<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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ShopKo 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>
Preliminary Copies
------------------
[LOGO]
SHOPKO STORES, INC.
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1998
TO THE SHAREHOLDERS OF SHOPKO STORES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of ShopKo
Stores, Inc. (the "Company") will be held on Wednesday, May 13, 1998 at 10:00
a.m., local time, at the Best Western Midway Hotel, 780 Packer Drive, Green Bay,
Wisconsin, for the following purposes:
1) To elect three directors to serve for three-year terms;
2) To vote upon a proposal to change the Company's state of incorporation
from Minnesota to Wisconsin by approval and adoption of an Agreement
and Plan of Merger, pursuant to which the Company will merge into a
newly formed Wisconsin corporation, which is a wholly owned subsidiary
of the Company;
3) To vote upon a proposal to adopt the Company's 1998 Stock Incentive
Plan;
4) To ratify the appointment of Deloitte & Touche LLP to audit the
financial statements of the Company for the fiscal year ending January
30, 1999; and
5) To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 20, 1998 are
entitled to one vote for each share held of record at that time.
IMPORTANT: We hope you will be able to attend the meeting in person and you
are cordially invited to attend. If you expect to attend the meeting, please
check the appropriate box on the proxy card when you return your proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND RETURN
YOUR PROXY PROMPTLY. It is important that all shareholders execute, date and
return the proxy, utilizing the enclosed envelope to which no postage need be
affixed if mailed in the United States.
BY ORDER OF THE BOARD OF DIRECTORS
Richard D. Schepp
Secretary
March 31, 1998
<PAGE>
Preliminary Copies
------------------
SHOPKO STORES, INC.
700 PILGRIM WAY
P.O. BOX 19060
GREEN BAY, WISCONSIN 54307-9060
PROXY STATEMENT
This proxy statement is furnished for solicitation by the Board of
Directors of ShopKo Stores, Inc. (the "Company") of proxies in the enclosed form
from holders of Common Stock to be voted at the Annual Meeting of Shareholders
("Annual Meeting") to be held on May 13, 1998 at 10:00 a.m., Green Bay time, at
the Best Western Midway Hotel, 780 Packer Drive, Green Bay, Wisconsin, and at
any adjournment of that meeting.
A shareholder may revoke his or her proxy at any time before it is voted by
written notice to the Secretary, or by filing with the Secretary another proxy
bearing a later date, or by appearing and voting at the meeting. All proxies
which are not so revoked will be voted in accordance with the terms thereof.
Unless otherwise indicated, all proxies will be voted for the individuals
nominated to serve as directors, for approval of the proposal to change the
Company's state of incorporation from Minnesota to Wisconsin, for approval of
the 1998 Stock Incentive Plan, and for ratification of the appointment of the
independent auditors. The Board knows of no other matters to be presented for
shareholder action at the Annual Meeting. If any other matters properly come
before the Annual Meeting, or if any of the persons named to serve as directors
or as auditors should decline or be unable to serve, the persons named in the
proxy will vote on the same in their discretion.
This proxy statement and accompanying form of proxy will be first mailed or
given to shareholders on or about March 31, 1998.
The Company's Common Stock, $0.01 par value ("Common Stock"), is the only
class of capital stock currently outstanding, and only the holders of Common
Stock of record at the close of business on March 20, 1998 (the "Record Date")
are entitled to vote at the meeting. Each shareholder is entitled to one vote
for each share held of record on each proposal being voted upon. As of the
Record Date, __________ shares of Common Stock are eligible to vote at the
meeting. A majority of the shares entitled to vote constitutes a quorum. Any
shares abstaining as to any matter will be considered present and entitled to
vote, but will not be considered to have voted in favor of such matter. Any
shares represented by a proxy which does not grant authority to vote as to any
matters (including broker non-votes), shall not be considered to be present and
entitled to vote with respect to such matters.
1
<PAGE>
ITEM 1
ELECTION OF DIRECTORS
On July 2, 1997, the Company's Board of Directors (the "Board") was
expanded from five members to seven members, and Stephen E. Watson and William
J. Podany were elected to fill the two new Board seats for terms expiring at the
1997 Annual Meeting of Shareholders. Both were re-elected at such Annual
Meeting. Mr. Podany was elected to serve for a term expiring at the 1999 Annual
Meeting of Shareholders. Mr. Watson was elected to serve for a term expiring at
the 2000 Annual Meeting of Shareholders.
On April 24, 1997, the Company entered into a Stock Buyback and Secondary
Offering Agreement (the "Stock Buyback Agreement") with Supervalu, Inc.
("Supervalu") and one of Supervalu's wholly owned subsidiaries, pursuant to
which the Company agreed to repurchase 8,174,387 shares of Common Stock from
Supervalu for $18.35 per share (the "Stock Buyback"). The obligation of the
Company and Supervalu to consummate the Stock Buyback was conditioned upon
completion of a secondary public offering of Supervalu's remaining 6,557,280
shares of Common Stock (the "Offering"). Both the Stock Buyback and the Offering
were consummated on July 2, 1997. Pursuant to the terms of the Stock Buyback
Agreement, Michael W. Wright and Jeffrey C. Girard, who were executive officers
of Supervalu, submitted their resignations from the Board. In July, 1997, prior
to the effectiveness of his resignation from the Board, Mr. Girard resigned from
his position with Supervalu. He has agreed to continue to serve on the Company's
Board, subject to his re-election at the Annual Meeting. Mr. Wright's
resignation from the Board became effective on August 13, 1997. Also pursuant to
the terms of the Stock Buyback Agreement, Mr. Wright resigned as the Company's
Chairman of the Board, effective upon the closing of the Stock Buyback and the
Offering. Mr. Kramer was elected Chairman of the Board on July 2, 1997.
On August 20, 1997, the Company announced the addition of Dr. James L.
Reinertsen, M.D. to the Board.
Pursuant to the Company's Articles of Incorporation, the Board is divided
into three classes, with the number of directors divided as equally as possible
among the three classes. Directors are elected for staggered terms of three
years. Messrs. Girard, Kramer and Reinertsen are nominated to serve three-year
terms expiring at the 2001 Annual Meeting of Shareholders.
Vote Requirement to Elect Nominees;
Board Recommendation
The affirmative vote of a majority of the shares represented at the Annual
Meeting is required for the election of directors. The Board recommends a vote
FOR these nominees. In the absence of instructions to the contrary, the persons
named in the accompanying proxy will vote for the election of these nominees.
The Board is informed that Messrs. Girard, Kramer and Reinertsen are willing to
serve as directors, however, if they are unable to serve or for good cause will
not serve, the proxy may be voted for such other person or persons as the
proxies shall, in their discretion, determine.
2
<PAGE>
Set forth below is certain information, as of January 31, 1998, concerning
each nominee for election as a director of the Company and the four directors of
the Company whose terms of office will continue after the Annual Meeting:
Nominees for Election as
Directors for Terms Expiring at the
Annual Meeting in 2001
----------------------
Jeffrey C. Girard; 50; director of the Company since June 1991; President of
Girard & Co. of Minneapolis, Minnesota, a private consulting company, and
an Adjunct Professor at the Carlson School of Management, University of
Minnesota; Executive Vice President and Chief Financial Officer of
Supervalu from October, 1992 to July, 1997; prior thereto, he held the
positions of Executive Vice President, Chief Financial Officer and
Treasurer of Supermarkets General Holdings Corporation (a supermarket
company not affiliated with the Company) and Senior Vice President and
Chief Financial Officer of Supervalu.
Dale P. Kramer; 58; director of the Company since August 1991; Chairman of the
Board since July, 1997; President and Chief Executive Officer of the
Company since February 1991; prior thereto, he served as the Company's
Executive Vice President from April 1983 to February 1986 and as its
Executive Vice President and Chief Operating Officer from February 1986 to
February 1991. Mr. Kramer has been employed by the Company in various other
positions since 1971.
James L. Reinertsen, M.D., 50; has been a director of ShopKo since August, 1997.
He has held several executive positions with HealthSystem Minnesota, a
private provider of health care services, since 1993, including the office
of Chief Executive Officer since 1994. He was Chairman of the Institute for
Clinical Systems Integration in 1993. He was President and Chief Executive
Officer for Park Nicollet Medical Center from 1986 to 1992, and President
of the Park Nicollet Medical Foundation from 1984 to 1986.
Directors Whose Terms Expire at
the Annual Meeting in 2000
-------------------------------
Jack W. Eugster; 52; director of the Company since September, 1991; he has been
the Chairman, President and Chief Executive Officer of Musicland Stores
Corporation, a retail music and home video company, since 1986. Mr. Eugster is
also a director of Damark International, Inc., MidAmerican Energy Company,
Donaldson Company, Inc., and Jostens, Inc.
Stephen E. Watson; 53; director of the Company since July, 1997; President,
Chief Executive Officer of Gander Mountain, L.L.C., a private specialty
retailer of outdoor recreational equipment and clothing, since November, 1997;
he held various executive officer positions with Dayton-
3
<PAGE>
Hudson Corporation and its corporate predecessors from 1972 until his
retirement in March, 1996, including President, Chairman/Chief Executive
Officer of the Department Store Division and member of the Board of Directors
from 1991 until March, 1996.
Directors Whose Terms Expire
at the Annual Meeting in 1999
-----------------------------
William J. Tyrrell; 67; director of the Company since March 1974; Vice Chairman
of the Board from August 1991 until August, 1997, and previously served as
the President of the Company from March 1973 to February 1991 and Chairman
of the Company from February 1991 to August 1991.
William J. Podany; 51; director of the Company since July, 1997; Executive Vice
President of the Company since November, 1994; President, Chief Operating
Officer of the Company's retail stores division since November, 1997. From
1992 to 1994, Mr. Podany was Executive Vice President-Merchandise of Carter
Hawley Hale, a federation of four department store chains. He has held
senior merchandising executive officer positions with Allied Stores, May
Department Stores and Carter Hawley Hale since 1978.
Board of Directors Meetings and Committees
The Board held nine meetings in the fiscal year ended January 31, 1998.
Each incumbent director attended 75 percent or more of the meetings of the Board
and the committees on which they served.
The Board has two standing committees: the Compensation and Stock Option
Committee and the Audit Committee. The Board does not have a standing nominating
committee.
The Compensation and Stock Option Committee is currently comprised of
Messrs. Eugster (Chairman) and Watson. Prior to August 19, 1997, the
Compensation and Stock Option Committee was comprised of Messrs. Eugster
(Chairman) and Wright. The duties of the Compensation and Stock Option Committee
are to provide a general review of the Company's compensation and benefit plans
to ensure that they meet corporate objectives. The Compensation and Stock Option
Committee has the authority to administer the Company's employee stock option
and stock incentive plans. In addition, the Compensation and Stock Option
Committee reviews the President's recommendations on (i) compensation of all
corporate officers, (ii) granting of awards under the Company's compensation and
benefit plans and (iii) adopting and changing major corporate compensation
policies and practices, and reports its recommendations to the full Board of
Directors for approval and to authorize action. The Compensation and Stock
Option Committee met three times in the fiscal year ended January 31, 1998.
4
<PAGE>
The Audit Committee is currently comprised of Mr. Girard. Prior to August
14, 1997, the Audit Committee was comprised of Mr. Eugster. The duties of the
Audit Committee are to recommend to the full Board the selection of independent
certified public accountants to audit annually the financial statements of the
Company, to review the activities and the reports of the independent certified
public accountants and to report the results of such review to the full Board.
The Audit Committee also monitors the internal audit controls of the Company.
The Audit Committee met three times in the fiscal year ended January 31, 1998.
Director Compensation
Each director who is not an employee of the Company receives an annual
retainer fee of $25,000, a fee of $1,000 for each board meeting attended and a
fee of $1,000 for each committee meeting if such committee meeting is not held
on the same day as a board meeting. Non-employee chairpersons of the Board's
committees receive an additional $2,000 annual retainer fee. The Company
reimburses all non-employee directors for travel and related expenses incurred
in connection with Board and committee meetings.
The Company's 1991 Stock Option Plan ("1991 Plan") and 1995 Stock Option
Plan, as amended ("1995 Plan") provide that each non-employee director will be
granted as of the date of such director's first election to the Board, an option
to purchase that number of shares of Common Stock having a fair market value as
of such date equal to $50,000, which will be exercisable 60 percent on the
second anniversary of the date of grant and an additional 20 percent on the
third and fourth anniversary of the date of grant. Pursuant to these provisions,
on July 2, 1997 Mr. Watson was granted options to purchase 1,942 shares of
Common Stock at $25.75 per share and on August 20, 1997, Dr. Reinertsen was
granted options to purchase 1,840 shares of Common Stock at $27.1875 per share.
The 1991 Plan and the 1995 Plan provide that in addition to the above-
referenced initial stock option grants, each non-employee director will be
granted as of the date of each annual meeting of the Company's shareholders held
during the term of such Plans, if such director's term of office continues after
such annual meeting, an option to purchase that number of shares of Common Stock
having a fair market value as of such date equal to $15,000, which shall become
exercisable in full on the second anniversary of the date of grant. On August
13, 1997, Messrs. Watson, Tyrrell and Eugster were each granted options to
purchase 523 shares of Common Stock at $28.6875 per share pursuant to these
provisions.
On January 14, 1998, the Board of Directors approved and adopted the 1998
Stock Incentive Plan, (the "1998 Plan"), subject to shareholder approval. The
1998 Plan authorizes various stock incentive awards to non-employee directors.
These provisions are described in detail below under Item 3. Upon approval of
the 1998 Plan by the Company's shareholders, no further stock option grants will
be made to non-employee directors pursuant to the 1991 Plan or the 1995 Plan
including the grants which would otherwise have been made on the date of the
1998 Annual Meeting.
The Company has adopted a deferred compensation plan for non-employee
directors that allows non-employee directors to elect to defer for the next four
years their annual retainers and other
5
<PAGE>
fees. This Plan provides that (i) the participating director must defer 100
percent (minus applicable tax withholding and social security tax) of the
director's fees under the Plan; (ii) amounts deferred under the Plan will, at
the election of the participating director, earn interest either at a rate equal
to 120 percent of the 120-month rolling average of 10-year U.S. Treasury Notes
or at a rate equal to the rate earned under one or more equity portfolios
described in the Plan; and (iii) amounts deferred under the Plan will be payable
in ten equal annual installments commencing upon the earlier of the
participating director's termination as a director for any reason (including
death) or the participating director's reaching age 70 1/2 (extended for up to
five years for a director's initial deferral under the Plan). As of January 31,
1998, no current non-employee directors have elected to participate in this
Plan.
6
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Set forth in the table below is information regarding the beneficial ownership
of shares of the Common Stock by (i) each person or entity known by the Company
to beneficially own 5 percent or more of the total number of outstanding shares
of the Common Stock, (ii) each director of the Company, (iii) the Company's
Chief Executive Officer and four most highly compensated executive officers
other than the Chief Executive Officer, and (iv) the directors and executive
officers of the Company as a group (18 persons). Except as otherwise noted,
information with respect to directors and executive officers is as of January
31, 1998.
<TABLE>
<CAPTION>
Amount and Nature
Name of of Beneficial
Beneficial Owner Ownership(1)(2) Percent
---------------- ----------------- --------
<S> <C> <C>
Boston Partners Asset Management, L.P. (3).... 2,608,594 10.__%
One Financial Center
43rd Floor
Boston, Massachusetts 02111
Palisade Capital Management, L.L.C. (4)....... 1,622,000 6.__%
One Bridge Plaza
Suite 695
Fort Lee, New Jersey 07024
Heartland Advisors, Inc. (5).................. 1,334,000 5.__%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Dale P. Kramer (6), (7)....................... 264,000 1.__%
Jack W. Eugster............................... 17,429 *
Jeffrey C. Girard (8)......................... 1,000 *
Stephen E. Watson............................. -- *
William J. Tyrrell............................ 16,429 *
James L. Reinertsen........................... -- *
William J. Podany (7), (9).................... 70,000 *
Roger J. Chustz (7)........................... 3,000 *
Jeffrey A. Jones (7).......................... 13,000 *
Michael J. Hopkins (7)........................ -- *
All directors and executive officers
as a group (18 persons)....................... 409,318 1.__%
- -----------------------
*Less than 1%
</TABLE>
(1) Except as otherwise noted, the persons named in the above table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) Includes shares which may be acquired within 60 days pursuant to stock
options as follows: Mr. Kramer 174,000 shares, Mr. Podany 45,000 shares,
Mr. Chustz 3,000 shares, Mr. Eugster 16,429 shares, Mr. Tyrrell 16,429
shares, Mr. Jones 13,000 shares and all directors and executive officers as
a group, 289,918 shares.
(3) Based on Amendment No. 1 to Schedule 13G filed on February 13, 1998.
According to this filing, Boston Partners Asset Management, L.P. has shared
voting power and shared dispositive power with respect to all 2,608,594
shares.
(4) Based on Amendment No. 1 to Schedule 13G filed on February 2, 1998.
7
<PAGE>
(5) Based on Amendment No. 1 to Schedule 13G filed on February 6, 1998.
According to this filing, Heartland Advisors, Inc. has sole voting power
with respect to 1,279,800 shares and sole dispositive power with respect to
1,334,000 shares.
(6) Includes 50,000 shares of restricted stock granted pursuant to the
Company's 1993 Restricted Stock Plan, as amended.
(7) The number of shares shown with respect to the Company's executive officers
does not reflect funds from their respective Profit Sharing and 401(k)
Plans invested in Common Stock through the ShopKo Stock Fund. As of January
30, 1998, such executive officers' approximate ShopKo Stock Fund account
balances were as follows: Mr. Kramer $290,278, Mr. Podany $29,434, Mr.
Jones $616, Mr. Chustz $43,350 and Mr. Hopkins $20,658.
(8) Mr. Girard is a former executive officer of Supervalu. Prior to July 2,
1997, Supervalu and a wholly-owned subsidiary of Supervalu, Supermarket
Operators of America, Inc. ("SOA") beneficially owned 14,731,667 shares of
the Common Stock. These shares were the subject of the Stock Buyback and
Offering described herein. See, "Relationship Between the Company and
Supervalu."
(9) Includes 25,000 shares of restricted stock granted pursuant to the
Company's 1993 Restricted Stock Plan, as Amended.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Based solely upon the Company's review of Forms 3, 4 and 5 received by it
during the last fiscal year pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended, all of such forms were filed on a timely basis by
reporting persons.
8
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table (the "Summary Compensation Table") sets forth the
compensation paid by the Company for each of the last three fiscal years to the
Company's Chief Executive Officer and its other four most highly compensated
executive officers:
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
---------------------------------------- ----------------------
Other Annual Securities All Other
Name and Principal Compensation Restricted Stock Underlying Compensation
Position Year (1) Salary ($) Bonus ($) (2) ($) (3) Awards ($) Options/SARs(#) ($)(4)
-------- -------- ---------- ------------- ------------ ---------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dale P. Kramer 1998 592,308 720,000 699 245,625 (5) 100,000 452,393 (7)
Chairman of the Board, 1997 500,000 500,000 5,721 595,000 (6) 0 22,332
President & CEO 1996 430,000 174,150 1,131 - 100,000 20,336
William J. Podany 1998 492,308 500,000 2 - 70,000 233,923 (8)
Executive Vice President 1997 390,793 312,635 2,750 371,875 (6) 0 47,445
President, COO of 1996 340,000 121,569 - - 50,000 15,391
Retail Stores Division
Jeffrey A. Jones 1998 321,923 325,000 14 - 10,000 150,431 (9)
Sr. Vice President 1997 285,000 228,000 15 - 0 12,537
& CFO; Executive 1996 285,000 93,641 15 - 45,000 9,212
Vice President of
ProVantage, Inc.
Roger J. Chustz 1998 243,077 171,500 9 - 40,000 143,044 (10)
Sr. Vice President 1997 220,000 154,000 10 - 0 11,359
GMM/Apparel 1996 202,215 63,698 10 - 30,000 10,582
Michael J. Hopkins 1998 224,000 158,200 200 - 40,000 138,338 (11)
Sr. Vice President 1997 199,231 25,644 - 0 11,334 (12)
GMM/Home 1996(13) 28,500 - - - 0 -
</TABLE>
(1) Refers to fiscal years ended on the following dates: 1996, February 24,
1996; 1997, February 22, 1997; and 1998, January 31, 1998.
(2) Represents bonuses earned with respect to the indicated fiscal year
pursuant to the Company's Executive Incentive Plan, although all or a
portion of the bonus may have been paid during the subsequent fiscal year.
(3) Represents above market interest earned under the Company's Deferred
Compensation Plan.
(4) All Other Compensation for the listed individuals includes one or more of
the following: Company-paid portion of individual life insurance policies;
401(k) Company match; Profit Sharing Plan contributions; Relocation
expenses and tax adjustments in connection therewith; and a Retention
Bonus, as described below in the Compensation and Stock Option Committee
Report.
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<PAGE>
(5) On November 12, 1997, Mr. Kramer was granted 10,000 shares of restricted
stock pursuant to the Company's 1993 Restricted Stock Plan, as amended
("1993 Restricted Stock Plan"). The dollar amount shown equals the number
of restricted shares granted, multiplied by $24.5625, the per-share closing
price of the Company's Common Stock on the date of grant. These valuations
do not take into account the diminution in value attributable to the
restrictions applicable to the shares. These restricted shares vest in
full on November 12, 1999. Pursuant to the 1993 Restricted Stock Plan,
dividends are paid on all shares of restricted stock at the same rate as on
unrestricted shares.
(6) On April 17, 1996, Mr. Kramer and Mr. Podany were granted 40,000 and 25,000
shares of restricted stock, respectively, pursuant to the 1993 Restricted
Stock Plan. The dollar amount shown equals the number of restricted shares
granted, multiplied by $14.875, the per-share closing price of the
Company's common stock on the date of grant. The dollar value of all
restricted stock held at January 31, 1998 based upon the per-share closing
price of $25.50 on January 30, 1998 is: Mr. Kramer, $1,275,000; and Mr.
Podany, $637,500. These valuations do not take into account the diminution
in value attributable to the restrictions applicable to the shares. Mr.
Podany's shares vest in full on April 17, 2001. Mr. Kramer's shares vest
upon the achievement of a targeted fair market value of ProVantage, Inc.
and its subsidiaries. Pursuant to the 1993 Restricted Stock Plan,
dividends are paid on all shares of restricted stock at the same rate as on
unrestricted shares.
(7) All Other Compensation for Mr. Kramer includes the following: Company paid
portion of individual life insurance policy: $3,288; 401(k) Company match:
$4,750; Profit Sharing Plan contributions: $42,569; and Retention Bonus:
$401,786.
(8) All Other Compensation for Mr. Podany includes the following: Company paid
portion of individual life insurance policy: $1,311; 401(k) Company match:
$4,750; Profit Sharing Plan contributions: $23,098; relocation expenses and
tax adjustments in connection therewith: $3,871; and Retention Bonus:
$200,893.
(9) All Other Compensation for Mr. Jones includes the following: Company paid
portion of individual life insurance policy: $1,802; 401(k) Company match:
$5,927; Profit Sharing Plan contributions: $22,166; and Retention Bonus:
$120,536.
(10) All Other Compensation for Mr. Chustz includes the following: Company paid
portion of individual life insurance policy: $1,004; 401(k) Company match:
$5,484; Profit Sharing Plan contributions: $16,020; and Retention Bonus:
$120,536.
(11) All Other Compensation for Mr. Hopkins in Fiscal Year 1998 includes the
following: Company paid portion of individual life insurance policy:
$1,004; 401(k) Company match: $4,776; Profit Sharing Plan contributions:
$7,530; relocation expenses and tax adjustments in connection therewith:
$4,492 and Retention Bonus: $120,536.
(12) All other compensation for Mr. Hopkins in Fiscal Year 1997 includes the
following: 401(k) Company match: $985; Profit Sharing Plan contributions:
$1,346; and relocation expenses and tax adjustments in connection
therewith: $9,003.
(13) Mr. Hopkins' employment with the Company commenced November 9, 1995.
10
<PAGE>
Option Grants Table
The following table sets forth information about stock option grants during
the fiscal year ended January 31, 1998 to the five executive officers named in
the Summary Compensation Table.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
--------------------------------------------------------
Number of % of Total Potential Realizable Value
Securities Options/SARs at Assumed Annual Rates of
Underlying Granted to Exercise or Stock Price Appreciation
Options/SARs Employees in Base Price Expiration For Option Term
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ------------ ------------ ---------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Dale P. Kramer (3) 100,000 (1) 8.10 20.00 4-29-07 1,258,000 3,187,000
William J. Podany (4) 50,000 (1) 4.05 20.00 4-29-07 629,000 1,593,500
20,000 (2) 1.62 24.5625 11-12-07 309,000 782,950
Jeffrey A. Jones (5) 30,000 (1) 2.43 20.00 4-29-07 377,400 956,100
30,000 (2) 2.43 25.75 7-02-07 485,700 1,231,200
20,000 (2) 1.62 24.5625 11-12-07 309,000 782,950
Roger J. Chustz (6) 30,000 (1) 2.43 20.00 4-29-07 377,400 956,100
10,000 (2) 0.81 24.5625 11-12-07 154,500 391,475
Michael J. Hopkins (7) 30,000 (1) 2.43 20.00 4-29-07 377,400 956,100
10,000 (2) 0.81 24.5625 11-12-07 154,500 391,475
</TABLE>
(1) These stock options vest and become exercisable on the second anniversary
of the date of grant. All stock options vest immediately upon a "Change of
Control", as defined in the Company's stock option plans.
(2) Forty percent (40%) of these stock options vest and become exercisable on
the second anniversary of the date of grant, with an additional twenty
percent (20%) of the options vesting and becoming exercisable on each
successive anniversary of the date of grant. All stock options vest
immediately upon a "Change of Control", as defined in the Company's stock
option plans.
(3) On April 25, 1997, Mr. Kramer canceled and surrendered performance vested
options to purchase 100,000 shares of Common Stock.
(4) On April 25, 1997, Mr. Podany canceled and surrendered performance vested
options to purchase 50,000 shares of Common Stock.
(5) On April 25, 1997, Mr. Jones canceled and surrendered performance vested
options to purchase 30,000 shares of Common Stock.
(6) On April 25, 1997, Mr. Chustz canceled and surrendered performance vested
options to purchase 30,000 shares of Common Stock.
(7) On April 25, 1997, Mr. Hopkins canceled and surrendered performance vested
options to purchase 30,000 shares of Common Stock.
11
<PAGE>
Option Exercise and Fiscal Year End Value Table
The following table sets forth information with respect to the five
executive officers named in the Summary Compensation Table concerning stock
options exercised during the last fiscal year and the number and value of
options outstanding on January 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Year-End (#) Value of Unexercised In-the-Money
Options/SARs at Fiscal Year-End (#) Options/SARs at Fiscal Year-End ($)
----------------------------------- -----------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dale P. Kramer 0 0 174,000 106,000 1,925,880 637,720
William J. Podany 0 0 45,000 100,000 697,500 758,750
Jeffrey A. Jones 21,000 412,125 13,000 96,000 196,125 424,125
Roger J. Chustz 35,000 437,576 3,000 51,000 43,860 302,235
Michael J. Hopkins 0 0 0 40,000 0 174,375
</TABLE>
Indemnification of Directors and Officers
The Company's Bylaws provide for the indemnification of directors and
officers of the Company to the full extent permitted by the Minnesota Statutes.
The Company has entered into agreements to indemnify its directors, and may
enter into agreements to indemnify certain officers, in addition to the
indemnification provided for in the Bylaws. These agreements will, among other
things, indemnify the Company's directors and certain of its officers to the
full extent permitted by the Minnesota Statutes for any claims, liabilities,
damages, judgments, penalties, fines, settlements, disbursements or expenses
(including attorneys' fees) incurred by such person in any action or proceeding,
including any action by or in the right of the Company, on account of services
as a director or officer of the Company. The Company believes that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and officers.
Severance Agreements
The Company has entered into change of control severance agreements (the
"Severance Agreements") with certain officers of the Company, including those
officers identified in the Summary Compensation Table above. The Severance
Agreements provide that, if, within two years after a "Change of Control" (as
defined below), the Company terminates the individual's employment other than
for "Cause" (as defined below) or disability, or the individual terminates the
individual's employment for "Good Reason" (as defined below), then the
individual will be entitled to a lump-sum cash payment equal to (1) a multiple
of one, two or three times the individual's annual base salary, plus
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<PAGE>
(2) a multiple of one, two or three times the individual's average annual bonus
for the three fiscal years immediately preceding the date of termination. The
multiple referred to in this paragraph is three for Mr. Kramer and two for each
of Mr. Podany, Mr. Jones, Mr. Chustz and Mr. Hopkins. Each individual would
also receive his salary through the date of termination and all other amounts
owed to the individual at the date of termination under the Company's benefit
plans. In addition, under such circumstances, the individual will be entitled
to continued health and dental coverage for the individual and the individual's
family for a one, two or three year period after the date of termination. The
Severance Agreements provide that if certain amounts to be paid thereunder
constitute "parachute payments," as defined in Section 280(G) of the Internal
Revenue Code of 1986, as amended (the "Code"), the severance benefits owed to
the individual may be decreased, but only if the result is to give the
individual a larger after-tax benefit than if the payments are not reduced. The
individual is permitted to elect the payments to be reduced.
A "Change of Control" is defined as occurring if (1) any person or group
acquires 20 percent or more of the Company's outstanding common stock or voting
securities, (2) the incumbent directors cease to constitute at least a majority
of the Board of Directors, (3) the shareholders approve a merger, consolidation,
liquidation, dissolution or reorganization of the Company, or (4) the
shareholders approve a complete liquidation or dissolution of the Company. For
purposes of the Severance Agreements, "Cause" means (a) personal dishonesty by
the individual intended to result in his substantial personal enrichment at the
expense of the Company, (b) repeated, willful violations by the individual of
his obligation to devote reasonable time and efforts to carry out his
responsibilities to the Company, or (c) the conviction of the individual of a
felony. "Good Reason" as used in the Severance Agreements means (i) any
reduction of the individual's authority, responsibilities or compensation
(excluding for this purpose specified actions by the Company not taken in bad
faith and which are promptly remedied by the Company upon receipt of notice),
(ii) any required relocation of the individual to a place of business more than
35 miles from where the individual works at the time of the Change of Control,
(iii) any purported termination of the individual other than for Cause, or (iv)
any failure of a successor to the Company, by merger or otherwise, to assume the
Company's obligations under the Severance Agreements.
Other Compensation
The Company provides certain personal benefits and other noncash
compensation to its executive officers. For the fiscal year ended January 31,
1998, the incremental cost of providing such compensation did not exceed the
minimum amounts required to be disclosed under current Securities and Exchange
Commission rules for each person named in the Summary Compensation Table.
Compensation Committee Interlocks and Insider Participation
Prior to August 14, 1997, the Compensation and Stock Option Committee
consisted of Messrs. Wright and Eugster. From March 1978 to August 1991, Mr.
Wright was a Vice President of the Company. See also "Relationship between the
Company and Supervalu".
13
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
Executive Compensation Principles
The Company's Executive Compensation Program is designed to align executive
compensation with Company values and objectives, its business strategy and
financial performance. In applying these principles, the Compensation and Stock
Option Committee (the "Committee") believes the Executive Compensation Program
must:
. Attract and retain key executives critical to the long-term success of
the Company by providing compensation levels comparable to those
offered by other leading companies in the industry.
. Reward executives for long-term strategic management and achievement
of business objectives.
. Reward executives for the enhancement of shareholder value.
. Support a performance oriented environment that rewards achievement of
Company goals and Company performance compared to that of the
industry.
. Differentiate compensation amounts according to individual
performance.
Executive Compensation Program
The executive compensation program is comprised of both cash and equity based
compensation. The annual compensation consists of base salary and an annual
Executive Incentive Plan (the "EIP") payment. The Committee determines the
level of base salary for key executive officers. The Committee determines the
base salary based on competitive norms. These competitive norms are based on a
comprehensive retail study including companies having approximately 2 billion
dollars in annual sales and not on the more diverse peer retail group used for
purposes of the performance graph. This narrower focus is believed to be that
most appropriate in fixing salaries. Additionally, the Committee seeks to fix
such salaries in the medium range of those companies used for salary survey
data. In establishing the base salary levels, the Committee considers:
. Surveys of external comparable positions.
. Position matching validating responsibilities, organizational level
and title with external comparable positions in the industry.
. Compensation paid to comparable positions in comparably sized
companies based on sales revenues derived from industry surveys.
Of these three referenced factors, the Committee places the most emphasis on
surveys of external comparable positions. The Committee next weighs the
compensation paid comparable positions in comparably sized companies. Finally,
the Committee validates the information derived from the first two factors by
ensuring accurate position matching by evaluation of responsibilities,
organizational level and title.
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<PAGE>
The Committee also approves the participation of key executives in the EIP.
Awards for key executive officers vary based on the Company's achievement of
certain financial goals. As with base salary, the EIP is intended to be
competitive with bonuses paid by other retail companies having approximately 2
billion dollars in annual sales but, in the medium range.
An analysis of the survey group compensation level indicates that, as it relates
to base salary, the Company's executives, on an individual basis, receive
compensation comparable to the survey norm. Since the Company has not granted
stock options to its executives on an annual basis, the Company believes
comparisons of the Company's stock option grants to the survey are not
meaningful or appropriate.
Long-term incentives are currently provided primarily through grants of stock
options and restricted stock. Under the Company's 1991 Stock Option Plan and
1995 Stock Option Plan (the "Stock Option Plans"), the Committee has the
discretion to determine, among other things, the individuals to whom stock
options are awarded, the number of shares subject to each option, and whether
the stock options will be subject to performance criteria. In determining the
award of options, the Committee considers the number of outstanding stock
options held by each Stock Option Plan participant. This consideration is
applied consistently to all Stock Option Plan participants including executive
officers and the Chief Executive Officer. The size of stock option grants are
based upon competitive practice and position level. Stock option grants align
key executive officers' long-range interests with those of the shareholders by
providing the key executive officers with the opportunity to build a meaningful
stake in the Company. All eligible Stock Option Plan participants were granted
stock option awards in the fiscal year ended January 31, 1998. The Company
intends to issue additional stock options to all eligible Stock Option Plan
participants every two years.
Restricted stock granted pursuant to the Company's 1993 Restricted Stock Plan is
intended to encourage recipients to continue to serve the Company and its
shareholders. Although the recipient receives dividends at the same rate as may
be granted to owners of unrestricted shares, the restricted stock certificates
are not delivered and such shares may not be sold, transferred or pledged until
they vest.
Key executive officers also participate in the Company's Profit Sharing Plan,
which is funded entirely by Company contributions to such Plan. In this regard,
key executive officers are treated in the same manner as any other Profit
Sharing Plan participant. Committee approval is not required for participation
by key executives in the Profit Sharing Plan. Key executive officers may also
participate in the Company's 401(k) Plan which is available to any associate
meeting minimum length of service and number of hours worked standards. Under
the 401(k) Plan, the Company contributes one-half of an associate's personal
contribution up to a maximum of 3 percent of the associate's base earnings.
Also, key executive officers may elect to defer certain annual compensation.
Deferred amounts are accounted for as if invested in various accounts.
On occasion, the Committee may make adjustments to a particular executive's
compensation in any given year based on circumstances unique to such executive.
For example, such adjustments may recognize extraordinary efforts on a special
project, or the need to compensate special talents or expertise in order to
retain a key individual.
15
<PAGE>
The Committee may also award additional bonus payments to certain executives
when it determines that such an award is in the Company's and its shareholders'
best interest. For example, on April 29, 1997, the Committee authorized certain
retention bonus payments to be paid to key executives in quarterly installments
over a two year period, contingent upon such executives' continued employment
with the Company ("Retention Bonuses"). These Retention Bonuses are intended to
enable the Company to retain its key executives in an industry which has
experienced numerous business failures and significant consolidation.
Chief Executive Officer Compensation
The Committee determined the Chief Executive Officer's compensation for the
fiscal year ended January 31, 1998 based upon a number of factors and criteria.
The Chief Executive Officer's base salary was established based on: surveys of
external comparable positions; position-matching validating responsibilities,
organizational level and title with external comparable positions in the
industry; compensation paid to comparable positions in comparably sized
companies based on sales revenue derived from industry surveys; and Committee
review of the Chief Executive Officer's individual performance. Individual
performance is evaluated through regular ongoing personal contact with Committee
members. As with other executive officer salaries, comparison was based on a
comprehensive retail study including companies having approximately 2 billion
dollars in annual sales, as opposed to the more diverse peer group used in the
Performance Graph. It is noted that the base salary awarded falls well within
industry norms. The EIP award consideration was based on the Company's
achievement of certain financial goals which include after tax earnings. For
the fiscal year ended January 31, 1998, it was determined that an EIP payment
should be awarded to the President/Chief Executive Officer in an amount which
was 200 percent of his targeted EIP payment, or 120 percent of his base salary.
This determination was made in light of the Company's significantly improved
financial performance during the fiscal year.
The Committee also awarded the Chief Executive Officer 10,000 shares of
restricted stock, pursuant to the Company's 1993 Restricted Stock Plan. These
shares will become vested on November 12, 1999. The Committee also awarded the
Chief Executive Officer a Retention Bonus of $937,500, payable in quarterly
installments over two years. The primary basis for the Committee's
determination to grant such restricted stock and Retention Bonus was to provide
a strong incentive for him to continue to serve the Company as Chief Executive
Officer and to increase the value of the Company during the course of his
employment.
16
<PAGE>
The Committee is aware of the limitations imposed by Section 162(m) of the
Internal Revenue Code of 1986, as amended, on the deductibility of non-
performance based compensation paid to certain executive officers of the Company
to the extent it exceeds 1 million dollars per executive. The Committee
believes its primary goal is to design compensation strategies that further the
best interests of the Company and its shareholders. To the extent they are not
inconsistent with that goal, the Committee will attempt where practical to use
compensation policies and programs that preserve the deductibility of
compensation expenses.
Compensation and Stock Option Committee
Jack W. Eugster, Chairman
Stephen E. Watson
17
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
shareholder return on the Company's Common Stock for the last five fiscal years,
with the cumulative total return on the Wilshire 5000 and the cumulative total
return for the S & P Retail Composite Index selected as the Company's peer
group. The comparison assumes $100 was invested on February 26, 1996 in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
Corporate Performance Graph
Summary Of Plotted Points
<TABLE>
<CAPTION>
Year Year Year Year Year
Index at Ending Ending Ending Ending Ending
2/26/93 2/25/94 2/24/95 2/23/96 2/21/97 1/31/98
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ShopKo Stores, Inc.: 100 77 63 79 114 189
Wilshire 5000 Index: 100 110 116 156 191 239
S&P Retail Composite Index: 100 100 92 101 125 172
</TABLE>
18
<PAGE>
ITEM 2
PROPOSED REINCORPORATION IN WISCONSIN
General
The Board of Directors has approved a plan to reincorporate the Company in
Wisconsin (the "Reincorporation"). The Reincorporation involves changing the
Company's state of incorporation from Minnesota to Wisconsin through a merger of
the Company into a newly-formed Wisconsin subsidiary (the "Merger") pursuant to
the Agreement and Plan of Merger dated as of __________________, 1998 (the
"Merger Agreement"), a copy of which is attached hereto as Appendix A.
Following the Reincorporation, the surviving Wisconsin corporation will
continue to be named "ShopKo Stores, Inc." In addition, the Reincorporation
will not involve any change in the business, management, benefit plans, assets,
liabilities or net worth of the Company, and the Company's current headquarters
will remain in Wisconsin. Shareholders of the Company will automatically become
shareholders of the Wisconsin corporation on a share-for-share basis, and the
Wisconsin corporation's shares will continue to be listed on the New York Stock
Exchange under the same symbol (SKO). See "Terms and Effects of the Merger,"
below. Shareholders will not have to exchange their stock certificates. The
current certificates will represent stock in the Wisconsin corporation following
the Merger.
The Reincorporation has no material effects upon the shareholders, other
than those described below. See "Certain Material Differences Between the WBCL
and the MBCA."
Vote Required to Approve the Merger and the Reincorporation; Board
Recommendation
Under the Minnesota Business Corporation Act ("MBCA") and the Company's
Articles of Incorporation, the affirmative vote of a majority of the shares of
Company Common Stock eligible to vote is required for the adoption and approval
of the Merger Agreement and the Reincorporation. A vote for the proposal will
constitute specific approval of the Merger and the Merger Agreement and all
transactions and proceedings related to the Reincorporation described in this
proxy statement. The Board of Directors recommends a vote FOR approval of the
Reincorporation. Proxies solicited by the Board of Directors will, unless
otherwise directed, be voted in favor of the Merger Agreement and the
Reincorporation.
Principal Reasons for the Reincorporation
For many years the Company was a wholly-owned subsidiary of Supervalu Inc.
("Supervalu"). Supervalu is headquartered in Minneapolis, Minnesota, and the
Company was incorporated in Minnesota as a matter of convenience. In July of
1997, Supervalu completed the disposition of its Company Common Stock which had
started with the Company's initial public offering in 1991. After completion of
Supervalu's disposition of its interest in the Company, the Company undertook a
review of its corporate structure in light of the fact that it was now a
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<PAGE>
completely independent public company. This review resulted in a number of
changes including changing the Company's fiscal year to match the National
Retail Federation calendar and adding several new independent board members.
The Company also reviewed several alternatives concerning the Company's state of
incorporation. After a careful review of the alternatives, the Board of
Directors unanimously recommended reincorporating in Wisconsin for the following
reasons: 1) as a major employer in Wisconsin, the Company believes it will have
the ability to influence changes in the state's corporate law which would be
favorable to the Company, 2) the Reincorporation will conform the Company's
legal residence to its principal place of business, 3) Wisconsin has a modern
corporate statute, 4) the costs of being incorporated in Wisconsin are
comparable to those of being incorporated in Minnesota and significantly less
than those of being incorporated in Delaware, and 5) reincorporating in
Wisconsin conforms with the practice of many other large public companies based
in Wisconsin.
Terms and Effect of the Merger
In September 1997, the Board approved and adopted the Merger Agreement.
Upon shareholder approval of the Merger Agreement, the Reincorporation will
occur by merging the Company into New ShopKo, Inc., a Wisconsin corporation
recently organized as a wholly-owned subsidiary of the Company in order to
effectuate the Merger ("New ShopKo"). Upon consummation of the Merger, New
ShopKo will be the surviving corporation, and the Company will cease to exist.
New ShopKo's Articles of Incorporation and By-Laws will become the Articles of
Incorporation and By-Laws of the surviving corporation, except that New ShopKo's
name will be changed from "New ShopKo, Inc." to "ShopKo Stores, Inc." As a
result, following the Reincorporation, the surviving corporation will continue
to be named "ShopKo Stores, Inc."
The Reincorporation will not result in any change in the business,
management, benefit plans, assets, liabilities or net worth of the Company, and
the Company's current corporate headquarters will remain in Wisconsin. All of
the assets, liabilities, subsidiaries (other than New ShopKo) and other
properties of the Company, will, pursuant to the Merger Agreement, become the
assets, liabilities, subsidiaries and other properties of New ShopKo to the full
extent provided by law. At present, New ShopKo has only nominal assets. The
directors and officers of the Company will hold the same positions with New
ShopKo, and outstanding employee stock options will be automatically converted
into identical rights to purchase the same number of shares of New ShopKo Common
Stock, $0.01 par value per share ("New ShopKo Stock"). New ShopKo Stock will
continue to be listed on the New York Stock Exchange under the same symbol
(SKO). In management's judgment, no presently contemplated activities of the
Company will be either favorably or unfavorably affected in any material respect
by adoption of the Reincorporation proposal. Shareholders should consider,
however, that the corporation law of Wisconsin and the corporation law of
Minnesota differ in a number of significant respects, including differences
pertaining to the rights of shareholders, and should carefully review the
discussion of certain of these differences under "Certain Material Differences
Between the WBCL and the MBCA."
At the effective time of the Reincorporation (the "Effective Time"), which
is expected to be the day after the Annual Meeting, each outstanding share of
the Common Stock, $0.01 par value per share, of the Company ("Company Stock")
will be converted automatically into one share of New
20
<PAGE>
ShopKo Stock (other than shares as to which the holder thereof has properly
exercised dissenters' rights under the MBCA). As a result, shareholders will
continue to own the same pro rata interest in New ShopKo after the Merger as
they did in the Company before the Merger. It will not be necessary for the
shareholders of the Company to exchange their existing share certificates for
share certificates of New ShopKo Stock; outstanding certificates of the Company
should not be destroyed or sent to the Company. Following the Reincorporation,
delivery of previously outstanding share certificates of the Company will
constitute "good delivery" in connection with sales through a broker, or
otherwise, of shares of New ShopKo Stock. The Company currently has authority
to issue 95,000,000 shares of capital stock, of which 75,000,000 are designated
as Common Stock and 20,000,000 shares are designated as Preferred Stock. New
ShopKo, on or before the Effective Time, will have authority to issue exactly
the same number of shares of capital stock with the same designations.
The rights, powers and privileges of, and limitations on, the shareholders
of the Company are presently governed by the MBCA and by the terms and
provisions of the Restated Articles of Incorporation, as amended, and By-Laws of
the Company (the "Company's Articles" and the "Company's By-Laws,"
respectively). After the Reincorporation, the rights, powers and privileges of,
and limitations on, the shareholders of New ShopKo will be governed by the
Wisconsin Business Corporation Act (the "WBCL") and by the terms and provisions
of the Articles of Incorporation and By-Laws of New ShopKo ("New ShopKo's
Articles" and "New ShopKo's By-Laws," respectively). New ShopKo's Articles
(attached as Appendix B) and New ShopKo's By-Laws (attached as Appendix C) are
substantially similar, in all material respects, to the Company's Articles and
the Company's By-Laws except for changes prompted by the differences between the
WBCL and the MBCA, and except as otherwise described below. Copies of the
Company's Articles and the Company's By-Laws may be obtained without charge by
contacting Mr. Richard D. Schepp, Secretary, ShopKo Stores, Inc., 700 Pilgrim
Way, Green Bay, Wisconsin 54307-9060. On September 24, 1997 (the date of the
public announcement of the proposed Reincorporation), the high and low sales
prices of shares of the Company Stock were $27.25 and $27.00, respectively, as
reported on the New York Stock Exchange Composite Tape.
Terms of the Common Stock -- In General
Following the Reincorporation, many of the inherent rights of shareholders
of New ShopKo will be virtually identical to the existing rights of shareholders
of the Company. The foregoing descriptions, as well as the other descriptions
herein, are descriptions of the material similarities and differences in
shareholder rights resulting from the Reincorporation, but are only summaries
and are qualified in their entirety by reference to the actual provisions of the
Company's Articles, the Company's By-Laws, New ShopKo's Articles, New ShopKo's
By-Laws, the WBCL and the MBCA.
After the Reincorporation, record holders of New ShopKo Stock will be
entitled to one vote on all matters to be voted on by shareholders for each
share of New ShopKo Stock held. Voting rights will not be cumulative, and,
therefore, holders of a majority of the New ShopKo Stock will be able to elect
all of New ShopKo's directors. Holders of New ShopKo Stock will be entitled to
receive dividends when, as and if declared by the Board of Directors of New
ShopKo in its
21
<PAGE>
discretion out of funds legally available therefor. Subject to the rights of
any New ShopKo Preferred Stock, $0.01 par value ("New Preferred Stock"),
outstanding, the holders of New ShopKo Stock will be entitled to receive on a
pro rata basis all assets remaining for distribution to shareholders. The New
ShopKo Stock will not have preemptive or other subscription rights, any
conversion rights or any sinking fund provisions.
New ShopKo's Board of Directors will also be authorized, without further
shareholder action, to issue New Preferred Stock in one or more series and to
fix and determine the relative rights and preferences thereof, including voting
rights, dividend rights, liquidation rights, redemption provisions, sinking fund
provisions and/or conversion rights. Although there is no current intention to
do so, the Board of Directors of New ShopKo may, without shareholder approval,
issue New Preferred Stock with voting, dividend, liquidation and/or other rights
that could adversely affect the holders of New ShopKo Stock and that could have
the effect of delaying, deferring or preventing a change in control of New
ShopKo.
New ShopKo's Articles divide the Board of Directors of New ShopKo into
three classes serving staggered three-year terms. As a result, at least two
annual shareholders meetings will generally be required for shareholders to
effect a change of a majority of the Board of Directors of New ShopKo. Any
director, or the entire Board of Directors, of New ShopKo may be removed from
office only for cause. These provisions in New ShopKo's Articles require a 75
percent vote of shareholders for amendment or repeal.
New ShopKo's By-Laws establish procedures, including advance notice
procedures, for considering at any annual shareholders meeting the nomination,
other than by the Board of Directors, of candidates for election as directors,
and for other shareholder proposals. In general, notice must be received by New
ShopKo at least 120 days prior to the anniversary date of the annual meeting of
shareholders in the immediately preceding year and must contain certain
specified information concerning, among other things, any person nominated for
director, the shareholder submitting the proposal or nomination, and the
shareholder's interest in any proposal. The Board of Directors determined to
make these changes in the by-laws regardless of whether or not the Company
reincorporated in Wisconsin. These provisions in New ShopKo's By-Laws may be
amended by the Board of Directors or by a 75 percent vote of the shareholders.
Certain Material Differences Between the WBCL and the MBCA
Although it is impractical to note all of the differences between the
corporation laws of Wisconsin and Minnesota, summarized below are certain
material differences between the WBCL and the MBCA which could affect the rights
of shareholders. Certain of these differences could be considered to have an
"anti-takeover effect." See "Certain Anti-takeover Effects of the
Reincorporation," below.
Potential Statutory Shareholder Liability for Debts to Employees. The WBCL
provides that shareholders of Wisconsin domestic corporations are personally
liable, up to the par value of the shares ($0.01 per share in the case of the
New ShopKo Stock), for all debts owed by the corporation to employees for
services performed, but not exceeding six month's service in any one
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<PAGE>
case. While the WBCL specifies that such liability is limited to the par value
of the shares, "par value" has been interpreted by a Wisconsin trial court to
mean the consideration paid to the corporation for its shares. The decision was
affirmed by a split decision of the Wisconsin Supreme Court with one justice
abstaining. Although there is no similar provision under Minnesota law,
Wisconsin courts have held the predecessor of this provision of the WBCL to be
applicable to foreign corporations registered to do business in Wisconsin. As a
result, this provision may already be applicable to the Company.
Shareholder Action By Consent. Under the MBCA, any action which may be
taken by the shareholders at a meeting may be taken without a meeting only by
unanimous written consent of all shareholders entitled to vote on the action.
Under the WBCL, shareholders of a corporation may take action without a meeting
only by unanimous written consent action or, if a Wisconsin corporation so
elects in its articles of incorporation, by less than unanimous written consent.
New ShopKo's Articles do not provide for shareholder consent actions to be taken
by less than a unanimous written consent. Therefore, any shareholder action
taken after the Effective Time will continue to require a shareholders' meeting
or the consent of every shareholder of New ShopKo.
Amendment of Articles and By-Laws. Under the MBCA, the Company's Articles
generally can be amended if the proposed amendment is approved by the Board of
Directors and by holders of a majority of the shares of the Company Stock. The
Company's Articles require a supermajority vote to amend certain provisions
thereof, including the "Board of Directors," business combination and "Rights"
provisions. The MBCA provides that unless reserved by the articles to the
shareholders, the power to adopt, amend or repeal a corporation's by-laws is
vested in the board, subject to the power of the shareholders to adopt, amend or
repeal the by-laws. After adoption of initial by-laws, the board of directors
of a Minnesota corporation cannot adopt, amend or repeal a by-law fixing a
quorum for meetings of shareholders, prescribing procedures for removing
directors or filling vacancies on the board or fixing the number of directors or
their classifications, qualifications or terms of office, but may adopt or amend
a by-law to increase the number of directors.
Under the WBCL, New ShopKo's Articles can be amended if the shareholder
votes cast in favor of the amendment exceed the shareholder votes cast against
the amendment. The Board of Directors of New ShopKo may condition its
submission to shareholders of a proposed amendment on any basis, including
requiring a greater vote of shareholders to approve the amendment. Consistent
with the Company's Articles, New ShopKo's Articles require a 75 percent vote of
shareholders to amend the provisions thereof relating to the board of directors
and business combinations, and also require a 75 percent vote of shareholders to
amend the provisions relating to amendment of by-laws and articles of
incorporation. New ShopKo's By-Laws can be amended by a vote of not less than
a majority of the entire Board of Directors of New ShopKo, or by the affirmative
vote of the holders of not less than 75 percent of the outstanding shares of
capital stock of New ShopKo and the affirmative vote of the holders of not less
than a majority of the shares of each class or series, if any, entitled to vote
thereon.
Inspection of Shareholders' List and Corporate Records. Under the MBCA, a
shareholder has the right to examine and copy the corporation's share register
and other corporate
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records upon written demand, which demand states a proper purpose for the
examination of such records. Under the WBCL, in order to inspect and copy the
corporate records of a corporation, including the corporation's shareholder
list, a shareholder must have been a shareholder of the corporation for at least
six months before making a demand or the shareholder must hold at least 5
percent of the outstanding stock of the corporation. Furthermore, a
shareholder's demand must be made at least five business days before the date on
which he or she wishes to inspect and copy the records and must be made in good
faith and for a proper purpose. In addition to the right to inspect corporate
records generally, under the WBCL, all shareholders may inspect the
corporation's shareholder list beginning two business days after the notice of a
meeting of shareholders is given and ending at the conclusion of the meeting.
Dissenters' Rights. Under the MBCA, shareholders have the right, in some
circumstances, to dissent from certain corporate transactions by demanding
payment in cash for their shares equal to the fair value of the shares as
determined by agreement with the corporation or by a court. The MBCA, in
general, affords dissenters' rights in the event of certain amendments to the
articles of incorporation that materially and adversely affect the rights or
preferences of the shares of the dissenting shareholder, the sale or other
disposition of substantially all corporate assets, or certain mergers and
statutory share exchanges involving the corporation, regardless of whether the
shares of the corporation are listed on a national securities exchange or widely
held. Shareholders of the Company have the right to dissent from the Merger and
Reincorporation. See "The Merger -- Dissenters' Rights" below.
Under the WBCL, absent a contrary provision in the corporation's articles
of incorporation, dissenters' rights are not available to holders of shares
registered on a national securities exchange, or quoted on the National
Association of Securities Dealers' Automated Quotation system in most
circumstances. As a result, assuming the continued listing of the New ShopKo
Stock on the New York Stock Exchange, shareholders of New ShopKo will not be
entitled to dissenters' rights with respect to any future merger or sale of all
or substantially all of the assets of New ShopKo which might occur following the
Reincorporation, regardless of the form of consideration to be received by
shareholders.
Dividends. Generally, a Minnesota corporation may pay a dividend if its
board of directors determines that the corporation will be able to pay its debts
in the ordinary course of business after paying the dividend and if, among other
things, the dividend payment does not reduce the remaining net assets of the
corporation below the aggregate preferential amount, if any, payable in the
event of liquidation to the holders of the shares having preferential rights,
unless the payment is made to those shareholders in the order and to the extent
of their respective priorities. A Wisconsin corporation may pay a dividend if
its board of directors determines that the corporation will be able to pay its
debts in the ordinary course of business as they become due and that the total
assets of the corporation after the dividend would not be less than the sum of
the corporation's liabilities, plus the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution.
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Indemnification and Limitation on Director and Officer Liability. Unless
limited by the articles of incorporation or by-laws of a corporation, the MBCA
provides for mandatory indemnification of a director, officer, employee or
committee member against certain liabilities and expenses if such person (i)
acted in good faith; (ii) received no improper personal benefit; (iii) in the
case of a criminal proceeding, had no reasonable cause to believe the conduct
was unlawful; and (iv) depending upon the capacity in which such person was
serving, either believed the conduct was in the best interests of the
corporation or believed that the conduct was not opposed to the best interests
of the corporation. The Company's By-Laws provide for indemnification of its
directors and officers to the extent permitted by the MBCA.
The WBCL and New ShopKo's By-Laws provide for mandatory indemnification of
a director or officer against certain liabilities and expenses (i) to the extent
such officers or directors are successful in the defense of a proceeding (i.e.,
any threatened, pending or completed civil, criminal, administrative or
investigative suit, arbitration or other proceeding, whether formal or informal,
which involves foreign, federal, state or local law and which is brought by or
in the right of the Company or by any other person) and (ii) in proceedings in
which the director or officer is not successful in the defense thereof, unless
it is determined that the director or officer breached or failed to perform his
or her duties to the corporation and such breach or failure constituted: (a) a
willful failure by the director or officer to deal fairly with the corporation
or its shareholders in connection with a matter in which the director or officer
had a material conflict of interest; (b) a violation of the criminal law,
unless the director or officer had reasonable cause to believe his or her
conduct was lawful or had no reasonable cause to believe his or her conduct was
unlawful; (c) a transaction from which the director or officer derived an
improper personal profit; (d) willful misconduct. The WBCL specifically states
that it is the public policy of Wisconsin to require or permit indemnification
in connection with a proceeding involving federal or state securities
regulation, as described therein, to the extent otherwise required or permitted
under the WBCL. In the opinion of the Securities and Exchange Commission,
indemnification for liabilities arising under the federal securities laws is
against public policy and is therefore unenforceable. New ShopKo's By-Laws also
require the advance payment of directors' and officers' expenses incurred in
connection with any proceeding, provided certain procedural requirements are
followed.
The WBCL provides for permissive indemnification of a director or officer
in the corporation's articles of incorporation or by-laws, by resolution of the
corporation's board of directors or by written agreement against certain
liabilities and expenses, provided that it is determined that the director or
officer did not breach or fail to perform a duty that he or she owes to the
corporation which constitutes conduct described in (a)-(d), above. New ShopKo
has currently not elected to expand the rights of indemnification for its
officers and directors beyond that contained in New ShopKo's By-Laws and the
WBCL. The MBCA provides only for mandatory indemnification as described above.
The MBCA permits a corporation to adopt a provision in its articles of
incorporation, which the Company has done, which limits a director's personal
liability to the corporation or its shareholders for monetary damages for breach
of fiduciary duty, except for conduct involving: (i) any breach of the
director's duty of loyalty to the corporation or its shareholders; (ii) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law;
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(iii) declarations of illegal distributions and certain violations of Minnesota
securities laws; or (iv) participation in a transaction from which the director
received an improper personal benefit.
The WBCL automatically limits the liability of directors of Wisconsin
corporations, unless the corporation's articles of incorporation provide
otherwise. Under the WBCL, the personal liability of a director to the
corporation and its shareholders is eliminated, except where the liability is
based on a breach of the director's duty to the corporation and its shareholders
and such breach constitutes (i) the director's willful failure to deal fairly
with the corporation or its shareholders in connection with a matter in which
the director had a material conflict of interest; (ii) a violation of criminal
law, unless the director had reasonable cause to believe that his or her conduct
was lawful or had no reasonable cause to believe that his or her conduct was
unlawful; (iii) a transaction from which the director derived an improper
personal profit; or (iv) willful misconduct. A director may also be found
personally liable to a corporation for the amount of a distribution made in
violation of the WBCL if the director's vote constitutes conduct described in
the preceding sentence. New ShopKo's Articles do not limit the director's
immunity provided by the WBCL.
To the extent that following the Reincorporation the indemnification and
limitation of director liability provisions are more favorable to directors and
executive officers, these persons have a personal interest in the
Reincorporation.
The Company's By-Laws provide for director indemnification to the full
extent provided by Minnesota law. Similarly, New ShopKo's By-Laws provide for
director indemnification to the full extent permitted by the WBCL.
Vacancies on the Board of Directors. Under the MBCA, unless a
corporation's articles of incorporation or by-laws provide otherwise, (i) a
vacancy on a corporation's board of directors may be filled by the vote of a
majority of directors then in office, although less than a quorum, (ii) a newly
created directorship resulting from an increase in the number of directors may
be filled by the vote of a majority of the directors serving at the time of the
increase and (iii) any director so elected shall hold office only until a
qualified successor is elected at the next regular or special meeting of
shareholders. The Company's Articles and By-Laws follow these provisions.
Under the WBCL, a director appointed by the directors or shareholders to
fill a vacancy on a corporation's board of directors shall hold office until a
successor is elected at the next annual shareholder meeting, unless the articles
of incorporation or by-laws of such corporation classify the board of directors
into groups, in which case the appointed director holds office for the remaining
term of the class of directors to which he or she was appointed. Both the
Company's Articles and New ShopKo's Articles provide for a classified board of
directors.
Interested Director Transactions. Both the MBCA and WBCL provide for the
ratification of transactions with a corporation in which a director has an
interest. Under the MBCA, a contract or transaction between a corporation and
one or more of its directors, or an entity in or of which one or more of the
corporation's directors are directors, officers or legal representatives, have a
material financial interest, is not void or voidable solely by reason of the
conflict, provided that the contract or transaction is fair and reasonable at
the time it is authorized, is ratified in good faith after full
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disclosure by two-thirds of the voting power of the shares of the corporation
(excluding the shares owned by the interested director) or by unanimous vote, is
authorized in good faith by a majority of the disinterested members of the board
of directors or a committee after full disclosure, or is an excluded transaction
under the statute. Approval of interested director transactions under the WBCL
is comparable to the MBCA, except that shareholder approval under the WBCL
requires the affirmative vote of a majority, rather than two-thirds, of the
voting power of shares entitled to vote.
Reliance by Directors or Officers on Reports of Others. The MBCA provides
that directors of a corporation may rely upon reports (including information,
opinions or statements, including financial statements and other financial data)
if such reports are prepared or presented by: (i) officers or employees of the
corporation reasonably believed to be reliable and competent in the matters
presented; (ii) professionals as to matters reasonably believed to be within
such person's professional or expert competence; and (iii) as to matters within
its delegated authority, committees of the corporation's board of directors (of
which committee the director is not a member) reasonably believed to merit
confidence. A director does not have the right to rely on reports of others if
such director has knowledge of the matter which makes such reliance unwarranted.
The right to rely on the reports of others does not extend to officers of the
corporation.
The WBCL provides that, unless a director or officer has knowledge that
makes reliance unwarranted, such director or officer, in discharging his or her
duties to the corporation, may rely on information, opinions, reports or
statements (including valuation reports, financial statements and other
financial data) if prepared or presented by any of the following: (i) an
officer or employee of the corporation whom the director or officer believes in
good faith to be reliable and competent with respect to the matters presented;
(ii) legal counsel, public accountants or other persons as to matters that the
director or officer believes in good faith are within the person's professional
or expert competence; or (iii) in the case of reliance by a director, a
committee of the board of directors of which the director is not a member if the
director believes in good faith that the committee merits confidence.
Treasury Shares. Treasury shares are not permitted under the MBCA. If a
corporation acquires its own shares, then any of the acquired shares which are
not pledged by the corporation as security for the future payment of the
purchase price for the shares constitute authorized but unissued shares of the
corporation, unless the articles of incorporation prohibit the reissuance of
such shares. The Company's Articles do not prohibit the reissuance of shares
acquired by the Company. Under the WBCL, unless the corporation's articles of
incorporation or resolutions of the board of directors provide otherwise, if a
corporation acquires its own shares, those shares become treasury shares.
Treasury shares are not outstanding shares, and, therefore, do not receive any
dividends and do not have voting rights. Neither New ShopKo's Articles nor
resolutions of New ShopKo's Board prohibit treasury shares. Pursuant to the
Merger Agreement, the 8,174,387 shares of Company Stock purchased by the Company
on July 2, 1997 from a subsidiary of Supervalu will automatically become
treasury shares of New ShopKo upon completion of the merger.
Certain Anti-takeover Effects of the Reincorporation -- General. Both the
MBCA and the WBCL contain provisions intended to protect shareholders from
individuals or companies attempting a takeover of a corporation in certain
circumstances. One of the consequences of the
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Reincorporation is that it may be more difficult for a third party to acquire
control of the Company, and, therefore, directors and executive officers might
be considered to have a personal interest in the Reincorporation.
In addition, certain provisions of New ShopKo's Articles and New ShopKo's
By-Laws are substantially similar to the Company's Articles and the Company's
By-Laws. These provisions, including New ShopKo's classified board of
directors, the inability of New ShopKo shareholders to remove directors without
cause or to take action by consent (other than by unanimous consent), New
ShopKo's advance notice procedures to nominate candidates for directors or for
other shareholder proposals, and the existence of "blank check" Preferred Stock
and the "rights plan," may also have an anti-takeover effects.
The Reincorporation is not recommended in response to any proposed business
combination or effort to accumulate Company Stock, and the Company's Board is
not currently aware of such a proposal or effort. The anti-takeover provisions
of the MBCA and the WBCL differ in a number of respects, and it is not practical
to summarize all such differences here. However, the following is a summary of
certain significant differences.
Business Combination Statutes. Both Wisconsin and Minnesota have business
combination statutes that are intended primarily to deter highly leveraged
takeover bids which propose to use the target's assets as collateral for the
offeror's debt financing and to liquidate the target, in whole or in part, to
satisfy financing obligations. Proponents of the business combination statutes
argue that such takeovers have a number of abusive effects, such as adverse
effects on the community and employees, when the target is broken-up.
Furthermore, proponents argue that if the offeror can wholly finance its bid
with the target's assets, that fact suggests that the price offered is not fair
in relation to the value of the company, regardless of the current market price.
The MBCA prohibits a publicly held Minnesota corporation from engaging in a
"business combination" (defined to include, subject to certain exceptions, a
merger, a statutory share exchange or a disposition of assets constituting 10
percent or more of the aggregate market value of all the assets or capital stock
of a corporation or of its earning power or net income) with an "interested
shareholder" (defined to include the beneficial owner of at least 10 percent of
the voting power of the outstanding shares) for four years following the date on
which such person became an interested shareholder, unless a committee of all of
the board of directors' disinterested directors approves the business
combination or the 10 percent or greater stock ownership before the interested
shareholder's share acquisition date (i.e., the date on which the shareholder
became an interested shareholder). No restrictions apply to a business
combination after the four year period expires. The MBCA permits a corporation
to opt out of the restrictions on business combinations under certain
circumstances. The Company has not opted out of these restrictions.
For purposes of selecting a committee, a director or person is
"disinterested" if the director or person is neither an officer nor an employee,
nor has been an officer or employee within five years preceding the formation of
the committee, of the public corporation, or of a related corporation or other
organization. The committee must consider and act on any written, good faith
definitive proposal to acquire shares or engage in a business combination. The
committee must
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consider and take action on the definitive proposal and within 30 days render a
decision in writing regarding the proposal.
The WBCL prohibits a "resident domestic corporation" (an "RDC," defined to
include a Wisconsin corporation with (i) its principal offices located in
Wisconsin, (ii) significant business operations in Wisconsin, (iii) Wisconsin
residents constituting more than 10 percent of the corporation's shareholders or
(iv) Wisconsin residents holding more than 10 percent of the corporation's
shares) from entering into a "business combination" (defined to include a
merger, share exchange or a disposition of 5 percent or more of the aggregate
market value of all the assets or capital stock of a corporation) with an
"interested stockholder" (defined to include the beneficial owner of at least 10
percent of the voting power of the outstanding stock) for three years following
the stock acquisition date (i.e., the date the person became an interested
stockholder), unless the board of directors approves the business combination or
the purchase of stock by the interested stockholder before the stock acquisition
date. Business combinations after the three-year period following the stock
acquisition date are permitted only if: (i) the board of directors approved the
acquisition of the stock prior to the stock acquisition date; (ii) the business
combination is approved by a majority of the outstanding voting stock not
beneficially owned by the interested stockholder; or (iii) the consideration to
be received by shareholders meets certain requirements of the statute with
respect to form and amount.
The Wisconsin and Minnesota business combination statutes differ in several
respects. An interested shareholder must wait four years in Minnesota to engage
in a business combination, while the waiting period is only three years in
Wisconsin. Certain business combinations in Wisconsin have a lower threshold
for triggering the prohibitions of the business combination statute than in
Minnesota. In addition, Wisconsin continues to prohibit business combinations
after its three year waiting period unless appropriate approval is received.
Finally, the MBCA permits a corporation to opt out of the business combination
statutes in its articles of incorporation or by-laws. However, neither the
Company's Articles nor the Company's By-Laws contain such an opt out provision.
Furthermore, both the Company's Articles and New ShopKo's Articles require a
supermajority vote of shareholders, in addition to the approval required under
the MBCA and the WBCL, respectively, to approve certain business combinations.
Fair Price Statute. The MBCA prohibits an offeror from acquiring by
merger, share exchange or otherwise shares of a publicly held corporation within
two years following the offeror's last purchase of shares pursuant to a takeover
offer (i.e., a tender offer), unless the shareholder is afforded, at the time of
the proposed acquisition, a reasonable opportunity to dispose of his or her
shares to the offeror upon substantially equivalent terms as those provided in
the earlier takeover offer. This provision of the MBCA does not apply to an
acquisition of shares described above if the proposed acquisition is approved by
a committee of all disinterested directors before the purchase of any shares by
the offeror pursuant to the earlier takeover offer.
The WBCL provides that certain mergers, share exchanges or sales, leases,
exchanges or other dispositions of assets in a transaction involving an RDC and
a "significant shareholder" (or a corporation which is or will be an affiliate
of a significant shareholder) are subject to approval by a supermajority vote of
shareholders, in addition to any approval otherwise required. A "significant
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shareholder" is defined as a person who beneficially owns, directly or
indirectly, 10 percent or more of the voting stock of the RDC or an affiliate of
the RDC which beneficially owned, directly or indirectly, 10 percent or more of
the voting stock of the RDC within the last two years. Such business
combination must be approved by 80 percent of the voting power of the RDC's
stock and at least two-thirds of the voting power of the RDC's stock not
beneficially held by the significant shareholder who is a party to the relevant
transaction (or any of its affiliates or associates), in each case voting
together as a single group, unless the following fair price standards have been
met: (i) the aggregate value of the per share consideration (cash and non-cash)
is equal to the highest of (a) the highest price paid for any common shares of
the corporation by the significant shareholder in the transaction in which it
became a significant shareholder or within two years before the date of the
business combination, whichever is higher, (b) the market value of the RDC's
shares on the date of commencement of any tender offer initiated by the
significant shareholder, the date on which the person became a significant
shareholder or the date of the first public announcement of the proposed
business combination, whichever is highest, or (c) the highest liquidation or
dissolution distribution to which holders of the shares would be entitled, and
(ii) either cash, or the form of consideration used by the significant
shareholder to acquire the largest number of shares, is offered.
Control Share Acquisition. The MBCA establishes various disclosure and
shareholder approval requirements to be met by individuals or companies
attempting to acquire a substantial number of shares of a Minnesota corporation.
Specifically, the MBCA states that, unless the articles of incorporation or by-
laws approved by the shareholders provide otherwise, if a person acquires a
number of shares that exceed one-fifth, one-third or one-half of the voting
power of a public corporation, those excess shares lose their voting rights.
The voting rights of the acquired shares regain their voting rights only if (i)
the acquiring person discloses certain information to the issuing public
corporation and (ii) the shareholders grant voting rights to such shares by a
resolution approved by a majority of the outstanding shares and by a majority of
the outstanding shares that are not owned by the acquiring shareholder or
officers or directors or employees of the corporation, at an annual or special
meeting. If the acquiring person fails to disclose certain information to the
corporation or the shareholders fail to approve a resolution granting voting
rights to the acquired shares, the board of directors may redeem all of the
excess shares at their market value. The MBCA control share acquisition statute
applies unless the public corporation opts out of the statute in its articles or
by-laws approved by the shareholders. Neither the Company's Articles nor the
Company's By-Laws contain a provision opting out of the MBCA control share
acquisition statute.
Under the WBCL, the voting power of shares, including shares issuable upon
conversion of convertible securities or exercise of options or warrants, of an
RDC held by any person or persons acting as a group in excess of one-fifth of
the voting power in the election of directors is limited to 10 percent of the
full voting power of those excess shares. This restriction does not apply to
shares acquired (a) under an agreement entered into before the corporation was
an RDC, (b) directly acquired from the RDC, (c) in certain specified non-market
transactions (i.e., gifts, distributions upon death and pledges) or (d) in a
transaction in which the corporation's shareholders have approved restoration of
the full voting power of the otherwise restricted shares. The WBCL does not
contain a provision permitting the board of directors to redeem control shares.
The WBCL control share acquisition statute applies unless the RDC opts out of
the statute in its articles or by-
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laws. Neither New ShopKo's Articles nor New ShopKo's By-Laws contain a
provision opting out of the WBCL control share acquisition statute.
Anti-Greenmail Statute. Both Minnesota and Wisconsin have statutes which
are intended to preclude a corporation from repurchasing large blocks of its
stock for a premium over its market value. The MBCA provides that a publicly
held corporation is prohibited from purchasing or agreeing to purchase any
shares from a person who beneficially owns more than five percent of the voting
power of the corporation if the shares have been owned by that person for less
than two years and the purchase price would exceed the market value of those
shares. However, such a purchase will not violate the MBCA if the purchase is
approved at a meeting of the corporation's shareholders by a majority of the
voting power of all shares entitled to vote, or if the corporation's offer to
purchase is made to all holders of shares of the class or series and to all
holders of any class or series into which the securities may be converted and
the offer to purchase from such person is at least equal in value (per share) to
the offer to purchase from the other shareholders.
The WBCL provides that, in addition to the vote otherwise required by law
or the articles of incorporation of an RDC, the approval by a majority vote of
the holders of the corporation's shares entitled to vote is required before such
RDC can take certain actions while a takeover offer is being made or after a
takeover offer has been publicly announced and before it is concluded. Under
the WBCL, shareholder approval is required for an RDC to (i) acquire more than 5
percent of the RDC's outstanding voting shares at a price above the market price
from any individual or organization that owns more than 3 percent of the
outstanding voting shares of the RDC and has held such shares for less than two
years, unless a similar offer is made to acquire all voting shares or (ii) sell
or option assets of the RDC which amount to at least 10 percent of the market
value of the RDC, unless the RDC has at least three independent directors or a
majority of the independent directors vote not to have this provision apply to
the corporation. The Company currently has three independent directors and, so
long as New ShopKo continues to maintain at least three independent directors,
the provisions of the WBCL described in clause (ii), above, would not apply to
New ShopKo after the Reincorporation.
Amendment of Compensation Agreements. The MBCA contains a provision which
prohibits a publicly held corporation from entering into or amending agreements
that increase current or future compensation of any officer or director (other
than routine increases) during any tender offer or request or invitation for
tenders (commonly referred to as a "golden parachute"). The WBCL does not have
a comparable provision.
Accounting Treatment of the Merger
Under generally accepted accounting principles, the Merger and the
Reincorporation will not result in any gain or loss to the Company or New
ShopKo. The assets, liabilities and shareholders' equity of the Company will
become the assets, liabilities and shareholders' equity of New ShopKo, without
any changes in amounts or classifications.
Federal Income Tax Consequences of the Reincorporation
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The Merger and Reincorporation will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Accordingly, for federal income tax purposes, no gain or loss will be recognized
by shareholders upon the automatic conversion of the Company's Stock into New
ShopKo Stock in the Merger. Each shareholder whose shares are converted from
the Company's Stock into New ShopKo Stock will have the same basis in his or her
New ShopKo Stock as he or she had in his or her Company Stock, and his or her
holding period of New ShopKo Stock will include the period during which he or
she held the corresponding shares of the Company Stock (provided that such
corresponding shares were held by him or her as a capital asset on the Effective
Date). No gain or loss will be recognized by the Company or New ShopKo as a
result of the Reincorporation.
No information is provided herein with respect to the tax consequences, if
any, under applicable state, local or foreign laws, and each shareholder is
advised to consult his or her personal attorney or tax advisor as to the
federal, state or local tax consequences of the proposed Reincorporation and the
reporting thereof in view of the shareholder's individual circumstances.
It is expected that, following shareholder approval, the Reincorporation
will be consummated as soon as practicable by the filing of Articles of Merger
with the Minnesota Secretary of State and with the Wisconsin Department of
Financial Institutions. No other federal or state regulatory approval is
required in order to consummate the Reincorporation.
The Board may amend, modify and supplement the Merger Agreement before or
after shareholder approval; provided, however, that no such amendment,
modification or supplement may be made or become effective after shareholder
approval which, in the judgment of the Company's Board of Directors, would have
a materially adverse effect upon the rights of the Company's shareholders in any
manner not permitted under applicable law. Shareholders will be notified of any
change to the Merger Agreement (before or after shareholder approval), other
than immaterial changes. The Merger Agreement may be terminated and the
Reincorporation may be abandoned, notwithstanding shareholder approval, by the
Company's Board of Directors at any time before consummation of the
Reincorporation in the unlikely event that the Board should determine that in
its judgment the Reincorporation is no longer in the best interests of the
Company and its shareholders.
The Merger -- Dissenters' Rights
Sections 302A.471 and 302A.473 of the MBCA grant any shareholder of the
Company of record on March 20, 1998 who objects to the Merger the right to have
the Company purchase the shares owned by the dissenting shareholder at their
fair value immediately prior to the Effective Time of the Merger. It is the
present intention of the Company to abandon the Merger in the event that a large
number of shareholders exercise dissenter's rights and the Company becomes
obligated to make a substantial payment to said dissenting shareholders.
To be entitled to payment under Sections 302A.471 and 302A.473 of the MBCA,
the dissenting shareholder must file prior to the vote for the Merger Agreement
and Reincorporation a
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written notice of intent to demand payment of the fair value of the shares and
must not vote in favor of the Merger Agreement and Reincorporation; provided,
however, that such demand shall be of no force and effect if the Merger and
Reincorporation is not effected. The submission of a blank proxy will
constitute a vote in favor of the Merger and Reincorporation and a waiver of
dissenter's rights. The liability of the Company to the dissenting shareholder
for the fair value of the shares shall also be the liability of New ShopKo when
and if the Merger and Reincorporation is consummated, and any references to the
"Company" in this section means the surviving corporation after the Effective
Time of the Merger. Any shareholder contemplating exercise of these dissenter's
rights should review carefully the provisions of Sections 302A.471 and 302A.473
of the MBCA, particularly the procedural steps required to effect such rights.
SUCH RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF SECTIONS 302A.471 AND
302A.473 ARE NOT FULLY AND PRECISELY SATISFIED. A COPY OF SECTIONS 302A.471 AND
302A.473 IS ATTACHED AS APPENDIX D.
The description of dissenters' rights and procedures herein does not
purport to be complete and is qualified in its entirety by reference to Sections
302A.471 and 302A.473.
Shareholders of the Company who do not demand payment for their shares as
provided above and in Section 302A.473 of the MBCA shall not be entitled to
dissenters' rights. A vote against the Merger and Reincorporation, however, is
not necessary to entitle dissenting shareholders to require the Company to
purchase their shares.
If and when the proposed Merger Agreement and Reincorporation is approved
by shareholders of the Company and is not abandoned by the Company's Board of
Directors, the Company shall notify all shareholders who have dissented as
provided above of:
1. The address to which demand for payment and certificates for shares
must be sent to obtain payment and the date by which they must be
received;
2. A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired
the shares or an interest in them and to demand payment; and
3. A copy of Sections 302A.471 and 302A.473 of the MBCA and a brief
description of the procedures to be followed to dissent and obtain
payment of fair values for shares under such sections.
To receive the fair value for the shares, a dissenting shareholder must
demand payment and deposit share certificates within 30 days after the notice
was given by the Company. Under the MBCA, notice by mail is given by the
Company when deposited in the United States mail. A shareholder who fails to
make demand for payment and to deposit certificates within the 30 day period
will lose the right to receive the fair value of the shares, notwithstanding the
timely filing of the first notice of intent to demand payment. After the
Effective Time of the Merger and Reincorporation or the receipt of the demand,
whichever is later, the Company shall remit to the dissenting shareholders who
have complied with the above-described procedures the amount the
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Company estimates to be the fair value of such shareholder's shares, plus
interest. For the purpose of dissenters' rights under Sections 302A.471 and
302A.473, "interest" means interest commencing five days after the Effective
Time up to and including the date of payment, calculated at the rate provided in
Minnesota Statutes Section 549.09 (presently 5.00 percent). The payment must be
accompanied by (i) the Company's closing balance sheet and statement of income
for a fiscal year ending not more than 16 months before the Effective Time and
the Company's latest available interim financial statements, (ii) an estimate by
the Company of the fair value of the shares and a brief description of the
method used by the Company to reach such estimate and (iii) a copy of Sections
302A.471 and 302A.473, and a brief description of the procedure to be followed
in demanding supplemental payment.
If a dissenting shareholder believes that the amount remitted by the
Company is less than the fair value of the shares, with interest, the
shareholder may give written notice to the Company of the dissenting
shareholder's estimate of fair value, with interest, within 30 days after the
Company mails such remittance and demand payment of the difference. UNLESS A
SHAREHOLDER MAKES SUCH A DEMAND (INCLUDING A WRITTEN NOTICE OF SUCH ESTIMATE)
WITHIN SUCH THIRTY-DAY PERIOD, THE SHAREHOLDER WILL BE ENTITLED ONLY TO THE
AMOUNT REMITTED BY THE COMPANY.
The Company may withhold such remittance with respect to shares for which
the dissenting shareholder demanding payment was not the registered owner (or
the person on whose behalf such dissenting shareholder acts was not the
beneficial owner) as of the first public announcement date of the Merger (the
"Public Announcement Date"). As to each such dissenting shareholder who has
validly demanded payment but with respect to which the Company plans to withhold
remittance, following the Effective Time or the receipt of demand, whichever is
later, the Company will mail to the dissenting shareholder the materials
described in the preceding paragraph, a statement of the reason for withholding
the remittance, and an offer to pay to the dissenting shareholder the amount
listed in the materials, with interest, if any, if the dissenting shareholder
agrees to accept that amount in full satisfaction. If such dissenting
shareholder believes that the Company's offer is for less than the fair value of
the shares with interest, such dissenting shareholder may give written notice to
the Company of the dissenting shareholder's estimate of the fair value, with
interest, within 30 days after the mailing of the Company's offer and demand
payment of this amount. If the dissenting shareholder fails to give written
notice of such estimate to the Company within such thirty day period, such
dissenting shareholder will be entitled only to the amount offered by the
Company.
Within 60 days after the Company receives such a demand from a shareholder
(including both a dissenting shareholder who purchased shares on or prior to the
Public Announcement Date and a dissenting shareholder who purchased shares
thereafter), it will be required (if such shareholder satisfied the statutory
demand requirements) either to pay the shareholder the amount demanded or agreed
to after discussion between the shareholder and the Company or to file in a
court of competent jurisdiction in Hennepin County, Minnesota, a petition
requesting that the court determine the statutory fair value of the shares, with
interest. All shareholders who have demanded payment for their shares, but have
not reached agreement with the Company, will be made parties to the proceeding.
The court will then determine whether the shareholders in question have fully
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complied with the provisions of Section 302A.473 and for all such shareholders
who have fully complied and not forfeited statutory dissenters' rights, will
determine the fair value of the shares, taking into account any and all factors
the court finds relevant (including the recommendation of any appraisers that
may have been appointed by the court), computed by any method that the court, in
its discretion, sees fit to use, whether or not used by the Company or a
shareholder. The fair value of the shares as determined by the court is binding
on all shareholders, wherever located. Each dissenting shareholder is entitled
to judgment in cash for the amount by which the fair value of the shares as
determined by the court, with interest, exceeds the amount, if any, previously
remitted by the Company to the dissenting shareholder. However, under the
statute, dissenting shareholders are not liable to the Company for the amount,
if any, by which payments remitted by the Company to the dissenting shareholders
exceed the fair value of such shares determined by the court, with interest.
Under Section 302A.471, Subd. 2, beneficial owners of shares who desire to
exercise statutory dissenters' rights themselves must obtain and submit the
registered owner's written consent at or before the time they deposit their
stock certificates and demand for payment with the Company. The costs and
expenses of the court proceeding will be assessed against the Company, except
that the court may assess part or all of those costs and expenses against a
shareholder whose action in demanding payment is found to be arbitrary,
vexatious or not in good faith. If the court finds that the Company has failed
to comply substantially with Section 302A.473, the court also may assess against
the Company such fees and expenses, if any, of attorneys and experts as the
court deems equitable. Such fees and expenses may also be assessed against any
person who has acted arbitrarily, vexatiously or not in good faith in bringing
the proceeding, and may be awarded to a party injured by those actions.
Under Section 302A.471, Subd. 2, a shareholder of the Company may not
assert dissenters' rights with respect to less than all of the shares registered
in the shareholder's name, unless the shareholder dissents with respect to all
shares beneficially owned by another person and discloses the name and address
of such other person.
The fair value of the Company's shares means the value of the shares
immediately before the Effective Time of the Merger and Reincorporation. Under
Section 302A.471, a shareholder of the Company has no right at law or equity to
set aside the adoption of the Merger Agreement or the consummation of the Merger
and Reincorporation, unless such adoption or such consummation is fraudulent
with respect to such shareholder or the Company.
Any shareholder making a demand for payment of fair value may withdraw the
demand at any time prior to the determination of the fair value of the shares by
filing written notice of such withdrawal with the Company.
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ITEM 3
PROPOSAL TO APPROVE THE COMPANY'S 1998 STOCK INCENTIVE PLAN
The purpose of the 1998 Stock Incentive Plan (the "Plan") is to provide a
means to attract and retain high quality individuals, to motivate key personnel
to achieve the long-term goals of the Company, to provide incentive compensation
opportunities to the key personnel of the Company that are competitive with
those of similar companies, and to further align the interests of key personnel
who participate in the Plan with those of the Company's shareholders through
compensation that is based on the value of the Company's Common Stock. The Board
of Directors adopted the Plan on January 14, 1998, subject to shareholder
approval. The following summary of the material features of the Plan is subject
in all respects to the complete text of the Plan, a copy of which is attached to
this Proxy Statement as Appendix E.
The Board of Directors has delegated administration of the Plan to the
Compensation and Stock Option Committee (the "Committee"). Under the Plan, the
Committee may grant (i) incentive stock options within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) non-
qualified stock options, and (iii) shares of stock or the right to receive
shares of stock in the future (or their cash equivalent or a combination of
both) ("Stock Awards") (options and Stock Awards are collectively referred to as
"Awards"), to certain key personnel of the Company and its related companies
(defined to include any corporation, joint venture, limited liability company,
or other business entity in which the Company has a significant direct or
indirect equity interest). The Committee has final authority, subject to the
express provisions of the Plan, to determine to whom Awards shall be granted; to
determine the types of Awards and the numbers of shares covered by the Awards;
to determine the terms, conditions, performance criteria, restrictions and other
provisions of each Award, and to cancel or suspend Awards; to determine the
terms and provisions of any agreements made pursuant to the Plan; and to make
all other determinations that may be necessary or advisable for the
administration of the Plan. In making such Award determinations, the Committee
may take into account the nature of the services rendered by the respective
personnel, their present and potential contribution to the Company's success and
such other factors as the Committee deems relevant. The Board of Directors has
the non-exclusive power to exercise the authority of the Committee with respect
to Awards to non-employee directors of the Company and its related companies.
The Plan provides for accelerated vesting of Awards upon the occurrence of
certain "change of control" transactions as described in the Plan.
Incentive stock options may be granted under the Plan to full or part-time
employees, including officers and directors who are also employees, of the
Company and its related companies (as defined above) (together, the
"Employees"). There are presently approximately 700 Employees who could be
selected by the Committee for participation in the Plan. In addition, non-
qualified stock options and Stock Awards may be granted to Employees and non-
employee directors.
Subject to the Committee's authority to adjust the number and kind of
shares subject to each outstanding Award and the exercise price in the event of
certain corporate transactions involving the Company, the aggregate number of
shares of Common Stock which may be issued under the Plan is
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1,250,000 shares. Award limits established under the Plan are as follows: the
maximum number of shares of Common Stock which may be issued pursuant to
incentive stock options is 500,000, the maximum number of shares of Common Stock
covered by options granted to any one individual is 500,000 in any one calendar
year, and the maximum value of Stock Awards granted to any one person is
$5,000,000.
The period during which incentive stock options may be granted under the
Plan will expire on January 14, 2008, and the term of each option granted under
the Plan will expire not more than ten years from the date of grant. Each option
granted will specify an exercise price or prices; provided, however, that no
option may be granted with a per share exercise price less than the fair market
value per share of Common Stock on the date of grant. The Plan does not allow
the repricing of options after grant except in the event of stock splits, stock
dividends, and similar transactions. At the discretion of the Committee, options
may be exercised in full at any time, from time to time or in installments, or
upon the occurrence of specified events. An option may be exercised as to any or
all of the shares covered by the option by delivering written notice of exercise
to the Secretary of the Company, accompanied by full payment of the exercise
price for such shares. Payment of the exercise price must be made in cash, by
tendering previously owned shares of Common Stock or by authorizing a third
party to sell shares of the Common Stock acquired upon exercise of an option and
remitting the purchase price to the Company.
The Plan may be terminated or amended by the Board of Directors of the
Company. The Board of Directors may not, without approval of the shareholders of
the Company, increase the number of shares of Common Stock which may be
delivered pursuant to Awards granted under the Plan, except for increases
resulting from certain corporate transactions involving the Company. Awards to
be granted under the Plan are not determinable as of the date of this Proxy
Statement. The closing sale price of the Common Stock on March ____, 1998 was
$______.
Certain Federal Income Tax Consequences
The following brief description of the tax consequences of the grant and
exercise of Awards under the Plan is based on federal income tax laws currently
in effect and does not purport to be a complete description of such federal
income tax consequences. Awards granted under the Plan may be either incentive
stock options, non-qualified stock options or shares of stock or the right to
receive shares of stock in the future. Neither the grant nor the exercise of an
incentive stock option will have immediate tax consequences to the optionee or
the Company, although the exercise of an incentive stock option may give rise to
liability for the optionee under the alternative minimum tax provisions of the
Code. Generally, if the optionee disposes of shares of Common Stock acquired
upon the exercise of an incentive stock option within one year of the date of
exercise or within two years from the date of grant of the option, the optionee
will recognize ordinary income and the Company will be entitled to a deduction
for tax purposes in the amount of the excess of the fair market value of the
shares of Common Stock on the date of exercise over the exercise price (or the
gain on sale, if less). Otherwise, the Company will not be entitled to any
deduction for tax purposes upon the disposition of such shares and the entire
gain for the optionee will be treated as capital gain.
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With respect to non-qualified stock options, at the time such options are
granted, the optionee will not recognize any taxable income and the Company will
not be entitled to any deduction. When an optionee exercises a non-qualified
stock option, the optionee, unless subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended, will recognize ordinary income and the Company
will be entitled to a corresponding deduction equal to the excess of the fair
market value of the Common Stock on the date of exercise over the exercise
price. The income arising from an optionee exercising a non-qualified stock
option will be subject to withholding for income and employment tax purposes,
and the Company will be entitled to defer making delivery of any Common Stock to
be issued until satisfactory withholding arrangements have been made.
With respect to Stock Awards, unless the recipient has made an election
under Section 83(b) of the Code, the recipient will not recognize taxable income
at the time of the Award. At the time any transfer or forfeiture restrictions
applicable to the Stock Award lapse, the recipient will recognize ordinary
income and the Company will be entitled to a corresponding deduction equal to
the excess of the fair market value of such stock at such time over the amount
paid therefor. The income arising from the lapse of any transfer or forfeiture
restrictions will be subject to withholding for income and employment tax
purposes, and the Company will be entitled to defer making delivery of any Stock
Award until satisfactory withholding arrangements have been made. Any dividends
paid to the recipient on the stock while the transfer or forfeiture restrictions
apply will be ordinary compensation income to the recipient and deductible as
such by the Company. If the recipient makes an election under Section 83(b) of
the Code, he or she will be taxed on the Award at its fair market value on the
date of grant (less any amount paid by the recipient for the Stock Award) and
the Company will be entitled to a corresponding deduction equal to the amount of
taxable income recognized by the recipient. The income arising from the Section
83(b) election will be ordinary income and will be subject to applicable income
and employment tax withholding. The lapse of the transfer or forfeiture
restrictions will not be a taxable event in this case.
Vote Required to Approve Plan; Board's Recommendation
Approval of the 1998 Stock Incentive Plan requires the affirmative vote of
holders of a majority of the shares present, or represented, and entitled to
vote at the Annual Meeting. The Board of Directors recommends a vote FOR
approval of the 1998 Stock Incentive Plan. Proxies solicited by the Board will,
unless otherwise directed, be voted for approval of the 1998 Stock Incentive
Plan.
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ITEM 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed Deloitte & Touche LLP to audit the financial statements of the Company
and its subsidiaries for the fiscal year ending January 30, 1999 and is seeking
the ratification of their appointment by the shareholders. Shares represented by
the accompanying proxy will be voted for ratification unless the proxy indicates
to the contrary.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate questions.
Vote Required to Ratify Selection; Board's Recommendation
Ratification of Deloitte & Touche LLP as the Company's independent auditors for
the fiscal year ending January 30, 1999 requires the affirmative vote of holders
of a majority of the shares present, or represented, and entitled to vote at the
meeting. The Board recommends a vote FOR such ratification. Proxies solicited by
the Board will, unless otherwise directed, be voted in favor of such
ratification.
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RELATIONSHIP BETWEEN THE COMPANY AND SUPERVALU
The following is a summary of the material features of certain agreements,
arrangements and transactions between the Company and Supervalu. The summaries
of each of the following agreements are qualified in their entirety by reference
to the full text of such agreement, a copy of which has been filed with the
Securities and Exchange Commission and the New York Stock Exchange. These
agreements may be modified and additional agreements, arrangements and
transactions may be entered into by the Company and Supervalu. Any such future
modifications, agreements, arrangements and transactions will be determined
through negotiation between the Company and Supervalu.
Stock Buyback and Secondary Offering Agreement
- ----------------------------------------------
Prior to July 2, 1997, Supervalu, through a wholly owned subsidiary,
beneficially owned 14,731,667 shares of the Company's Common Stock. On April 24,
1997, the Company, Supervalu and its subsidiary entered into a Stock Buyback and
Secondary Offering Agreement (the "Stock Buyback Agreement") pursuant to which
the Company agreed to repurchase 8,174,387 shares of Common Stock from Supervalu
for $18.35 per share (the "Stock Buyback"). The obligation of the Company and
Supervalu to consummate the Stock Buyback was conditioned upon completion of a
secondary public offering of Supervalu's remaining 6,557,280 shares of Common
Stock (the "Offering"). Both the Stock Buyback and the Offering were consummated
on July 2, 1997.
Pursuant to the terms of the Stock Buyback Agreement, Messrs. Wright and
Girard, who were executive officers of Supervalu, submitted their resignations
from the Company's Board. In July, 1997, prior to the effectiveness of his
resignation from the Company's Board, Mr. Girard resigned from his position with
Supervalu. He has agreed to continue to serve on the Company's Board, subject to
his re-election at the Annual Meeting. Mr. Wright's resignation from the
Company's Board of Directors became effective on August 13, 1997. Also in
accordance with the terms of the Stock Buyback Agreement, Mr. Wright resigned as
the Company's Chairman of the Board, which resignation became effective upon the
closing of the Stock Buyback and the Offering. Mr. Kramer was elected as
Chairman of the Board on July 2, 1997.
At the price the shares were sold in the Offering, the Stock Buyback
Agreement required Supervalu to pay the underwriting discount and certain other
expenses of the Offering estimated in the aggregate at $8,500,000. The Company
and Supervalu each paid the costs and expenses of their respective counsel and
the Company paid certain marketing costs.
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Initial Public Offering Agreements
- ----------------------------------
The following agreements were developed in connection with the Company's
initial public offering in October 1991 ("Initial Public Offering") when the
Company was a wholly owned subsidiary of Supervalu, and, therefore, were not the
result of arms'-length negotiations between independent parties. As a result,
while it has been the intention of the Company and Supervalu that such
agreements and the transactions provided for therein, taken as a whole, would
accommodate the parties' interests in a manner that is fair to the parties while
continuing certain mutually beneficial arrangements, there can be no assurance
that each of such agreements, or the transactions provided for therein, has been
or will be effected on terms at least as favorable to the Company as could have
been obtained from unaffiliated third parties.
Food Products Supply Agreement
The Company and Supervalu entered into a Food Products Supply
Agreement dated as of October 8, 1991 (the "Supply Agreement") whereby the
Company agreed, under certain conditions, to purchase from Supervalu all of
the Company's requirements for certain products purchased from a wholesaler
and sold in any food store owned or operated by the Company which is
located within the geographic areas serviced by Supervalu until October 16,
1998. The Supply Agreement was terminated as of July 2, 1997.
Indemnification Agreement
The Company and Supervalu have entered into an Indemnification, Tax
Matters and Guarantee Fee Agreement dated as of October 8, 1991 (the
"Indemnification Agreement") with respect to certain liabilities which may
arise after the Initial Public Offering. In general, the Indemnification
Agreement provides that the Company and Supervalu will each indemnify the
other party and that party's directors, officers, employees and agents
against certain liabilities arising from or based upon the operation of
their own respective businesses prior to and following such offering. Since
the Company is no longer eligible to participate in Supervalu's
consolidated income tax returns, the Indemnification Agreement also
contains certain agreements by the parties intended to clarify
responsibilities and procedures for the filing of returns, the payment of
taxes and the resolution of disputes regarding taxes following such
offering. The Company has provided standby letters of credit in lieu of
agreed to fees associated with Supervalu guaranteeing certain obligations
of the Company.
The Company was previously a member of the Supervalu consolidated
group for federal income tax purposes. The Company may be held liable for
any unpaid federal income tax liabilities of the Supervalu consolidated
group for each taxable year in which the Company was a member of the
Supervalu consolidated group during any part of such taxable year. The
Indemnification Agreement between the Company and Supervalu provides that,
subject to the limitation set forth below, Supervalu will indemnify the
Company for any income tax liability of the Company for any taxable year
ending on or before October 16, 1991. Supervalu shall not be required to
indemnify the Company against any taxes attributable to the Company for any
tax periods ending on or before October 16, 1991 to the extent that such
taxes result,
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directly or indirectly, from any adjustment made by a taxing authority to
the tax liability of the Company for any period ending after October 16,
1991. Notwithstanding the above limitation, the Indemnification Agreement
also provides that Supervalu will indemnify the Company for all income tax
liabilities attributable to any member of the Supervalu consolidated group
other than the Company for any taxable year.
Insurance Matters Agreement
Prior to the Initial Public Offering, insurance coverage for the
Company was provided under various insurance policies maintained by
Supervalu. As a result of such offering, coverage for the Company ceased
under such policies for certain claims made and occurrences arising after
October 16, 1991. The Company has since obtained its own insurance
policies. The Company and Supervalu have entered into an Insurance Matters
Agreement dated as of October 8, 1991 (the "Insurance Matters Agreement")
which provides for the allocation of premiums and premium adjustments under
the Supervalu policies after October 16, 1991 in accordance with
Supervalu's normal annual allocation process. The Insurance Matters
Agreement also provides that Supervalu and the Company will cooperate in
good faith on the handling of claims by the Company under the Supervalu
policies after October 16, 1991, with Supervalu retaining decision-making
authority in connection with any such policies that are liability policies.
Registration Rights Agreement
The Company and SOA, a wholly owned subsidiary of Supervalu, entered
into a Registration Rights Agreement dated as of October 8, 1991 (the
"Registration Rights Agreement") pursuant to which the Company granted
certain demand and "piggyback" registration rights to SOA (and to certain
affiliates of Supervalu) with respect to shares of Common Stock owned by
SOA (or such affiliates) following the Initial Public Offering. The
Registration Rights Agreement terminated upon SOA's divestiture of its
Common Stock on July 2, 1997.
OTHER MATTERS
Other Proposed Action. The Board of Directors of the Company knows of no
other matters which may come before the meeting. However, if any matter other
than those referred to above should properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote such proxy in
accordance with their discretion.
Cost of Solicitation. The cost of soliciting proxies will be borne by the
Company. Arrangements will be made with brokerage houses, custodians, nominees
and other fiduciaries to send proxy materials to their principals, and the
Company will reimburse them for their expenses. In addition to solicitation by
mail, certain officers and directors of the Company, who will receive no
compensation for their services other than their regular salaries, may solicit
proxies by telephone, telecopy and personally.
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Shareholder Proposals. Assuming the Reincorporation is completed,
nominations, other than by or at the direction of the Board of Directors, of
candidates for election as directors at the 1999 Annual Meeting and any other
shareholder proposed business to be brought before the 1999 Annual Meeting must
be submitted to the Company not later than January 13, 1999. Such shareholder
proposed nominations and other shareholder proposed business must be made in
accordance with the Company's By-Laws which upon completion of the
Reincorporation will provide, among other things, that shareholder proposed
nominations must be accompanied by certain information concerning the proposal
and the shareholder submitting the proposal. To be considered for including in
the proxy statement solicited by the Board of Directors, shareholder proposals
for consideration at the 1999 Annual Meeting of Shareholders of the Company must
be received by the Company at its principal executive offices, 700 Pilgrim Way,
P.O. Box 19060, Green Bay, Wisconsin 54307-9060 on or before December 1, 1998.
Proposals should be directed to Mr. Richard D. Schepp, Senior Vice President,
General Counsel and Secretary. To avoid disputes as to the date of receipt, it
is suggested that any shareholder proposal be submitted by certified mail,
return receipt requested.
BY ORDER OF THE BOARD OF DIRECTORS
Richard D. Schepp
Secretary
Dated: March 31, 1998
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Appendix A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of _____________, 1998, by and
between ShopKo Stores, Inc., a Minnesota corporation ("ShopKo"), and New ShopKo,
Inc., a Wisconsin corporation and a wholly-owned subsidiary of ShopKo (the
"Surviving Corporation"). ShopKo and the Surviving Corporation are sometimes
hereinafter referred to as the "Constituent Corporations."
WHEREAS, ShopKo, as of the date hereof, has authority to issue 95,000,000
shares of capital stock, of which 75,000,000 are designated as Common Stock,
$.01 par value (the "ShopKo Common Stock"), and 20,000,000 shares are designated
as Preferred Stock, $.01 par value (the "ShopKo Preferred") and, as of the date
hereof, ________ shares of ShopKo Common Stock are issued and outstanding, and
no shares of ShopKo Preferred are issued and outstanding; and
WHEREAS, the Surviving Corporation, on or before the Effective Time of the
Merger (as defined below), will have authority to issue 95,000,000 shares of
capital stock, of which 75,000,000 will be designated as Common Stock, $.01 par
value (the "Surviving Corporation Common Stock"), and 20,000,000 shares will be
designated as Preferred Stock, $.01 par value (the "Surviving Corporation
Preferred"); and
WHEREAS, as of the date hereof, 100 shares of Surviving Corporation Common
Stock are issued and outstanding, all of which are held by ShopKo, and no shares
of Surviving Corporation Preferred are issued and outstanding; and
WHEREAS, ShopKo and the Surviving Corporation desire that ShopKo merge with
and into the Surviving Corporation and that the Surviving Corporation shall
continue as the surviving corporation in such merger, upon the terms and subject
to the conditions set forth herein and in accordance with the laws of the State
of Wisconsin and the laws of the State of Minnesota; and
WHEREAS, the respective Boards of Directors of ShopKo and the Surviving
Corporation have approved this Agreement and directed that it be submitted to a
vote of their shareholders.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, the parties hereto agree to merge as follows:
ARTICLE 1
Merger
1.1 Merger. Subject to the terms and conditions of this Agreement, ShopKo
shall be merged with and into the Surviving Corporation (the "Merger") in
accordance with the
A-1
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Wisconsin Business Corporation Law ("WBCL") and Sections 302A.611, 302A.613,
302A.615 and 302A.651 of the Minnesota Business Corporation Act (the "MBCA"),
the separate existence of ShopKo shall cease, and the Surviving Corporation
shall be the surviving corporation and continue its corporate existence under
the laws of the State of Wisconsin.
1.2 Effect of the Merger. At the Effective Time of the Merger (as
hereinafter defined), the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, of each of ShopKo and the Surviving Corporation; all property, real,
personal and mixed, and all debts due on any account, including subscriptions
for shares, and all other choses in action, and every other interest of or
belonging to or due to each of ShopKo and the Surviving Corporation shall vest
in the Surviving Corporation without any further act or deed; the title to any
real estate or any interest therein vested in ShopKo shall not revert nor in
anyway become impaired by reason of the Merger; the Surviving Corporation shall
be responsible and liable for all the liabilities and obligations of each of
ShopKo and the Surviving Corporation; a claim of or against or a pending
proceeding by or against ShopKo or the Surviving Corporation may be prosecuted
as if the Merger had not taken place, or the Surviving Corporation may be
substituted in the place of ShopKo; and neither the rights of creditors nor any
liens upon the property of ShopKo or the Surviving Corporation shall be impaired
by the Merger.
1.3 Effective Time of the Merger. The Merger shall become effective as of
the date and time (the "Effective Time of the Merger") the following actions are
completed: (a) appropriate duly executed articles of merger are filed in
accordance with Section 180.1105 of the WBCL; and (b) appropriate duly executed
articles of merger are filed in accordance with Sections 302A.615 and 302A.641
of the MBCA.
ARTICLE 2
Name, Articles of Incorporation, Bylaws,
Directors and Officers of the Surviving Corporation
2.1 Name of Surviving Corporation. At the Effective Time of the Merger,
Article I of the Surviving Corporation's Articles of Incorporation shall be
amended to read as follows:
The name of the Corporation is ShopKo Stores, Inc.
2.2 Articles of Incorporation. The Articles of Incorporation of the
Surviving Corporation, as amended pursuant to Section 2.1 hereof, shall be the
Articles of Incorporation of the Surviving Corporation from and after the
Effective Time of the Merger by virtue of the Merger and without any further
action by the Constituent Corporations, until amended thereafter as provided
therein or by law.
2.3 By-laws. The By-laws of the Surviving Corporation shall be the By-laws
of the Surviving Corporation from and after the Effective Time of the Merger by
virtue of the Merger
A-2
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and without any further action by the Constituent Corporations, until amended
thereafter as provided therein, in the Surviving Corporation's Articles of
Incorporation, or By-laws.
2.4 Directors and Officers. The directors and officers of ShopKo
immediately prior to the Effective Time of the Merger shall be the directors and
officers, respectively, of the Surviving Corporation from and after the
Effective Time of the Merger and shall hold office in accordance with the
Articles of Incorporation and By-laws of the Surviving Corporation until the
expiration of the terms to which they were elected to serve as directors and
officers of ShopKo and until their successors are duly elected and qualified.
ARTICLE 3
Conversion of Securities
3.1 Conversion. At the Effective Time of the Merger, each of the following
transactions shall be deemed to occur simultaneously and this Section 3.1 shall
constitute the manner and basis of converting the capital stock of the
Constituent Corporations into capital stock of the Surviving Corporation and of
consummating the other transactions referred to in this Section 3.1:
(a) Each share of ShopKo Common Stock (other than shares as to which
the holder thereof has properly exercised dissenters' rights under the
MBCA) issued and outstanding immediately prior to the Effective Time of the
Merger shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and become one validly issued, fully
paid and non-assessable share of Surviving Corporation Common Stock (except
to the extent provided in Section 180.0622(2)(b) of the WBCL).
(b) Each stock option to purchase shares of ShopKo Common Stock
granted by ShopKo or any of its subsidiaries under any of the stock option
plans of ShopKo and outstanding immediately prior to the Effective Time of
the Merger shall, by virtue of the terms of the stock option plans, the
actions of the Boards of Directors of the Constituent Corporations and the
Merger and without any action on the part of the holder thereof, be
converted into and become a stock option to purchase, upon the same terms
and conditions, the number of shares of Surviving Corporation Common Stock
which is equal to the number of shares of ShopKo Common Stock which the
optionee would have received had he or she exercised his or her option or
right in full immediately prior to the Effective Time of the Merger
(whether or not such option or right was then exercisable). The exercise
price per share of the Surviving Corporation Common Stock under each of
such options or warrants shall be equal to the exercise price per share of
ShopKo Common Stock thereunder immediately prior to the Effective Time of
the Merger. A number of shares of Surviving Corporation Common Stock shall
be reserved for issuance upon the exercise of options equal to the number
of shares of ShopKo Common Stock so reserved immediately prior to the
Effective Time of the Merger.
(c) Each Right issued by ShopKo under the Rights Agreement with
Norwest Bank Minnesota, as agent, dated as of July 3, 1992 (the "Rights
Agreement") and outstanding
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immediately prior to the Effective Time of the Merger shall, by virtue of
the Rights Agreement, the actions of the Boards of Directors of the
Constituent Corporations and the Merger and without any action on the part
of the holder thereof, be converted into and become a right to purchase,
upon the same terms and conditions, an identical number of shares of the
Surviving Corporation's Series B Junior Participating Preferred Stock (the
"Series B Preferred Stock") (subject to future adjustments as may be
provided in the Rights Agreement). A number shares of Series B Preferred
Stock of the Surviving Corporation shall be reserved for issuance upon the
exercise of rights equal to the number of shares of Series B Junior
Participating Preferred Stock of ShopKo so reserved immediately prior to
the Effective Time of the Merger.
(d) The 8,174,387 shares of ShopKo Common Stock which were purchased
by ShopKo on July 2, 1997 and which reverted to authorized but unissued
shares of ShopKo Common Stock on such date under the MBCA, shall by virtue
of Merger be converted into 8,174,387 shares of treasury stock of the
Surviving Corporation.
(e) Each share of Surviving Corporation Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger (each of
which is presently held by ShopKo), without any action on the part of the
holder thereof shall be canceled and cease to exist, and no shares of the
Surviving Corporation or other securities of the Surviving Corporation
shall be issued or other consideration paid in respect thereof.
3.2 Conversion of Certificates.
(a) Each stock certificate (other than to the extent a stock certificate
represented shares as to which the holder thereof has properly exercised
dissenters' rights under the MBCA) which, immediately prior to the Effective
Time of the Merger, represented issued and outstanding shares of ShopKo Common
Stock shall not represent shares of ShopKo Common Stock (which shares shall
cease to exist) after the Effective Time of the Merger but instead shall be and
become at the Effective Time of the Merger a certificate representing an
identical number of shares of Surviving Corporation Common Stock, automatically
by virtue of the Merger and without any action on the part of the holder
thereof. Upon the surrender or transfer following the Effective Time of the
Merger of a stock certificate that represented ShopKo Common Stock immediately
prior to the Effective Time of the Merger, but subject to Section 3.2(b) hereof,
a stock certificate representing the same number of shares of Surviving
Corporation Common Stock shall be reissued to the holder or transferee, as the
case may be, thereof, provided that no holder of a stock certificate that
represented ShopKo Common Stock immediately prior to the Effective Time of the
Merger shall be required to surrender such stock certificate in connection with
the Merger and such stock certificate shall represent the same number of shares
of Surviving Corporation Common Stock until so surrendered.
(b) If after the Effective Time of the Merger any certificate for shares
of Surviving Corporation Common Stock is to be issued in a name other than that
in which the certificate which immediately prior to the Effective Time of the
Merger represented shares of ShopKo Common Stock surrendered in exchange
therefor is registered, it shall be a condition of such
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exchange that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting such exchange
shall pay any transfer and other taxes required by reason of the issuance of
certificates for such shares of the Surviving Corporation capital stock in a
name other than that of the registered holder of the certificate surrendered, or
shall establish to the satisfaction of the Surviving Corporation or its agent
that such tax has been paid or is not applicable. Notwithstanding the foregoing,
no party hereto shall be liable to a holder of shares of ShopKo capital stock
for any shares of Surviving Corporation capital stock or dividends or
distributions thereon delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
3.3 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of ShopKo Common Stock that are outstanding immediately prior
to the Effective Time of the Merger and are held or beneficially owned by
shareholders or eligible beneficial owners who, prior to the vote of the
shareholders of ShopKo on the approval of this Agreement, shall have filed with
ShopKo a written notice of intent to demand the fair value of their shares of
ShopKo Common Stock in the manner provided in Section 302A.473 of the MBCA
("Dissenting Shares") and who shall not have voted such Dissenting Shares in
favor of approval of this Agreement or otherwise withdrawn or lost their right
to payment for their Dissenting Shares under Section 302A.473 of the MBCA will
not be converted into the right to receive shares of Surviving Corporation
Common Stock, but the holders or eligible beneficial owners thereof will be
entitled to payment of the fair value of such shares of ShopKo Common Stock in
accordance with the provisions of such Section 302A.473; provided, however that
if any holder or beneficial owner of Dissenting Shares shall fail to establish
or perfect his, her or its entitlement to dissenters' rights as provided in such
Section 302A.473 or shall fail strictly to comply with any provision of Section
302A.473 of the MBCA or otherwise withdraws or loses such dissenters' rights,
the shares of ShopKo Common Stock held by such holder or owned by such
beneficial owner shall be automatically converted into shares of Surviving
Corporation Common Stock in accordance with Section 3.1(a).
ARTICLE 4
Employee Benefit and Compensation Plans
At the Effective Time of the Merger, any employee benefit plan or incentive
compensation plan, including any stock option plan, to which ShopKo is then a
party shall be assumed by, and continue to be the plan of, the Surviving
Corporation. To the extent any employee benefit plan or incentive compensation
plan of ShopKo or any of its subsidiaries provides for the issuance or purchase
of, or otherwise relates to, ShopKo capital stock, from and after the Effective
Time of the Merger, such plan shall be deemed to provide for the issuance or
purchase of, or otherwise to relate to, the Surviving Corporation capital stock.
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ARTICLE 5
Conditions
Consummation of the Merger is subject to the satisfaction at or prior to
the Effective Time of the Merger of the following conditions:
5.1 ShopKo Shareholder Approval. This Agreement and the Merger shall have
been adopted and approved by the shareholders of ShopKo in accordance with the
Articles of Incorporation of ShopKo and the applicable provisions of the MBCA.
5.2 Surviving Corporation Shareholder Approval. This Agreement and the
Merger shall have been adopted and approved by ShopKo as the holder of all the
outstanding shares of Surviving Corporation capital stock prior to the Effective
Time of the Merger.
5.3 Consents, etc. Any and all consents, permits, authorizations,
approvals and orders deemed in the sole discretion of ShopKo to be material to
the consummation of the Merger shall have been obtained.
ARTICLE 6
Agreements
6.1 No Preferred Stock. Prior to the first to occur of the Effective Time
of the Merger or the termination of this Agreement, the Surviving Corporation
shall not issue Surviving Corporation Preferred.
6.2 Taking of Necessary Action; Further Action. Subject to Section 7.1,
each of ShopKo and the Surviving Company will take all such reasonable and
lawful action as may be necessary or appropriate in order to effectuate the
Merger as promptly as possible. If, at any time after the Effective Time of the
Merger, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers,
and franchises of the Constituent Corporations, the officers and directors of
the Constituent Corporations are fully authorized in the name of their
corporation or otherwise to take, and will take, all such lawful and necessary
action.
6.3 Other Agreements. The Surviving Corporation, from and after the
Effective Time of the Merger, agrees that it may be served with process in the
State of Minnesota in any proceeding for the enforcement of any obligation of
either Constituent Corporation and in any proceeding for the enforcement of the
rights of a dissenting shareholder of ShopKo against the Surviving Corporation.
The Surviving Corporation irrevocably appoints the Secretary of State of the
State of Minnesota as its agent to accept service of process in any such
proceeding. The Surviving Corporation will promptly pay to the dissenting
shareholders of ShopKo the amounts, if any, to which they will be entitled under
Section 302A.473 of the MBCA with respect to the rights of
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dissenting shareholders, provided that such dissenting shareholders act in
strict compliance with the provisions of the MBCA governing rights of dissenting
shareholders in the case of a merger. The Surviving Corporation shall comply
with all of its obligations under Section 302A.651, Subd. 4, of the MBCA.
ARTICLE 7
General
7.1 Termination and Abandonment. This Agreement may be terminated and the
Merger and other transactions herein provided for abandoned at any time prior to
the Effective Time of the Merger, whether before or after adoption and approval
of this Agreement by the shareholders of ShopKo, by action of the Board of
Directors of ShopKo, if the Board of Directors of ShopKo determines that the
consummation of the transactions provided for herein would not, for any reason,
be in the best interests of ShopKo and its shareholders. In the event of
termination of this Agreement, this Agreement shall become void and of no effect
and there shall be no liability on the part of either ShopKo or the Surviving
Corporation or their respective Boards of Directors or shareholders, except that
ShopKo shall pay all expenses incurred in connection with the Merger or in
respect of this Agreement or relating thereto.
7.2 Amendment. This Agreement may be amended at any time prior to the
Effective Time of the Merger with the mutual consent of the Boards of Directors
of ShopKo and the Surviving Corporation; provided, however, that after it has
been adopted by the shareholders of ShopKo, this Agreement may not be amended in
any manner which, in the judgment of the Board of Directors of ShopKo, would
have a material adverse effect on the rights of such shareholders or in any
manner not permitted under applicable law; provided further, however, that any
amendment of this Agreement after its adoption by the sole shareholder of the
Surviving Corporation shall require the prior approval of such shareholder.
7.3 Headings. The headings set forth herein are inserted for convenience or
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
7.4 Counterparts. This Agreement may be executed in two counterparts, each
of which shall constitute an original, and all of which, when taken together,
shall constitute one and the same instrument.
7.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin without giving effect to the
principles of conflicts of law thereof, except to the extent the laws of the
State of Minnesota are applicable to ShopKo in respect of the Merger, in which
case the laws of the State of Minnesota shall apply without giving effect to the
principles of conflicts of law thereof.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf and attested by its officers hereunto duly authorized,
all as of the day and year first above written.
SHOPKO STORES, INC.
A Minnesota Corporation
By:
---------------------------------------
Dale P. Kramer, Chairman, President and
Chief Executive Officer
Attest:
---------------------------------------
Richard D. Schepp, Secretary
NEW SHOPKO, INC.
A Wisconsin Corporation
By:
---------------------------------------
Dale P. Kramer, Chairman, President and
Chief Executive Officer
Attest:
---------------------------------------
Richard D. Schepp, Secretary
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Appendix B
ARTICLES OF INCORPORATION
OF
NEW SHOPKO, INC.
The undersigned incorporator, acting as incorporator of a corporation
under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin
Statutes, adopts the following Articles of Incorporation for such corporation:
ARTICLE I
Name
The name of the Corporation is New ShopKo, Inc.
ARTICLE II
Purposes
The Corporation is authorized to engage in any lawful activity for which
corporations may be organized under the Wisconsin Business Corporation Law and
any successor provisions.
ARTICLE III
Capital Stock
The aggregate number of shares which the Corporation shall have the
authority to issue, the designation of each class of shares, the authorized
number of shares of each class and the par value thereof per share shall be as
follows:
<TABLE>
<CAPTION>
Designation of Par Value Authorized
Class Per Share Number of Shares
-------------- --------- ----------------
<S> <C> <C>
Common Stock $.01 75,000,000
Preferred Stock $.01 20,000,000
</TABLE>
The preferences, limitations and relative rights of shares of each class
and series thereof, if any, and the authority of the Board of Directors of the
Corporation to create and to designate series of Preferred Stock and to
determine the preferences, limitations and relative rights as between series
shall be as follows:
A. Common Stock.
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1. Voting. Except as otherwise provided by law and except as may be
determined by the Board of Directors of the Corporation with respect to
shares of Preferred Stock as provided in Section B, below, only the holders
of shares of Common Stock shall be entitled to vote for the election of
directors of the Corporation and for all other corporate purposes. Except
as otherwise provided by law, upon any such vote, each holder of Common
Stock shall be entitled to one vote for each share of Common Stock held of
record by such shareholder.
2. Dividends. Subject to the provisions of paragraph (2) of Section B,
below, the holders of Common Stock shall be entitled to receive such
dividends as may be declared thereon from time to time by the Board of
Directors of the Corporation, in its discretion, out of any funds of the
Corporation at the time legally available for payment of dividends.
3. Liquidation. In the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, after there have
been paid to or set aside for the holders of shares of Preferred Stock the
full preferential amounts, if any, to which they are entitled as provided
in paragraph (3) of Section B, below, the holders of outstanding shares of
Common Stock shall be entitled to share ratably, according to the number of
shares held by each, in the remaining assets of the Corporation available
for distribution.
B. Preferred Stock.
1. Series and Variations Between Series. The Board of Directors of the
Corporation is authorized, to the full extent permitted under the Wisconsin
Business Corporation Law and the provisions of this Section B, to provide
for the issuance of the Preferred Stock in one or more series, each of such
series to be distinctively designated, and to have such voting rights,
redemption or conversion rights, dividend or distribution rights,
preferences with respect to dividends or distributions, or other
preferences, limitations or relative rights as shall be provided by the
Board of Directors of the Corporation consistent with the provisions of the
Wisconsin Business Corporation Law and this Article III. The Board of
Directors of the Corporation, unless otherwise provided when the series is
established, may increase or decrease the number of shares of any series,
provided that the number of shares of any series shall not be reduced below
the number of shares then outstanding.
2. Dividends. Before any dividends (other than a dividend payable
solely in Common Stock) shall be paid or set apart for payment upon shares
of Common Stock, the holders of each series of Preferred Stock shall be
entitled to receive dividends at the rate (which may be fixed or variable)
and at such times as specified in the particular series, if any. The
holders of shares of Preferred Stock shall have no rights to participate
with the holders of shares of Common Stock in any dividends in excess of
the preferential dividends, if any, fixed for such Preferred Stock.
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3. Liquidation. In the event of liquidation, dissolution or winding
up (whether voluntary or involuntary) of the Corporation, the holders of
shares of Preferred Stock shall be entitled to be paid the full amount
payable on such shares upon the liquidation, dissolution or winding up of
the Corporation fixed by the Board of Directors with respect to such
shares, if any, before any amount shall be paid to the holders of the
Common Stock.
C. Designation of Series B Preferred Stock. A series of Preferred
Stock is hereby created and is designated as the "Series B Junior Participating
Preferred Stock" (the "Series B Preferred Stock") and the number of shares
constituting the Series B Preferred Stock shall be 100,000. Such number of
shares of Series B Preferred Stock may be increased or decreased by resolution
of the Board of Directors of the Corporation; provided, however, that no
decrease shall reduce the number of shares of Series B Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series B Preferred Stock. The preferences,
limitations and relative rights of the Series B Preferred Stock shall be as set
forth on the attachment hereto entitled "Preferences, Limitations and Relative
Rights of the Series B Junior Participating Preferred Stock."
ARTICLE IV
Board of Directors
A. Number. The number of directors (exclusive of directors, if any,
elected by the holders of one or more series of Preferred Stock, voting
separately as a series pursuant to the provision of these Articles of
Incorporation applicable thereto) shall not be less than one (1) nor more than
fifteen (15) directors, the exact number of directors to be determined from time
to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors then in office.
B. Classification of Board. The directors shall be divided into three
classes, designated Class I, Class II and Class III, and the term of office of
directors of each class shall be three years. Each class shall consist, as
nearly as possible, of one-third of the total number of directors constituting
the entire Board of Directors. If the number of directors is changed by
resolution of the Board of Directors pursuant to this Article IV, any increase
or decrease shall be apportioned among the classes so as to maintain the number
of directors in each class as nearly equal as possible, but in no case shall a
decrease in the number of directors shorten the term of any incumbent director.
C. Tenure and Vacancies. A director shall hold office until the annual
meeting for the year in which his or her term expires and until his or her
successor shall be elected and shall qualify. Any newly created directorship
resulting from an increase in the number of directors and any other vacancy on
the Board of Directors, however caused, shall be filled by the vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Any director so elected to fill any vacancy on the
Board of Directors, including a vacancy
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created by an increase in the number of directors, shall hold office for the
remaining term of directors of the class to which he or she has been elected and
until his or her successor shall be elected and shall qualify.
D. Removal of Directors. Exclusive of directors, if any, elected by
the holders of one or more classes or series of Preferred Stock, no director of
the Corporation may be removed from office, except for Cause and by the
affirmative vote of not less than 75% of the outstanding shares of capital stock
of the Corporation entitled to vote at a meeting of shareholders duly called for
such purpose. As used in this Article IV, the term "Cause" shall mean solely
malfeasance arising from the performance of a director's duties which has a
materially adverse effect on the business of the Corporation.
E. Nominations of Directors. No person, except those nominated by or
at the direction of the Board of Directors, shall be eligible for election as a
director at any annual or special meeting of shareholders unless a written
request, in the form established by the Corporation's By-laws, that a person's
name be placed in nomination is received from a shareholder of record by the
Secretary of the Corporation, together with the written consent of such person
to serve as a director, (i) with respect to an election held at an annual
meeting of shareholders, not less than one hundred twenty (120) days prior to
the anniversary date of the annual meeting of shareholders in the immediately
preceding year, or (ii) with respect to an election held at a special meeting of
shareholders for the election of directors, not later than the close of business
on the eighth day following the date of the earlier of public announcement or
notice of such meeting.
F. Amendment. Notwithstanding any other provisions of these Articles
of Incorporation or By-laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, these Articles of
Incorporation or the By-laws of the Corporation), this Article IV may be
amended, altered or repealed only by the affirmative vote of the holders of not
less than 75% of the outstanding total shares of stock of the Corporation
entitled to vote at a meeting of shareholders duly called for such purpose and
by the affirmative vote of the holders of not less than a majority of the shares
of each class or series, if any, entitled to vote thereon at such meeting.
ARTICLE V
Business Combinations
A. Special Vote for Certain Combinations. Except as otherwise expressly
provided in Section B of this Article V:
(i) any merger or consolidation of the Corporation with or into any
other corporation;
(ii) any sale, lease, exchange or other disposition of all or any
substantial part of the assets of the Corporation to or with any other
corporation, person or other entity; or
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(iii) the issuance or transfer of any securities of the Corporation by
the Corporation to any other corporation, person or other entity in
exchange for assets, cash or securities or a combination thereof (except
assets, cash or securities or a combination thereof so acquired in a single
transaction or a series of related transactions having an aggregate fair
market value of less than $10,000,000);
shall require the affirmative vote of the holders of
(a) at least 75% of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors,
considered for the purposes of this Article V as one class, and
(b) at least a majority of the outstanding shares of capital stock of
the Corporation which are not beneficially owned by such corporation,
person or other entity,
if as of the record date for the determination of shareholders entitled to
notice thereof and to vote thereon, such other corporation, person or entity is
the beneficial owner, directly or indirectly, of 5% or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors, considered for the purposes of this Article V as one
class. Such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that some lesser percentage may be specified by law or
in any agreement with any national securities exchange or quotation system.
B. Special Vote Not Required. The provisions of this Article V shall not
apply to any transaction described in clauses (i), (ii), or (iii) of Section A
of this Article V, (a) with another corporation, person or other entity if a
majority of the outstanding equity interests in such other corporation, person
or other entity considered for this purpose as one class is owned of record or
beneficially by the Corporation and/or its subsidiaries; or (b) with another
corporation, person or other entity if the Board of Directors of the Corporation
shall by resolution have approved a memorandum of understanding with such other
corporation, person or other entity with respect to and substantially consistent
with such transaction prior to the time such other corporation, person or other
entity became the beneficial owner, directly or indirectly, of 5% or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors; or (c) with another corporation, person
or other entity pursuant to a public or private offering of securities of the
Corporation if such public or private offering does not involve any merger or
consolidation of the Corporation with or into any other corporation and such
public or private offering has been approved by the Board of Directors of the
Corporation.
C. Beneficial Ownership. For the purposes of this Article V, a corporation,
person or other entity shall be deemed to be the beneficial owner of any shares
of capital stock of the Corporation (i) which it has the right to acquire
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, or (ii) which are beneficially owned, directly or
indirectly (including shares deemed owned through application of clause (i)
above), by any other corporation, person or other entity (a) with which it or
its "affiliate" or "associate" (as
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defined below) has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of capital stock of the Corporation
or (b) which is its "affiliate" or "associate" as those terms were defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934 as in effect on September 24, 1997. For the purposes of this Article
V, the outstanding shares of any class of capital stock of the Corporation shall
include shares deemed owned through the application of clauses (i) and (ii) of
this Section C but shall not include any other shares which may be issuable
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise.
D. Determination by Board of Directors. The Board of Directors of the
Corporation shall have the power and duty to determine for the purposes of this
Article V, on the basis of information then known to it, whether (i) any
corporation, person or other entity beneficially owns, directly or indirectly,
5% or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, or is an "affiliate" or
an "associate" (as defined above) of another, (ii) any proposed sale, lease,
exchange or other disposition of part of the assets of the Corporation involves
a substantial part of the assets of the Corporation, (iii) assets, cash or
securities, or a combination thereof, to be acquired in exchange for securities
of the Corporation, have an aggregate fair market value of less than $10,000,000
and whether the same are proposed to be acquired in a single transaction or a
series of related transactions, and (iv) the memorandum of understanding
referred to above is substantially consistent with the transaction to which it
relates. Any such determination by the Board shall be conclusive and binding for
all purposes of this Article V.
E. Amendment. Notwithstanding any other provisions of these Articles of
Incorporation or By-laws of the Corporation (and notwithstanding the fact that a
lesser percentage may be specified by law, these Articles of Incorporation or
the By-laws of the Corporation), this Article V may be amended, altered or
repealed only by the affirmative vote of the holders of not less than 75% of the
outstanding total shares of stock of the Corporation entitled to vote at a
meeting of shareholders duly called for such purpose and by the affirmative vote
of the holders of not less than a majority of the shares of each class or
series, if any, entitled to vote thereon at such meeting.
ARTICLE VI
Preemptive Rights
No holder of any shares of the Corporation shall have any preemptive
or subscription rights nor be entitled, as of right, to purchase or subscribe
for any part of the unissued shares of the Corporation or of any additional
shares issued by reason of any increase of authorized shares of the Corporation
or other securities whether or not convertible into shares of the Corporation.
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ARTICLE VII
Share Dividends
A dividend payable in shares of any class or series of the Corporation
may be paid in shares of any other class or series.
ARTICLE VIII
Shareholder Action
The shareholders of the Corporation shall not be entitled to take action
without a meeting by less than unanimous consent.
ARTICLE IX
Amendment of By-Laws and Articles of Incorporation
A. Amendment of By-Laws. Notwithstanding any other provision of these
Articles of Incorporation or the Corporation's By-laws, the Corporation's By-
laws may be amended, altered or repealed, and new By-laws may be enacted, only
by the affirmative vote of the holders of not less than 75% of the outstanding
shares of capital stock of the Corporation entitled to vote at a meeting of
shareholders duly called for such purpose and by the affirmative vote of the
holders of not less than a majority of the shares of each class or series, if
any, entitled to vote thereon at such meeting, or by a vote of not less than a
majority of the entire Board of Directors then in office.
B. Amendment of Articles of Incorporation. Except as provided in Articles
IV and V and this Article IX, these Articles of Incorporation may be amended,
altered or repealed, and new Articles of Incorporation may be enacted, only by
the affirmative vote of the holders of not less than a majority of the
outstanding total shares of stock of the Corporation entitled to vote at a
meeting of shareholders duly called for such purpose and by the affirmative vote
of the holders of not less than a majority of the shares of each class or
series, if any, entitled to vote thereon at such meeting; provided, however,
that this Article IX shall not limit the power of the Corporation's Board of
Directors to make certain amendments to the Articles of Incorporation under
Chapter 180 of the Wisconsin Statutes and any successor provisions without
shareholder approval.
C. Amendment of this Article IX. Notwithstanding any other provisions
of these Articles of Incorporation or By-laws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, these
Articles of Incorporation or the By-laws of the Corporation), this Article IX
may be amended, altered or repealed only by the affirmative vote of the holders
of not less than 75% of the outstanding total shares of stock of the Corporation
entitled to vote at a meeting of shareholders duly called for such purpose and
by the affirmative vote of the holders of not less than a majority of the shares
of each class or series, if any, entitled to vote thereon at such meeting.
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ARTICLE X
Registered Office
The address of the initial registered office of the Corporation is 44
East Mifflin Street, Madison, Wisconsin 53703. The name of its initial
registered agent at such address is CT Corporation System.
ARTICLE XI
The name and address of the incorporator is Randall J. Erickson,
Godfrey & Kahn, S.C., 780 North Water Street, Milwaukee, Wisconsin 53202.
This instrument was drafted by:
Randall J. Erickson
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
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ATTACHMENT
TO THE
ARTICLES OF INCORPORATION
OF
NEW SHOPKO, INC.
Preferences, Limitations and
Relative Rights of the Series B
Junior Participating Preferred Stock
1. Dividends and Distributions. (a) Subject to the rights of the
holders of any shares of any series of Preferred Stock (or any similar
stock) ranking prior and superior to the Series B Junior Participating
Preferred Stock (the "Series B Preferred Stock") with respect to dividends,
the holders of shares of Series B Preferred Stock, in preference to the
holders of Common Stock, par value $0.01 per share (the "Common Stock") of
the Corporation and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on
the first day of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the greater of
(i) $10 or (ii) subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends,
and 1,000 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series B Preferred Stock.
In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which holders
of shares of Series B Preferred Stock were entitled immediately prior to
such event under clause (ii) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
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(b) The Corporation shall declare a dividend or distribution on the
Series B Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$10 per share on the Series B Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series B Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series
B Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series B Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
2. Voting Rights. The holders of shares of Series B Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series B Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
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(b) Except as otherwise provided herein, in any Articles of Amendment
or such other similar document creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series B Preferred Stock
and the holders of shares of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of shareholders of the
Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series B Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
3. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section C.1, above,
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series B Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B
Preferred Stock, except dividends paid ratably on the Series B
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up), to the Series B Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series B Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Preferred Stock, or any shares of stock ranking
on a parity with the Series B Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of
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the respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(a) of this Section 3, purchase or otherwise acquire such shares at such
time and in such manner.
4. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any Articles of Amendment or such other similar
document creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
5. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (a)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred Stock unless,
prior thereto, the holders of shares of Series B Preferred Stock shall have
received $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series B Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (b) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except distributions made ratably on the Series B Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series B Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(b) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
6. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
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hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. No Redemption. The shares of Series B Preferred Stock shall not
be redeemable.
8. Rank. The Series B Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Corporation's Preferred Stock.
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<PAGE>
Appendix C
BY-LAWS
OF
NEW SHOPKO, INC.
ARTICLE I. OFFICES
-------------------
SECTION 1.1. Principal and Other Offices. The principal office of the
Corporation shall be located at any place either within or outside the State of
Wisconsin as designated in the Corporation's most current Annual Report filed
with the Wisconsin Secretary of State. The Corporation may have such other
offices, either within or outside the State of Wisconsin, as the Board of
Directors may designate or as the business of the Corporation may require from
time to time.
SECTION 1.2. Registered Office. The registered office of the
Corporation required by the Wisconsin Business Corporation Law to be maintained
in the State of Wisconsin may, but need not, be the same as any of its places of
business. The registered office may be changed from time to time.
SECTION 1.3. Registered Agent. The registered agent of the
Corporation required by the Wisconsin Business Corporation Law to maintain a
business office in the State of Wisconsin may, but need not, be an officer or
employee of the Corporation. The registered agent may be changed from time to
time.
ARTICLE II. SHAREHOLDERS
------------------------
SECTION 2.1. Annual Meeting. The annual meeting of shareholders shall
be held on the fourth Wednesday in May of each year at 10:00 a.m. (local time)
or on such other date and at such other time as may be fixed by, or at the
direction of, the Board of Directors, for the purpose of electing directors and
for the transaction of such other business as may have been properly brought
before the meeting in compliance with the provisions of Section 2.5. If the day
fixed for the annual meeting shall be a legal holiday in the State of Wisconsin,
such meeting shall be held on the next succeeding business day.
SECTION 2.2. Special Meetings. Except as otherwise required by
applicable law, special meetings of shareholders of the Corporation may only be
called by the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer, the President or by not less than a majority of the Board of
Directors; provided, however, that the Corporation shall hold a special meeting
of shareholders of the Corporation if a signed and dated written demand or
demands by the holders of at least 10% of all the votes entitled to be cast on
any issue proposed
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to be considered at the proposed special meeting is delivered to the Corporation
as required under the Wisconsin Business Corporation Law, which demand or
demands must describe one or more purposes for which the shareholders demand a
meeting be called, and the shareholders demanding the meeting pay to the
Corporation, or make satisfactory arrangements with the Corporation for payment
of, the Corporation's anticipated costs of holding the meeting, including the
costs of printing and mailing any proxy materials. Only business within the
purpose described in the notice required by Section 2.4 may be conducted at a
special shareholders' meeting.
SECTION 2.3. Place of Meeting. The Board of Directors, the Chairman
of the Board, the Vice Chairman of the Board, the Chief Executive Officer or the
President may designate any place, within or outside the State of Wisconsin, as
the place of meeting for the annual meeting or for any special meeting. If no
designation is made the place of meeting shall be the principal office of the
Corporation, but any meeting may be adjourned to reconvene at any place
designated by vote of a majority of the shares represented thereat.
SECTION 2.4. Notice of Meeting. The Corporation shall notify
shareholders of the date, time and place of each annual and special
shareholders' meeting. Notice of a special meeting shall include a description
of each purpose for which the meeting is called. Notice of all meetings need be
given only to shareholders entitled to vote, unless otherwise required by the
Wisconsin Business Corporation Law, and shall be given not less than ten nor
more than sixty days before the meeting date. The Corporation may give notice in
person, by telephone, teletype, facsimile, electronic mail or other forms of
wire or wireless communication, or by mail or private carrier, and, if these
forms of personal communication are impracticable, notice may be communicated by
a newspaper of general circulation in the area where published, or by radio,
television or other form of public broadcast communication. Written notice shall
be deemed to be effective at the earlier of receipt or mailing and may be
addressed to the shareholder's address shown in the Corporation's current record
of shareholders. The Corporation may give oral notice and such oral notice shall
be deemed to be effective when communicated. Notice by newspaper, radio,
television or other form of public broadcast communication shall be deemed to be
effective on the date of publication or broadcast.
SECTION 2.5. Advance Notice Shareholder-Proposed Business at Annual
Meeting. At an annual meeting of shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) specified in the notice
of meeting (or any amendment or supplement thereto) given in accordance with
Section 2.4, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, or the President, or (c)
otherwise properly brought before the meeting by a shareholder. In addition to
any other requirements under applicable law, the Articles of Incorporation or
the By-Laws for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
received at the principal office of the Corporation not less than 120 days prior
to the anniversary date of the annual meeting of shareholders in the immediately
preceding year. A shareholder's notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before the annual meeting (i) the
text of
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such proposal or a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of the shareholder proposing
such business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, (iv) any interest of the shareholder in
such business, (v) a representation that the person sending the notice is a
shareholder of record and will remain such through the record date for the
meeting, and (vi) a representation that such shareholder intends to appear in
person or by proxy at such meeting to move for the consideration of the business
set forth in the notice. In addition, any such shareholder shall be required to
provide such further information as may be requested by the Corporation in order
to comply with federal and state securities laws, and rules and regulations
thereunder. The Corporation may require evidence by any person giving notice
under this Section 2.5 that such person is a bona fide beneficial owner of the
Corporation's shares.
Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 2.5; provided, however, that nothing in
this Section 2.5 shall be deemed to preclude discussion by any shareholder of
any business properly brought before the annual meeting in accordance with said
procedure.
The presiding officer at an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
2.5, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
SECTION 2.6. Procedure for Nomination of Directors. Only persons
nominated in accordance with all of the procedures set forth in the
Corporation's Articles of Incorporation and By-Laws shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of shareholders by or at
the direction of the Board of Directors, by any nominating committee or persons
appointed by the Board, or by any shareholder of the Corporation entitled to
vote for election of directors at the meeting who complies with all of the
notice procedures set forth in this Section 2.6.
Nominations other than those made by or at the direction of the Board
of Directors or any nominating committee or person appointed by the Board shall
be made pursuant to timely notice in proper written form to the Secretary of the
Corporation. To be timely, a shareholder's request to nominate a person for
director, together with the written consent of such person to serve as a
director, must be received by the Secretary of the Corporation at the
Corporation's principal office (i) with respect to an election held at an annual
meeting of shareholders, not less than 120 days prior to the anniversary date of
the annual meeting of shareholders in the immediately preceding year, or (ii)
with respect to an election held at a special meeting of shareholders for the
election of directors, not less than the close of business on the eighth day
following the date of the earlier of public announcement or notice of such
meeting. To be in proper written form, such shareholder's notice shall set forth
in writing (a) as to each person whom the shareholder proposes to nominate for
election or reelection as a director (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class
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and number of shares of stock of the Corporation which are beneficially owned by
such person, and (iv) such other information relating to such person as would be
required to be disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, and any successor to such Regulation; and (b) as to the shareholder
giving the notice (i) the name and address, as they appear on the Corporation's
books, of such shareholder, (ii) the class and number of shares of the
Corporation which are owned beneficially and of record by such shareholder,
(iii) a representation that the shareholder is a holder of record of shares of
the Corporation entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice, and (iv) a representation that the person sending the notice is a
shareholder of record and will remain such through the record date for the
meeting. The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as a director of the Corporation
or the shareholder to nominate the proposed nominee. The presiding officer at
the meeting shall, if the facts so warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures or other
requirements prescribed by the Corporation's Articles of Incorporation and By-
Laws; and if he should so determine, such presiding officer shall so declare to
the meeting and the defective nomination(s) shall be disregarded.
SECTION 2.7. Fixing of Record Date. For the purpose of determining
shareholders of any voting group entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any distribution or dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders.
Such record date shall not be more than 70 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is so fixed for the determination of shareholders entitled to
notice of, or to vote at a meeting of shareholders, or shareholders entitled to
receive a share dividend or distribution, the record date for determination of
such shareholders shall be at the close of business on:
(a) With respect to an annual shareholders meeting or any
special shareholders meeting called by the Board of Directors or any person
specifically authorized by the Board of Directors or these By-Laws to call
a meeting, the day before the first notice is mailed to shareholders;
(b) With respect to a special shareholders meeting demanded by
the shareholders, the date the first shareholder signs the demand;
(c) With respect to the payment of a share dividend, the date
the Board of Directors authorizes the share dividend; and
(d) With respect to a distribution to shareholders (other than
one involving a repurchase or reacquisition of shares), the date the Board
of Directors authorizes the distribution.
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SECTION 2.8. Voting Lists. After fixing a record date for a meeting,
the Corporation, shall prepare a list of the names of all its shareholders who
are entitled to notice of a shareholders meeting. The list shall be arranged by
class or series of shares and show the address of and the number of shares held
by each shareholder. The shareholders list must be available for inspection by
any shareholder, beginning two business days after notice of the meeting is
given for which the list was prepared and continuing to the date of the meeting.
The list shall be available at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting is to be held.
Subject to the provisions of the Wisconsin Business Corporation Law, a
shareholder or his agent or attorney may, on written demand, inspect and copy
the list during regular business hours at his expense, during the period that it
is available for inspection. The Corporation shall make the shareholders list
available at the meeting, and any shareholder or his agent or attorney may
inspect the list at any time during the meeting or any adjournment thereof.
Refusal or failure to prepare or make available the shareholders list shall not
affect the validity of any action taken at such meeting.
SECTION 2.9. Shareholder Quorum and Voting Requirements. Shares
entitled to vote as a separate voting group may take action on a matter at a
meeting only if a quorum of those shares exists with respect to that matter.
Unless the Articles of Incorporation, By-Laws adopted under authority granted in
the Articles of Incorporation or the Wisconsin Business Corporation Law provide
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
If the Articles of Incorporation or the Wisconsin Business Corporation
Law provide for voting by two or more voting groups on a matter, action on that
matter is taken only when voted upon by each of those voting groups counted
separately. Action may be taken by one voting group on a matter even though no
action is taken by another voting group entitled to vote on the matter.
Once a share is represented for any purpose at a meeting, other than
for the purpose of objecting to holding the meeting or transacting business at
the meeting, it is deemed present for purposes of determining whether a quorum
exists, for the remainder of the meeting and for any adjournment of that meeting
to the extent provided in Section 2.14.
If a quorum exists, action on a matter by a voting group is approved
if the votes cast within the voting group favoring the action exceed the votes
cast opposing the action, unless the Articles of Incorporation, the By-Laws or
the Wisconsin Business Corporation Law require a greater number of affirmative
votes; provided, however, that for purposes of electing directors, unless
otherwise provided in the Articles of Incorporation, directors are elected by a
plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. For purposes of electing directors, (i) a
"plurality" means that the individuals with the largest number of votes are
elected as directors up to the maximum number of directors to be chosen at the
election, and (ii) votes against a candidate are not given legal effect and are
not counted as votes cast in an election of directors.
SECTION 2.10. Proxies. For all meetings of shareholders, a shareholder
may appoint a proxy to vote or otherwise act for the shareholder by signing an
appointment form, either
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personally or by a duly authorized attorney-in-fact. Such proxy shall be
effective when filed with the Secretary of the Corporation or other officer or
agent authorized to tabulate votes before or at the time of the meeting. No
proxy shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
SECTION 2.11. Voting of Shares. Unless otherwise provided in the
Articles of Incorporation or the Wisconsin Business Corporation Law, each
outstanding share entitled to vote shall be entitled to one vote upon each
matter submitted to a vote at a meeting of shareholders.
No shares in the Corporation held by another corporation may be voted
if the Corporation owns, directly or indirectly, a sufficient number of shares
entitled to elect a majority of the directors of such other corporation;
provided, however, that the Corporation shall not be limited in its power to
vote any shares, including its own shares, held by it in a fiduciary capacity.
SECTION 2.12. Voting Shares Owned by the Corporation. Shares of the
Corporation belonging to it shall not be voted directly or indirectly at any
meeting and shall not be counted in determining the total number of outstanding
shares at any given time, but shares held by this Corporation in a fiduciary
capacity may be voted and shall be counted in determining the total number of
outstanding shares at any given time.
SECTION 2.13. Acceptance of Instruments Showing Shareholder Action.
(a) If the name signed on a vote, consent, waiver or proxy
appointment corresponds to the name of a shareholder, the Corporation, if
acting in good faith, may accept the vote, consent, waiver or proxy
appointment and give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver or proxy
appointment does not correspond to the name of its shareholder, the
Corporation, if acting in good faith, may accept the vote, consent, waiver
or proxy appointment and give it effect as the act of the shareholder if
any of the following apply:
(1) the shareholder is an entity, within the meaning of the
Wisconsin Business Corporation Law, and the name signed purports to be
that of an officer or agent of the entity;
(2) the name signed purports to be that of a personal
representative, administrator, executor, guardian or conservator
representing the shareholder and, if the Corporation or its agent
requests, evidence of fiduciary status acceptable to the Corporation
is presented with respect to the vote, consent, waiver or proxy
appointment;
(3) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation or
its agent requests, evidence
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of this status acceptable to the Corporation is presented with respect
to the vote, consent, waiver or proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the Corporation
or its agent requests, evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder is presented with
respect to the vote, consent, waiver or proxy appointment; or
(5) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least
one of the co-owners and the person signing appears to be acting on
behalf of all co-owners.
(c) The Corporation may reject a vote, consent, waiver or proxy
appointment if the Secretary or other officer or agent of the Corporation
who is authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
SECTION 2.14. Adjournments. An annual or special meeting of
shareholders may be adjourned at any time, including after action on one or more
matters, by a majority of shares represented, even if less than a quorum. The
meeting may be adjourned for any purpose, including, but not limited to,
allowing additional time to solicit votes on one or more matters, to disseminate
additional information to shareholders or to count votes. Upon being reconvened,
the adjourned meeting shall be deemed to be a continuation of the initial
meeting.
(a) Quorum. Once a share is represented for any purpose at the
original meeting, other than for the purpose of objecting to holding the
meeting or transacting business at a meeting, it is considered present for
purposes of determining if a quorum exists, for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is
or must be set for that adjourned meeting.
(b) Record Date. When a determination of shareholders entitled
to notice of or to vote at any meeting of shareholders has been made as
provided in Section 2.7, such determination shall be applied to any
adjournment thereof unless the Board of Directors fixes a new record date,
which it shall do if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting.
(c) Notice. Unless a new record date for an adjourned meeting
is or must be fixed pursuant to Section 2.14(b), the Corporation is not
required to give notice of the new date, time or place if the new date,
time or place is announced at the meeting before adjournment.
SECTION 2.15. Polling. In the sole discretion of the presiding
officer of an annual or special meeting of shareholders, polls may be closed at
any time after commencement of any annual or special meeting. When there are
several matters to be considered at a meeting, the polls
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may remain open during the meeting as to any or all matters to be considered, as
the presiding officer may declare. Polls will remain open as to matters to be
considered at any adjournment of the meeting unless the presiding officer
declares otherwise. At the sole discretion of the presiding officer, the polls
may remain open after adjournment of a meeting for not more than 72 hours for
the purpose of collecting proxies and counting votes. All votes submitted prior
to the announcement of the results of the balloting shall be valid and counted.
The results of balloting shall be final and binding after announcement of such
results.
SECTION 2.16. Waiver of Notice by Shareholders. A shareholder may
waive any notice required by the Wisconsin Business Corporation Law, the
Articles of Incorporation or the By-Laws before or after the date and time
stated in the notice. The waiver shall be in writing and signed by the
shareholder entitled to the notice, contain the same information that would have
been required in the notice under any applicable provisions of the Wisconsin
Business Corporation Law, except that the time and place of the meeting need not
be stated, and be delivered to the Corporation for inclusion in the
Corporation's records. A shareholder's attendance at a meeting, in person or by
proxy, waives objection to (i) lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting or promptly upon
arrival objects to the holding of the meeting or transacting business at the
meeting, and (ii) consideration of a particular matter at the meeting that is
not within the purpose described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
SECTION 2.17. Unanimous Consent without Meeting. Any action required
or permitted to be taken at a meeting of shareholders may be taken without a
meeting only by unanimous written consent or consents signed by all of the
shareholders of the Corporation and delivered to the Corporation for inclusion
in the Corporation's records. Such consent must describe the action taken and
must be delivered to the Corporation for inclusion in the corporate records. The
record date for determining shareholders entitled to take action under this
section is the date that the first shareholder signs the consent. A consent
signed under this section has the effect of a meeting vote and may be described
as such in any document.
ARTICLE III. BOARD OF DIRECTORS
-------------------------------
SECTION 3.1. General Powers. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of, its Board of Directors, subject to
any limitations set forth in the Articles of Incorporation.
SECTION 3.2. Number, Tenure, Qualifications and Term.
(a) Number. Except as otherwise provided in the Articles of
Incorporation, the number of directors (exclusive of directors, if any,
elected by the holders of one or more series of Preferred Stock, voting
separately as a series pursuant to the provisions of the Articles of
Incorporation) shall be not less than one (1) nor more than fifteen (15)
directors, the exact number of directors to be determined from time to time
by resolution adopted by affirmative vote of a majority of the entire Board
of Directors then in office.
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(b) Class. The directors shall be divided into three classes,
designated Class I, Class II and Class III, and the term of office of
directors of each class shall be three years. Each class shall consist, as
nearly as possible, of one-third of the total number of directors
constituting the entire Board of Directors. If the number of directors is
changed by resolution of the Board of Directors pursuant to Section 3.2(a),
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible,
but in no case shall a decrease in the number of directors shorten the term
of any incumbent director.
(c) Tenure. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor
shall be duly elected and shall qualify.
(d) Qualifications. A director need not be a resident of the
state of Wisconsin or a shareholder of the Corporation except if required
by the Articles of Incorporation. The Board of Directors, at its
discretion, may establish any qualifications for directors, which
qualifications, if any, shall only be applied for determining
qualifications of a nominee for director as of the date of the meeting at
which such nominee is to be elected or appointed.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of shareholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Articles of Incorporation applicable thereto. Directors so elected
shall not be divided into classes unless expressly provided by such Articles,
and during the prescribed terms of office of such directors, the Board of
Directors shall consist of such directors in addition to the number of directors
determined as provided in Section 3.2(a).
SECTION 3.3. Removal. Exclusive of directors, if any, elected by the
holders of one or more classes or series of Preferred Stock, no director of the
Corporation may be removed from office except for Cause and by the affirmative
vote of 75% of the outstanding shares of capital stock the Corporation entitled
to vote at a meeting of shareholders duly called for such purpose. As used in
this Section 3.3, the term "Cause" shall mean solely malfeasance arising from
the performance of a director's duties which has a materially adverse effect on
the business of the Corporation.
SECTION 3.4. Resignation. A director may resign at any time by
delivering written notice to the Board of Directors, the Chairman of the Board
or to the Corporation (which shall be directed to the Secretary). Such
resignation is effective when the notice is delivered unless the notice
specifies a later effective date.
SECTION 3.5. Vacancies. Exclusive of a vacancy in directors, if any,
elected by the holders of one or more series of Preferred Stock, any vacancy on
the Board of Directors, however caused, including, without limitation, any
vacancy resulting from an increase in the number of directors, shall be filled
by the vote of a majority of the directors then in office, although
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less than a quorum, or by a sole remaining director. Any director so elected to
fill any vacancy on the Board of Directors, including a vacancy created by an
increase in the number of directors, shall hold office for the remaining term of
directors of the class to which he or she has been elected and until his or her
successor shall be elected and shall qualify. A vacancy that will occur at a
specific later date may be filled before the vacancy occurs, but the new
director will not take office until the vacancy occurs.
SECTION 3.6. Committees. The Board of Directors by resolution adopted
by the affirmative vote of a majority of the number of directors fixed by
Section 3.2(a) then in office may create one or more committees, appoint members
of the Board of Directors to serve on the committees and designate other members
of the Board of Directors to serve as alternates. Each committee shall consist
of two or more members of the Board of Directors. Unless otherwise provided by
the Board of Directors, members of the committee shall serve at the pleasure of
the Board of Directors. Each committee may exercise those aspects of the
authority of the Board of Directors which are within the scope of the
committee's assigned responsibilities or which the Board of Directors otherwise
confers upon such committee; provided, however, a committee may not do any of
the following:
(a) authorize distributions;
(b) approve or propose to shareholders action that the
Wisconsin Business Corporation Law requires be approved by
shareholders;
(c) fill vacancies on the Board of Directors or, unless the
Board of Directors has specifically granted authority to the
committee, its committees;
(d) amend the Articles of Incorporation pursuant to the
authority of directors to do so granted by the Wisconsin Business
Corporation Law;
(e) adopt, amend, or repeal by-laws;
(f) approve a plan of merger not requiring shareholder
approval;
(g) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of Directors;
or
(h) authorize or approve the issuance or sale or contract
for sale of shares or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except
that the Board of Directors may authorize a committee (or a senior
executive officer of the Corporation, including without limitation the
President and any Vice President) to do so within limits prescribed by
the Board of Directors.
Except as required or limited by the Articles of Incorporation, the By-Laws, the
Wisconsin Business Corporation Law, or resolution of the Board of Directors,
each committee shall be
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authorized to fix its own rules governing the conduct of its activities. Each
committee shall make such reports to the Board of Directors of its activities as
the Board of Directors may request.
SECTION 3.7. Compensation. Except as provided in the Articles of
Incorporation, the Board of Directors, irrespective of any personal interest of
any of its members, may fix the compensation of directors.
SECTION 3.8. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this By-Law on the same date
as, and at the same place as, the annual meeting of shareholders, and each
adjourned session thereof. A regular meeting of a committee, if any, shall be at
such date, place, either within or outside the State of Wisconsin, and time as
such committee determines. Other regular meetings of the Board of Directors
shall be held at such dates, times and places, either within or outside the
State of Wisconsin, as the Chairman of the Board determines.
SECTION 3.9. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
Vice Chairman of the Board, the Chief Executive Officer, the President or a
majority of the members of the Board of Directors. Special meetings of a
committee may be called by or at the request of the Chairman of a committee or a
majority of the committee members. The person or persons authorized to call
special meetings of the Board of Directors or a committee may fix any date, time
and place, either within or outside the State of Wisconsin, for any special
meeting of the Board of Directors or committee called by them.
SECTION 3.10. Notice; Waiver. Notice of meetings shall be given at
least 24 hours prior thereto and shall state the date, time and place of the
meeting of the Board of Directors or committee. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors or committee need be specified in the notice of such meeting.
Notice may be communicated in person, by telephone, telegraph, teletype,
facsimile or other form of wire or wireless communication, or by mail or private
carrier. Written notice is effective at the earliest of the following: (1) when
received; (2) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee; or (3) two days after it is deposited with a private
carrier. Oral notice is deemed effective when communicated. Facsimile notice is
deemed effective when sent.
A director may waive any notice required by the Wisconsin Business
Corporation Law, the Articles of Incorporation or the By-Laws before or after
the date and time stated in the notice. The waiver shall be in writing, signed
by the director entitled to the notice and retained by the Corporation.
Notwithstanding the foregoing, a director's attendance at or participation in a
meeting waives any required notice to such director of the meeting unless the
director at the beginning of the meeting or promptly upon such director's
arrival objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
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SECTION 3.11. Quorum; Voting. Unless otherwise provided in the
Articles of Incorporation or the Wisconsin Business Corporation Law, a majority
of the number of directors fixed by Section 3.2(a) or appointed by the Board of
Directors to a committee shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors or committee; provided,
however, that even though less than such quorum is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice. Except as otherwise provided in the Articles of
Incorporation, the By-Laws or the Wisconsin Business Corporation Law, if a
quorum is present when a vote is taken, the affirmative vote of a majority of
directors present is the act of the Board of Directors or committee.
SECTION 3.12. Presumption of Assent. A director of the Corporation who
is present and is announced as present at a meeting of the Board of Directors or
a committee thereof at which action on any corporate matter is taken is deemed
to have assented to the action taken unless (i) such director objects at the
beginning of the meeting or promptly upon arrival to holding the meeting or
transacting business at the meeting, (ii) such director dissents or abstains
from an action taken and minutes of the meeting are prepared that show the
director's dissent or abstention from the action taken, (iii) such director
delivers written notice of his dissent or abstention to the presiding officer of
the meeting before its adjournment or to the Corporation (directed to the
Secretary) immediately after adjournment of the meeting, or (iv) such director
dissents or abstains from an action taken, minutes of the meeting are prepared
that fail to show the director's dissent or abstention from the action taken and
the director delivers to the Corporation (directed to the Secretary) a written
notice of that failure promptly after receiving the minutes. A director who
votes in favor of action taken may not dissent or abstain from that action.
SECTION 3.13. Informal Action Without Meeting. Any action required or
permitted by the Articles of Incorporation, the By-Laws or the Wisconsin
Business Corporation Law to be taken by the Board of Directors or a committee at
a meeting may be taken without a meeting if the action is taken by all of the
directors or committee members then in office. The action shall be evidenced by
one or more written consents describing the action taken, signed by each
director and retained by the Corporation. Any such consent is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this section has the effect of a
unanimous vote taken at a meeting at which all directors were present, and may
be described as such in any document.
SECTION 3.14. Telephonic or Other Meetings. Unless the Articles of
Incorporation provide otherwise, any or all directors may participate in a
regular or special meeting of the Board of Directors or any committee thereof
by, or conduct the meeting through the use of, any means of communication by
which (i) all directors participating may simultaneously hear each other during
the meeting, (ii) all communication during the meeting is immediately
transmitted to each participating director, and (iii) each participating
director is able to immediately send messages to all other participating
directors. If the meeting is to be conducted through the use of any such means
of communication all participating directors shall be informed that a meeting is
taking place at which official business may be transacted. A director
participating in a meeting by this means is deemed to be present in person at
the meeting. Notwithstanding the foregoing, the
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Chairman of the Board, or other presiding officer, shall, at any time, have the
authority to deem any business or resolution not appropriate for meetings held
pursuant to this Section 3.14.
ARTICLE IV. OFFICERS
--------------------
SECTION 4.1. Number. The principal officers of the Corporation shall
be a Chairman of the Board, a Chief Executive Officer, a President, one or more
Vice Presidents, any number of whom may be designated as Senior Executive Vice
President, Executive Vice President or Senior Vice President, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors. Until such
time as the Board of Directors shall deem it desirable to elect a Chairman of
the Board such office may remain vacant, and while such office is vacant, the
powers and duties of the Chairman of the Board shall vest in and be performed by
the Chief Executive Officer of the Corporation. The Board of Directors may elect
or appoint a Vice Chairman of the Board. Such other officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Such other
assistant officers as may be deemed necessary may be appointed by the Board of
Directors, the Chief Executive Officer or the President for such term as is
specified in the appointment. The same natural person may simultaneously hold
more than one office in the Corporation.
SECTION 4.2. Election and Term of Office. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
the annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
SECTION 4.3. Resignation and Removal. An officer may resign at any
time by delivering notice to the corporation. The resignation is effective when
the notice is delivered, unless the notice specifies a later effective date and
the corporation accepts the later effective date. If a resignation is effective
at a later date, the Board of Directors may fill the pending vacancy before the
effective date if the Board of Directors provides that the successor may not
take office until the effective date. The Board of Directors may remove any
officer at any time with or without cause and notwithstanding the contract
rights, if any, of the officer removed. The Board of Directors, the Chief
Executive Officer or the President may remove any assistant officer who was
appointed by the Board, the Chief Executive Officer or the President. The
appointment of an officer or assistant officer does not itself create contract
rights.
SECTION 4.4. Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be filled by
the Board of Directors for the unexpired portion of the term. A vacancy in any
assistant office because of death, resignation, removal, disqualification or
otherwise may be filled by the Board of Directors, the Chief Executive Officer
or the President.
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SECTION 4.5. Chairman of the Board. The Chairman of the Board shall
preside at all annual and special meetings of shareholders and all regular and
special meetings of the Board of Directors, shall advise and counsel with the
Chief Executive Officer and shall be responsible for the administration and
management of the areas of the business and affairs of the Corporation assigned
to him or her from time to time by the Board of Directors.
SECTION 4.6. Vice Chairman of the Board. The Vice Chairman of the
Board shall advise and counsel with the Chief Executive Officer and shall be
responsible for the administration and management of the areas of the business
and affairs of the Corporation assigned to him or her from time to time by the
Board of Directors.
SECTION 4.7. Chief Executive Officer. The Chief Executive Officer
shall be the principal executive officer of the Corporation and, subject to the
control of the Board of Directors, shall have general supervision and control of
the business and affairs of the Corporation and its officers. The Chief
Executive Officer shall have the authority, subject to such rules as may be
prescribed by the Board of Directors, to appoint such agents and employees of
the Corporation as the Chief Executive Officer deems necessary, prescribe their
powers, duties and compensation, and delegate authority to them. Such agents and
employees shall hold offices at the discretion of the Chief Executive Officer.
The Chief Executive Officer shall have authority to sign, execute and
acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds, stock
certificates, contracts, leases, reports and all other documents or instruments
necessary or proper to be executed in the course of the Corporation's regular
business or which shall be authorized by the Board of Directors. Except as
otherwise provided by the Wisconsin Business Corporation Law or the Board of
Directors, the Chief Executive Officer may authorize any other officer or agent
of the Corporation to sign, execute and acknowledge such documents in his place
and stead. In general, the Chief Executive Officer shall have all authority and
perform all duties incident to the office of the chief executive offices and
such other duties as may be prescribed by the Board of Directors from time to
time.
SECTION 4.8. President. In the absence of the Chief Executive Officer
or in the event of his death, inability or refusal to act, the President shall
perform the duties of the Chief Executive Officer, and when so acting shall have
all the powers and duties of the Chief Executive Officer. In addition, the
President shall be responsible for the administration and management of the
areas of the business and affairs of the Corporation assigned to him from time
to time by the Board of Directors or the Chief Executive Officer.
SECTION 4.9. Vice Presidents. One or more of the Vice Presidents may
be designated as Senior Executive Vice President, Executive Vice President or
Senior Vice President. In the absence of the President or in this event of his
death, inability or refusal to act, the Vice Presidents in the order designated
at the time of their election, shall perform the duties of the President and
when so acting shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign with the Secretary
or Assistant Secretary certificates for shares of the Corporation. Any Vice
President shall perform such other duties as are incident to the office of Vice
President or as may be prescribed from time to time by the Board of Directors,
the Chief Executive Officer or the President.
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SECTION 4.10. Secretary. The Secretary shall: (i) keep the minutes of
the shareholders and Board of Directors meetings in one or more books provided
for that purpose, (ii) see that all notices are duly given in accordance with
the provisions of the By-Laws or as required by law, (iii) be custodian of the
Corporation's records and of the seal of the Corporation, (iv) see that the seal
of the Corporation is affixed to all appropriate documents the execution of
which on behalf of the Corporation under its seal is duly authorized, (v) keep a
register of the address of each shareholder which shall be furnished to the
Secretary by such shareholder, and (vi) perform all duties incident to the
office of Secretary and such other duties as may be prescribed from time to time
by the Board of Directors, the Chief Executive Officer or the President.
SECTION 4.11. Treasurer. The Treasurer shall: (i) have charge and
custody of and be responsible for all funds and securities of the Corporation,
(ii) receive and give receipts for moneys due and payable to the Corporation
from any source whatsoever, and deposit all such moneys in the name of the
Corporation, and (iii) in general perform all of the duties incident to the
office of Treasurer and have such other duties and exercise such other authority
as from time to time may be delegated or assigned by the Board of Directors, the
Chief Executive Officer or the President.
SECTION 4.12. Assistant Secretaries and Assistant Treasurers. An
Assistant Secretary, if any, when authorized by the Board of Directors, may sign
with the Chief Executive Officer, the President or any Vice President
certificates for shares of the Corporation, the issuance of which shall have
been authorized by a resolution of the Board of Directors. An Assistant
Treasurer, if any, shall, if required by the Board of Directors, give bonds for
the faithful discharge of his duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Board of Directors, the Chief Executive Officer, the President, the
Secretary or the Treasurer, respectively.
SECTION 4.13. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Directors or a committee authorized by the
Board to fix the same, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the Corporation or a
member of such committee.
ARTICLE V. CONTRACTS; VOTING OF STOCK IN OTHER CORPORATIONS
-----------------------------------------------------------
SECTION 5.1. Contracts. The Board of Directors may authorize any
officer or officers, committee, or any agent or agents to enter into any
contract or execute and deliver any instrument in the name of and on behalf of
the Corporation, and such authorization may be general or confined to specific
instances.
SECTION 5.2. Voting of Stock in Other Corporations. The Board of
Directors by resolution shall from time to time designate one or more persons to
vote all stock held by this Corporation in any other corporation or entity, may
designate such persons in the alternative and
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may empower them to execute proxies to vote in their stead. In the absence of
any such designation by the Board of Directors, the President shall be
authorized to vote any stock held by the Corporation or execute proxies to vote
such stock.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
------------------------------------------------------
SECTION 6.1. Certificates for Shares. Certificates representing shares
of the Corporation shall be in such form as shall be determined by, or under the
authority of a resolution of, the Board of Directors, which shall be consistent
with the requirements of the Wisconsin Business Corporation Law. Such
certificates shall be signed by the Chief Executive Officer, the President or a
Vice President and by the Secretary or an Assistant Secretary. The validity of a
share certificate is not affected if a person who signed the certificate no
longer holds office when the certificate is issued. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors or its designee may prescribe.
SECTION 6.2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the Corporation shall be deemed by
the Corporation to be the owner thereof for all purposes, except as otherwise
required by the Wisconsin Business Corporation Law.
SECTION 6.3. Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Wisconsin as they may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation, including the appointment or designation
of one or more stock transfer agents and one or more stock registrars.
ARTICLE VII. INDEMNIFICATION; INSURANCE
---------------------------------------
SECTION 7.1. Indemnity of Directors, Officers, Designated Employees
and Designated Agents.
(a) Definitions to Indemnification and Insurance Provisions.
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(1) "Director, Officer, Employee or Agent" means any of the
following: (i) a natural person who is or was a director, officer,
employee or agent of the Corporation; (ii) a natural person who, while
a director, officer, employee or agent of the Corporation, is or was
serving either pursuant to the Corporation's specific request or as a
result of the nature of such person's duties to the Corporation as a
director, officer, partner, trustee, member of any governing or
decision-making committee, manager, employee or agent of another
corporation or foreign corporation, partnership, joint venture, trust
or other enterprise; (iii) a natural person who, while a director,
officer, employee or agent of the Corporation, is or was serving an
employee benefit plan because his duties to the Corporation also
impose duties on, or otherwise involve services by, the person to the
plan or to participants in or beneficiaries of the plan; or (iv)
unless the context requires otherwise, the estate or personal
representative of a director, officer, employee or agent.
Notwithstanding the foregoing, any natural person who is or was an
agent or an employee but is not or was not also a director or officer
shall not fall within the foregoing definition and shall not be
entitled to indemnification under this Section 7.1 unless the Board of
Directors or committee appointed thereby determines such agent or
employee shall be entitled to the indemnification provided herein.
This Section 7.1 shall not deny indemnification due to any person from
the Corporation as required by the Wisconsin Business Corporation Law.
(2) "Expenses" means all reasonable fees, costs, charges,
disbursements, attorneys' fees and any other expenses incurred in
connection with a Proceeding.
(3) "Liability" means the obligation to pay a judgment, penalty,
assessment, forfeiture or fine, including an excise tax assessed with
respect to an employee benefit plan, the agreement to pay any amount
in settlement of a Proceeding (whether or not approved by a court
order), and reasonable expenses and interest related to the foregoing.
(4) "Party" means a natural person who was or is, or who is
threatened to be made, a named defendant or respondent in a
Proceeding.
(5) "Proceeding" means any threatened, pending or completed
civil, criminal, administrative or investigative action, suit,
arbitration or other proceeding, whether formal or informal (including
but not limited to any act or failure to act alleged or determined to
have been negligent, to have violated the Employee Retirement Income
Security Act of 1974, or to have violated Section 180.0833 of the
Wisconsin Statutes, or any successor thereto, regarding improper
dividends, distributions of assets, purchases of shares of the
Corporation, or loans to officers), which involves foreign, federal,
state or local law and which is brought by or in the right of the
Corporation or by any other person or entity.
(b) Indemnification of Officers, Directors, Employees and Agents.
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(1) The Corporation shall indemnify a Director, Officer, Employee
or Agent to the extent he has been successful on the merits or
otherwise in the defense of any Proceeding, for all reasonable
Expenses incurred in the Proceeding if the Director, Officer, Employee
or Agent was a Party because he is a Director, Officer, Employee or
Agent of the Corporation.
(2) In cases not included under subsection (1), the Corporation
shall indemnify a Director, Officer, Employee or Agent against
Liability and Expenses incurred in a Proceeding to which the Director,
Officer, Employee or Agent was a Party because he is a Director,
Officer, Employee or Agent of the Corporation, unless it is determined
by final judicial adjudication that such person breached or failed to
perform a duty such person owed to the Corporation and the breach or
failure constitutes any of the following:
(i) A willful failure to deal fairly with the Corporation or
its shareholders in connection with a matter in which the
Director, Officer, Employee or Agent has a material conflict of
interest;
(ii) A violation of criminal law, unless the Director,
Officer, Employee or Agent had reasonable cause to believe that
his conduct was lawful or no reasonable cause to believe his
conduct was unlawful;
(iii) A transaction from which the Director, Officer,
Employee or Agent derived an improper personal profit; or
(iv) Willful misconduct.
(3) Indemnification under this Section 7.1 is not required to the
extent the Director, Officer, Employee or Agent has previously
received indemnification or allowance of expenses from any person or
entity, including the Corporation, in connection with the same
Proceeding.
(4) Indemnification required under subsection (b) (1) shall be
made within 10 days of receipt of a written demand for
indemnification. Indemnification required under subsection (b) (2)
shall be made within 30 days of receipt of a written demand for
indemnification.
(5) Upon written request by a Director, Officer, Employee or
Agent who is a Party to a Proceeding, the Corporation shall pay or
reimburse his reasonable Expenses as incurred if the Director,
Officer, Employee or Agent provides the Corporation with all of the
following:
(i) A written affirmation of his good faith belief that he
is entitled to indemnification under Section 7.1; and
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(ii) A written undertaking, executed personally or on his behalf,
to repay all amounts advanced without interest to the extent that it
is ultimately determined that indemnification under Section 7.1(b)(2)
is prohibited. The undertaking under this subsection shall be accepted
without reference to the ability of the Director, Officer, Employee or
Agent to repay the allowance. The undertaking shall be unsecured.
(c) Determination that Indemnification is Proper.
--------------------------------------------
(1) Unless provided otherwise by a written agreement between the
Director, Officer, Employee or Agent and the Corporation, determination of
whether indemnification is required under subsection (b) shall be made by
one of the following methods, which in the case of a Director or Officer
seeking indemnification shall be selected by such Director or Officer: (i)
by a majority vote of a quorum of the Board of Directors consisting of
directors who are not at the time Parties to the same or related
Proceedings or, if a quorum of disinterested directors cannot be obtained,
by a majority vote of a committee duly appointed by the Board of Directors
(which appointment by the Board may be made by directors who are parties to
the Proceeding) consisting solely of two or more directors who are not at
the time parties to the same or related Proceedings, (ii) by independent
legal counsel selected by a quorum of the Board of Directors or its
committee constituted as required under (i) above or, if unable to obtain
such a quorum or constitute such committee, by a majority vote of the full
Board of Directors, including directors who are parties to the same or
related Proceedings, (iii) by a panel of three arbitrators consisting of
(a) one arbitrator selected by a quorum of the Board of Directors or its
committee constituted as required under (i), above, or, if unable to obtain
such a quorum or committee, by a majority vote of the full Board of
Directors, including directors who are parties to the same or related
Proceedings, (b) one arbitrator selected by the director or officer seeking
indemnification and (c) one arbitrator selected by the other two
arbitrators, (iv) by an affirmative vote of shareholders as provided under
Section 2.9, except that shares owned by, or voted under the control of,
persons who are at the time parties to the same or related proceedings,
whether as plaintiffs or defendants or in any other capacity, may not be
voted in making the determination, or (v) by a court of competent
jurisdiction as permitted under the Wisconsin Business Corporation Law;
provided, however, that with respect to any additional right to
indemnification permissible under the Wisconsin Business Corporation Law
and granted by the Corporation, the determination of whether such
additional right of indemnification is required shall be made by any method
permissible under the Wisconsin Business Corporation Law, as such methods
may be limited by the grant of such additional right to indemnification.
The termination of a Proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea, does not,
by itself create a presumption that indemnification of the Director,
Officer, Employee or Agent is not required under this Article.
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(2) A Director, Officer, Employee or Agent who seeks
indemnification under this Section 7.1 shall make a written request to
the Corporation. As a further pre-condition to any right to receive
indemnification, the writing shall contain a declaration that the
Corporation shall have the right to exercise all rights and remedies
available to such Director, Officer, Employee or Agent against any
other person, corporation, foreign corporation, partnership, joint
venture, trust or other enterprise, arising out of, or related to, the
Proceeding which resulted in the Liability and the Expense for which
such Director, Officer, Employee or Agent is seeking indemnification,
and that the Director, Officer, Employee or Agent is hereby deemed to
have assigned to the Corporation all such rights and remedies.
(d) Severability. The provisions of this Section 7.1 shall not apply
in any circumstance where a court of competent jurisdiction determines that
indemnification would be invalid as against public policy, but such
provisions shall not apply only to the extent that they are invalid as
against public policy and shall otherwise remain in full force and effect.
(e) Limitation or Expansion of Indemnification. The right to
indemnification under this Section 7.1 may be limited or reduced only by
subsequent affirmative vote of not less than two-thirds of the
Corporation's outstanding shares entitled to vote on such matters. Any
limitation or reduction in the right to indemnification may only be
prospective from the date of such vote. The Board of Directors, however,
shall have the authority to expand the indemnification permitted under this
Section 7.1 to the fullest extent permissible under the Wisconsin Business
Corporation Law as in effect on the date of any such resolution with or
without further amendment to this Section 7.1.
SECTION 7.2. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is a Director,
Officer, Employee or Agent against any Liability asserted against or incurred by
the individual in any such capacity or arising out of his status as such,
regardless of whether the Corporation is required or authorized to indemnify or
allow expenses to the individual under Section 7.1.
ARTICLE VIII. AMENDMENTS
------------------------
SECTION 8.1. Amendment by the Board of Directors. The By-Laws of the
Corporation may be amended or repealed by the Board of Directors unless any of
the following apply:
(a) The Articles of Incorporation, the particular by-law or the
Wisconsin Business Corporation Law reserve this power exclusively to the
shareholders in whole or part;
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(b) The shareholders in adopting, amending, or repealing a particular
by-law provide expressly within the by-law that the Board of Directors may
not amend, repeal or readopt that by-law; or
(c) The by-law fixes a greater or lower quorum requirement or greater
voting requirement for the Board of Directors, unless the shareholders in
adopting or amending such by-law provide expressly within the by-law that
it may be amended or repealed by a specified vote of the Board of
Directors.
The Corporation's By-Laws may be amended, altered, or repealed, and new By-Laws
may be enacted, only by the affirmative vote of not less than a majority of the
entire Board of Directors then in office. Action by the Board of Directors to
adopt or amend a by-law that changes the quorum or voting requirement for the
Board of Directors must meet the same quorum requirement and be adopted by the
same vote required to take action under the quorum and voting requirement then
in effect, except where a different voting requirement is specified as provided
in Section 8.1(c).
SECTION 8.2. Amendment by the Corporation's Shareholders. The
Corporation's shareholders may amend or repeal the Corporation's By-Laws or
adopt new by-laws even though the Board of Directors may also amend or repeal
the Corporation's By-Laws or adopt new by-laws. The Corporation's By-Laws may be
amended, altered or repealed, and new By-Laws may be enacted, only by the
affirmative vote of the holders of not less than 75% of the outstanding shares
of the Corporation entitled to vote at a meeting of shareholders duly called for
such purpose and by the affirmative vote of the holders of not less than a
majority of the shares of each class or series, if any, entitled to vote thereon
at such meeting. The adoption or amendment of a by-law that adds, changes or
deletes a greater or lower quorum requirement or a greater voting requirement
for shareholders or the Board of Directors must meet the same quorum and voting
requirement then in effect.
SECTION 8.3. Implied Amendments. Any action taken or authorized by the
Board of Directors or by the shareholders which would be inconsistent with the
By-Laws then in effect but which is taken or authorized by affirmative vote of
not less than the number of directors or the shares required to amend the By-
Laws so that the By-Laws would be consistent with such action shall be given the
same effect as though the By-Laws had been temporarily amended or suspended so
far, but only so far, as is necessary to permit the specific action so taken or
authorized.
ARTICLE IX. CORPORATE SEAL
--------------------------
SECTION 9.1. Corporate Seal. The Board of Directors may provide for a
corporate seal which may be circular in form and have inscribed thereon any
designation including the name of the Corporation, Wisconsin as the state of
incorporation, and the words "Corporate Seal." Any instrument executed in the
corporate name by the proper officers of the Corporation under any seal,
including the words "Seal," "Corporate Seal" or similar designation, is sealed
even though the corporate seal is not used.
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ARTICLE X. EMERGENCY BY-LAWS
----------------------------
SECTION 10.1. Emergency By-Laws. Unless the Articles of Incorporation
provide otherwise, the following provisions of this Article X shall be effective
during an "Emergency," which is defined as a catastrophic event that prevents a
quorum of the Corporation's directors from being readily assembled.
SECTION 10.2. Notice of Board Meetings. During an Emergency, any one
member of the Board of Directors or any one of the following officers: Chairman
of the Board, Vice Chairman of the Board, Chief Executive Officer, President,
any Vice-President, Secretary or Treasurer, may call a meeting of the Board of
Directors. Notice of such meeting need be given only to those directors whom it
is practicable to reach, and may be given in any practical manner, including by
publication or radio. Such notice shall be given at least six hours prior to
commencement of the meeting.
SECTION 10.3. Temporary Directors and Quorum. One or more officers of
the Corporation present at the Emergency meeting of the Board of Directors, as
is necessary to achieve a quorum, shall be considered to be directors for the
meeting, and shall so serve in order of rank, and within the same rank, in order
of seniority. In the event that less than a quorum (as determined by Section
3.11) of the directors are present (including any officers who are to serve as
directors for the meeting), those directors present (including the officers
serving as directors) shall constitute a quorum.
SECTION 10.4. Actions Permitted To Be Taken. The Board of Directors as
constituted in Section 10.3, and after notice as set forth in Section 10.2 may:
(a) Officers' Powers. Prescribe emergency powers to any officers
of the Corporation;
(b) Delegation of Any Power. Delegate to any officer or director,
any of the powers of the Board of Directors;
(c) Lines of Succession. Designate lines of succession of
officers and agents, in the event that any of them are unable to discharge
their duties;
(d) Relocate Principal Place of Business. Relocate the principal
place of business, or designate successive or simultaneous principal places
of business; and
(e) All Other Action. Take any and all other action, convenient,
helpful, or necessary to carry on the business of the Corporation.
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Corporate action taken in good faith in accordance with the emergency by-laws
binds the Corporation and may not be used to impose liability on any of the
Corporation's directors, officers, employees or agents.
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Appendix D
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1. Actions
creating rights. A shareholder of a corporation may dissent from, and obtain
payment for the fair value of the shareholder's shares in the event of, any of
the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the redemption
or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares or
securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that section 302A.671
does not apply to a control share acquisition does not give rise to the right to
obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder
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dissents with respect to all the shares that are beneficially owned by another
person but registered in the name of the shareholder and discloses the name and
address of each beneficial owner on whose behalf the shareholder dissents. In
that event, the rights of the dissenter shall be determined as if the shares as
to which the shareholder has dissented and the other shares were registered in
the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
Subd. 3. Rights not to apply. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
(b) If a date is fixed according to section 302A.445, subdivision 1 ,for
the determination of shareholders entitled to receive notice of and to vote on
an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subd. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.-- Subdivision 1.
Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by merger of that issuer.
(c) "Fair value of the share" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1 up
to and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
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Subd. 3. Notice of dissent. If the proposed action must be approved by
the shareholders, a shareholder who is entitled to dissent under section
302A.471 and who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the shareholder and must not vote
the shares in favor of the proposed action.
Subd. 4 Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description of
the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each dissenting shareholder who has
complied with subdivisions 3 and 4 the amount the corporation estimates to be
the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
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(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel all
transfer restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount
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by which the fair value of the shares as determined by the court, plus interest,
exceeds the amount, if any, remitted under subdivision 5, but shall not be
liable to the corporation for the amount, if any, by which the amount, if any,
remitted to the dissenter under subdivision 5 exceeds the fair value of the
shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
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Appendix E
SHOPKO STORES, INC.
1998 STOCK INCENTIVE PLAN
-------------------------
SECTION 1
---------
GENERAL
-------
1.1. Purpose. The ShopKo Stores, Inc. 1998 Stock Incentive Plan (the
"Plan") has been established by ShopKo Stores, Inc. (the "Company") (i) to
attract and retain high quality individuals eligible to participate in the Plan;
(ii) to motivate Participants, by means of appropriate incentives, to achieve
long-range goals; (iii) to provide incentive compensation opportunities that are
competitive with those of other similar companies; and (iv) to further align
Participants' interests with those of the Company's shareholders through
compensation that is based on the Company's common stock; and thereby promote
the long-term financial interests of the Company and the Related Companies,
including the growth in value of the Company's equity and enhancement of long-
term shareholder return.
1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Employees and the Eligible Directors, those persons who will be granted
one or more Awards under the Plan, and thereby become "Participants" in the
Plan. In the discretion of the Committee, a Participant may be granted any
Award permitted under the provisions of the Plan, and more than one Award may be
granted to a Participant. Awards may be granted as alternatives to or
replacement of awards outstanding under the Plan, or any other plan or
arrangement of the Company or a Related Company (including a plan or arrangement
of a business or entity, all or a portion of which is acquired by the Company or
a Related Company).
1.3. Operation and Administration. The operation and administration of
the Plan, including the Awards made under the Plan, shall be subject to the
provisions of Section 4 (relating to operation and administration). Subject to
subsection 5.5 (relating to the Board's authority), the authority to control and
manage the operation and administration of the Plan shall be vested in a
committee of the Board (the "Committee") in accordance with Section 5.
1.4 Definitions. Capitalized terms used herein which are not defined
where such terms first appear shall be defined as set forth in Section 7.
SECTION 2
---------
OPTIONS
-------
2.1. Options. The grant of an "Option" entitles the Participant to
purchase shares of Stock at an Exercise Price established by the Committee.
Options granted under this Section 2 may be either Incentive Stock Options or
Non-Qualified Stock Options, as determined in the discretion of the Committee.
An "Incentive Stock Option" is an Option that is intended to satisfy
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the requirements applicable to an "incentive stock option" described in section
422(b) of the Code. A "Non-Qualified Option" is an Option that is not intended
to be an "incentive stock option" as that term is described in section 422(b) of
the Code.
2.2. Exercise Price. The "Exercise Price" of each Option granted under
this Section 2 shall be established by the Committee; except that the Exercise
Price shall not be less than 100% of the Fair Market Value of a share of Stock
as of the Pricing Date. For purposes of the preceding sentence, the "Pricing
Date" shall be the date on which the Option is granted.
2.3. Exercise. An Option shall be exercisable in accordance with such
terms and conditions and during such periods as may be established by the
Committee.
2.4 Payment of Option Exercise Price. The payment of the Exercise Price
of an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the full
Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the
case of an exercise arrangement approved by the Committee and
described in subsection 2.4(c), payment may be made as soon as
practicable after the exercise).
(b) The Exercise Price shall be payable in cash or by tendering shares of
Stock (by either actual delivery of shares or by attestation, with
such shares valued at Fair Market Value as of the day of exercise), or
in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by authorizing a third party to
sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any
tax withholding resulting from such exercise.
2.5. Expiration Date. The "Expiration Date" with respect to an Option
means the date established as the Expiration Date by the Committee at the time
of the grant; provided, however, that the Expiration Date with respect to any
Option shall not be later than the earliest to occur of:
(a) the tenth anniversary of the date on which the Option is granted;
(b) if the Participant is an Eligible Employee and the Participant's Date
of Termination occurs by reason of death or Disability, the first
anniversary of such Date of Termination;
(c) if the Participant is an Eligible Employee and the Participant's Date
of Termination occurs by reason of Retirement, the second anniversary
of such Date of Termination;
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(d) if the Participant is an Eligible Employee and the Participant's Date
of Termination occurs for reasons other than Retirement, death or
Disability, the 90-day anniversary of such Date of Termination; or
(e) if the Participant is an Eligible Director, the third anniversary of
the Participant's Date of Termination.
Notwithstanding the foregoing provisions of this subsection 2.5, if the
Participant dies while the Option is otherwise exercisable, the Expiration Date
may be later than the dates set forth above, provided that it is not later than
the first anniversary of the date of death.
2.6. Settlement of Award. The distribution following exercise of an
Option of shares of Stock, shall be subject to such conditions, restrictions and
contingencies as the Committee may establish. The Committee, in its discretion,
may impose such conditions, restrictions and contingencies with respect to
shares of Stock acquired pursuant to the exercise of an Option as the Committee
determines to be desirable.
SECTION 3
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OTHER STOCK AWARDS
------------------
3.1. Definition. A Stock Award is a grant of shares of Stock or of a
right to receive shares of Stock (or their cash equivalent or a combination of
both) in the future.
3.2. Restrictions on Stock Awards. Each Stock Award shall be subject to
such conditions, restrictions and contingencies as the Committee shall
determine. These may include continuous service and/or the achievement of
performance measures. The Committee may designate a single goal criterion or
multiple goal criteria for performance measurement purposes, with the
measurement based on absolute Company or business unit performance and/or on
performance as compared with that of other publicly-traded companies. The
performance measures for such awards may include: stock price, total
shareholder return, earnings, earnings per share, return on equity, and return
on assets. The Committee may define the performance measures, including,
without limitation, defining such performance measures to exclude non-recurring
or extraordinary terms or events.
SECTION 4
---------
OPERATION AND ADMINISTRATION
----------------------------
4.1. Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 1998 annual meeting of its shareholders, the Plan shall
be effective as of January 14, 1998 (the "Effective Date"); provided, however,
that to the extent that Awards are made under the Plan prior to its approval by
shareholders, they shall be contingent on approval of the Plan by the
shareholders of the Company. The Plan shall be unlimited in duration and, in
the event of
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Plan termination, shall remain in effect as long as any Awards under it are
outstanding; provided, however, that, to the extent required by the Code, no
Incentive Stock Options may be granted under the Plan on a date that is more
than ten years from the date the Plan is adopted or, if earlier, the date the
Plan is approved by shareholders.
4.2. Shares Subject to Plan.
----------------------
(a) (i) Subject to the following provisions of this subsection 4.2, the
maximum number shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be 1,250,000 shares of Stock.
(ii) Any shares of Stock granted under the Plan that are forfeited because
of the failure to meet an Award contingency or condition shall again be
available for delivery pursuant to new Awards granted under the Plan. To
the extent any shares of Stock covered by an Award are not delivered to a
Participant or beneficiary because the Award is forfeited or canceled, such
shares shall not be deemed to have been delivered for purposes of
determining the maximum number of shares of Stock available for delivery
under the Plan.
(b) Subject to subsection 4.2(c), the following additional maximums are imposed
under the Plan.
(i) The maximum number of shares of Stock that may be issued by Options
intended to be Incentive Stock Options shall be 500,000 shares.
(ii) The maximum number of shares that may be covered by Awards granted to
any one individual pursuant to Section 2 (relating to Options) shall be
500,000 shares in any one calendar year.
(iv) The maximum payment that can be made for awards granted to any one
individual pursuant to Section 3 (relating to Stock Awards) shall be
$5,000,000. If an Award granted under Section 3 is, at the time of grant,
denominated in shares, the value of the shares of Stock for determining
this maximum individual payment amount will be the Fair Market Value of a
share of Stock on the date of grant multiplied by the number of shares
granted.
(c) In the event of a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-
up, spin-off, combination or exchange of shares), the Committee may adjust
Awards to preserve the benefits or potential benefits of the Awards.
Action by the Committee may include adjustment of: (i) the number and kind
of shares which may be delivered under the Plan; (ii) the number and kind
of shares subject to outstanding Awards; and (iii) the Exercise Price of
outstanding Options; as well as any other adjustments that the Committee
determines to be equitable.
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4.3. Acceleration on Change of Control. Subject to the provisions of
subsection 4.2(c) (relating to the adjustment of shares), and except as
otherwise provided in the Plan or the Agreement reflecting the applicable Award,
upon the occurrence of a Change of Control:
(a) All outstanding Options shall become fully exercisable.
(b) All Stock Awards shall become fully vested.
4.4. Limit on Distribution. Distribution of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any shares of Stock under the Plan or
make any other distribution of benefits under the Plan unless such
delivery or distribution would comply with all applicable laws
(including, without limitation, the requirements of the Securities Act
of 1933), and the applicable requirements of any securities exchange
or similar entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance
may be effected on a noncertificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock
exchange.
4.5. Tax Withholding. Whenever the Company proposes or is required to
distribute Stock under the Plan, the Company may require the recipient to remit
to the Company an amount sufficient to satisfy any Federal, state and local tax
withholding requirements prior to the delivery of any certificate for such
shares or, in the discretion of the Committee, the Company may withhold from the
shares to be delivered shares sufficient to satisfy all or a portion of such tax
withholding requirements. Whenever under the Plan payments are to be made in
cash, such payments may be net of an amount sufficient to satisfy any Federal,
state and local tax withholding requirements.
4.6. Payment Shares. Subject to the overall limitation on the number of
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Related Company, including the plans and arrangements of the
Company or a Related Company acquiring another entity (or an interest in another
entity).
4.7. Dividends and Dividend Equivalents. An Award may provide the
Participant with the right to receive dividends or dividend equivalent payments
with respect to Stock which may be either paid currently or credited to an
account for the Participant, and may be settled in cash or Stock as determined
by the Committee. Any such settlements, and any such crediting of dividends or
dividend equivalents or reinvestment in shares of Stock, may be subject to such
conditions, restrictions and contingencies as the Committee shall establish,
including the reinvestment of such credited amounts in Stock equivalents.
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4.8. Transferability. Except as otherwise provided by the Committee or in
the Agreement reflecting the applicable Award, Awards under the Plan are not
transferable except as designated by the Participant by will or by the laws of
descent and distribution.
4.9. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.10. Agreement With Company. At the time of an Award to a Participant
under the Plan, the Committee may require a Participant to enter into an
agreement with the Company (the "Agreement") in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, determine.
4.11. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of the
Plan, acquire any right in or title to any assets, funds or property
of the Company or any Related Company whatsoever, including, without
limitation, any specific funds, assets, or other property which the
Company or any Related Company, in their sole discretion, may set
aside in anticipation of a liability under the Plan. A Participant
shall have only a contractual right to the stock or amounts, if any,
payable under the Plan, unsecured by any assets of the Company or any
Related Company. Nothing contained in the Plan shall constitute a
guarantee that the assets of such companies shall be sufficient to pay
any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection
as a Participant will not give any employee the right to be retained
in the employ of the Company or any Related Company, nor any right or
claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan. Selection as a
Participant will not give any director the right to be retained or
nominated as a director of the Company or any Related Company. Except
as otherwise provided in the Plan, no Award under the Plan shall
confer upon the holder thereof any right as a shareholder of the
Company prior to the date on which the individual fulfills all
conditions for receipt of such rights.
4.12. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
4.13. Action by Company or Related Company. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors,
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or by action of one or more members of the board (including a committee of the
board) who are duly authorized to act for the board, or (except to the extent
prohibited by applicable law or applicable rules of any stock exchange) by a
duly authorized officer of the Company.
4.14. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
SECTION 5
---------
COMMITTEE
---------
5.1. Selection of Committee. The Committee shall be selected by the Board,
and shall consist of two or more members of the Board.
5.2. Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to subsection 5.5 hereof and to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Employees
and the Eligible Directors those persons who shall receive Awards, to
determine the time or times of receipt, to determine the types of
Awards and the number of shares covered by the Awards, to establish
the terms, conditions, performance criteria, restrictions, and other
provisions of such Awards, and (subject to the restrictions imposed by
Section 6) to cancel or suspend Awards. In making such Award
determinations, the Committee may take into account the nature of
services rendered by the individual, the individual's present and
potential contribution to the Company's success and such other factors
as the Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to determine the extent to which Awards under
the Plan will be structured to conform to the requirements applicable
to performance-based compensation as described in Code section 162(m),
and to take such action, establish such procedures, and impose such
restrictions at the time such Awards are granted as the Committee
determines to be necessary or appropriate to conform to such
requirements.
(c) The Committee will have the authority and discretion to establish
terms and conditions of Awards as the Committee determines to be
necessary or appropriate to conform to applicable requirements or
practices of jurisdictions outside of the United States.
(d) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to
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determine the terms and provisions of any agreements made pursuant to
the Plan, and to make all other determinations that may be necessary
or advisable for the administration of the Plan.
(e) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan is final and binding.
(f) In controlling and managing the operation and administration of the
Plan, the Committee shall act by a majority of its then members, by
meeting or by writing filed without a meeting. The Committee shall
maintain and keep adequate records concerning the Plan and concerning
its proceedings and acts in such form and detail as the Committee may
decide.
5.3. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
5.4. Information to be Furnished to Committee. The Company and Related
Companies shall furnish the Committee with such data and information as may be
required for it to discharge its duties. The records of the Company and Related
Companies as to an employee's or Participant's employment, termination of
employment, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined to be incorrect. Participants and other
persons entitled to benefits under the Plan must furnish the Committee such
evidence, data or information as the Committee considers desirable to carry out
the terms of the Plan.
5.5. Board Administration. The Board shall have the authority to exercise
all of the powers of the Committee under the Plan with respect to any Award to
an Eligible Director if the Board determines to exercise such authority. The
determination by the Board to make an Award to an Eligible Director shall not
limit the authority of the Committee to also make Awards to Eligible Directors.
SECTION 6
---------
AMENDMENT AND TERMINATION
-------------------------
The Board may, at any time, amend or terminate the Plan; provided, however,
that
(a) subject to subsection 4.2(c) (relating to the adjustments of shares),
no amendment or termination may, in the absence of written consent to
the change by the affected Participant (or, if the Participant is not
then living, the affected beneficiary), adversely affect the rights of
any Participant or beneficiary under any Award granted under the Plan
prior to the date such amendment is adopted by the Board; and
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(b) without further approval of the shareholders of the Company, no
amendment shall materially increase the number of shares of Stock
which may be delivered pursuant to Awards hereunder, except for
increases resulting from subsection 4.2(c) (relating to the adjustment
of shares).
SECTION 7
---------
DEFINED TERMS
-------------
For purposes of the Plan, the terms listed below shall be defined as
follows:
(a) Award. The term "Award" shall mean any award or benefit granted to any
Participant under the Plan, including, without limitation, the grant of
Options and Stock Awards.
(b) Board. The term "Board" shall mean the Board of Directors of the Company.
(c) Change of Control. The term "Change of Control" shall mean any of the
following events:
(1) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of Common Stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (1), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii)
and (iii) of subsection (3) below; or
(2) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then constituting the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
other than the Board; or
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(3) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company for which approval of the shareholders of the Company is required
(a "Business Combination"), in each case, unless, immediately following
such Business Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (iii) at least a majority of
the members of the Board of Directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(4) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(d) Code. The term "Code" means the Internal Revenue Code of 1986, as amended.
A reference to any provision of the Code shall include reference to any
successor provision of the Code.
(e) Date of Termination.
(1) With respect to a Participant who is an Eligible Employee, the
Participant's "Date of Termination" shall be the first day occurring on or
after the Agreement Date on which the Participant's employment with the
Company and all Related Companies terminates for any reason; provided that
a termination of employment shall not be deemed to occur by reason of a
transfer of the Participant between the Company and a Related Company or
between two Related Companies; and further provided that the Participant's
employment shall not be considered terminated while the Participant is on a
leave of absence from the Company or a Related Company approved by the
Participant's employer. If, as a result of a sale or other transaction, the
Participant's employer ceases to be a Related Company (and the
Participant's employer is or becomes an entity that is
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separate from the Company), the occurrence of such transaction shall
be treated as the Participant's Date of Termination caused by the
Participant being discharged by the employer.
(2) With respect to a Participant who is an Eligible Director,
the Participant's "Date of Termination" shall be the first day
occurring on or after the Agreement Date on which the Participant
ceases to be a director of any of the Company and any Related
Companies for any reason.
(f) Disability. Except as otherwise provided by the Committee, the
Participant shall be considered to have a "Disability" during the
period in which the Participant is unable, by reason of a medically
determinable physical or mental impairment, to engage in any
substantial gainful activity, which condition, in the opinion of a
physician selected by the Committee, is expected to have a duration of
not less than 120 days.
(g) Eligible Director. The term "Eligible Director" shall mean any
director (or person holding authority comparable to that of a director
for business entities which do not have directors) of the Company or a
Related Company who is not an employee of the Company or a Related
Company.
(h) Eligible Employee. The term "Eligible Employee" shall mean any
employee of the Company or a Related Company.
(i) Fair Market Value. For purposes of determining the "Fair Market
Value" of a share of Stock, the following rules shall apply:
(i) If the Stock is at the time listed or admitted to trading on any
stock exchange, then the "Fair Market Value" shall be the last
reported sale price of the Stock on the date in question on the
principal exchange on which the Stock is then listed or admitted to
trading. If no reported sale of Stock takes place on the date in
question on the principal exchange, then the most recent reported sale
of the Stock on the principal exchange shall be determinative of "Fair
Market Value."
(ii) If the Stock is not at the time listed or admitted to trading on
a stock exchange, the "Fair Market Value" shall be the mean between
the lowest reported bid price and highest reported asked price of the
Stock on the date in question in the over-the-counter market, as such
prices are reported in a publication of general circulation selected
by the Committee and regularly reporting the market price of Stock in
such market.
(iii) If the Stock is not listed or admitted to trading on any stock
exchange or traded in the over-the-counter market, the "Fair Market
Value" shall be as determined in good faith by the Committee.
(j) Related Companies. The term "Related Company" means any corporation,
joint venture, limited liability company, or other business entity in
which the Company has a
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significant direct or indirect equity interest as determined by the
Committee in its sole discretion.
(k) Retirement. "Retirement" of the Participant shall mean the occurrence
of the Participant's Date of Termination after age 55 with ten (10) or
more years of service with the Company or a Related Company, or as
otherwise expressly approved by the Committee.
(l) Stock. The term "Stock" shall mean shares of common stock of the
Company.
_________________________
Adopted: January 14, 1998.
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Preliminary Copies
------------------
[FRONT SIDE]
[Logo] SHOPKO STORES, INC. PROXY
700 Pilgrim Way
P.O. Box 19060
Green Bay, Wisconsin 54307
1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Richard D. Schepp and David A. Liebergen as
the undersigned's agent and proxy, with power of substitution to vote as the
undersigned's proxy in accordance with the specifications appearing below, and,
in their discretion, upon all other matters that may properly come before the
Annual Meeting of Shareholders of ShopKo Stores, Inc., a Minnesota corporation,
to be held on Wednesday, May 13, 1998, at 10:00 a.m., local time, or any
adjournment or adjournments thereof, according to the number of votes that the
undersigned would be entitled to vote if the undersigned were personally present
at said meeting, and hereby revoking all former proxies. The undersigned hereby
acknowledges receipt of the Proxy Statement for the meeting.
1. ELECTION OF DIRECTORS
Nominees: Jeffrey C. Girard, Dale P. Kramer and James L. Reinertsen,
M.D.
[_] VOTE FOR all nominees listed, except those whose name(s) is (are)
written below.
- --------------------------------------------
[_] VOTE WITHHELD for all nominees.
2. PROPOSAL TO CHANGE THE COMPANY'S STATE OF INCORPORATION FROM MINNESOTA
TO WISCONSIN BY APPROVAL AND ADOPTION OF AN AGREEMENT AND PLAN OF
MERGER
For [ ] Against [ ] Abstain [ ]
3. PROPOSAL TO APPROVE THE COMPANY'S 1998 STOCK INCENTIVE PLAN
For [ ] Against [ ] Abstain [ ]
4. PROPOSAL TO RATIFY APPOINTMENT OF DELOITTE & TOUCHE LLP
For [ ] Against [ ] Abstain [ ]
(over)
<PAGE>
Preliminary Copies
------------------
[BACK SIDE]
5. In their discretion, the Proxy is authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED AS Dated: __________________________, 1998
DIRECTED, IF NO CHOICE IS (Month) (Day)
SPECIFIED, PROXIES WILL BE
VOTED FOR ALL ITEMS. Signature of Shareholder
_______________________________________
(if there are co-owners both must sign)
The signature(s) should be exactly as the
name(s) appear printed to the left.
If a corporation, please sign the corporation
name in full by a duly authorized officer and
indicate the office of the signer. When
signing as executor, administrator,
fiduciary, attorney, trustee or guardian, or
as custodian for a minor, please give full
title as such. When signing pursuant to a
power of attorney, please attach photocopy.
If a partnership, sign in the partnership
name by authorized person.
[_] PLEASE CHECK BOX IF YOU ARE ATTENDING THE
ANNUAL MEETING IN PERSON. NUMBER OF
SHAREHOLDERS ATTENDING: ________
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
