<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
SCHULTZ SAV-O STORES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
SCHULTZ SAV-O STORES, INC.
2215 UNION AVENUE
SHEBOYGAN, WISCONSIN 53081
[LOGO]
------------------------
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1998
---------------------
TO THE SHAREHOLDERS OF SCHULTZ SAV-O STORES, INC.:
NOTICE IS HEREBY GIVEN that the 1998 annual meeting of shareholders of
Schultz Sav-O Stores, Inc., a Wisconsin corporation (the "Company"), will be
held at the John Michael Kohler Arts Center, 608 New York Avenue, Sheboygan,
Wisconsin, on Wednesday, May 13, 1998, at 3:00 p.m., for the following purposes:
1. To elect three directors for three-year terms.
2. To ratify the Board of Directors' selection of the Company's 1998
independent public accountants.
3. To transact such other business as may properly come before the annual
meeting or any adjournments thereof.
Only holders of record of Common Stock at the close of business on March 25,
1998 will be entitled to notice of, and to vote at, the annual meeting.
It is desirable that as many shareholders as possible be represented at the
meeting, in person or by proxy. Even if you expect to attend the meeting in
person, please complete, date, sign and mail the accompanying proxy in the
enclosed, postage paid envelope. You may revoke your proxy at any time before it
is actually voted by notice in writing to the undersigned or by voting in person
at the meeting. Your attention is directed to the attached Proxy Statement and
accompanying proxy.
On Behalf of the Board of Directors
[SIGNATURE]
John H. Dahly
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL
OFFICER AND SECRETARY
Sheboygan, Wisconsin
April 1, 1998
YOUR VOTE IS IMPORTANT, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY,
WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS
AND RETURN IMMEDIATELY IN THE ENVELOPE PROVIDED.
<PAGE>
SCHULTZ SAV-O STORES, INC.
---------------
[LOGO]
PROXY STATEMENT
---------------------
FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1997
GENERAL INFORMATION
This Proxy Statement and accompanying proxy are being furnished to the
shareholders of Schultz Sav-O Stores, Inc., a Wisconsin corporation (the
"Company"), beginning on or about April 1, 1998, in connection with the
solicitation by the Board of Directors of the Company (the "Board") of proxies
for use at the Company's 1998 annual meeting of shareholders to be held at the
John Michael Kohler Arts Center, 608 New York Avenue, Sheboygan, Wisconsin, on
Wednesday, May 13, 1998, at 3:00 p.m., and at any adjournment thereof (the
"Meeting"), for the purposes set forth in the attached Notice of 1998 Annual
Meeting of Shareholders and in this Proxy Statement.
Only record holders of outstanding shares of the Company's Common Stock
("Common Stock") as of the close of business on March 25, 1998 (the "Record
Date") are entitled to notice of, and to vote at, the Meeting. As of the Record
Date, 6,811,879 shares of Common Stock were outstanding. The record holder of
each outstanding share of Common Stock as of the Record Date is entitled to one
vote per share for each proposal submitted for shareholder consideration at the
Meeting.
A proxy, in the accompanying form, which is properly executed, duly returned
to the Company or its authorized representatives or agents and not revoked will
be voted in accordance with the instructions contained therein. If no
specification is indicated on the proxy, the shares represented thereby will be
voted FOR the Board's three nominees for director, FOR ratification of the
Board's selection of the Company's 1998 independent public accountants and on
such other matters which may properly come before the Meeting in accordance with
the best judgment of the individual proxies named in the proxy. Execution of a
proxy given in response to this solicitation will not affect a shareholder's
right to attend the Meeting and to vote in person. Presence at the Meeting of a
shareholder who has signed a proxy does not in itself revoke a proxy. Each proxy
granted may be revoked by the person giving it at any time before its exercise
by giving written notice to such effect to the Company's Secretary or the
Company's authorized representatives or agents at the Meeting, by execution and
delivery of a subsequent proxy or by attendance and voting in person at the
Meeting, except as to any matter upon which, prior to such revocation, a vote
shall have been cast pursuant to the authority conferred by such proxy.
<PAGE>
ELECTION OF DIRECTORS
Three members of the Board are to be elected at the Meeting for three-year
terms to expire at the Company's 2001 annual meeting of shareholders. The term
in office of Bernard S. Kubale, a director of the Company since 1962, will
expire at the Meeting and Mr. Kubale has chosen not to stand for reelection for
another term. The Company wishes to express its most sincere thanks and
appreciation to Mr. Kubale for his 36 years of dedicated service to the Company
and for his valued advice and guidance. The Board has nominated James H.
Dickelman and William K. Jacobson, both current directors of the Company, and
Steven R. Barth for initial election at the Meeting.
It is intended that the persons named as proxies in the accompanying proxy
will vote FOR the election of the Board's three nominees. If any nominee should
become unable to serve as a director prior to the Meeting, the shares
represented by proxies otherwise voted in favor of the Board's three nominees or
which do not contain any instructions will be voted FOR the election of such
other person as the Board may recommend. Under Wisconsin law, directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election, assuming a quorum is present. For this purpose, "plurality" means that
the individuals receiving the largest number of votes are elected as directors,
up to the maximum number of directors to be chosen at the election. Therefore,
any shares of Common Stock which are not voted on this matter at the Meeting,
whether by abstention or otherwise, will have no effect on the election of
directors at the Meeting.
Certain information about the Board's nominees and its continuing members is
set forth below. Unless otherwise indicated, all occupations listed are with the
Company.
THE BOARD RECOMMENDS A VOTE FOR
JAMES H. DICKELMAN, WILLIAM K. JACOBSON AND STEVEN R. BARTH
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED (1)
DIRECTOR ----------------------
NAME AND AGE CURRENT PRINCIPAL OCCUPATION SINCE SHARES PERCENT
- -------------------------- --------------------------------------------------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
CLASS III --NOMINEES FOR TERMS TO EXPIRE IN 2001
- --------------------------------------------------------------------------------------------------------------------------
James H. Dickelman Chairman of the Board, President and Chief Executive 1978 357,479 5.12%
50 Officer
William K. Jacobson Senior Vice President--Retail Operations 1996 85,846 1.25%
47
Steven R. Barth Partner in the law firm of Foley & Lardner 5,375 *
39
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED (1)
DIRECTOR ----------------------
NAME AND AGE CURRENT PRINCIPAL OCCUPATION SINCE SHARES PERCENT
- -------------------------- --------------------------------------------------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
CLASS I --DIRECTORS WHOSE TERMS EXPIRE IN 1999
- --------------------------------------------------------------------------------------------------------------------------
John H. Dahly Executive Vice President, 1984 134,892 1.96%
57 Chief Financial Officer and Secretary
Martin Crneckiy, Jr. Executive Vice President and Chief Financial Officer of 1989 6,300 *
52 The Vollrath Company, LLC (manufacturer of stainless
steel and plastic wares and light equipment for the
international food service industry)
R. Bruce Grover President and Chief Executive Officer of Vinyl Plastics, 1989 3,300 *
62 Inc. (manufacturer of solid vinyl floor products, custom
extruded sheets and sound barrier materials for
automotive applications)
CLASS II --DIRECTORS WHOSE TERMS EXPIRE IN 2000
- --------------------------------------------------------------------------------------------------------------------------
Howard C. Dickelman Retired; formerly Chairman of the Board 1959 448,950 6.59%
79
Michael R. Houser Executive Vice President--Marketing and Merchandising 1992 106,205 1.54%
46
</TABLE>
- ------------------------
* Indicates Less than 1%.
(1) Individuals have sole voting and investment power over all shares listed.
Shares owned separately by wives and certain adult children are not included
and beneficial ownership of such shares is disclaimed, including 56,340
shares owned by a revocable trust for the benefit of Howard C. Dickelman's
wife, 8,411 shares owned by James H. Dickelman's adult son, 3,405 shares
owned by James H. Dickelman's adult daughter and 1,476 shares owned by John
H. Dahly's wife. James H. Dickelman also disclaims beneficial ownership of
the 448,950 and 56,340 shares held by Howard C. Dickelman and his wife,
respectively, pursuant to separate revocable trusts, over each of which he
serves as co-trustee. Such disclaimed shares are not included in James H.
Dickelman's share totals set forth above. The figures include the following
shares allocated to the accounts of certain directors (who are also
officers) in the Schultz Sav-O Stores Retirement Savings Plan (the
"Retirement Savings Plan") as of December 31, 1997, over which such
individuals retain sole investment power and shared voting power, as
described under "Principal Shareholders": as to James H. Dickelman, 107,596
shares; as to John H. Dahly, 29,808 shares; as to Michael R. Houser, 28,060
shares; and as to William K. Jacobson, 40,346 shares. The figures also
include the following shares issuable under stock options exercisable within
60 days of the Record Date: as to James H. Dickelman, 170,000 shares; as to
John H. Dahly, 69,450 shares; as to Michael R. Houser, 65,650 shares; and as
to William K. Jacobson, 45,500 shares. See "Executive Compensation-- Stock
Options."
3
<PAGE>
During the last five years, all directors have held the same or a similar
position with the Company or other employer as described in the table above,
except that William K. Jacobson was Vice President-- Franchise Operations prior
to January 1996 and Senior Vice President-- Franchise Operations from January
1996 to March 1996 and Michael R. Houser was Senior Vice President--Marketing
and Merchandising prior to December 1997. James H. Dickelman is the son of
Howard C. Dickelman.
During 1997, the Board held six meetings. The Board has an Audit Committee,
currently consisting of Bernard S. Kubale (Chairman), Martin Crneckiy, Jr., R.
Bruce Grover and Howard C. Dickelman. In 1997, the Audit Committee held two
meetings. The principal functions of the Audit Committee are to meet with the
Company's independent public accountants to review the scope and results of
their audit, to review the adequacy of the financial and accounting control
mechanisms used by the Company, and to approve the performance of any nonaudit
professional services by the Company's independent public accountants. The
Company's Stock Option Committee currently consists of Martin Crneckiy, Jr.
(Chairman), Howard C. Dickelman and R. Bruce Grover, and its principal function
is to evaluate, establish and grant stock options and other equity incentive
awards and administer the Company's stock option and other equity incentive
plans. The Stock Option Committee met once in 1997. The Compensation Committee
currently consists of Bernard S. Kubale (Chairman), R. Bruce Grover, Howard C.
Dickelman and Martin Crneckiy, Jr. The principal function of the Compensation
Committee, which met two times in 1997, is to evaluate and establish
compensation and benefit levels of the Company's officers, except with respect
to stock option and equity incentive awards administered by the Stock Option
Committee. The Board's Nominating Committee recommends criteria for selection to
the Board, helps determine potential Board candidates, reviews Board
compensation policies and recommends candidates to serve on each standing
committee of the Board. Members of the Nominating Committee currently include R.
Bruce Grover (Chairman), Bernard S. Kubale, Martin Crneckiy, Jr. and Howard C.
Dickelman. The Nominating Committee met once in 1997. Written shareholder
recommendations for director candidates, including appropriate background
information, will be kept on file by the Company and considered by the
Nominating Committee.
4
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of the Record Date,
regarding the beneficial ownership of Common Stock held by (i) each person or
entity known to the Company who beneficially owned 5% or more of the Common
Stock, (ii) each executive officer of the Company who is named in the Summary
Compensation Table set forth below under "Executive Compensation--Summary
Compensation Information," and (iii) all current directors and nominees and
executive officers of the Company as a group. Except as otherwise indicated, all
shares listed are owned with sole voting and investment power.
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER OR GROUP SHARES PERCENT
- ---------------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Schultz Sav-O Stores Retirement Savings Plan(1)......................................... 1,220,186 17.91%
Delaware Management Holdings, Inc.(2)................................................... 527,300 7.74%
Howard C. Dickelman (3)................................................................. 448,950 6.58%
Neuberger & Berman, LLC (4)............................................................. 433,950 6.37%
Reich & Tang Asset Management L.P. (5).................................................. 467,700 6.87%
James H. Dickelman (6).................................................................. 357,479 5.12%
John H. Dahly (6)....................................................................... 134,892 1.96%
Michael R. Houser (6)................................................................... 106,205 1.54%
William K. Jacobson (6)................................................................. 85,846 1.25%
Kenneth S. Folberg (7).................................................................. 26,774 *
All directors, director nominees and executive officers as a group (15 persons) (8)..... 1,439,529 19.75%
</TABLE>
- ------------------------------
* Indicates less than 1%.
(1) The share amount listed is derived from the amended Schedule 13G dated as of
February 13, 1998 filed with the Securities and Exchange Commission (the
"SEC") and the Company. The listed shares were held by Marshall & Ilsley
Trust Company ("M&I"), as trustee for the Retirement Savings Plan. A Plan
Administrative Committee, consisting of James H. Dickelman, John H. Dahly,
William K. Jacobson and Armand C. Go, administers the Retirement Savings
Plan and shares voting power for the shares listed with the participants in
the Retirement Savings Plan in that the Committee is entitled to vote all
shares for which no voting instructions are received from participants. The
Retirement Savings Plan participants have investment power over the listed
shares held by the Retirement Savings Plan which are allocated to their
accounts. The address of M&I is 1000 North Water Street, Milwaukee,
Wisconsin 53202. The address for the individual members of the Committee is
c/o Schultz Sav-O Stores, Inc., 2215 Union Avenue, Sheboygan, Wisconsin
53081. See "Executive Compensation--Report on Executive Compensation."
(2) The share amount listed is from the amended Schedule 13G dated as of
February 12, 1998 filed with the SEC and the Company. The address of
Delaware Management Holdings, Inc. is 2005 Market Street, Philadelphia,
Pennsylvania 19103.
(3) The share amount listed for Mr. Dickelman has been derived from his amended
Schedule 13G dated as of February 12, 1998 filed with the SEC and the
Company. The address for Mr. Dickelman is c/o Schultz Sav-O Stores, Inc.,
2215 Union Avenue, Sheboygan, Wisconsin 53081. See footnote (1) to the table
set forth under "Election of Directors."
(4) The share amount listed is from the amended Schedule 13G dated as of
February 6, 1998 filed with the SEC and the Company. The address of
Neuberger & Berman LLC is 605 Third Avenue, New York, New York 10158.
(5) The share amount listed is from the Schedule 13G dated as of February 12,
1998 filed with the SEC and the Company. The address of Reich & Tang Asset
Management is 600 Fifth Avenue, New York, New York 10020.
(6) See footnote (1) to the table set forth under "Election of Directors" for
certain additional information concerning the beneficial ownership of Common
Stock by James H. Dickelman, John H. Dahly, Michael R. Houser and William K.
Jacobson, respectively.
(7) The share amount listed includes 19,500 shares issuable under stock options
exercisable within 60 days of the Record Date and 7,274 shares held by Mr.
Folberg in the Retirement Savings Plan.
(8) The share amount listed includes 477,450 shares issuable under stock options
exercisable within 60 days of the Record Date, 353,159 shares beneficially
held by current directors and executive officers in the Retirement Savings
Plan, and 3,786 shares of Common Stock beneficially owned by Bernard S.
Kubale, whose term as a director of the Company will end at the Meeting, but
excludes 69,632 shares as to which beneficial ownership is disclaimed by
certain of such individuals. See footnote (1) to the table set forth under
"Election of Directors" and footnote (1) above for additional information.
5
<PAGE>
EXECUTIVE COMPENSATION
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board ("Committee") evaluates and
establishes the compensation of the Company's executive officers. The
Committee's executive compensation policies and practices generally reflect the
Company's efforts to attract, motivate and retain the Company's executive
officers by providing a total compensation package based on corporate and
personal performance and which is competitive within the Company's industry.
Executive officers' compensation is comprised of salary, stock option grants,
corporate contributions to the Company's Retirement Saving Plan and cash bonuses
under the Officer Annual Incentive Plan ("Incentive Plan"). The Incentive Plan
is intended to motivate the Company's executive officers to achieve annual
corporate financial performance goals for the economic benefit of all
shareholders by rewarding executive officers, individually and as a team, for
the achievement of such goals. The Incentive Plan provides for the establishment
of an annual variable bonus pool based on the Company's achievement of certain
specified levels of economic value added for the year then ended. For purposes
of the Incentive Plan, economic value added is determined by calculating the
difference between the Company's annual net earnings after tax and a
pre-established target threshold investment return based on the Company's
weighted average cost of capital. Ten percent of the resulting economic value
added for the year is deposited in the incentive pool, together with 5% of any
increase in the current year's economic value added over the prior year's
economic value added. Fifty percent of the resultant total incentive pool is
then distributed to all executive officers pro rata according to relative salary
levels and 50% based on each officer's relative achievement of pre-established
individual and group performance goals, as determined by the Committee. A total
bonus pool of $360,000 was established in 1997 under the Incentive Plan, with
$311,000 contributed as a result of the Company's economic value added amount
for 1997 and $49,000 as a result of the amount of 1997 economic value added
generated by the Company being in excess of the amount of the Company's 1996
economic value added.
The Committee adjusts each executive officer's salary, including the salary
of James H. Dickelman, the Chairman of the Board, President and Chief Executive
Officer of the Company, at the end of each fiscal year for the forthcoming
fiscal year. Objective performance criteria are established for each of the
officers which the Committee considers in its salary adjustment decisions and
bonus allocations. The Committee also analyzes and evaluates the Company's
relative sales, earnings, return on sales, cost and expense levels, and balance
sheet strength for the year then ending compared to the Company's historical
results, as well as to the current trends and results within the Company's
industry. Based on such analysis and evaluation, for 1997 the Committee
subjectively determined Mr. Dickelman's and the other executives' salaries, in
conjunction with the other elements of each such executive's base compensation
package, to fall generally within a range of the estimated average salaries and
compensation packages of similarly situated executives at other generally
comparable food wholesalers and retailers, including several companies included
in the Company's stock performance peer group index. For executive officers
other than Mr. Dickelman, the Committee considered the compensation
recommendations of Mr. Dickelman. In raising the salary levels of executive
officers, including Mr. Dickelman, and in allocating discretionary bonuses for
1997 out of the bonus pool for other executives, the Committee considered
specifically the Company's outstanding earnings, earnings per share and earnings
as a percentage of sales increases in 1997 compared to 1996 results and budgeted
expectations for 1997, as well as the Company's outstanding stock price
performance during 1997. The January 12, 1998 edition of the SUPERMARKET NEWS
cited the Company's 66% stock price increase in 1997 as the best performance by
a food wholesaler during the year.
6
<PAGE>
Additionally, despite a flat food price inflation environment, for the second
consecutive year, the Company's annual revenues increased from the prior year.
Fiscal 1997 earnings and earnings per share set new records and were 18.1% and
17.8%, respectively, ahead of last year. Also, the Committee took into account
the increase in the Company's ratio of after tax earnings as a percentage of
sales from 1.42% to 1.61% from 1996 to 1997, as well as the Company's successful
expansion of its presence in the Appleton, Wisconsin marketplace and ongoing
success in generating same-store sales growth by completing the rollout of its
card marketing program during 1997. Also, the amount of cash dividends per share
paid to shareholders increased by almost 14% in 1997 from the amount paid in
1996. Mr. Dickelman's bonus amount of $96,759 for 1997 was based on his pro rata
share of the bonus pool established under the Incentive Plan and on his
achievement of individual and group financial and other goals and objectives
established at the beginning of 1997 by the Committee. These goals and
objectives included specified targeted levels of sales, earnings and economic
value added, all of which were exceeded. Other established goals and objectives
which were achieved by Mr. Dickelman and which were considered by the Committee
included improving the financial performance of both the Company's corporate
stores and the Company's warehouse operations.
Stock options are generally granted annually to executive officers shortly
after the end of each year by the Stock Option Committee (which includes all of
the members of the Compensation Committee, except Bernard S. Kubale) and are
based principally on the executive officer's relative position at the Company,
his existing and anticipated ability to directly impact corporate performance,
compensation, seniority, grants made in the past, options held and stock
ownership. Each executive officer's individual initiatives and achievements
within the Company over the prior year also affect the level of such officer's
option grants. The Company's 1995 Equity Incentive Plan is intended to promote
the best interests of the Company and its shareholders by providing key
employees with the opportunity to acquire or increase their ownership interests
in the Company and thereby develop a stronger incentive to put forth maximum
effort for the continued success and growth of the Company. Options have
historically been granted at 100% of the Common Stock's fair market value on the
date of grant, have a term of not to exceed seven years and vest in increments
of one-third on each of the first, second and third anniversaries of the grant
date. Since the economic value of stock options is inherently dependent upon the
level of future market price appreciation of the underlying Common Stock, stock
options granted by the Stock Option Committee will only provide executive
officers with value to the extent the market price of the Common Stock increases
above the option exercise price on the grant date. Thus, the Stock Option
Committee believes that stock option grants help better align the economic
interests of the Company's management with its shareholders. Under the 1995
Equity Incentive Plan, the Stock Option Committee has the additional flexibility
to grant other types of equity-based incentive awards (including stock
appreciation rights, restricted stock and performance shares) in addition to
stock options. However, the Stock Option Committee has to date continued its
historical practice of granting stock options on terms substantially identical
to past practice.
The Company's Retirement Savings Plan is a qualified profit sharing plan
which provides for supplemental income at retirement for all eligible (1,000
hours or more per year) salaried employees of the Company. The retirement
benefits provided by the Retirement Savings Plan for each participant are based
upon the value of the participant's account balance at retirement. The
Retirement Savings Plan requires the Company to make an annual basic
contribution which, when added to forfeitures for the year, is equal to 5% of
the participant's salary for the year. The Company may make an additional
discretionary contribution as determined by the Board. Basic contributions are
allocated to each participant's account on the basis of the participant's
eligible compensation compared to the compensation of all participants for such
year. Discretionary contributions are allocated in the same way, except that
Company contributions to
7
<PAGE>
Social Security benefits are taken into account in the allocation of
discretionary contributions. The Company's discretionary contribution to the
Retirement Savings Plan in 1997 was approximately 4.3% of each participant's
eligible compensation. The Retirement Savings Plan permits pretax employee
contributions pursuant to Internal Revenue Code Section 401(k). The Company
provides a 25% matching contribution on pretax employee contributions up to 4%
of pay. Most of the Company's executive officers (including all of the named
executives officers set forth below) have typically invested all, or a
substantial portion, of their annual Retirement Savings Plan allocations in
shares of Common Stock. At the end of 1997, the Company's ten current executive
officers as a group held 353,159 shares, or approximately 5.2% of the total
outstanding Common Stock on the Record Date, in their accounts under the
Retirement Savings Plan. See "Principal Shareholders."
The Company also maintains an Executive Benefit Restoration Plan, which is
an unfunded supplemental benefit pension plan intended to provide benefits
otherwise denied to participants under the Retirement Savings Plan by reason of
limitations imposed by the Internal Revenue Code. The Executive Benefit
Restoration Plan provides benefit accruals on pay in excess of the amount able
to be recognized by the Retirement Savings Plan equivalent to the rate of
Company basic and discretionary contributions made under the Retirement Savings
Plan for the year.
Given the levels of compensation and benefits provided currently to the
named executive officers, the Committee does not otherwise believe it is
necessary to conform or adjust its compensation policies, plans or practices to
comply with the $1 million executive compensation deductibility cap imposed by
Internal Revenue Code Section 162(m).
<TABLE>
<S> <C>
BY THE COMPENSATION COMMITTEE: BY THE STOCK OPTION COMMITTEE:
Bernard S. Kubale, Chairman Martin Crneckiy, Jr., Chairman
Martin Crneckiy, Jr. Howard C. Dickelman
Howard C. Dickelman R. Bruce Grover
R. Bruce Grover
</TABLE>
8
<PAGE>
SUMMARY COMPENSATION INFORMATION
The table below sets forth certain information concerning compensation paid
by the Company for its last three fiscal years to the Company's Chief Executive
Officer and to the four executive officers of the Company, other than the Chief
Executive Officer, who received the highest aggregate compensation during fiscal
1997. The persons named in the table below are hereinafter sometimes referred to
as the "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
STOCK OPTION
FISCAL ANNUAL ANNUAL GRANTS (1) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION (3)
- ----------------------------------------------------- --------- ----------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
James H. Dickelman 1997 $ 275,000 $ 96,759 45,000 $ 56,914
Chairman of the Board, 1996 $ 247,500 $ 59,060 39,000 $ 51,358
President and Chief Executive Officer 1995 $ 225,000 $ 48,974 39,000 $ 39,595
John H. Dahly 1997 $ 145,520 $ 51,202 18,000 $ 24,461
Executive Vice President, 1996 $ 136,000 $ 32,453 18,000 $ 21,054
Chief Financial Officer 1995 $ 126,000 $ 27,426 18,000 $ 15,335
and Secretary
Michael R. Houser 1997 $ 143,000 $ 52,289 18,000 $ 29,522
Executive Vice President-- 1996 $ 130,000 $ 32,236 16,800 $ 20,036
Marketing and 1995 $ 120,000 $ 26,669 16,800 $ 14,640
Merchandising
William K. Jacobson 1997 $ 89,000 $ 32,544 13,500 $ 12,664
Senior Vice President-- 1996 $ 84,000 $ 20,045 12,000 $ 18,039
Retail Operations 1995 $ 75,000 $ 16,669 11,400 $ 7,878
Kenneth S. Folberg Vice President--Logistics and 1997 $ 86,700 $ 29,308 10,500 $ 12,155
Labor Relations 1996 $ 81,000 $ 18,950 9,600 $ 11,051
1995 $ 76,000 $ 16,194 9,600 $ 8,012
</TABLE>
- ------------------------
(1) Granted at 100% fair market value on the date of grant. See footnote (1) to
the table set forth under "Stock Options-- Option Grants in 1997 Fiscal
Year" below for additional information.
(2) For Mr. Dickelman, Mr. Dahly and Mr. Houser, amounts set forth under this
column represent (i) benefit accruals of $36,578, $4,124 and $3,180,
respectively, under the Company's Executive Benefit Restoration Plan, (ii)
Company contributions of $20,336 to the Retirement Savings Plan for each
such officer, and (iii) in the case of Mr. Houser, a travel bonus of $6,006.
For Mr. Jacobson and Mr. Folberg, the amounts represent Company
contributions to the Retirement Savings Plan. See "Severance and Change in
Control Arrangements" below with respect to certain severance arrangements
between the Company and the named executive officers in the event of a
"change in control" of the Company.
9
<PAGE>
STOCK OPTIONS
The following table sets forth information concerning the grant of stock
options under the Company's 1995 Equity Incentive Plan during fiscal 1997 to the
named executive officers.
OPTION GRANTS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL OPTIONS
SHARES GRANTED TO ALL
UNDERLYING EMPLOYEES IN EXERCISE GRANT DATE
OPTIONS 1996 FISCAL PRICE (2) PRESENT
NAME GRANTED (1) YEAR (PER SHARE) EXPIRATION DATE VALUE (3)
- ----------------------------------------- ----------- --------------- ----------- --------------------- -----------
<S> <C> <C> <C> <C> <C>
James H. Dickelman....................... 45,000 31.3% $ 9.67 January 29, 2004 $ 126,900
John H. Dahly............................ 18,000 12.5% $ 9.67 January 29, 2004 $ 50,760
Michael R. Houser........................ 18,000 12.5% $ 9.67 January 29, 2004 $ 50,760
William K. Jacobson...................... 13,500 9.4% $ 9.67 January 29, 2004 $ 38,070
Kenneth S. Folberg....................... 12,000 7.9% $ 9.67 January 29, 2004 $ 33,840
</TABLE>
- ------------------------
(1) The options reflected in the table are nonqualified stock options under the
Internal Revenue Code and were granted on January 29, 1997. The exercise
price of each option granted was equal to 100% of the fair market value of
the Common Stock on the date of grant, as determined by the Committee. The
options granted vest in increments of one-third on each of the first, second
and third anniversaries of the grant date; provided, however, that no
options may be exercised more than seven years after the date of grant. The
options are subject to early vesting in the event of the optionee's death,
disability or retirement after reaching age 65. Under the Stock Option
Agreements granting the options, upon a "change in control" of the Company
(as defined in such Stock Option Agreements), all options then outstanding
will become immediately exercisable in full for the remainder of their term
and each optionee will have the right, for a period of 30 days, to require
the Company to purchase his outstanding options for cash at the aggregate
"acceleration price" for all shares of Common Stock then subject to such
options, provided that at least six months has elapsed since the grant date.
(2) The exercise price of options may be paid in cash, by delivering previously
issued shares of Common Stock or any combination thereof.
(3) The option values presented are based on the Black-Scholes option pricing
model adapted for use in valuing stock options. The actual value, if any,
that an optionee may realize upon exercise will depend on the excess of the
market price of the Common Stock over the option exercise price on the date
the option is exercised. There is no assurance that the actual value
realized by an optionee upon the exercise of an option will be at or near
the value estimated under the Black-Scholes model. The estimated values
under the Black-Scholes model are based on arbitrary assumptions as to
variables such as interest rates, stock price volatility and future dividend
yield, including the following: (a) an assumed United States Treasury bond
rate of 6.51%; (b) stock price volatility of 20.14% (based on 36-month stock
price history ending January 31, 1997); and (c) a current dividend yield of
2.06%.
10
<PAGE>
The following table sets forth certain information with respect to the named
executive officers concerning their exercise of stock options during the 1997
fiscal year and the value of their unexercised stock options held as of the end
of fiscal 1997.
1997 FISCAL YEAR-END AGGREGATED OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING OPTIONS AT END IN-THE-MONEY OPTIONS AT END
SHARES OF FISCAL 1996 OF FISCAL 1996 (1)
ACQUIRED UPON VALUE -------------------------- ----------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- -------------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James H. Dickelman.............. 49,800 $ 406,050 129,000 84,000 $ 1,279,250 $ 509,350
John H. Dahly................... 49,500 $ 449,625 51,450 36,000 $ 497,538 $ 218,940
Michael R. Houser............... 36,300 $ 335,500 48,450 34,800 $ 468,988 $ 211,340
William K. Jacobson............. 10,500 $ 127,750 33,200 25,300 $ 320,400 $ 152,905
Kenneth S. Folberg.............. 6,000 $ 66,500 9,600 20,100 $ 73,620 $ 122,015
</TABLE>
- ------------------------
(1) The dollar values were calculated by determining the difference between the
fair market value of the underlying shares of Common Stock and the various
applicable exercise prices of the named executive officers' outstanding
options at exercise or the end of fiscal 1997, respectively. The fair market
value at the end of fiscal 1997 was $15.50, the closing sale price per share
on January 2, 1998, the last trading day of such fiscal year.
DIRECTOR COMPENSATION
Directors, other than directors who are Company employees or who receive
legal fees for their attendance at Board meetings, are paid an annual cash
retainer of $1,500, plus $300 for each attended Board meeting and committee
meeting not held in conjunction with Board meetings. In addition, each such
independent director receives an annual grant of 300 shares of the Company's
Common Stock.
SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
The Company has severance agreements with the named executive officers which
provide that, following a "change of control" of the Company (as defined in the
severance agreements), such executive officer will be employed for three years
in the same position, performing equivalent duties, and at the same location as
in effect immediately prior to the change of control. During the employment
period, the officer is entitled to receive a salary based upon his compensation
rate in effect at the date of change of control (subject to increase by the
Committee) and to be included in the Company's benefit plans available to
employees of comparable status. If, during the employment period, the officer's
employment is terminated by the Company, other than for "cause" (as defined in
the severance agreements) or the officer's disability, or the officer's duties
are changed substantially without his written consent and the officer terminates
his employment as a result, the officer is entitled to receive a lump sum
payment equal to the officer's base salary for the greater of the remainder of
the employment period or one year, plus the actuarially determined present value
of the benefit accruals that would have been made through the end of the
employment period under the Company's retirement plans applicable to the
officer. The officer and his eligible dependents are also entitled to coverage
under the Company's medical benefit plans through the end of the employment
period.
Additionally, as described in footnote (1) to the table entitled "Option
Grants in 1997 Fiscal Year," upon a "change in control" of the Company, stock
options granted to the named executive officers will become fully exercisable
and the optionee will then have the right to require the Company to purchase his
outstanding options for cash at the aggregate "acceleration price" for all
shares of Common Stock subject to such options.
11
<PAGE>
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Howard C. Dickelman, a retired former executive officer of the Company, and
Bernard S. Kubale, a partner in the law firm which serves as the Company's
general counsel, have both been members of the Compensation Committee for many
years. Mr. Dickelman is also a member of the Stock Option Committee.
STOCK PERFORMANCE INFORMATION
Set forth below is a line graph comparing the annual percentage change
during the last five years in the Company's cumulative total shareholder return
on the Common Stock, compared to the cumulative total return of companies
included within The Wilshire 5000 Index and companies in a peer group of food
retailers and wholesalers selected in good faith by the Company. The companies
comprising the peer group index include: Arden Group, Inc., Delchamps, Inc.,
Marsh Supermarkets, Inc., Nash Finch Co., RichFood Holdings, Inc., and Seaway
Food Town, Inc. The shareholder returns of each of these companies have been
weighted, based on each such company's relative market capitalization as of the
beginning of each period.
COMPARISON OF FIVE-YEAR TOTAL RETURNS
(ON A DIVIDEND REINVESTED BASIS)
[FIVE-YEAR PERFORMANCE CHART]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
12/31/92 12/31/93 12/30/94 12/29/95 12/27/96 1/2/98
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Company Index 100.0 113.1 145.1 223.1 217.2 373.9
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Wilshire 5000 Index 100.0 111.3 111.2 151.7 183.9 240.5
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Peer Group Index 100.0 118.9 106.1 155.3 194.7 236.8
</TABLE>
12
<PAGE>
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
AND OTHER MATTERS
Arthur Andersen LLP has been selected by the Board as the Company's
independent public accountants for 1998. The Board recommends a shareholder vote
FOR ratification of such selection. The affirmative vote of more shares than
those voted against such ratification at the Meeting is required for
ratification. Under Wisconsin law, any shares of Common Stock which are not
voted on this matter at the Meeting, whether by abstention or otherwise, will
have no effect on the ratification of independent public accountants. Arthur
Andersen LLP has served as the Company's independent public accountants for many
years. A representative of Arthur Andersen LLP is expected to be present at the
Meeting and will have an opportunity to make a statement if he desires to do so
and to respond to appropriate questions.
The election of directors and ratification of the Company's 1998 independent
public accountants are the only matters known to the Board which will be
presented for shareholder consideration at the Meeting. If any other matters
should properly come before the Meeting, the proxies named in the accompanying
proxy will vote on such matters in accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. The Company
expects to solicit proxies primarily by mail. Proxies may also be solicited
personally and by telephone by certain officers and regular employees of the
Company. It is not anticipated that anyone will be specially engaged to solicit
proxies or that special compensation will be paid for that purpose. The Company
will reimburse brokers and other nominees for their reasonable expenses in
communicating with the persons for whom they hold Common Stock.
UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER, ADDRESSED TO THE SECRETARY OF
THE COMPANY, THE COMPANY WILL PROVIDE TO SUCH SHAREHOLDER, WITHOUT CHARGE, A
COPY OF THE COMPANY'S 1997 ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS), AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
Any shareholder proposal intended for consideration at the 1999 annual
meeting of shareholders must be received by the Company no later than December
2, 1998 in order to be considered for inclusion in the Company's proxy statement
and proxy for that meeting.
By Order of the Board of Directors
[SIGNATURE]
John H. Dahly
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL
OFFICER AND SECRETARY
April 1, 1998
13
<PAGE>
SCHULTZ SAV-0 STORES, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS - MAY 13, 1998
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints James H. Dickelman and John H. Dahly,
and each or either of them as proxies, each with the power to appoint his
substitute, and hereby authorizes each or either of them to represent and to
vote, as designated below, all the shares of Common Stock of Schultz Sav-O
Stores, Inc. held of record by the undersigned on March 25, 1998 at the 1998
annual meeting of shareholders scheduled to be held on May 13, 1998 and any
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE THREE SPECIFIED DIRECTOR NOMINEES, FOR THE RATIFICATION
OF ARTHUR ANDERSEN LLP AS THE COMPANY'S 1998 INDEPENDENT AUDITORS, AND ON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING IN ACCORDANCE
WITH THE BEST JUDGMENT OF THE PROXIES NAMED HEREIN.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and accompanying Proxy Statement relating to the Company's 1998 Annual
Meeting of Shareholders, and the Company's 1997 Annual Report.
- DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED -
<PAGE>
SCHULTZ SAV-O-STORES, INC. 1998 ANNUAL MEETING
1. ELECTION OF DIRECTORS:
1-JAmes H Dicheriman
2- William K Jacobson
3- Steven R. Barth
/ / FOR all nominees listed to the left (except as specified below).
/ / WITHHOLD AUTHORITY to vote for all nominees listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)
2. Ratification of Arthur Andersen LLP as the Company's 1998 independent
auditors.
3. In their discretion, upon such other business as may properly come before
the meeting and at any adjournment thereof.
Check appropriate box indicate changes below
Address Change: / /
Name Change? / /
Date_____________________
NO OF SHARES _______________
Signatures(s) in Box
Please sign exactly as your name appears hereon, when shares are held by
joint owners of share should sign. State full title when signing as executor,
administrator, trustee, guardian, etc. Please return signed proxy in the
enclosed envelope.
