redemption Date.
If an Event of Default with respect to Notes of this series shall
occur and be continuing, the principal of all the Notes of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
[INCLUDE IF SECURITY IS A GLOBAL SECURITY -- In the event of a deposit
or withdrawal of an interest in this Note, including an exchange, transfer,
repurchase or conversion of this Note in part only, the Trustee, as custodian of
the Depositary, shall make an adjustment on its records to reflect such deposit
or withdrawal in accordance with the rules and procedures of the Depositary.]
[INCLUDE IF SECURITY IS A RESTRICTED SECURITY -- Subject to certain
limitations in the Indenture, at any time when the Company is not subject to
Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended,
upon the request of a Holder of a Restricted Security, the Company will promptly
furnish or cause to be furnished Rule 144A Information (as defined below) to
such Holder of Restricted Securities, or to a prospective purchaser of any such
security designated by any such Holder, to the extent required to permit
compliance by any such Holder with Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act"). "Rule 144A Information" shall be such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto).]
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company under this Note and (b) certain
restrictive covenants and the related defaults and Events of Default applicable
to the Company, in each case, upon compliance by the Company with certain
conditions set forth in the Indenture, which provisions apply to this Note.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of at least 66% in aggregate principal amount of the
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of a majority in aggregate
principal amount of the Securities of each series at the time Outstanding, on
behalf of the
A-7
<PAGE>
Holders of all Securities of each series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
thereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium, and
interest on this Note at the times, place and rate, and in the coin or currency,
herein prescribed.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Notes of this series, the Holders of not less than 25% in principal amount of
the Notes of this series at the time Outstanding shall have made written request
to the Trustee to institute proceedings in respect of such Event of Default as
Trustee and offered the Trustee reasonable indemnity and the Trustee shall not
have received from the Holders of a majority in principal amount of Notes of
this series at the time Outstanding a direction inconsistent with such request,
and shall have failed to institute any such proceeding, for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Notes for the enforcement of
any payment of principal hereof or any interest hereon on or after the
respective due dates expressed herein.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Notes is registrable upon surrender of
this Note to the Registrar, for registration of transfer duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar attached hereto duly executed by the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new Notes,
and of like tenor, of authorized denominations and for the same aggregate
principal amount, shall be issued to the designated transferee or transferees.
The Notes of this Series are issuable only in fully registered form
without coupons in denominations of $100,000 and any integral multiples of
$1,000. As provided in the Indenture and subject to certain limitations therein
set forth, the Notes of this Series are exchangeable for a like aggregate
principal amount of Notes of a different authorized denomination, as requested
by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
A-8
<PAGE>
Prior to due presentment of this Note for registration of transfer,
the Company, the Trustee and any agent of the Company, or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Company, the
Trustee or any such agent shall be affected by notice to the contrary.
Interest on this Note shall be computed on the basis of a 360-day year
of twelve 30-day months.
The Company shall furnish to any Holder of record of Notes, upon
written request and without charge, a copy of the Indenture.
The Indenture and this Note each shall be governed by and construed in
accordance with the laws of the State of New York.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.
All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
A-9
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common.
UNIF GIFT MIN ACT -- ______________ Custodian _____________
(Cust) (Minor)
under the Uniform Gifts to Minors Act
______________________________________
(State)
Additional abbreviations may also be used though not in the above list.
A-10
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
____________________________________
____________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
_______________________________________________________________________________
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
_______________________________________________________________________________
attorney to transfer said Security on the books of the Company, with full power
of substitution in the premises.
Date:_____
_____________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the
within instrument in ever particular, without
alteration or enlargement, or any change
whatsoever.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES THAT HAVE THE PRIVATE
PLACEMENT LEGEND]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the Shelf Registration Statement is
declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
---------
[_] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
--
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<PAGE>
[_] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 603 of the Indenture shall have
been satisfied.
Date:_______ ______________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within-mentioned instrument in
every particular, without alteration or any
change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Date:____ ______________________________________________
NOTICE: To be executed by an executive officer
A-12
<PAGE>
In Witness Whereof, the Company has caused this instrument to be duly
executed
Dated: KOHL'S CORPORATION
By:_________________
Name:
Title:
Attest:
____________________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities of the Series
originated therein referred to in the
within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:_________________________________________
Authorized Officer
<PAGE>
APPENDIX A
----------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
____________________, ____
The Bank of New York
101 Barclay Street 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Kohl's Corporation (the "Company")
6.3% Notes due March 1, 2011, (the "Notes")_____
------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_________ aggregate
principal amount of the 6.3% Notes due 2011 (the "Notes") of Kohl's Corporation,
a Wisconsin corporation ("Kohl's"), we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of
1933, as amended (the "Securities Act")), purchasing for our own account or
for the account of such an institutional "accredited investor," and we are
acquiring the Notes for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act or other applicable securities law and we have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we
and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
2. We understand and acknowledge that the Notes have not been
registered under the Securities Act or any other applicable securities law
and may not be offered, sold or otherwise transferred except in compliance
with the registration requirements of the Securities Act or any other
applicable securities law, or pursuant to an exemption therefrom, or in a
transaction not subject thereto, and in each case in compliance with the
conditions for transfer set forth below. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Notes to offer,
sell or otherwise transfer such Notes prior to (x) the date which is two
years (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act) after the later of the date of original issue and the last
date on which Kohl's or any affiliate of Kohl's was the owner of such Notes
(or any predecessor thereto) and (y) such later date, if any, as may be
required by applicable law (the "Resale Restriction Termination Date") only
(a) to Kohl's or any of Kohl's subsidiaries, (b) pursuant to a registration
statement which has been declared
<PAGE>
effective under the Securities Act, (c) for so long as the Notes are
eligible for resale pursuant to Rule 144A under the Securities Act, to a
person we reasonably believe is a "Qualified Institutional Buyer" within
the meaning of Rule 144A (a "QIB") that purchases for its own account or
for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) pursuant to offers and sales to
non-U.S. persons in an offshore transaction within the meaning and
consistent with the terms and conditions of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2),(3) or (7) of Rule 501 under the
Securities Act that is acquiring the Notes for its own account or for the
account of such an institutional "accredited investor" for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution in violation of the Securities Act or (f) pursuant to any
other available exemption from the registration requirements of the
Securities Act, subject in each of the foregoing cases to any requirement
of law that the disposition of our property or the property of such
investor account or accounts be at all times within our or their control
and to compliance with any applicable state or other securities laws. The
foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes
is proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver to the trustee
(the "Trustee") a letter from the transferee substantially in the form of
this letter, which shall provide, among other things, that the transferee
is a person or entity as defined in paragraph 1 of this letter and that it
is acquiring such Notes for investment purposes and not for distribution in
violation of the Securities Act. We acknowledge that the Company and the
Trustee reserve the right prior to any offer, sale or other transfer of the
Notes pursuant to clauses (d), (e) or (f) above prior to the Resale
Restriction Termination Date to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to Kohl's and
the Trustee.
3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
A-2
<PAGE>
Very truly yours,
By: (Name of Purchaser)
---------------------------------
Date:
-------------------------------
Upon transfer the Notes would be registered in the name of the new
beneficial owner as follows:
Taxpayer ID
Name Address Number
---- ------- -------------
<PAGE>
APPENDIX B
----------
Form of Certificate to Be Delivered in
Connection with Transfers Pursuant to Regulation S
--------------------------------------------------
________, ____
Kohl's Corporation
c/o The Bank of New York
101 Barclay Street 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Kohl's Corporation (the "Company")
6.3% Notes due 2011 (the "Notes")_____
--------------------------------------
Dear Sirs:
In connection with our proposed sale of U.S.$__________________
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933 and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------
Authorized Signature
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>dex101.txt
<DESCRIPTION>A & R EXE DEFERRED COMP PLAN
<TEXT>
<PAGE>
EXHIBIT 10.1
KOHL'S CORPORATION
AMENDED & RESTATED
DEFERRED COMPENSATION PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I TITLE AND DEFINITIONS 1
1.1 Title 1
1.2 Definitions 1
ARTICLE II ELIGIBILITY AND PARTICIPATION 5
2.1 Eligibility 5
2.2 Participant 5
ARTICLE III DEFERRAL ELECTIONS 5
3.1 Elections to Defer Compensation 5
3.2 Investment Elections 6
ARTICLE IV ACCOUNTS AND TRUST FUNDING 7
4.1 Deferral Accounts 7
4.2 Trust Funding 7
ARTICLE V DISTRIBUTION OF DEFERRED COMPENSATION 8
5.1 Distribution Due to Termination of Employment 8
5.2 Early Distribution 9
5.3 Programmed Early Distributions 9
5.4 Hardship Withdrawals 9
5.5 Other Amounts 10
ARTICLE VI ADMINISTRATION 11
6.1 Committee 11
6.2 Committee Action 11
6.3 Powers and Duties of the Committee 11
6.4 Committee and Interpretation 11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
6.5 Compensation and Expenses 12
6.6 Liability 12
6.7 Quarterly Statements 12
6.8 Disputes 12
ARTICLE VII MISCELLANEOUS 13
7.1 Unsecured General Creditor 13
7.2 Restriction Against Assignment 13
7.3 Withholding 13
7.4 Amendment, Modification, Suspension or Termination 13
7.5 Governing Law 14
7.6 Receipt or Release 14
7.7 Payments on Behalf of Persons Under Incapacity 14
7.8 No Continued Right to Employment 14
7.9 Information 14
</TABLE>
3
<PAGE>
KOHL'S CORPORATION
AMENDED & RESTATED
DEFERRED COMPENSATION PLAN
WHEREAS, Kohl's Department Stores, Inc. ("KDS") established the 1993
Non-Qualified Deferred Compensation Plan as amended; and
WHEREAS, Kohl's Corporation desires to amend and restate the Kohl's
Corporation Deferred Compensation Plan as a master plan to permit certain of its
and its affiliate entities' senior management employees to provide supplemental
retirement income benefits through the deferral of salary, bonus and incentive
compensation; and
WHEREAS, KDS, a subsidiary of Kohl's Corporation, desires to amend
and restate the 1993 Non-Qualified Deferred Compensation Plan, as amended, to
conform to the provisions of this Kohl's Corporation Deferred Compensation Plan;
NOW, THEREFORE, Kohl's Corporation and KDS hereby adopt, amend and
restate, as the case may be, effective October 1, 1997, as follows:
ARTICLE I
TITLE AND DEFINITIONS
---------------------
1.1. Title. This Plan shall be known as the Kohl's Corporation
-----
Deferred Compensation Plan.
1.2. Definitions. Whenever the following words and phrases are used
-----------
in this Plan, with the first
letter capitalized, they shall have the meaning specified below:
a) "Account" or "Accounts" shall mean a Participant's Deferral
Account.
b) "Base Salary" shall mean a Participant's annual base salary,
excluding Performance Bonuses, Equity Share Awards and all other remuneration
for services rendered to the Company.
c) "Beneficiary" or "Beneficiaries" shall mean the person or persons,
including a trustee, personal representative or other fiduciary, last designated
in writing by a Participant in accordance with procedures established by the
Committee to receive the benefits specified hereunder in the event of the death
of a Participant. No beneficiary designation shall become effective until it is
filed with the Committee. Any designation shall be revocable at any time through
a written instrument filed by the Participant with the Committee with or without
the consent of the previous Beneficiary. If there is no such designation, then
the surviving spouse of the Participant shall be the Beneficiary. If there is no
surviving spouse to receive any benefits
<PAGE>
payable in accordance with the preceding sentence, the estate of the Participant
shall be the Beneficiary. In the event any amount is payable under the Plan to a
minor, then payment shall be made to the duly appointed and currently acting
guardian of the estate for the minor or, if no guardian of the estate for the
minor is duly appointed and currently acting within sixty (60) days after the
date the amount becomes payable (or such extended period as the Committee
determines is reasonably necessary to allow such guardian to be appointed),
payment shall be deposited with the court having jurisdiction over the estate of
the minor. The Company may condition any payment hereunder on the receipt of
such release as the Company may request. Payment by the Company pursuant to any
unrevoked Beneficiary designation, or to the spouse or estate of the Participant
if no such designation exists, of all benefits owed hereunder shall terminate
any and all liability of Company.
d) "Board of Directors" shall mean the Board of Directors of the
Company.
e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
f) "Committee" shall mean the Committee appointed by the Board of the
Company to administer the Plan.
g) "Company" shall mean Kohl's Corporation and any successor
corporations and each corporation which is an "affiliate" member of a controlled
group of corporations (within the meaning of Section 414(b) of the Code) of
which Kohl's Corporation is a component member, if the Board of the Company and
the Board of Directors of the applicable corporation provides that such
corporation shall participate in the Plan.
h) "Compensation" shall mean Base Salary, Performance Bonuses, Equity
Share Awards and other compensation that the Participant is entitled to receive
for services rendered to the Company.
i) "Competition with the Company" means that a Participant, directly
or indirectly, whether as a partner, officer, director, employee, manager,
consultant or otherwise, during the one (1) year period following the
Participant's Termination of Employment performs services for any organization
which is or owns or provides advice to a retail department or retail specialty
store selling goods competitive with the Company or any of its affiliates in any
area which is within five (5) miles of any retail store operated by the Company
or any of its affiliates.
j) "Credit Rate" for each Fund shall mean an amount equal to the net
gain or loss on the assets deemed invested in each Fund by the Participant
during each month.
k) "Declining Balance Method" is the method by which the Account is
to be distributed in installments (a "Distribution") to a Participant or his
beneficiary following the Termination of a Participant. According to the
Declining Balance Method, a Distribution will be equal to a portion of the
Account remaining undistributed immediately prior to the Distribution multiplied
by a fraction, the numerator of which shall be one (1) and the denominator of
which shall be the number of periods during which Distributions remain to be
paid, including the period for which
2
<PAGE>
the Distribution is being computed. Section V below shall govern the duration of
each period and the number of periods over which amounts credited to Accounts
may be distributed.
l) "Deferral Account" shall mean the bookkeeping account maintained
by the Committee for each Participant that is credited with amounts equal to (1)
the portion of the Compensation the Participant elects to defer; and (2) net
earnings and losses on such amount as provided herein; less (3) prior
withdrawals, forfeitures and expenses allocated by the Committee to the Deferral
Account of the Participant.
m) "Dependent" shall mean an individual described in Section 152(a)
of the Code.
n) "Disability," if the Participant is covered by an individual or
group long-term policy paid for by the Company, shall mean total disability as
defined in such policy without regard to any waiting period. If the Participant
is covered by both an individual and a group policy, Disability occurs under
this Plan when total disability occurs under either the individual or the group
policy, also without regard to any waiting period. If the Participant is not
covered by such a policy, Disability shall mean the Participant is suffering a
sickness, accident or injury which, in the judgment of a physician satisfactory
to the Committee, prevents the Participant from performing substantially all of
his/her normal duties for the Company. As a condition to any benefits, the
Committee may require the Participant to submit to such physical or mental
evaluations and tests as the Committee deems appropriate.
o) "Distributable Amount" shall mean the amounts credited to the
Deferral Account of a Participant.
p) "Early Distribution" (Unscheduled In-Service Withdrawal),
"Programmed Early Distribution" (Scheduled In-Service Withdrawals), and
"Hardship Withdrawals" shall be in-service withdrawals with different
applications. (See Article V, Sections 5.2, 5.3 and 5.4 respectively).
q) "Effective Date" shall mean August 1, 1998, the effective date of
this amendment, restatement and adoption.
r) "Eligible Employee" shall mean such management employees that are
actively employed by the Company on a full time basis as are designated by the
Board for participation in this Plan.
s) "Equity Share Award" shall mean amounts payable to a Participant
under the terms of the Equity Incentive Plan of Kohl's Department Stores, Inc.,
the Management Incentive Plan of Kohl's Department Stores, Inc., and such other
incentive compensation arrangements as the Committee determines to be eligible
to be included as an Equity Share Award.
t) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
u) "Fund" or "Funds" shall mean one or more of the investment funds
selected by the Committee from time to time.
3
<PAGE>
v) "Initial Election Period" for an Eligible Employee shall mean the
period from August 20, 1997 to September 30, 1997, or, if later, the thirty (30)
day period following the date the employee initially becomes an Eligible
Employee.
w) "Participant" shall mean any Eligible Employee who becomes a
Participant in accordance with Article II hereof.
x) "Payment Date" shall mean on March 31 (or such other date
determined by the Committee) of the Company's fiscal year which commences after
the date of a Participant's Termination of Employment.
y) "Performance Bonuses" shall mean the performance bonus earned
during a Plan Year, whether or not paid during such Plan Year as such
performance bonuses may be determined by the Company.
z) "Plan" shall mean the Kohl's Corporation Deferred Compensation
Plan set forth herein, as amended from time to time.
aa) "Plan Year" shall mean the twelve (12) consecutive monthly
periods beginning on January 1 and ending on December 31 of each year, or such
shorter period beginning on the date an Eligible Employee becomes a Participant
and ending on the last day of the calendar year.
bb) "Policy" shall mean any insurance policy purchased in connection
with this Plan.
cc) "Reasonable Cause" shall mean any of the following with respect
to the Participant's position of employment with the Company:
(i) Gross negligence, fraud or willful violation of any law or
significant Company policy committed in connection with the position
of the Participant with the Company; or
(ii) Failure to substantially perform (for reasons other than
Disability) the duties reasonably assigned or appropriate to the
position of the Participant.
dd) "Retirement" shall mean:
(i) for employees hired before August 31, 1988, the date on
which an employee attains age 65;
(ii) for employees hired after August 31, 1988, the later of
the date on which an employee attains age 65 or the fifth anniversary
of the employee's participation in the Company's retirement program;
or
(iii) such other ages and length of service the Committee shall
from time to time determine to allow Participants to qualify for
normal retirement under the Plan.
4
<PAGE>
ee) "Early Retirement" shall mean the date on which an employee has
been employed by the Company for ten (10) years on or after the employee attains
age 55.
ff) "Termination of Employment" means the Participant ceases to be
actively employed by the Company for any reason on a full time basis.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1. Eligibility. The Board shall from time to time determine the
-----------
employees of the Company that are Eligible Employees. The Committee shall
promptly notify each employee of the Company designated as an Eligible Employee
of his/her right to participate in the Plan. The designation of an employee of
the Company as an Eligible Employee for any Plan Year shall not confer upon such
employee a right to continue as an Eligible Employee in any other Plan Year.
2.2. Participant. A Participant in the Kohl's Department Stores, Inc.
-----------
1993 Deferred Compensation Plan immediately prior to the Effective Date shall
continue such participation as a Participant in this Plan. An employee of the
Company who was an Eligible Employee prior to the Effective Date, but not a
Participant, may become a Participant in accordance with rules established by
the Committee. An employee of the Company who becomes an Eligible Employee may
become a Participant in the Plan in accordance with rules established by the
Committee.
ARTICLE III
DEFERRAL ELECTIONS
3.1. Elections to Defer Compensation.
-------------------------------
a) General Rule. The amount of Compensation which an Eligible
Employee may elect to defer is Compensation earned on or after the effective
date of the election by the Eligible Employee to defer in accordance with this
Article III. The Eligible Employee shall generally be eligible to defer a
percentage or dollar amount of compensation which shall not exceed one hundred
percent (100%) of the Eligible Employee's Compensation, provided that the total
amount deferred by a Participant shall be limited in any calendar year, if
necessary, to an amount in excess of the amount required to satisfy social
security tax (including Medicare and any other applicable tax or similar
assessment), income tax and employee benefit plan withholding requirements as
determined by the Committee. The minimum deferral that may be made for any Plan
Year by an Eligible Employee shall not be less than Five Thousand Dollars
($5,000.00), provided, however, the minimum deferral for the Initial Election
Period for participation pursuant to 3.1 shall be prorated based on the number
of months of participation remaining in the calendar year.
b) Initial Election Period. The Committee shall establish rules
regarding (i) the participation by employees of the Company who were not
Eligible Employees prior to the Effective Date; (ii) the participation of
employees of the Company who were Eligible Employees
5
<PAGE>
prior to the Effective Date but were not Participants; and (iii) additional
deferrals of compensation by previous Participants.
c) Annual Election. An employee's election during the Initial
Election Period to defer Base Salary shall be in effect for all Plan Years
unless on or before December 15th of the year prior to the applicable year the
Participant changes or terminates his/her election and such amended election
shall be applicable until amended or revoked as provided herein. An Eligible
Employee's election during the Initial Election Period to defer any other
Compensation shall be in effect only for the Plan Year to which such election
relates. Any subsequent election with respect to Compensation must be filed by
December 15th of the year prior to the year the Compensation is earned. The
failure to make an election with respect to any other Compensation earned during
the Plan Year shall result in no deferral of Compensation for such Plan Year.
The Committee shall from time to time promulgate rules applicable to elections
to defer Compensation.
d) Duration of Compensation Deferral Election. An Eligible Employee's
initial election in accordance with this Plan shall be effective on the first
day of the first pay period beginning after such Initial Election Period. An
Eligible Employee's election after the Initial Election Period in accordance
with this Plan shall be effective on the first day of the Plan Year following
such election.
3.2. Investment Elections.
--------------------
a) The Committee shall from time to time select types of investment
Funds and specific Funds available for investment designation by Participants
with respect to Deferral Accounts. The Committee shall notify Participants of
the type of Funds and the specific Funds selected from time to time. At the time
of making the deferral elections described in Section 3.1, each Participant
shall designate, on a form provided by the Committee, the types of investment
funds the Account of the Participant will be deemed to be invested in for
purposes of determining the Credit Rate to be credited to that Account. In
making the designation, a Participant may specify that all or any percentage of
his/her Deferral Account (in one percent (1%) or more whole percentage
increments) be deemed to be invested in one or more of the types of investment
funds selected by the Committee. Effective as of the end of any calendar month,
a Participant may change the designation made by filing an election, on a form
provided by the Committee, at least five (5) days prior to the end of such
month. Such change shall be effective as of the beginning of the next calendar
month. If a Participant fails to timely elect a type of Fund, he/she shall be
deemed to have elected the money market type of investment Fund or such other
Fund as the Committee may from time to time designate as the Fund to be employed
if no timely election is made. A Participant may make investment elections
either prior to or after Termination of Employment, or in the event of a
Participant's death, the Beneficiary designated by the Participant may make
investment elections.
6
<PAGE>
b) Although the Participant may designate the type of investment
Funds, the Committee shall not be bound to invest such amount in any specific
Fund and shall have no liability to Participants for failure to so invest. The
Committee shall select from time to time, in its sole discretion, commercially
available investment Funds of the investment types determined from time to time
by the Committee. The Committee may from time to time select alternate Funds in
addition to or in replacement of Funds previously selected. The Credit Rate of
each such commercially available investment fund shall be used to determine the
amount of earnings or losses to be credited to the Account of the Participant.
ARTICLE IV
ACCOUNTS AND TRUST FUNDING
4.1. Deferral Accounts. The Committee shall establish and maintain a
-----------------
Deferral Account for each Participant under the Plan. Each Participant's
Deferral Account shall be further divided into separate subaccounts ("Investment
Fund Subaccounts"), each of which corresponds to an investment Fund selected by
the Participant. A Participant's Deferral Account shall be credited as follows:
a) As of the last day of each month, the Committee shall credit the
Participant's Deferral Account with an amount equal to Compensation deferred by
the Participant during each pay period occurring in that month in accordance
with the deferral election of the Participant. Compensation that the Participant
has elected to be deemed to be invested in a certain type of Fund shall be
credited to the Investment Fund Subaccount as of the end of the month.
b) As of the last day of each month, each Investment Fund Subaccount
of a Participant's Deferral Account shall be credited with earnings or losses in
an amount equal to that determined by multiplying the balance credited to such
Investment Fund Subaccount as of the last day of the preceding month by the
Credit Rate for the applicable month for the corresponding Fund in which the
amount is deemed invested.
4.2. Trust Funding. The Company has created a Trust into which the
-------------
Company shall deposit amounts equal to the amounts deferred by Participants. The
Company shall cause the Trust to be funded each month. The Company shall
contribute to the Trust an amount equal to the amount deferred by each
Participant for each month during the Plan Year.
Although the principal of the Trust and any earnings thereon shall be
held separate and apart from other funds of Company and except as otherwise
provided herein, shall be used exclusively for the uses and purposes of Plan
Participants and beneficiaries as set forth therein, neither the Participants
nor their beneficiaries shall have any preferred claim on, or any beneficial
ownership in, any assets of the Trust prior to the time such assets are paid to
the Participants or beneficiaries as benefits and all amounts credited under
this Plan shall represent unsecured contractual rights of Plan Participants and
beneficiaries against the Company. Any assets held in the Trust will be subject
to the claims of general creditors of the Company under federal and state law in
the event of insolvency as defined in the Trust.
7
<PAGE>
Except as provided above and except for amounts forfeited by a
Participant hereunder, the assets of the Plan and Trust shall not inure to the
benefit of the Company other than in the case of insolvency as defined in the
Trust and the same shall be held for the purpose of providing benefits to
Participants and their beneficiaries and defraying reasonable expenses of
administering the Plan and Trust.
ARTICLE V
DISTRIBUTION OF DEFERRED COMPENSATION
5.1. Distribution Due to Termination of Employment. In the case of a
---------------------------------------------
Termination of Employment of a Participant, the Distributable Amount shall be
paid to the Participant (and after his/her death to his/her Beneficiary) in the
form of calendar quarterly installments over fifteen years (15) years beginning
on his/her Payment Date on the Declining Balance Method. Notwithstanding the
foregoing, a Participant described in the preceding sentence may elect one of
the following optional forms of distribution provided that his/her election is
filed with the Committee at least one (1) year prior to his/her Termination of
Employment:
a) A lump sum distribution on the Participant's Payment Date; or
b) Calendar quarterly installments over a period of whole years
as selected by the Participant which is at least one (1) year but not
more than fourteen (14) years beginning on the Participant's Payment
Date on the Declining Balance Method.
Notwithstanding any election by a Participant, in the event (X) a Participant's
employment is terminated (i) voluntarily by the Participant (but not as a result
of Retirement or Early Retirement); or (ii) by the Company for Reasonable Cause,
(Y) the Participant engages in Competition with the Company following
Termination of Employment, or (Z) the Participant's Distributable Amount at any
time following Termination of Employment is not more than Twenty-Five Thousand
Dollars ($25,000.00), the Committee may determine that such Participant
Distributable Amount shall be paid in a lump-sum distribution.
c) In the case of a Participant who dies while employed by the
Company, the Company will pay the Participant such additional
benefit, if any, as the Committee may from time to time determine to
pay from insurance benefits as a result of the death of the
Participant.
d) In the event a Participant dies after his Termination of
Employment and still has a balance in his/her Deferral Account, the balance of
such Deferral Account shall continue to be paid in quarterly installments for
the remainder of the period as elected by the Participant to the Beneficiary
designated by the Participant.
8
<PAGE>
5.2. Early Distribution. A Participant shall be permitted to elect an
------------------
Early Distribution from his/her Deferral Account prior to the Payment Date,
subject to the following restrictions:
a) The election to take an Early Distribution shall be made by
completing a form prescribed by and filed with the Committee prior to the end of
any calendar month.
b) A Participant shall specify the amount the Participant has elected
for Early Distribution. The amount of the Early Distribution shall in all cases
not exceed ninety percent (90%) of the total Deferral Account as of the end of
the calendar month during which request is made. A Participant who elects an
Early Distribution shall permanently forfeit an amount equal to ten percent
(10%) of the amount elected for Early Distribution from such Participant's
Deferral Account. The Company shall have no obligations to the Participant or
his/her Beneficiary with respect to any forfeited amount.
c) The amount described in subsection (b) above shall be paid in a
single cash lump sum as soon as practicable after the end of the calendar month
in which the Early Distribution election is made.
d) If a Participant receives an Early Distribution, the Participant
will be ineligible to participate in the Plan for the balance of the Plan year
during which the Early Distribution occurs and for the following Plan Year.
5.3. Programmed Early Distributions. A Participant shall be permitted
------------------------------
to elect a Programmed Early Distribution from his/her Deferral Account prior to
the Payment Date, subject to the following restrictions:
a) The election to take a Programmed Early Distribution shall be made
by filing a form prescribed by and with the Committee prior to the end of any
calendar month;
b) The amount of the Programmed Early Distribution shall be as
specified in the form filed with the Committee requesting such Distribution;
c) The amount described in Subsection (b), above, shall be paid on
the date set forth in the notice filed with the Committee but in no event before
the end of the twenty-fourth (24th) month after such filing.
d) If a Participant receives an Early Distribution, the Participant
will be ineligible to participate in the Plan for the balance of the Plan year
during which the Early Distribution occurs and for the following Plan Year.
5.4. Hardship Withdrawals.
--------------------
a) Any Participant who has been determined by the Committee to have
incurred a "Financial Hardship" as defined herein may request and receive a
withdrawal of all or part of his/her Account balance.
9
<PAGE>
b) In the event a Participant desires to withdraw an amount as a
Financial Hardship withdrawal:
1) The Participant shall deliver a request for such withdrawal
to the Committee setting forth the amount requested and the factual
basis for such hardship request. The request for withdrawal shall be
in a form which complies with requirements, if any, established by
the Committee.
2) If the Participant's request for Financial Hardship
withdrawal is approved by the Committee, the distribution shall be
made on the last day of the month following such approval and the
Participant shall be ineligible to participate in the Plan for the
balance of the Plan Year.
3) If the Participant's request for Financial Hardship
withdrawal is denied by the Committee, in whole or in part, the
Committee shall notify the Participant of such denial.
c) "Financial Hardship" is defined as an immediate and significant
financial need of the Participant where such Participant lacks other available
resources. Notwithstanding the foregoing, only the following financial needs
shall be considered immediate and significant:
1) Expenses incurred due to a sudden and unexpected illness or
accident of the Participant or of a dependent of the Participant;
2) Loss of the Participant's property due to casualty; or
3) Such other similar, extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant.
d) Notwithstanding the foregoing, a distribution will be considered
as necessary to satisfy an immediate and significant financial need of the
Participant only if such need has not and cannot be relieved:
1) Through reimbursement or compensation by insurance or
otherwise;
2) By liquidation of the assets of the Participant, to the
extent the liquidation of such assets would not itself cause severe
financial hardship;
3) Be cessation of deferrals under the Plan; or
4) By borrowing funds from any source, to the extent such
borrowing of funds would not itself cause severe financial hardship.
5.5. Other Amounts. Any amounts not required to be paid to the
-------------
Participants hereunder shall belong to the Company and no Participants shall
have any rights thereto.
10
<PAGE>
ARTICLE VI
ADMINISTRATION
6.1. Committee. The Committee shall be appointed by, and serve at the
---------
pleasure of, the Board. The number of members comprising the Committee shall be
determined by the Board from time to time. A member of the Committee may resign
by delivering a written notice of resignation to the Board. The Board may remove
any member. Vacancies in the membership of the Committee shall be filled
promptly by the Board.
6.2. Committee Action. The Committee shall act at meetings by
----------------
affirmative vote of a majority of the members of the Committee. Any action
permitted to be taken at a meeting may be taken without a meeting if a written
consent to the action is signed by all members of the Committee. A member of the
Committee shall not vote or act upon any matter which relates solely to
himself/herself as a Participant. The chairman or any other member or members of
the Committee designated by the chairman may execute any certificate or other
written direction on behalf of the Committee.
6.3. Powers and Duties of the Committee. The Committee shall
----------------------------------
administer the Plan in accordance with its terms, and shall have all powers
necessary to accomplish its purposes including, but not by way of limitation,
the following:
a) To select the types of investments and the Funds in accordance
with Section 3.2 hereof;
b) To construe and interpret the provisions of this Plan;
c) To compute the amount of benefits payable to Participants and
their Beneficiaries.
d) To maintain all records that may be necessary for the
administration of the Plan;
e) To provide for the disclosure of all information and the filing of
all reports and statements to Participants, Beneficiaries or governmental
agencies as shall be required by law;
f) To make and publish rules, definitions and procedures for
administration of the Plan;
g) To appoint a plan administrator or any other agent, and to
delegate to them such powers and duties in connection with the administration of
the Plan as the Committee may from time to time prescribe; and
h) To take all actions necessary or in its best interests for the
administration of the Plan.
6.4. Committee and Interpretation. The Committee shall have full
----------------------------
discretion to construe and interpret the terms and provisions of this Plan,
which interpretations or construction shall be final and binding on all parties
including, but not limited to, the Company and any Participant or Beneficiary.
11
<PAGE>
6.5. Compensation and Expenses.
-------------------------
a) The members of the Committee shall serve without compensation for
their services hereunder.
b) The Committee is authorized at the expense of the Company to
employ such legal counsel as it may deem advisable to assist in the performance
of its duties hereunder. The Committee may require Participants to pay expenses
and fees incurred in connection with the administration of the Plan. To the
extent authorized by Company, expenses and fees in connection with the
administration of the Plan shall be paid by the Company.
6.6. Liability. Neither the Committee nor any member of the Committee
---------
nor the Company nor any other person who is acting on behalf of the Committee or
the Company shall be liable for any act or failure to act hereunder except for
gross negligence or fraud. Such persons shall be indemnified and held harmless
against any and all claims, damages, liabilities, costs and expenses (including
attorneys' fees) arising by reason of any good faith error of omission or
commission with respect to any responsibility, duty or action hereunder.
6.7. Quarterly Statements. The Committee, under procedures
--------------------
established by it, shall provide a statement with respect to each Account of the
Participant on a quarterly basis.
6.8. Disputes.
--------
a) An individual who believes that he/she is being denied a benefit
to which he/she is entitled under this Plan (hereinafter referred to as
"Claimant") may file a written request for such benefit with the Committee
setting forth his/her claim. The request must be addressed to the Chairman of
the Committee at its then principal place of business.
b) Upon receipt of a claim, the Committee shall deliver a reply
within a ninety (90) day period after receipt of the claim. The Committee may,
however, extend the reply period for an additional ninety (90) days by notice to
the Claimant.
If the claim is denied in whole or in part, the Committee shall inform the
Claimant in writing, using language calculated to be understood by the Claimant,
setting forth: (i) the specified reason or reasons for such denial; and (ii)
appropriate information as to the procedure to be followed if the Claimant
wishes to submit the claim for review.
c) Within sixty (60) days after the receipt by the Claimant of the
opinion of the Committee, the Claimant may request in writing that the Company
review the determination of the Committee. Such request must be addressed to the
secretary of the Company at its then principal place of business. The Claimant
or his/her duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for consideration
by the Company. If the Claimant does not request a review within such sixty (60)
day period, the Claimant shall be barred and estopped from challenging the
Committee's determination.
12
<PAGE>
d) Within ninety (90) days after the Company's receipt of a request
for review, after considering all materials presented by the Claimant, the
Company will inform the Participant in writing, in a manner calculated to be
understood by the Claimant, of its decision setting forth the specific reasons
for the decision. If special circumstances require that the ninety (90) day time
period be extended, the Company will so notify the Claimant and will render the
decision as soon as possible, but no later than one hundred eighty (180) days
after receipt of the request for review. The decision of the Company shall be
final, binding and conclusive upon Claimant.
ARTICLE VII
MISCELLANEOUS
7.1. Unsecured General Creditor. Participants and their
--------------------------
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, claims or interest in any specific property or assets of the Company. No
assets of the Company shall be held in any way as collateral security for the
fulfilling of the obligations of the Company under this Plan. Any and all of the
Deferral Accounts shall remain the Company's assets and shall remain the general
unpledged and unrestricted assets of the Company. The Company's obligation under
the Plan shall be merely that of an unfunded and unsecured promise of the
Company to pay money in the future, and the rights of the Participants and
Beneficiaries shall be no greater than those of unsecured general creditors. It
is the intention of the Company that this Plan be unfunded for purposes of the
Code and for purposes of Title I of ERISA.
7.2. Restriction Against Assignment. The Company shall pay all
------------------------------
amounts payable hereunder only to the person or persons designated according to
the Plan and not to any other person or corporation. No part of a Participant's
Accounts shall be liable for the debts, contracts, engagements of any
Participant, his/her Beneficiary, or successors in interest, nor shall a
Participant's Accounts be subject to execution by levy, attachment, or
garnishment or by any other legal or equitable proceeding, nor shall any such
person have any right to alienate, anticipate, sell, transfer, commute, pledge,
encumber, or assign any benefits or payments hereunder in any manner whatsoever.
If any Participant, Beneficiary or successor in interest is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, commute, assign, pledge,
encumber, or charge any distribution or payment from the Plan, voluntarily or
involuntarily, the Committee, in its sole discretion, may cancel such
distribution or payment (or any part thereof) to or for the benefit of such
Participant, Beneficiary or successor in interest in such manner as the
Committee shall direct.
7.3. Withholding. There shall be deducted from each payment made
-----------
under the Plan or any other Compensation payable to the Participant (or
Beneficiary) all taxes which are required to be withheld by the Company in
respect to such payment or this Plan. The Company shall have the right to reduce
any payment (or Compensation) by the amount of cash sufficient to provide the
amount of said taxes.
7.4. Amendment, Modification, Suspension or Termination. The Company
--------------------------------------------------
may amend, modify, suspend or terminate the Plan in whole or in part, except
that no amendment, modification, suspension or termination shall have any
retroactive effect to reduce any amounts
13
<PAGE>
allocated to a Participant's Account (neither the Policies themselves, nor the
death benefit shall be treated as allocated to any Account). In the event this
Plan is terminated, the amounts allocated to a Participant's Account shall be
distributed to the Participant or, in the event of his/her death, his/her
Beneficiary in a lump sum within thirty (30) days following the date of Plan
termination.
7.5. Governing Law. This Plan shall be construed, governed and
-------------
administered in accordance with the laws of the State of Wisconsin.
7.6. Receipt or Release. Any payment to a Participant or the
------------------
Participant's Beneficiary in accordance with the provisions of the Plan shall,
to the extent thereof, be in full satisfaction of all claims against the
Committee and the Company. The Committee may require such Participant or
Beneficiary, as a condition precedent to such payment, to execute a receipt and
release to such effect.
7.7. Payments on Behalf of Persons Under Incapacity. In the event
----------------------------------------------
that any amount becomes payable under the Plan to a person who, in the sole
judgment of the Committee, is considered by reason of physical or mental
condition to be unable to give a valid receipt therefor, the Committee may
direct that such payment be made to any person found by the Committee, in its
sole judgment, to have assumed the care of such person.
7.8. No Continued Right to Employment. The designation of a key
--------------------------------
employee as an Eligible Employee under this Plan shall not be construed as
conferring upon such employee any right to remain employed by the Company or
obligate the Company to continue the employment of the employee or limit the
right of the Company to discipline the employee or terminate the employee's
employment. Termination of Employment of the Participant with the Company for
any reason, whether by action of the Company or employee, shall immediately
terminate the employee's participation in the Plan and all further obligations
of the Company under the Plan to the employee, except for obligations incurred
prior to Termination of Employment. In no event shall this Plan, by its terms or
implication, constitute an employment contract of any nature between the Company
and the employee.
7.9. Information. Each person, whether a Participant, a duly
-----------
designated beneficiary of a Participant, a guardian or any other person,
entitled to receive payment under the Plan shall provide the Committee with such
information or documents as the Committee may from time to time deem necessary
or in its best interests in administering the Plan.
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>4
<FILENAME>dex1013.txt
<DESCRIPTION>1ST AMEND TO EMPLOY AGRMNT
<TEXT>
<PAGE>
EXHIBIT 10.13
-------------
FIRST AMENDMENT TO
------------------
EMPLOYMENT AGREEMENT
--------------------
This First Amendment to the January 31, 1998 Employment Agreement between
KOHL'S DEPARTMENT STORES, INC., a Delaware corporation ("Corporation"), and R.
Lawrence Montgomery ("Executive") is made as of this 15th day of November, 2000.
1. Article 1 of the Agreement is hereby revised to read, in its entirety, as
follows:
ARTICLE I
Employment Duties
During the term of the Executive's employment hereunder, the Corporation
shall employ the Executive and the Executive shall serve as Chief Executive
Officer of the Corporation. Subject to the authority and direction of the
Board of Directors of the Corporation, the Executive shall have supervision
and control over, and responsibility for, the general management and day-
to-day operation of the Corporation. The Executive shall also have such
other powers and duties as may from time to time be prescribed by the Board
of Directors of the Corporation; provided, however, that such duties are
reasonably consistent with the duties normally performed by a Chief
Executive Officer. The Executive's principal place of employment shall be
at the Corporation's headquarters in Menomonee Falls, Wisconsin; provided,
however, that the Executive acknowledges and agrees that he may from time
to time be required to travel outside Milwaukee, Wisconsin on behalf of the
Corporation. The Executive shall devote his entire working time and efforts
to the business affairs of the Corporation and its affiliates and shall
faithfully and to the best of his ability perform his duties hereunder,
provided that Executive may take reasonable amounts of time to serve on
corporate, civil or charitable boards or committees if such activities do
not interfere with the performance of Executive's duties hereunder. The
Executive hereby agrees to serve as an officer of the Corporation and of
affiliates of the Corporation as part of his contemplated duties hereunder
without additional compensation therefor.
2. Section 8.2 of the Agreement is hereby revised to read, in its entirety, as
follows:
8.2. Confidential Information. The Executive agrees that he shall not, at
any time while he is employed hereunder and during the Restricted Period,
disclose to any person who is not at the time of such disclosure, a person
to whom such disclosure has been authorized by the Board any confidential
information regarding the Corporation or its business obtained by the
Executive while in the employ of the Corporation, including without
limitation, financial information, marketing information and pricing
information (the "Confidential Information"). The Executive acknowledges
that he also understands and agrees that the foregoing shall not constitute
a waiver by the Corporation of any right to
<PAGE>
protect its trade secrets, including rights under Section 134.90 of the
Wisconsin Statutes and any successor provision thereto.
3. Executive expressly agrees that the modifications reflected in this First
Amendment shall not be deemed to be changes or occurrences that could
constitute or contribute to a claim by Executive for termination of the his
employment for "Good Reason" as defined in Section 4.14 of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of November 15/th/, 2000.
KOHL'S DEPARTMENT STORES, INC.
By: /s/ Arlene Meier
----------------------------
Arlene Meier
Chief Operating Officer
EXECUTIVE:
/s/ R. Lawrence Montgomery
-----------------------------
R. Lawrence Montgomery
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>5
<FILENAME>dex1014.txt
<DESCRIPTION>EMPLOY AGRMNT - MEIER
<TEXT>
<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made and entered into as of the 15th day of November, 2000,
by and between KOHL'S DEPARTMENT STORES, INC., a Delaware corporation
("Corporation"), and Arlene Meier ("Executive").
W I T N E S S E T H:
--------------------
WHEREAS, the Corporation desires to employ the Executive in the capacity
and under the terms set forth herein and the Executive desires to be employed by
the Corporation on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Corporation and the Executive agree as
follows:
ARTICLE I
---------
Employment Duties. During the term of the Executive's employment
-----------------
hereunder, the Corporation shall employ the Executive and the Executive shall
serve as Chief Operating Officer of the Corporation. Subject to the authority
and direction of the Chairman, the Chief Executive Officer and Board of
Directors of the Corporation, the Executive shall have supervision and control
over, and responsibility for such general management and day-to-day operations
of the Corporation as may be designated by the Chief Executive Officer. The
Executive shall also have such other powers and duties as may from time to time
be prescribed by the Board of Directors of the Corporation; provided, however,
that such duties are reasonably consistent with the duties normally performed by
a Chief Operating Officer. The Executive's principal place of employment shall
be at the Corporation's headquarters in Menomonee Falls, Wisconsin; provided,
however, that the Executive acknowledges and agrees that she may from time to
time be required to travel outside Milwaukee, Wisconsin on behalf of the
Corporation. The Executive shall devote her entire working time and efforts to
the business affairs of the Corporation and its affiliates and shall faithfully
and to the best of her ability perform her duties hereunder, provided that
Executive may take reasonable amounts of time to serve on corporate, civil or
charitable boards or committees if such activities do not interfere with the
performance of Executive's duties hereunder. The Executive hereby agrees to
serve as an officer of the Corporation and of affiliates of the Corporation as
part of her contemplated duties hereunder without additional compensation
therefor.
<PAGE>
ARTICLE II
----------
Term. The term of the Executive's employment (the "Employment Term") under
----
this Agreement shall commence as of the date first above written (the
"Anniversary Date"), and shall, except as it may otherwise be subject to
termination hereunder, continue thereafter until the third anniversary of such
Anniversary Date; provided, however, that at the end of each day during the
Employment Term the Employment Term shall be automatically extended for one (1)
day unless either party shall give written notice to the other not less than
thirty (30) days prior thereto that the Employment Term shall not be so
extended.
ARTICLE III
-----------
Compensation.
------------
3.1. Salary. The Corporation shall pay to the Executive an annual base
-----------
salary in the amount of Six Hundred Thousand Dollars ($600,000.00) during the
Employment Term ("Annual Base Salary"). The Executive's Annual Base Salary shall
be payable in equal installments not less frequently than monthly. Executive's
Annual Base Salary shall be reviewed by the Board of Directors of the
Corporation at least annually and may be increased by such amount as the Board
of Directors, in its sole discretion, may determine, taking into consideration
the profitability of the Corporation relative to its business plan and such
other factors as the Board of Directors may deem relevant for that purpose.
Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased.
3.2. Bonuses. The Executive shall participate in bonus plans established
------------
for the executive officers of the Corporation on terms no less favorable than
those applicable to other employees of the Corporation of comparable status with
the Executive.
ARTICLE IV
----------
Termination of Employment.
--------------------------
4.1. Causes for Termination. Notwithstanding the term set forth in Article
---------------------------
II, above, Executive's employment hereunder may be terminated prior to the
expiration of such term upon occurrence of any of the following events:
4.1.1. Death. The Executive's employment shall terminate upon the
------------
Executive's death.
4.1.2. Disability. The Executive's employment shall terminate in the event
-----------------
of the Disability of the Executive. For purposes of this Agreement, the term
"Disability" shall be defined as the inability of the Executive to perform her
normal duties as a full-time employee of
2
<PAGE>
the Corporation for a continuous period of two hundred seventy (270) consecutive
days by reason of physical or mental illness or incapacity, or for periods of
physical or mental illness or incapacity aggregating two hundred fifteen (215)
business days in any consecutive twelve (12) month period. If the Corporation
determines in good faith that the Disability of Executive has occurred it may
give the Executive written notice of its intention to terminate the Executive's
employment. In such event, Executive's employment with the Corporation shall
terminate on the thirtieth (30th) day after receipt of such notice by the
Executive unless within such thirty (30) day period Executive shall have
returned to full-time performance of her duties or Executive shall deliver
written notice to the Corporation disagreeing that a Disability has occurred. If
there is any dispute as to whether Executive is disabled, such question shall be
submitted to a licensed physician for the purpose of making such determination.
An examination of the Executive shall be made within thirty (30) days after
written notice by the Corporation to the Executive by a licensed physician
appointed by the Corporation. The Executive shall submit to such examination and
provide such information as such physician may request. If the Executive shall
disagree with the determination of the physician appointed by the Corporation,
she may request an examination to be conducted by a physician of her own
choosing. If the two (2) physicians shall disagree, the two (2) physicians shall
jointly appoint an independent physician, whose determination shall be binding
and conclusive on all parties concerned for purposes of this Agreement. The
termination shall be deemed effective as of the date of the final determination
of Disability.
4.1.3. Cause. The Corporation may terminate the Executive for "Cause". A
------------
termination for Cause is a termination upon (a) the continued failure by
Executive to substantially perform her duties with the Corporation (other than
any such failure resulting from termination by Executive for Good Reason) after
a written demand for substantial performance is delivered to Executive that
specifically identifies the manner in which the Corporation believes that
Executive has not substantially performed her duties, and Executive has failed
to resume substantial performance of her duties on a continuous basis within
sixty (60) days after receiving such demand; (b) the willful engaging by
Executive in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise; (c) any dishonest or fraudulent conduct
which results or is intended to result in gain to Executive or Executive's
personal enrichment at the expense of the Corporation; or (d) Executive's
conviction of a felony, misdemeanor or criminal offense (other than traffic
violations and other minor offenses).
4.1.4. Good Reason. The Executive may terminate her employment for "Good
------------------
Reason". "Good Reason" shall mean the occurrence of any of the following: (a) A
change in the Executive's status, title, position or responsibilities (including
reporting responsibilities) which, in the Executive's reasonable judgment, does
not represent a promotion from her status, title, position or responsibilities
as in effect immediately prior thereto; the assignment to the Executive of any
duties or responsibilities which, in the Executive's reasonable judgment, are
inconsistent with her status, title, position or responsibilities in effect
immediately prior to such assignment; or any removal of the Executive from or
failure to reappoint or reelect her to any position, except in connection with
the termination of her employment for Disability, Cause, as a result of her
death or by the Executive other than for Good Reason. (b) The insolvency or the
filing (by any party, including the Corporation) of a petition for bankruptcy of
the Corporation. (c) Any material breach by the Corporation of this Agreement.
(d) Any purported termination of the
3
<PAGE>
Executive's employment for Cause by the Corporation which does not comply with
the terms of this Agreement. (e) The failure of the Corporation to obtain an
agreement, satisfactory to the Executive, from any successor or assign of the
Corporation, to assume and agree to perform this Agreement, as contemplated in
Section 9.4 hereof. Provided, however, that no termination shall be for Good
Reason until the Corporation shall have had at least thirty (30) days to cure
any conduct alleged to have caused Good Reason after a written demand shall have
been delivered to the Corporation specifying the alleged conduct. The
Executive's right to terminate her employment pursuant to this Section 4.1.4
shall not be affected by her incapacity due to physical or mental illness. The
Executive's continued employment or failure to give Notice of Termination shall
not constitute consent to, or a waiver of rights with respect to, any
circumstances constituting Good Reason hereunder. Subject to the thirty (30) day
cure period set forth above, any good faith determination of Good Reason made by
the Executive shall be conclusive.
4.1.5. Voluntary. The Executive's employment shall terminate upon the
----------------
Executive's voluntary resignation as an employee of the Corporation.
4.2. Notice of Termination. Any purported termination by the Corporation or
--------------------------
by the Executive (other than by death of the Executive) shall be communicated by
Notice of Termination to the other. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated, and (iii) the Termination Date. For purposes of this
Agreement, no such purported termination of employment shall be effective
without such Notice of Termination.
4.3. Termination Date, etc. "Termination Date" shall mean in the case of
--------------------------
the Executive's death, her date of death, in the event of Executive's
Disability, the date set forth in Section 4.1.2, or in all other cases, the date
specified in the Notice of Termination subject to the following: (a) If the
Executive's employment is terminated by the Corporation, the date specified in
the Notice of Termination shall be at least thirty (30) days after the date the
Notice of Termination is given to the Executive, Provided, however, that in the
case of Disability, the Executive shall not have returned to the full-time
performance of her duties during such period of at least thirty (30) days. (b)
If the Executive's employment is terminated for Good Reason, the date specified
in the Notice of Termination shall not be less than thirty (30) nor more than
sixty (60) days after the date the Notice of Termination is given to the
Corporation. (c) Except in the case of a termination for Disability subject to
the provisions of Section 4.1.2, in the event that within thirty (30) days
following the date of receipt of the Notice of Termination, one party notifies
the other that a dispute exists concerning the basis for termination, the
Executive's employment hereunder shall not be terminated except after the
dispute is finally resolved and a Termination Date is determined either by a
mutual written agreement of the parties, or by a binding and final judgment
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
4
<PAGE>
ARTICLE V
---------
Obligations of the Corporation Upon Termination
-----------------------------------------------
5.1. Good Reason; Other Than for Cause, Death or Disability. If, during the
-----------------------------------------------------------
Employment Term, the Corporation shall terminate the Executive's employment
other than for Cause or Disability or the Executive shall terminate employment
for Good Reason:
(a) The Corporation shall pay to the Executive in a lump sum in cash within ten
(10) days after the Termination Date the aggregate of the following amounts:
(1) The sum of:
(i) The Executive's Annual Base Salary through the Termination Date
to the extent not theretofore paid;
(ii) The product of (x) the sum of the average bonuses paid or
payable, including any amounts that were deferred, and the
average value of any stock options and stock appreciation
rights awarded (computed solely by reference to the difference
between the value of the stock to which it relates and the
exercise price or base value thereof) to the Executive in
respect of the three (3) fiscal years immediately preceding the
fiscal year in which the Effective Date occurs (the "Recent
Average Bonus") and (y) a fraction, the numerator of which is
the number of days completed in the current fiscal year through
the Termination Date, and the denominator of which is 365; and
(iii) Except as provided in Section 5.1(b), any compensation
previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid. The sum of the
amounts described in clauses (i), (ii) and (iii)shall be
hereinafter referred to as the "Accrued Obligations";
(2) The amount equal to the product of: (i) the number of days remaining
in the Employment Term as of the Termination Date had the Executive's
employment not been terminated (the "Remaining Employment Term")
divided by 365, and (ii) the sum of (x) the Executive's Annual Base
Salary (increased for this purpose by any Section 401(k) deferrals,
cafeteria plan elections, or other deferrals that would have 7
increased Executive's Annual Base Salary if paid in cash to Executive
when earned) and (y) the Executive's Recent Average Bonus.
(b) To the extent not theretofore paid or provided, the Corporation shall timely
pay or provide to the Executive any other amounts or benefits required to be
paid or provided or which the Executive is eligible to receive after a
termination of Employment under any plan, program, Policy or practice or
contract or agreement of the Corporation (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
5
<PAGE>
5.2. Death. If the Executive's employment is terminated by reason of the
----------
Executive's death during the Employment Term, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, except that the Corporation shall pay or provide the Accrued
Obligations, six (6) months of Annual Base Salary, and the other Benefits. The
Accrued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within thirty (30) days of the Termination
Date. The six (6) months of Annual Base Salary shall be paid during the six (6)
month period following the Termination Date on a monthly basis. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
section shall include, and the Executive's family shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the
Corporation to surviving families of peer executives of the Corporation.
5.3. Disability. If the Executive's employment is terminated by reason of
---------------
the Executive's Disability during the Employment Term, this Agreement shall
terminate without further obligations to the Executive, except that the Company
shall pay or provide the Accrued Obligations, six (6) months of Annual Base
Salary (subject to reduction as provided below) and the Other Benefits. The
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
thirty (30) days of the Termination Date. The six (6) months of Annual Base
Salary shall be paid during the six (6) month period following the termination
on a monthly basis. The six (6) months of Annual Base Salary shall be reduced by
any amounts paid to the Executive for such six (6) month period under any
disability insurance or program paid by the Corporation. The provision of Other
Benefits shall include, and the Executive shall be entitled to receive,
disability and other benefits at least equal to the most favorable of those
generally provided by the Corporation to disabled executives and/or their
families to other peer executives and their families.
5.4. Cause; Other Than for Good Reason. If the Executive's employment shall
--------------------------------------
be terminated for Cause during the Employment Term, or if the Executive
voluntarily terminates employment during the Employment Term for other than Good
Reason, this Agreement (other than Section 7.3, if applicable, and Article VIII
thereof) shall terminate without further obligations to the Executive other than
the obligation to pay to the Executive Annual Base Salary through the Date of
Termination, any other amounts earned or accrued through the Termination Date,
and the amount of any compensation previously deferred by the Executive, in each
case to the extent theretofore unpaid; provided that if Executive voluntarily
terminates Executive shall receive the benefits normally provided upon normal or
early retirement with respect to other peer Executives and their families to the
extent she qualifies therefor. All salary or compensation hereunder shall be
paid to the Executive in a lump sum in cash within thirty (30) days of the Date
of Termination.
5.5. Delinquent Payments. If any of the payments referred to in this
------------------------
Article V are not paid within the time specified after the Termination Date
(hereinafter a "Delinquent Payment"), in addition to such principal sum, the
Corporation will pay to the Executive interest on all such Delinquent Payments
computed at the prime rate as announced from time to time by Bankers Trust
Company, New York, New York, or its successor, compounded monthly.
6
<PAGE>
5.6. No Mitigation. In no event shall the Executive be obligated to seek
------------------
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced (except to the extent expressly set forth herein)
whether or not the Executive obtains other employment.
5.7. Excise Tax Payments.
------------------------
(a) Notwithstanding anything contained in this Agreement to the contrary,
in the event that any payment or distribution to or for the benefit of
the Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, her employment with the Corporation (a
"Payment" or "Payments"), 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 are incurred by the Executive
with respect to such excise tax (such excise tax, together with any
interest and penalties, are collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) A determination shall be made as to whether and when Gross-Up Payment
is required pursuant to this Section 5.7 and the amount of such Gross-
Up Payment, such determination to be made within fifteen (15) business
days of the Termination Date, or such other time as requested by the
Corporation or by the Executive (provided the Executive reasonably
believes that any of the Payments may be subject to the Excise Tax).
Such determination shall be made by a national independent accounting
firm selected by the Executive (the "Accounting Firm"). All fees,
costs and expenses (including, but not limited to, the cost of
retaining experts) of the Accounting Firm shall be borne by the
Corporation and the Corporation shall pay such fees, costs and
expenses as they become due. The Accounting Firm shall provide
detailed supporting calculations, acceptable to the Executive, both to
the Company and the Executive. The Gross-Up Payment, if any, as
determined pursuant to this Section 5.7(b) shall be paid by the
Corporation to the Executive within five (5) business days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive with respect
to a Payment or Payments, it shall furnish the Executive with an
unqualified opinion that no Excise Tax will be imposed with respect to
any such Payment or Payments. Any such initial determination by the
Accounting Firm of the Gross-Up Payment shall be binding upon the
Corporation and the Executive subject to the application of Section
5.7 (c).
(c) As a result of the uncertainty in the application of Sections 4999 and
280G of the Code, it is possible that a Gross-Up Payment (or a portion
thereof) will be paid which should not have been paid (an
"Overpayment") or a Gross-Up Payment (or a portion
7
<PAGE>
thereof) which should have been paid will not have been paid (an
"Underpayment"). An Underpayment shall be deemed to have occurred upon
notice (formal or informal) to the Executive from any governmental
taxing authority that the tax liability of the Executive (whether in
respect of the then current taxable year of the Executive or in
respect of any prior taxable year of the Executive) may be increased
by reason of the imposition of the Excise Tax on a Payment or Payments
with respect to which the Company has failed to make a sufficient
Gross-Up Payment. An Overpayment shall be deemed to have occurred upon
a "Final Determination" (as hereinafter defined) that the Excise Tax
shall not be imposed upon a Payment or Payments with respect to which
the Executive had previously received a Gross-Up Payment. A Final
Determination shall be deemed to have occurred when the Executive has
received from the applicable governmental taxing authority a refund of
taxes or other reduction in her tax liability by reason of the
Overpayment and upon either (i) the date a determination is made by,
or an agreement is entered into with, the applicable governmental
taxing authority which finally and conclusively binds the Executive
and such taxing authority, or in the event that a claim is brought
before a court of competent jurisdiction, the date upon which a final
determination has been made by such court and either all appeals have
been taken and finally resolved or the time for all appeals has
expired or (ii) the expiration of the statute of limitations with
respect to the Executive's applicable tax return. If an Underpayment
occurs, the Executive shall promptly notify the Corporation and the
Corporation shall pay to the Executive at least five (5) business days
prior to the date on which the applicable governmental taxing
authority has requested payment, an additional Gross-Up Payment equal
to the amount of the Underpayment plus any interest and penalties
imposed on the Underpayment. If an Overpayment occurs, the amount of
the Overpayment shall be treated as a loan by the Corporation to the
Executive and the Executive shall, within ten (10) business days of
the occurrence of such Overpayment, pay to the Corporation the 11
amount of the Overpayment plus interest at an annual rate equal to the
rate provided for in Section 1274 (b)(2)(B) of the Code from the date
the Gross- Up Payment (to which the Overpayment relates) was paid to
the Executive.
(d) Notwithstanding anything contained in this Agreement to the contrary,
in the event it is determined that an Excise Tax will be imposed on
any Payment or Payments, the Corporation shall pay to the applicable
governmental taxing authorities as Excise Tax withholding, the amount
of the Excise Tax that the Corporation has actually withheld from the
Payment or Payments.
ARTICLE VI
----------
Expenses. During the term of the Executive's employment hereunder, the
--------
Corporation shall promptly pay or reimburse the Executive for all
reasonable and necessary business expenses incurred by the Executive in the
interest of the Corporation. The Executive shall be required to submit an
itemized account of such expenditures and such proof as may be reasonably
necessary to establish to the satisfaction of the Corporation that the
expenses
8
<PAGE>
incurred by the Executive were ordinary and necessary business expenses
incurred on behalf of the Corporation.
ARTICLE VII
-----------
Fringe Benefits.
---------------
7.1. Benefits. During the term of the Executive's employment hereunder, the
-------------
Executive shall be entitled to participate in any benefit plans and
programs which the Corporation may from time to time make available to its
executive employees, including, without limitation (i) health and dental
insurance (family plan); (ii) supplemental executive medical plan (without
maximum limit); (iii) long term disability insurance; (iv) annual physical;
(v) business travel accident insurance; and (vi) financial consulting (up
to Three Thousand Five Hundred Dollars ($3,500.00) per year). The Executive
acknowledges that she shall have no vested rights in any such programs
except as expressly provided under the terms thereof and that such programs
may be terminated, modified, altered or reduced as well as supplemented.
7.2. Life Insurance. During the term of the Executive's employment
-------------------
hereunder, the Corporation shall provide the Executive with term life
insurance equal to not less than three (3) times the annual salary of the
Executive; provided, however, that the Executive shall have the option to
purchase, at her own expense, additional insurance equal to her annual
salary under such term life insurance policy.
7.3. Health Insurance. Notwithstanding anything contained herein to the
---------------------
contrary, in the event the Executive's employment with the Corporation is
terminated (i) at the expiration of the Employment Term, or (ii) prior to
such date for any reason other than (A) a termination for Cause, or (B) a
voluntary termination by the Executive for any reason other than "Good
Reason" or other than approved by the Board of Directors of the
Corporation, the Corporation shall continue, until the Executive's death,
to provide the Executive and her spouse and dependents with health
insurance and a supplemental executive medical plan (with coverage similar
to that received by the Executive at the time of such termination and
covering the Executive, her spouse and her dependents (as defined in such
insurance and medical plan), provided such insurance is reasonably
available to the Corporation with respect to the Executive.
7.4. Automobile. The Executive shall be provided with an automobile of a
---------------
quality and value comparable to the automobile provided to Executive as of
the date of this Agreement for the Executive's use during the term of this
Agreement. Every two(2) years during the term of this Agreement, the
Executive shall be entitled to exchange the automobile then in her
possession for a new automobile of a quality and value comparable to the
vehicle being replaced. The Corporation shall provide or reimburse the
Executive for all reasonable insurance and maintenance for such automobile,
including repairs, gas and oil.
9
<PAGE>
7.5. Vacation. The Executive shall be entitled to such vacation time as the
-------------
Corporation may from time to time make available to its executive
employees.
ARTICLE VIII
------------
Non-Competition and Confidential Information
--------------------------------------------
8.1. Non-Competition. The Executive agrees that she shall not at any time
--------------------
while she is employed hereunder or at any time during the Restricted Period
(as hereinafter defined), for any reason, either directly or indirectly,
whether as agent, stockholder (except as the holder of not more than five
percent (5%) of the stock of a publicly held company, provided the
Executive does not participate in the business of such company or render
advice or assistance to it), employee, officer, director, trustee, partner,
consultant, proprietor or otherwise:
(i) Engage in, render advice or assistance to, or in any way be connected
with any Competitive Entity (as hereinafter defined) located in the
Restricted Area (as hereinafter defined).
(ii) Except on behalf of the Corporation, entice or attempt to entice any
of the suppliers or customers of the Corporation, so as to cause, or
attempt to cause, any of said suppliers or customers not to do
business with the Corporation or to reduce or adversely change the
nature of the business done with the Corporation.
(iii) For purposes of this Section 8, the following definitions shall
apply:
(A) A "Competitive Entity" shall be defined as any business, person,
firm, association, partnership, corporation or other entity
which (x) is engaged directly or indirectly in the retail
department store business or (y) which competes with the
business of the Corporation as such business is conducted from
time to time during the course of the Executive's employment
hereunder.
(B) The term "Restricted Area" shall be defined during the
Executive's employment as fifty (50) miles from any store
operated by the Corporation from time to time during the course
of the Executive's employment, and after the termination of the
Executive's employment it shall be defined as fifty (50) miles
from any store operated by the Corporation during the one (1)
year period prior to the termination of the Executive's
employment or during the Restricted Period.
(C) The term Restricted Period" shall be defined as two (2) years
from the date of termination of the Executive's employment
hereunder; provided, hereunder, that the Restricted Period shall
be extended for the period during which it is determined that
the Executive is in violation of the provisions of this Sections
8.1 or 8.2.
8.2. Confidential Information. The Executive agrees that she shall not, at
------------------------
any time while she is employed hereunder and during the Restricted Period,
disclose to any person who
10
<PAGE>
is not at the time of such disclosure, a person to whom such disclosure has
been authorized by the Board or Chief Executive officer any confidential
information regarding the Corporation or its business obtained by the
Executive while in the employ of the Corporation, including without
limitation, financial information, marketing information and pricing
information (the "Confidential Information"). The Executive acknowledges
that she also understands and agrees that the foregoing shall not
constitute a waiver by the Corporation of any right to protect its trade
secrets, including rights under Section 134.90 of the Wisconsin Statutes
and any successor provision thereto.
8.3. Return of Material. The Executive agrees upon termination of her
-----------------------
employment with the Corporation immediately to surrender to the Corporation
all correspondence, letters, contracts, manuals, mailing lists, marketing
data, ledgers, supplies, and all other materials or records of any kind
relating to the Corporation or its business then in her possession or under
her control, as well as all copies of any of the foregoing.
8.4. Specific Performance. The Executive recognizes that irrevocable injury
-------------------------
may result to the Corporation and its business and properties, in the event
of a breach by her of the restrictions imposed by this Article VIII and
that the Executive's acceptance of such restrictions was a material factor
in the Corporation's decision to enter into this Agreement. The Executive
agrees that if she shall engage in any acts in violation of this Article
VIII, the Corporation shall be entitled, in addition to such other remedies
and damages as may be available to it, to an injunction prohibiting
Executive from engaging in any such acts.
ARTICLE IX
----------
Miscellaneous.
--------------
9.1. Insurance. The Executive agrees to perform all acts and execute all
instruments necessary in connection with the obtaining by the Corporation
of life insurance or disability insurance on the Executive.
9.2. Waiver of Breach. No waiver by either party hereto of any breach of
---------------------
any provision of this Agreement shall be deemed a waiver by such party of
any subsequent breach.
9.3. Notice. Any notice required or permitted to be given hereunder shall
-----------
be in writing and shall be deemed to be sufficiently given and received in
all respects when personally delivered or when deposited in the United
States mail, certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
IF TO THE CORPORATION:
Kohl's Department Stores, Inc.
N56 W17000 Ridgewood Drive
Menomonee Falls, WI 53051
11
<PAGE>
Attention: Chief Executive Officer
Copy To: General Counsel
IF TO THE EXECUTIVE:
c/o Kohl's Department Stores, Inc.
N56 W17000 Ridgewood Drive
Menomonee Falls, WI 53051
9.4. Assignment. This Agreement shall not be assignable by the Corporation
---------------
without the written consent of the Executive, except that if the
Corporation shall merge or consolidate with or into or transfer all or
substantially all of its assets, including goodwill, to another corporation
or other form of business organization, the Corporation shall require any
successor corporation in such merger, consolidation or transfer to assume
and perform this Agreement. The Executive may not assign, pledge or
encumber any interest in this Agreement or any part thereof without the
written consent of the Corporation.
9.5. Complete Agreement; Amendment. Once the term of this Agreement
----------------------------------
commences, her Agreement shall contain the full and complete understanding
and agreement of the parties and supersede all prior agreements and
understandings between the parties with respect to the subject matter
hereof. This Agreement may not be modified, amended, terminated or
discharged orally.
9.6. Fees and Expenses. The Corporation shall pay all legal fees and related
- ----------------------
expenses (including the costs of experts, evidence and counsel) reasonably
incurred by the Executive as they become due as a result of a position taken in
good faith by the Executive with respect to (i) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (ii) the Executive's hearing
before the Board as contemplated in Section 4.13 of this Agreement, (iii) the
Executive's seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Corporation
under which the Executive is or may be entitled to receive benefits or (iv) a
dispute between the Executive and the Internal Revenue Service (or any other
taxing authority) with regard to an "Underpayment" (as defined in Section 5.7 of
this Agreement).
9.7. Severability. The provisions of this Agreement shall be deemed
-----------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
9.8. Withholding Taxes. The Corporation shall deduct from all payments to
----------------------
the Executive hereunder any federal, state or local withholding or other
taxes or charges which the Corporation is from time to time required to
deduct under applicable law, and all amounts payable to the Executive
hereunder are stated herein before any such deduction. The Corporation
shall have the right to rely upon written opinion of legal counsel, which
may be independent legal counsel or legal counsel regularly employed by the
Corporation, if any questions should arise as to any such deductions.
12
<PAGE>
9.9. Governing Law. This Agreement and all questions or its interpretation,
------------------
performance, enforceability and the rights and remedies of the parties
hereto shall be governed by and determined in accordance with the laws of
the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day, month and year first above written.
KOHL'S DEPARTMENT STORES, INC.
By: /s/ R. Lawrence Montgomery
----------------------------
Chief Executive Officer
EXECUTIVE:
/s/ Arlene Meier
---------------------------
Arlene Meier
13
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>6
<FILENAME>dex1016.txt
<DESCRIPTION>AMEND #1 TO REC PURCH AGRMNT
<TEXT>
<PAGE>
EXHIBIT 10.16
AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT (this
"Amendment") is entered into as of December 21, 2000 by and among KOHL'S
DEPARTMENT STORES, INC., a Delaware corporation (the "Seller"), the Investors,
Preferred Receivables Funding Corporation ("PREFCO") and BANK ONE, NA, as Agent.
Unless defined elsewhere herein, capitalized terms used in this Amendment shall
have the meanings assigned to such terms in the Existing Purchase Agreement
referred to below.
WITNESSETH:
WHEREAS, the parties hereto have entered into a Receivables Purchase
Agreement, dated as of December 23, 1999, providing for a receivables purchase
facility in an aggregate amount not to exceed $225,000,000 (the "Existing
Purchase Agreement, and as amended by this Amendment, the "Purchase Agreement");
and
WHEREAS, the Seller, PREFCO, the Investors and the Agent desire to
make certain amendments and modifications to the Existing Purchase Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and for other consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Amendments to Existing Purchase Agreement. Subject to and
-----------------------------------------
conditioned upon the fulfillment of each of the conditions precedent set forth
in Section 2 hereto, effective as of the date of this Amendment:
1.1. Section 1. 1 (e) of the Existing Purchase Agreement is amended
to delete the phrase "not to exceed 360 days" contained therein and substitute
the phrase "not to exceed 364 days" therefor.
1.2. The definition of "Liquidity Termination Date" set forth in
Exhibit I to the Existing Purchase Agreement is amended to delete the terms
thereof in their entirety and substitute the following therefor:
"Liquidity Termination Date" means December 20, 2001 or such
later date to which the Agent and the Purchasers may agree in accordance
with Section 1. 1 (e).
----------------
2. Conditions Precedent to Amendment Effectiveness. The amendments
-----------------------------------------------
and modifications set forth in Section 1 shall become effective as of date of
---------
this Amendment upon, and are expressly conditioned upon the Agent's receipt of
original executed counterparts of this Amendment from the Seller, PREFCO and
each Investor.
1
<PAGE>
3. Representations and Warranties. In order to induce the Agent and
the Investors to enter into this Amendment, the Seller hereby represents and
warrants to the Investors that:
(a) The execution, delivery and performance by the Seller of this
Amendment and each other document to be delivered hereunder to which
it is a party, are within its corporate powers, have been duly
authorized by all necessary corporate action, do not contravene or
violate (i) its certificate or articles of incorporation or by-laws,
(ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it
is a party or by which it or any of its property is bound, or (iv) any
order, writ, judgment, award, injunction or decree binding on or
affecting it or its property is bound, or (iv) any property, and do
not result in the creation or imposition of any Adverse Claim on
assets of the Seller. This Amendment has been duly executed and
delivered by the Seller.
(b) This Amendment and the Existing Purchase Agreement as amended by
this Amendment constitutes the legal, valid and binding obligation of
the Seller enforceable against the Seller in accordance with tits
terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors' rights generally.
(c) The representations and warranties of the Seller set forth in
Article 3 of the Purchase and Sale Agreement are correct in all
material respects on and as of the date hereof as though made on and
as of he date hereof.
(d) As of the effectiveness of this Amendment, no Servicer Default
or a Potential Servicer Default has occurred and is continuing.
4. Reference to and Effect Upon the Existing Purchase Agreement.
------------------------------------------------------------
Upon the effectiveness of this Amendment, each reference in the Existing
Purchase Agreement to "the Agreement", "hereunder", "hereof", "herein", or words
of like import, shall mean and be a reference to the Existing Purchase Agreement
in any other Transaction Document shall mean and be a reference to the Existing
Purchase Agreement, as amended hereby.
5. Reaffirmation; Consent; Acknowledgement of Modification to Fee
--------------------------------------------------------------
Letter. Seller hereby reaffirms to the Agent and each of the Purchasers that,
- ------
except as modified hereby, the Existing Purchase Agreement and all of the
Transaction Documents remain in full force and effect and have not been
otherwise waived, modified or amended. Except as expressly modified hereby, all
of the terms and conditions of the Existing Purchase Agreement shall remain
unaltered and in full force and effect. Notwithstanding the foregoing
provisions of this Section 5, each of the parties hereto hereby acknowledges
that the Fee letter has been amended and restated of the date hereof and that
references to the Fee Letter in the Existing Purchase Agreement and the
Transaction Documents shall be deemed to be a reference to such Amended and
Restated Fee Letter.
2
<PAGE>
6. Choice of Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws and decisions of the State of Illinois
without giving effect to the conflicts of law principles thereunder.
7. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. One or more counterparts
of this Amendment may be delivered by telecopier, with the intention that they
shall have the same effect as an original counterpart thereof.
[Signature Pages Follow]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
and delivered by their duly authorized officers or representatives as of the
date hereof.
KOHL'S DEPARTMENT STORES, INC.
By: /S/
--------------------------------
Arlene Meier
Chief Operating Officer
PREFERRED RECEIVABLES FUNDING CORPORATION
By: /S/
--------------------------------
Brooks Crankshaw
Managing Director
INVESTORS:
BANK ONE, NA, as an Investor and as Agent
By: /S/
--------------------------------
Brooks Crankshaw
Authorized Signer
4
<PAGE>
BANK OF NEW YORK
By: /S/
--------------------------------
Title: Vice President
5
<PAGE>
COMERICA BANK
By: /S/
--------------------------------
Assistant Vice President
6
<PAGE>
FIRST UNION NATIONAL BANK
By: /S/
--------------------------------
Title: William F. Fox, Vice President
7
<PAGE>
FIRSTAR BANK MILWAUKEE, N.A
By: /S/
--------------------------------
Title: James Spredemann, Vice President
8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>7
<FILENAME>dex121.txt
<DESCRIPTION>RATIO OF EARNINGS TO FIXED CHARGES
<TEXT>
<PAGE>
Exhibit 12.1
Kohl's Corporation
Ratio of Earnings to Fixed Charges
($000s)
<TABLE>
<CAPTION>
Fiscal Year (1)
-------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings
- --------
Income before income taxes $605,114 $421,112 $316,749 $235,063 $171,368
Fixed charges (2) 116,753 82,835 63,135 57,446 42,806
Less interest capitalized
during period (3,478) (4,405) (1,878) (2,043) (2,829)
------------ ----------------- ------------ ------------- -------------
$718,389 $499,542 $378,006 $290,466 $211,345
============ ================= ------------ ------------- -------------
Fixed Charges
- -------------
Interest (expensed or capitalized) (2) $52,305 $33,813 $24,550 $26,304 $20,574
Portion of rent expense
representative of interest 63,943 48,769 38,385 30,798 22,031
Amortization of deferred
financing fees 505 253 200 344 201
------------ ----------------- ------------ ------------- -------------
$116,753 $82,835 $63,135 $57,446 $42,806
============ ================= ============ ============= =============
Ratio of earnings to fixed charges 6.15 6.03 5.99 5.06 4.94
============ ================= ============ ============= =============
</TABLE>
(1) Fiscal 1999, 1998, 1997 and 1996 are 52 week years and fiscal 2000 is a 53
week year.
(2) Interest expense for fiscal 1997and 1996 has been restated to properly
reflect interest expense included on the Consolidated Statements of Income.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>8
<FILENAME>dex211.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>
<PAGE>
Exhibit 21.1
SUBSIDIARIES
<TABLE>
<CAPTION>
State of Incorporation
Name or Formation
- ---- ----------------------
<S> <C>
Kohl's Department Stores, Inc............................ Delaware
Kohl's Investment Corporation............................ Delaware
Kohl's Illinois, Inc.*................................... Nevada
Kohl's Pennsylvania, Inc.*............................... Pennsylvania
Kohl's New York D.C., Inc................................ Nevada
Kohl's Texas, L.L.C.*.................................... Delaware
Kohl's Texas Limited Partner, L.L.C.*.................... Delaware
Kohl's Texas, L.P.*...................................... Texas
</TABLE>
- --------
*These subsidiaries are direct or indirect subsidiaries of Kohl's Department
Stores, Inc.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>dex231.txt
<DESCRIPTION>CONSENT OF ERNST AND YOUNG
<TEXT>
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 #33-49886) pertaining to the 1992 Long Term Compensation Plan, in
the Registration Statement (Form S-8 #333-26409) pertaining to the 1994 Long
Term Compensation Plan and 1997 Stock Option Plan for Outside Directors, in
the Registration Statement (Form S-8 #33-84558) pertaining to the Kohl's
Corporation Employee Savings Plan, in the Registration Statement (Form S-3
#33-80323) pertaining to the Debt Offering and in the Registration Statement
(Form S-3 #333-4398) pertaining to the Liquid Yield Option Subordinated Notes
of Kohl's Corporation of our report dated March 9, 2001, except for note 12,
as to which the date is March 16, 2001, with respect to the consolidated
financial statements and schedule of Kohl's Corporation included in this
Annual Report (Form 10-K) for the year ended February 3, 2001.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
April 13, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>10
<FILENAME>dex991.txt
<DESCRIPTION>CAUTIONARY STATEMENTS RE: FORWARD LOOKING INFO
<TEXT>
<PAGE>
EXHIBIT 99.1
Cautionary Statements Relating To Forward-looking Information And Risk Factors.
The Company and its representatives may, from time to time, make written or
verbal forward-looking statements. Those statements relate to developments,
results, conditions or other events the Company expects or anticipates will
occur in the future. The Company intends words such as "believes,"
"anticipates," "plans," "expects" and similar expressions to identify
forward-looking statements. Without limiting the foregoing, those statements may
relate to future revenues, earnings, store openings, market conditions, new
strategies and the competitive environment. Forward-looking statements are based
on management's then current views and assumptions and, as a result, are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those projected. Any such forward-looking statements are
qualified by the following important risk factors that could cause actual
results to differ materially from those predicted by the forward-looking
statements.
An investment in the Company's common stock or other securities carries certain
risks. Investors should carefully consider the risks described below and other
risks which may be disclosed from time to time in the Company's filings with the
SEC before investing in the Company's securities.
General Economic Conditions
General economic factors that are beyond the Company's control impact the
Company's forecasts and actual performance. These factors include interest
rates, recession, inflation, deflation, consumer credit availability, consumer
debt levels, tax rates and policy, unemployment trends and other matters that
influence consumer confidence and spending. Increasing volatility in financial
markets may cause these factors to change with a greater degree of frequency and
magnitude. Changes in the economic climate could adversely affect the Company's
performance.
Competitive Pressures
The retail business is highly competitive. The Company competes for customers,
associates, locations, merchandise, services and other important aspects of its
business with many other local, regional and national retailers. Those
competitors, some of which have a greater market presence than the Company,
include traditional store-based retailers, Internet and catalog businesses and
other forms of retail commerce. Unanticipated changes in the pricing and other
practices of those competitors may adversely affect the Company's performance.
Consumer Demand
The Company's business is dependent on the Company's ability to anticipate
fluctuations in consumer demand for a wide variety of merchandise. Failure to
accurately predict constantly changing consumer tastes, preferences, spending
patterns and other lifestyle decisions could create inventory imbalances and
adversely affect the Company's performance and long term relationships with its
customers.
Weather Conditions
Because a significant portion of the Company's business is apparel and subject
to weather conditions in its markets, its operating results may be unexpectedly
and adversely affected. Frequent or unusually heavy snow, ice or rain storms or
extended periods of unseasonable temperatures in its markets could adversely
affect the Company's performance.
Seasonality
The Company's business is subject to seasonal influences, with a major portion
of sales and income historically realized during the second half of the fiscal
year, which includes the back-to-school and holiday seasons. This seasonality
causes the Company's operating results to vary considerably from quarter to
quarter and could materially adversely affect the market price of its
securities.
Merchandise Sourcing
The merchandise we sell is sourced from a wide variety of domestic and
international vendors. All of the Company's vendors must comply with applicable
laws and the Company's required standards of conduct. The Company's ability to
find qualified vendors and access products in a timely and efficient manner is a
significant
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challenge which is typically even more difficult with respect to goods sourced
outside the United States. Political or financial instability, trade
restrictions, tariffs, currency exchange rates, transport capacity and costs and
other factors relating to foreign trade, and the ability to access suitable
merchandise on acceptable terms are beyond the Company's control and could
adversely impact the Company's performance.
Labor Conditions
The Company's performance is dependent on attracting and retaining a large and
growing number of quality associates. Many of those associates are in entry
level or part time positions with historically high rates of turnover. The
Company's ability to meet the Company's labor needs while controlling the
Company's costs is subject to external factors such as unemployment levels,
prevailing wage rates, minimum wage legislation and changing demographics.
Changes that adversely impact the Company's ability to attract and retain
quality associates could adversely affect the Company's performance.
New Store Growth
The Company's plans to continue to increase the number of its stores will
depend in part upon the availability of existing retail stores or store sites on
acceptable terms. Increases in real estate, construction and development costs
could limit the Company's growth opportunities. There can be no assurance that
such stores or sites will be available to the Company for purchase or lease, or
that they will be available on terms acceptable to the Company. If the Company
is unable to grow its retail business, the Company's financial performance could
be adversely affected.
New Markets
The Company's growth strategy is dependent upon the Company's ability to
successfully execute the Company's retailing concept in new markets and
geographic regions. If the Company is unable to successfully execute its retail
concept in these new markets and regions, or if consumers are not receptive to
the Company's concept in these markets or regions, the Company's financial
performance could be adversely affected.
Regulatory And Litigation Developments
Various aspects of the Company's operations are subject to federal, state or
local laws, rules and regulations, any of which may change from time to time.
Additionally, the Company is regularly involved in various litigation matters
that arise in the ordinary course of its business. Litigation or regulatory
developments could adversely affect the Company's business operations and
financial performance.
Other Factors
The foregoing list of risk factors is not exclusive. Other factors and
unanticipated events could adversely affect the Company. The Company does not
undertake to revise any forward-looking statement to reflect events or
circumstances that occur after the date the statement is made.
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</DOCUMENT>
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