SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 ss. 240.14a-11(c) or ss. 240.14
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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[GRAPHIC OMITTED]
SCHULTZ SAV-O STORES, INC.
2215 Union Avenue
Sheboygan, Wisconsin 53081
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 10, 2000
Dear Fellow Shareholder:
We invite you to attend our 2000 annual meeting of shareholders on
Wednesday, May 10, 2000 at 3:00 p.m. at the John Michael Kohler Arts Center,
located at 608 New York Avenue, Sheboygan, Wisconsin. As we describe in our
accompanying proxy statement, if you held shares of our common stock on March
22, 2000, you will be entitled to vote at the annual meeting on the following
matters:
1. the election of three directors;
2. our board of directors' selection of independent public accountants
for 2000; and
3. any other business that may properly come before our annual meeting.
We have enclosed a proxy card and our 1999 annual report along with this
proxy statement. Your vote is important, no matter how many shares you own. Even
if you plan to attend our annual meeting, please complete, date and sign the
proxy card and mail it as soon as you can in the envelope provided. If you
attend the annual meeting, you can revoke your proxy and vote your shares in
person if you like.
Thank you for your continued support. We look forward to seeing you at our
annual meeting.
Sincerely,
SCHULTZ SAV-O STORES, INC.
John H. Dahly
Executive Vice President,
Chief Financial Officer and Secretary
Sheboygan, Wisconsin
March 30, 2000
<PAGE>
FREQUENTLY ASKED QUESTIONS
Q: Why did I receive this proxy Statement?
Our board of directors has sent you this proxy statement to ask for
your vote, as a Schultz shareholder, on certain matters to be voted
on at our upcoming annual shareholders' meeting.
Q: What am I voting on?
You will vote on:
o the election of three directors; and
o the ratification of our board's choice of Arthur Andersen LLP as
our independent public accountants for 2000.
Our board of directors is not aware of any other matter that will be
presented for your vote at the annual meeting.
Q: Do I need to attend the annual
Meeting in order to vote?
No. You can vote either in person at the annual
meeting or by completing and mailing the enclosed
proxy card.
Q: Who is entitled to vote?
You are entitled to vote if you owned shares as of the close of
business on the March 22, 2000 record date. You will be entitled to
one vote per share for each share of our common stock you owned on
the record date.
Q. Who will count the votes?
Firstar Bank, N.A., our transfer agent and registrar, will count the
votes and act as inspector of elections at the annual meeting.
Q: How many shares of Schultz's stock are entitled to vote?
A total of 5,943,569 shares of common stock will be entitled to vote at
the annual meeting.
Q: What constitutes a quorum?
A "quorum" refers to the number of shares that must be in attendance at
a meeting to lawfully conduct business. A majority of the shares of our
common stock entitled to be cast will represent a quorum. As a result,
at least 2,971,785 shares must be present at the annual meeting before
we can take the actions called for at the meeting.
2
<PAGE>
Q: What happens if I sign and return my proxy card but do not mark my vote?
If you return a signed proxy card without indicating whether you wish to
vote for or against the proposals, James H. Dickelman and John H. Dahly,
as proxies, will vote your shares:
o to elect the board's nominees for directors; and
o to ratify our board's selection of Arthur Andersen as independent
public accountants for 2000.
Q: What percentage of Schultz's votes do directors and officers own?
Approximately 15.0% of our shares, as of the record date, are controlled
by our directors and officers. See page 8 for more details.
Q: Who are the largest shareholders?
Investors holding 5% of more of our outstanding common stock are:
1. Our Retirement Savings Plan for employees - 18.2%
2. Franklin Resources, Inc. - 10.3%
3. FMR Corp. - 6.6%
4. Mr. James H. Dickelman, our Chief Executive Officer, including
shares he can acquire upon exercise of stock options - 6.5%
5. Delaware Management Holdings Co., Inc. - 6.4%
6. Dimensional Fund Advisors, Inc. - 6.0%
3
<PAGE>
ELECTION OF DIRECTORS
Director Nominees
At the annual meeting, shareholders will elect three directors to hold
office until the annual meeting held in 2003. Our board's nominees are Michael
R. Houser, Bruce J. Olson and Walter G. Winding, each of which currently serve
as directors. James H. Dickelman and John H. Dahly, as proxies, intend to vote
for the election of all of the board's nominees. They will also vote for another
person that our board may recommend in the event that a nominee becomes unable
to serve as a director before the annual meeting.
Under Wisconsin law, shareholders elect directors by a plurality of the
votes cast. This means that the nominees receiving the largest number of votes,
even if less than a majority, will be elected as directors. Any shares that do
not vote, whether by abstention, broker non-vote or otherwise, will not affect
the election of directors.
Our board of directors recommends a vote for Michael R. Houser, Bruce J.
Olson and Walter G. Winding.
Current Board Composition, Meetings and Committees
The table set forth below lists certain information about our board of
directors and the board committees on which our directors serve, as well as how
many times the board and each committee met in 1999.
<TABLE>
<CAPTION>
Stock
Executive Nominating Audit Compensation Option
Board Member Board Committee Committee Committee Committee Committee
Class II - Nominees for Terms to Expire in 2003
<S> <C> <C> <C> <C> <C> <C>
Michael R. Houser (48), a director v v
since 1992; Executive Vice President -
Marketing and Merchandising
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
Bruce J. Olson (50), a director since v v v v v
1999; Group Vice President of
The Marcus Corporation -
owner of hotels, resorts,
movie theatres and restaurants
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
Walter G. Winding (58), a director v v v v v
since 1999; owner and Chief Executive
Officer of Winding and Company - a
business consulting firm
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
4
<PAGE>
<CAPTION>
Stock
Executive Nominating Audit Compensation Option
Board Member Board Committee Committee Committee Committee Committee
Class I - Directors Whose Terms Expire in 2002
<S> <C> <C> <C> <C> <C> <C>
John H. Dahly (59), a director since v v
1984; Executive Vice President, Chief
Financial Officer and Secretary
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
Martin Crneckiy, Jr. (54), a director v v v v v*
since 1989; Executive Vice President
of The Vollrath Company, LLC - a
manufacturer of stainless steel and
plastic wares and light equipment for
the international food service industry
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
R. Bruce Grover (64), a director since v v v v* v
1989; President and Chief Executive
Officer of VPI, LLC - a manufacturer
of solid vinyl floor products, custom
extruded sheets and sound barrier
materials for automotive applications
<CAPTION>
Class III - Directors Whose Terms Expire in 2001
<S> <C> <C> <C> <C> <C> <C>
James H. Dickelman (52), a director v* v v*
since 1978; Chairman of the Board,
President and Chief Executive Officer
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
William K. Jacobson (49), a director v v
since 1996; Senior Vice President -
Retail Operations and Development and
Assistant Secretary
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
Steven R. Barth (41), a director since v v v* v
1998; Partner in the law firm of Foley
& Lardner
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
Meetings Held in 1999 8 2 2 4 2 1
- - ---------------------------------------- -------- ------------ ------------- ------------ ---------------- ------------
* Denotes Chairman
</TABLE>
5
<PAGE>
All of our directors have held the positions indicated on the preceding
page for at least the last five years, except that William K. Jacobson was our
Vice President - Franchise Operations prior to January 1996, our Senior Vice
President - Franchise Operations from January 1996 until March 1996 and our
Senior Vice President - Retail Operations from March 1996 until June 1998, and
that Michael R. Houser was our Senior Vice President - Marketing and
Merchandising prior to January 1998.
The Executive Committee. The Executive Committee acts on behalf of the
board between board meetings, except with respect to matters upon which
Wisconsin law does not allow a committee to act.
The Nominating Committee. The Nominating Committee's functions include:
o recommending criteria for board members;
o determining prospective candidates for board membership;
o recommending candidates for each of the board's committees; and
o reviewing our compensation policies for board members who are not
full-time employees.
The Audit Committee. The Audit Committee's principal functions include:
o annually recommending a firm of independent public accountants to
act as our auditing firm for the coming year;
o reviewing areas of financial risk that could have a material
adverse effect on our results of operations and financial
condition with our principal accounting officers and independent
public accountants;
o reviewing annual audit plans with our principal accounting
officers and independent public accountants;
o reviewing our policies as to officers' conflicts of interest with
our principal accounting officers and independent public
accountants;
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<PAGE>
o reviewing plans to engage our independent public accountants for
any non-audit professional services; and
o reviewing, in consultation with our principal accounting officers
and independent public accountants, financial reporting and
accounting practices of comparable companies that differ from our
own.
The Compensation Committee. The Compensation Committee:
o evaluates and sets cash compensation levels for our officers;
o reviews and establishes the employee benefits we offer to our
officers; and
o determines officers' bonuses under our annual incentive plan.
The Stock Option Committee. The Stock Option Committee has the
responsibility to:
o evaluate and grant stock options and other equity incentives to
our employees; and
o administer our equity incentive plans.
7
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
We describe in the following table certain information, as of the record
date, regarding the beneficial ownership of our common stock held by:
o each person or entity that we know beneficially owns more than 5%
of our common stock;
o each of our directors and those of our executive officers who are
named in the Summary Compensation Table on page 14 under "Summary
Compensation Information;" and
o all of our directors and officers as a group.
We believe that all of the people listed below have sole voting and
investment power over the listed shares, except as indicated otherwise in the
accompanying footnotes.
Name of Individual or Entity Shares Percentage (1)
---------------------------- ------ --------------
Schultz Sav-O Stores Retirement Savings Plan (2) 1,080,321 18.2
Franklin Resources, Inc. (3) 612,800 10.3
FMR Corp. (4) 395,100 6.6
James H. Dickelman (5) 400,530 6.5
Delaware Management Holdings Co., Inc. (6) 377,900 6.4
Dimensional Fund Advisors, Inc. (7) 356,450 6.0
John H. Dahly (8) 123,394 2.1
Michael R. Houser (9) 110,442 1.8
William K. Jacobson (10) 92,400 1.5
Thomas J. Timler (11) 56,429 *
Martin Crneckiy, Jr. 7,156 *
Steven R. Barth 5,375 *
R. Bruce Grover 4,156 *
Bruce J. Olson 764 *
Walter G. Winding 764 *
All directors and officers as
a group (14 persons) (12) 966,973 15.0
- - ---------------------------
* Indicates less than 1%
8
<PAGE>
(1) For individuals who hold rights to acquire shares of stock upon
exercise of stock options, the percentages indicated reflect inclusion
of certain of these shares as described in the appropriate footnotes
below, as well as the increase in the total number of shares of common
stock outstanding that would result from their exercise of those
options.
(2) We obtained the share amount listed from the amended Schedule 13G,
dated February 11, 2000, filed with the Securities and Exchange
Commission. The listed shares were held by Marshall & Ilsley Trust
Company, as trustee for our Retirement Savings Plan. Retirement Savings
Plan participants have investment power over the listed shares held by
the Retirement Savings Plan that are allocated to their accounts. A
Plan Administrative Committee, consisting of James H. Dickelman, John
H. Dahly, Elwood F. Winn, William K. Jacobson, Armand C. Go and Lynn M.
Berg, 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 shares when participants
have provided no voting instructions. The address of M&I is 1000 North
Water Street, Milwaukee, Wisconsin 53202. The address for the
individual members of the Plan Administrative Committee is c/o Schultz
Sav-O Stores, Inc., 2215 Union Avenue, Sheboygan, Wisconsin 53081. See
"Executive Compensation--Report on Executive Compensation."
(3) We obtained the share amount listed from the amended Schedule 13G,
dated January 5, 2000, filed with the SEC. The address of Franklin
Resources, Inc. is 777 Mariners Island Boulevard, 6th Floor, San Mateo,
California 94404.
(4) We obtained the share amount listed from the amended Schedule 13G,
dated February 14, 2000, filed with the SEC. The address of FMR Corp.
is 82 Devonshire Street, Boston, Massachusetts 02109.
(5) The share amount listed includes (a) 112,347 shares allocated to Mr.
Dickelman's account in the Retirement Savings Plan as of December 31,
1999; (b) 204,000 shares covered by stock options that will be
exercisable within 60 days following the record date; (c) 19,422 shares
held by Mr. Dickelman as trustee for his minor children; and (d) 19,161
shares held as joint tenant with his wife. The share amount does not
include the following shares as to which Mr. Dickelman disclaims
beneficial ownership: (a) 238,560 shares held by the Howard Dickelman
Revocable Trust; (b) 14,730 shares held by the Dorothy J. Dickelman
Revocable Trust; (c) 8,811 shares held by Mr. Dickelman's adult son;
and (d) 3,805 shares held by Mr. Dickelman's adult daughter. Mr.
Dickelman's address is c/o Schultz Sav-O Stores, Inc., 2215 Union
Avenue, Sheboygan, Wisconsin 53081.
(6) We obtained the share amount listed from the amended Schedule 13G,
dated February 14, 2000, filed with the SEC. The address of Delaware
Management Holdings Co., Inc. is One Commerce Square, 2005 Market
Street, Philadelphia, Pennsylvania 19103.
(7) We obtained the share amount listed from the amended Schedule 13G,
dated February 11, 2000, filed with the SEC. The address of Dimensional
Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401.
9
<PAGE>
(8) The share amount listed includes (a) 33,760 shares allocated to Mr.
Dahly's account in the Retirement Savings Plan as of December 31, 1999
and (b) 54,000 shares covered by stock options that will be exercisable
within 60 days following the record date. The share amount does not
include 1,476 shares held by Mr. Dahly's wife to which Mr. Dahly
disclaims beneficial ownership.
(9) The share amount listed includes (a) 28,347 shares allocated to Mr.
Houser's account in the Retirement Savings Plan as of December 31,
1999; (b) 69,600 shares covered by stock options that will be
exercisable within 60 days following the record date; and (c) 1,080
shares held as joint tenant with his wife.
(10) The share amount listed consists of (a) 42,000 shares allocated to Mr.
Jacobson's account in the Retirement Savings Plan as of December 31,
1999 and (b) 50,400 shares covered by stock options that will be
exercisable within 60 days following the record date.
(11) The share amount listed includes (a) 10,613 shares allocated to Mr.
Timler's account in the Retirement Savings Plan as of December 31,
1999; and (b) 44,700 shares covered by stock options that will be
exercisable within 60 days following the record date.
(12) The share amount listed includes 490,500 shares issuable under stock
options exercisable within 60 days of the record date and 305,372
shares beneficially held by current directors and executive officers in
the Retirement Savings Plan as of December 31, 1999, but excludes
267,382 shares as to which beneficial ownership is disclaimed by
certain of such individuals. See footnotes 6 and 8 above.
10
<PAGE>
EXECUTIVE COMPENSATION
Report on Executive Compensation
Our board's compensation committee evaluates and establishes the
compensation of our executive officers. The committee's executive compensation
policies and practices generally reflect our efforts to attract, motivate and
retain our executive officers by providing a total compensation package based on
corporate and personal performance and which is competitive within our industry.
Executive officers' compensation is comprised of salary, stock option grants,
corporate contributions to our retirement saving plan and cash bonuses under our
officer annual incentive plan.
The annual incentive plan is intended to motivate our 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 annual incentive plan provides for the
establishment of an annual variable bonus pool, based on our achievement of
increased net sales and certain specified levels of economic value added for the
year then ended. For purposes of the annual incentive plan, economic value added
is determined by calculating the difference between our annual net earnings
after tax and a pre-established target threshold investment return, based on our
weighted average cost of capital. Our bonus pool is comprised of:
o 10% of the economic value added for the year;
o an additional 5% of any incremental increase in the current
year's economic value added over the prior year's economic value
added; and
o $25,000 for each 1% increase in our net sales over net sales for
the prior year.
We then distribute 25% of the resulting total incentive pool to all executive
officers, pro rata, according to relative salary levels and 75% based on each
officer's relative achievement of pre-established individual and group
performance goals, as determined by the compensation committee. We established a
total bonus pool of approximately $440,928 in 1999 under the annual incentive
plan, with $378,677 contributed as a result of our economic value added amount
for 1999 and $62,251 as a result of a 2.5% increase in net sales over 1998.
The compensation committee adjusts each executive officer's salary,
including the salary of James H. Dickelman, our chairman of the board, president
and chief executive officer, at the end of each fiscal year for the forthcoming
fiscal year. The committee establishes objective performance criteria for each
of the officers that the committee considers in its salary adjustment decisions
and bonus allocations. The committee also analyzes and evaluates our relative
revenues, earnings, return on sales, cost and expense levels, and balance-sheet
strength for the year then ending compared to historical results, as well as to
the current trends and results within our industry. Based on such analysis and
evaluation, for last year, the committee 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
11
<PAGE>
compensation packages of similarly situated executives at other comparable food
wholesalers and retailers, including several companies included in our stock
performance peer group index. For executive officers other than Mr. Dickelman,
the committee considered the compensation recommendations of Mr. Dickelman. In
setting the salary levels of our executive officers, including Mr. Dickelman,
and in allocating discretionary bonuses for last year out of the bonus pool for
other executives, the committee considered specifically:
o our earnings and earnings per share, which each approached 1998 levels,
making 1999 the second most profitable year in our history;
o our net revenues, which increased for the fourth consecutive year,
despite an absence of price inflation and significant new competition in the
marketplace; and
o the 13% increase in the amount of cash dividends per share paid to our
shareholders, compared to 1998.
The committee based Mr. Dickelman's bonus amount of $140,000 for 1999 on
his pro-rata share of the bonus pool established under the annual incentive plan
and on the degree to which he achieved individual and group financial and other
goals and objectives established at the beginning of 1999 by the committee.
These goals and objectives included specified targeted levels of revenues,
earnings and economic value added.
In January 2000, the committee decided to maintain 2000 base salaries for
all executive offices, including Mr. Dickelman, at 1999 levels.
Our stock option committee - which includes all of the members of the
compensation committee, except Steven R. Barth - generally grants stock options
annually to key employees shortly after the end of each year. The committee
bases option grants principally on the executive officer's relative position at
the company, his existing and anticipated ability to directly impact corporate
performance, cash compensation, seniority, grants made in the past, options held
and stock ownership. Each executive officer's individual initiatives and
achievements over the prior year also affect the level of such officer's option
grants. Our 1995 equity incentive plan is intended to promote our best interests
and those of our 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 our continued success and
growth. We have historically granted options at 100% of our common stock's fair
market value on the date of grant, with a term not to exceed seven years and
vesting 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 our 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 our management with those of our shareholders.
Under our 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.
However, the stock option committee has, to date, continued its historical
practice of granting only stock options.
12
<PAGE>
In January 2000, our board of directors amended the 1995 equity incentive
plan to change the maximum term of option grants under the plan from seven years
to ten years and the Stock Option Committee made annual grants with ten-year
terms.
Our retirement savings plan is a qualified profit sharing plan that
provides for supplemental income at retirement for all of our eligible - 1,000
hours or more per year - salaried employees. 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 us 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. We may also make an additional discretionary contribution as determined by
our board. We allocate basic contributions to each participant's account on the
basis of the participant's eligible compensation, compared to the compensation
of all participants for such year. We allocate discretionary contributions in
the same way, except that our contributions to Social Security benefits are
taken into account in the allocation of discretionary contributions. Our
discretionary contribution to the retirement savings plan in 1999 was
approximately 9.5% of each participant's eligible compensation. The retirement
savings plan permits pretax employee contributions pursuant to Internal Revenue
Code Section 401(k). We provide a 25% matching contribution on pretax employee
contributions up to 4% of pay. Most of our executive officers - including all of
the named executive officers set forth below - have typically invested all, or a
substantial portion, of their annual retirement savings plan allocations in
shares of our common stock. At the end of 1999, our nine current executive
officers, as a group, held 305,372 shares, or approximately 5.1% of the total
outstanding common stock on the record date, in their accounts under the
retirement savings plan. See "Stock Ownership of Management and Others."
We also maintain an executive benefit restoration plan, which is a
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 our basic and
discretionary contributions made under the retirement savings plan for the year.
We believe that our stock option plans have been adopted, and are being
administered, in accordance with the requirements of Internal Revenue Code
Section 162(m). Given the levels of compensation and benefits provided currently
to our named executive officers, we do not otherwise believe it is necessary to
further conform or adjust our compensation policies, plans or practices to
comply with the $1 million executive compensation deductibility cap imposed by
Internal Revenue Code Section 162(m).
By the Compensation Committee: By the Stock Option Committee:
R. Bruce Grover, Chairman Martin Crneckiy, Jr., Chairman
Martin Crneckiy, Jr. R. Bruce Grover
Bruce J. Olson Bruce J. Olson
Walter G. Winding Walter G. Winding
Steven R. Barth
13
<PAGE>
Summary Compensation Information
The table below describes the compensation paid for the last three years to
our Chief Executive Officer and to our four officers, other than the Chief
Executive Officer, who we paid the highest compensation during 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Stock Option
Name and Fiscal Compensation Grants All Other
Principal Positions Year Salary Bonus (shares) (1) Compensation (2)
<S> <C> <C> <C> <C> <C>
James H. Dickelman 1999 $ 325,000 $140,000 45,000 $ 81,538
Chairman of the Board, 1998 $ 300,000 $121,000 45,000 $ 71,315
President and Chief Executive Officer 1997 $ 275,000 $ 96,759 45,000 $ 56,914
Michael R. Houser 1999 $ 172,000 $ 83,000 18,000 $ 39,148
Executive Vice President - 1998 $ 156,000 $ 68,000 18,000 $ 31,191
Marketing and Merchandising 1997 $ 143,000 $ 52,289 18,000 $ 29,522
John H. Dahly 1999 $ 166,000 $ 70,000 18,000 $ 36,579
Executive Vice President, 1998 $ 156,000 $ 63,000 18,000 $ 30,952
Chief Financial Officer and Secretary 1997 $ 145,520 $ 51,202 18,000 $ 24,461
William K. Jacobson 1999 $ 120,000 $ 46,000 13,500 $ 20,619
Senior Vice President - Retail 1998 $ 94,300 $ 41,000 13,500 $ 15,522
Operations and Development 1997 $ 89,000 $ 32,544 13,500 $ 12,664
and Assistant Secretary
Thomas J. Timler 1999 $ 92,000 $ 42,000 10,500 $ 15,237
Vice President - Business Systems 1998 $ 87,000 $ 34,000 10,500 $ 13,600
Support Group 1997 $ 82,500 $ 27,318 10,200 $ 11,343
- - ---------------------
(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 1999"
below for additional information.
(2) For Mr. Dickelman, Mr. Houser, Mr. Dahly and Mr. Jacobson, amounts set
forth for 1999 under this column represent (a) benefit accruals of
$61,073, $18,683, $16,114 and $154, respectively, under our Executive
Benefit Restoration Plan, and (b) our contributions of $20,465 to the
Retirement Savings Plan for each such executive officer. For Mr.
Timler, the amounts represent our contributions to our Retirement
Savings Plan. See "Severance and Change in Control Arrangements" below
with respect to certain severance arrangements between us and certain
of the named executive officers in the event that we experience a
"change of control."
</TABLE>
14
<PAGE>
Stock Options
We have two stock option plans currently in place: our 1990 Stock Option
Plan and our 1995 Equity Incentive Plan. Currently, we are granting options to
our employees only under the 1995 plan. The following table lists the option
grants under the 1995 plan that we made during 1999, as well as certain other
information relating to those grants.
<TABLE>
Option Grants In 1999
<CAPTION>
Percentage of
Shares Total Options
Underlying Granted to All Exercise Grant Date
Options Employees in Price (per Present
Name Granted (1) 1999 share) (2) Expiration Date Value (3)
<S> <C> <C> <C> <C> <C>
James H. Dickelman 45,000 27.2% $ 16.125 January 27, 2006 $220,500
Michael R. Houser 18,000 10.9% $ 16.125 January 27, 2006 $ 88,200
John H. Dahly 18,000 10.9% $ 16.125 January 27, 2006 $ 88,200
William K. Jacobson 13,500 8.1% $ 16.125 January 27, 2006 $ 66,150
Thomas J. Timler 10,500 6.3% $ 16.125 January 27, 2006 $ 51,450
- - ---------------------
(1) The options reflected in the table are nonqualified stock options under
the Internal Revenue Code and were granted on January 28, 1999. The
exercise price of each option granted was equal to 100% of the fair
market value of our common stock on the date of grant, as determined by
our Stock Option Committee. The options become exercisable 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. Under the stock option agreements evidencing
the options, upon a "change of 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
us to purchase his outstanding options for cash at an 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 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 our 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 4.76%; (b) stock
price volatility of 28.15% (based on 36-month stock price history
ending January 30, 1999); and (c) a current dividend yield of 2.15%.
</TABLE>
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<PAGE>
Set forth below is certain information about the cash values realized by
named executive officers who exercised stock options during 1999 and the number
and value of unexercised stock options held by named executive officers as of
the end of 1999.
<TABLE>
1999 Year-End Value Table
<CAPTION>
Number of Number of Shares Value of Unexercised
Shares Underlying Options at End of In-the-Money Options at End
Acquired Upon Value Fiscal 1999 Of Fiscal 1999 (2)
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
James H. Dickelman 27,000 $ 278,910 159,000 90,000 $ 700,020 $ 46,200
Michael R. Houser 31,650 $ 316,451 51,600 36,000 $ 179,760 $ 18,480
John H. Dahly 51,450 $ 482,951 36,000 36,000 $ 77,460 $ 18,480
William K. Jacobson 21,600 $ 215,802 36,900 27,000 $ 125,970 $ 13,860
Thomas J. Timler -- -- 34,300 20,900 $ 143,464 $ 10,472
- - --------------------------
(1) The dollar value reflects the difference between the fair market value
of the underlying shares at the time of exercise and the applicable
exercise price of the options exercised.
(2) The dollar values reflect the difference between the fair market value
of the underlying shares of common stock at the end of fiscal 1999 and
the various applicable exercise prices of the named executive officers'
outstanding options. The dollar values do not reflect any options that
had an exercise price in excess of the fair market value of the
underlying shares at the end of fiscal 1999. The fair market value at
the end of fiscal 1999 was $12.75, the closing sale price per share on
December 31, 1999, the last trading day of the fiscal year.
</TABLE>
Director Compensation
Our directors who are also our employees receive no additional compensation
for serving on the board. We compensate our non-employee directors - other than
those whom we pay professional fees - by paying:
o an annual cash retainer of $6,000;
o $1,000 for each attended board meeting and $500 for each attended
committee meeting not held in conjunction with a board meeting;
and
o an annual grant of unregistered shares of the our common stock
with a value of $6,000, taking into account a 10% discount for
restrictions on transfer under securities laws.
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<PAGE>
Severance and Change of Control Arrangements
We have severance agreements with James H. Dickelman, Michael R. Houser,
John H. Dahly and William K. Jacobson that provide that, following a "change of
control" of the company (as defined in the severance agreements), such executive
officer will be employed:
o for three years in the same position;
o performing equivalent duties; and
o at the same location as immediately prior to the change of
control.
During the employment period, each such officer would be entitled to:
o receive a salary equal to his compensation rate in effect at the
date of the change of control - subject to increase by the board
of directors' compensation committee; and
o inclusion in benefit plans available to employees of comparable
status.
If the officer elects to terminate his employment within one year after the
change of control or if, at any time during the employment period, the officer's
employment is terminated other than for "cause" as defined in the severance
agreements - or the officer's disability, or if the officer's duties are changed
substantially without his written consent and the officer terminates his
employment as a result, the officer would be entitled to receive:
o a lump sum payment equal to the officer's base salary for the
greater of the remainder of the employment period or one year;
o the actuarially determined present value of the benefit accruals
that would have been made through the end of the employment
period under our retirement plans applicable to the officer; and
o along with his eligible dependents, coverage under medical
benefit plans through the end of the employment period.
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<PAGE>
Additionally, upon a "change of control" of the company:
o stock options granted to the named executive officers will have
become fully exercisable; and
o the optionee will then have the right to require the company to
purchase his outstanding options for cash at an aggregate
"acceleration price" for all shares of common stock subject to
such options.
Compensation Committee and Stock Option Committee Interlocks and Insider
Participation
Steven R. Barth, a member of our compensation committee, is a partner in
the law firm of Foley & Lardner, which has provided legal services to Schultz
Sav-O Stores for over 40 years.
STOCK PERFORMANCE INFORMATION
The line graph appearing on the next page compares the total return on our
common stock during the last five years with the total return of:
o companies in the Wilshire 5000 Index; and
o companies in a peer group of food retailers and wholesalers which
includes: Arden Group, Inc., Delchamps, Inc., Marsh Supermarkets, Inc., Nash
Finch Co., RichFood Holdings, Inc., and Seaway Food Town, Inc. We have selected
this peer group in good faith, and the shareholder returns of each of the
companies have been weighted, based on each company's relative market
capitalization as of the beginning of each period. The following graph only
reflects the performance of Delchamps, Inc. until November 1997, when Delchamps
was acquired by Jitney Jungle Stores of America, Inc., and of RichFood Holdings,
Inc. until August 1999, when RichFood Holdings was acquired by SUPERVALU Inc.
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<PAGE>
Comparison of Five-Year Total Shareholder Returns
(on a dividend reinvested basis)
[GRAPHIC OMITTED]
12/31/94 12/30/95 12/28/96 1/3/98 1/2/99 1/1/00
Company Index $ 100 $ 154 $ 150 $ 256 $ 276 $ 217
Wilshire 5000 Index $ 100 $ 136 $ 165 $ 217 $ 268 $ 331
Peer Group Index $ 100 $ 146 $ 184 $ 223 $ 186 $ 125
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<PAGE>
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
AND OTHER MATTERS
Our Independent Public Accountants
Our board has reappointed Arthur Andersen LLP to serve as our independent
public accountants for 2000. Arthur Andersen has served as our independent
public accountants for many years. We expect that representatives of Arthur
Andersen will be at the annual meeting and will have a chance to make a
statement if they would like to do so. They will also be available to respond to
your questions. James H. Dickelman and John H. Dahly, as proxies, intend to vote
for ratification of the board of directors' reappointment of Arthur Andersen as
our independent public accountants for 2000.
Our board of directors recommends a vote for ratification of its selection
of Arthur Andersen LLP as our independent public accountants for 2000.
Miscellaneous
We expect that the election of directors and ratification of our selection
of 2000 independent public accountants to be the only matters that will be
presented for shareholder consideration at the annual meeting. Other matters may
properly come before the annual meeting and the proxies named in the
accompanying proxy will vote on them in accordance with their best judgment.
We will bear the cost of soliciting proxies. We expect to solicit proxies
mainly by mail. Some of our employees may also solicit proxies personally and by
telephone. We do not anticipate that we will retain anyone to solicit proxies or
that we will pay compensation to anyone for that purpose. We will, however,
reimburse brokers and other nominees for their reasonable expenses in
communicating with the persons for whom they hold common stock.
If you would like to receive a copy of our 1999 annual report on Form 10-K
- - - without exhibits please write to our Secretary at 2215 Union Avenue,
Sheboygan, Wisconsin 53081, and we will provide you with a copy free of charge.
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<PAGE>
If you wish to include a proposal in our proxy statement for the 2001
annual meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
you should forward your proposal to our Secretary by December 3, 2000. If you
submit a proposal other than pursuant to Rule 14a-8 less than 45 days in advance
of the 2001 meeting, your proposal will be considered untimely under our by-laws
and we will not be required to present your proposal at the 2001 annual meeting.
If the board chooses to present your proposal despite its untimeliness, the
people named in the proxies solicited by the board of directors for the 2001
annual meeting will have the right to exercise discretionary voting power with
respect to your proposal.
SCHULTZ SAV-O STORES, INC.
John H. Dahly
Executive Vice President,
Chief Financial Officer and Secretary
Sheboygan, Wisconsin
March 30, 2000
