<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Shopko Stores, Inc.
-------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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<PAGE>
[SHOPKO LOGO]
SHOPKO STORES, INC.
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 1999
TO THE SHAREHOLDERS OF SHOPKO STORES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of ShopKo
Stores, Inc. will be held on Wednesday, May 26, 1999 at 10:00 a.m., local
time, at the Radisson Inn, 2040 Airport Drive, Green Bay, Wisconsin, for the
following purposes:
1) To elect two directors of the Company to serve for three-year terms;
2) To ratify the appointment of Deloitte & Touche LLP to audit the
financial statements of the Company for the fiscal year ending January 29,
2000;
3) To approve the ShopKo Stores, Inc. 1999 Executive Incentive Plan; and
4) To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 31, 1999 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
April 19, 1999
<PAGE>
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 26, 1999 at 10:00 a.m.,
Green Bay time, at the Radisson Inn, 2040 Airport 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 1999 Executive 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 April 19, 1999.
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 31, 1999 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,
26,140,380 shares of Common Stock are eligible to vote at the meeting. A
majority of the shares entitled to vote constitutes a quorum. Abstentions and
broker non-votes (i.e., proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owners or other
persons entitled to vote shares as to a matter with respect to which brokers
or nominees do not have discretionary power to vote) will be treated as
present for purposes of determining the quorum. Abstentions and broker non-
votes will not be counted as voting on any matter at the Annual Meeting.
ITEM 1
ELECTION OF DIRECTORS
On November 11, 1998, Gregory H. Wolf was appointed to the Board for a term
expiring at the 1999 Annual Meeting of Shareholders. William J. Tyrell, whose
term as a director expires at the 1999 Annual Meeting of Shareholders, is
retiring from the Board and will not be standing for reelection. With the
addition of Mr. Wolf and the retirement of Mr. Tyrell, the Board will have
seven members.
Pursuant to the Company's Articles of Incorporation, the Board is divided
into three classes with the number of directors to be divided as equally as
possible among the three classes. Directors are elected for staggered terms of
three years. William J. Podany and Gregory H. Wolf are nominated to serve
three-year terms expiring at the 2002 Annual Meeting of Shareholders.
<PAGE>
Vote Requirement to Elect Nominees; Board Recommendation
Directors are elected by a plurality of the votes cast by holders of the
Common Stock entitled to vote at a meeting at which a quorum is present. In
other words, the two directors who receive the largest number of votes will be
elected as directors. Any votes attempted to be cast "against" a candidate are
not given legal effect and are not counted as votes cast.
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.
Podany and Wolf are willing to serve as directors. If, however, 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.
Set forth below is certain information, as of January 30, 1999, concerning
Messrs. Podany, Wolf and the five 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 2002
William J. Podany; 53; director of the Company since July, 1997; he has been
the President and Chief Executive Officer of the Company since March, 1999.
He was President and Chief Operating Officer of ShopKo's retail stores from
November, 1997 to March, 1999, and was Executive Vice President of the
Company from November, 1994 to March, 1999. 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.
Gregory H. Wolf; 42; director of the Company since November, 1998; he has been
an officer of Humana, Inc, a provider of managed healthcare products and
services, since October, 1995, having first served as Senior Vice President
of Sales and Marketing; as Chief Operating Officer from July, 1996 to
September, 1996; as President from September, 1996 through November, 1997;
and as President, Chief Executive Officer and Director since December, 1997.
Prior to joining Humana, Mr. Wolf had been employed by EMPHESYS Financial
Group, Inc. and its affiliates since 1988, where he most recently served as
President. In October, 1995, EMPHESYS was acquired by Humana. Mr. Wolf is
also a director of National City Bank of Kentucky.
Directors Whose Terms Expire at
the Annual Meeting in 2001
Jeffrey C. Girard; 51; director of the Company since June, 1991; he has been
the President of Girard & Co. of Minneapolis, Minnesota, a private consulting
company, and an Adjunct Professor at the Carlson School of Management,
University of Minnesota since 1997; Executive Vice President and Chief
Financial Officer of Supervalu Inc. 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; 60; director of the Company since August, 1991; he has been
the Chairman of the Board of the Company since July, 1997; President and
Chief Executive Officer of the Company from February, 1991 to March, 1999;
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 was
employed by the Company in various other positions since 1971.
2
<PAGE>
Dr. James L. Reinertsen; 52; director of the Company since August, 1997; he has
been the Chief Executive Officer of CareGroup Healthcare System, a provider of
healthcare services, since July, 1998. Prior thereto, he was the Chief
Executive Officer of HealthSystem Minnesota since 1994 and 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; 53; 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 Co., and Jostens, Inc.
Stephen E. Watson; 54; director of the Company since July, 1997; he has been
the President and 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-
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.
Board of Directors Meetings and Committees
The Board of Directors held seven meetings in the fiscal year ended January
30, 1999. Each incumbent director participated in 75 percent or more of the
total number of the meetings of the Board and those of the committees of which
such director is a member.
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. 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 30, 1999.
The Audit Committee is currently comprised of Mr. Girard. The duties of the
Audit Committee are to recommend to the full Board of Directors 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 of Directors. The Audit Committee also monitors the
internal audit controls of the Company. The Audit Committee met two times in
the fiscal year ended January 30, 1999.
3
<PAGE>
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 in which the
director participates, and a fee of $1,000 for each committee meeting in which
the director participates, 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, 1995 Stock Option Plan, as amended,
and 1998 Stock Incentive Plan authorize various stock incentive awards to non-
employee directors. Messrs. Eugster, Girard, Reinertsen, Tyrrell, and Watson
were granted options to purchase 3,000 shares of Common Stock at $36.4375 per
share on May 13, 1998. Additionally, on November 11, 1998, Mr. Wolf was
granted an option to purchase 3,000 shares of Common Stock at $31.1250 per
share.
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 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 30, 1999, no
current non-employee directors have elected to participate in this Plan.
4
<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% 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 (20 persons). Except as otherwise
noted, information with respect to directors and executive officers is as of
January 30, 1999.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Name of Beneficial Owner Ownership(1)(2) Percent
- - ------------------------ ----------------- -------
<S> <C> <C>
Boston Partners Asset Management, L.P. (3)........... 2,874,294 11.0%
28 State Street
20th Floor
Boston, Massachusetts 02109
Robert Fleming Inc. (4).............................. 1,901,381 7.28%
320 Park Avenue
11th Floor
New York, NY 10022
Palisade Capital Management, L.L.C. (5).............. 1,612,200 6.2%
One Bridge Plaza
Suite 695
Fort Lee, New Jersey 07024
Cramer Rosenthal McGlynn, LLC (6).................... 1,425,300 5.5%
130 West 57th Street
New York, NY 10019
Dale P. Kramer (7)(8)................................ 270,000 1%
Jack W. Eugster...................................... 16,374 *
Jeffrey C. Girard.................................... 1,000 *
William J. Podany (7)(9)............................. 40,000 *
James L. Reinertsen.................................. -- *
William J. Tyrrell................................... 17,374 *
Stephen E. Watson.................................... -- *
Gregory H. Wolf...................................... -- *
Michael J. Bettiga (7)............................... 20,640 *
Roger J. Chustz (7).................................. 14,000 *
Michael J. Hopkins................................... -- *
All directors and executive officers as a group (20
persons)............................................ 401,308 1.5%
</TABLE>
- - --------
* Less than 1%
(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.
5
<PAGE>
(2) Includes shares which may be acquired within 60 days pursuant to stock
options as follows: Mr. Kramer 180,000 shares, Mr. Podany 15,000 shares,
Mr. Chustz 14,000 shares, Mr. Eugster 15,374 shares, Mr. Tyrrell 17,374
shares, Mr. Bettiga 18,240 shares and all directors and executive officers
as a group, 281,908 shares.
(3) Based on Amendment No. 2 to the Schedule 13G filed on February 12, 1999.
According to this filing, Boston Partners Asset Management, L.P. has
shared voting power and shared dispositive power with respect to all
2,874,294 shares.
(4) Based on Schedule 13G filed on February 10, 1999. According to this
filing, Robert Fleming Inc. has shared voting power and shared dispositive
power as to all 1,901,381 shares.
(5) Based on Amendment No. 2 to the Schedule 13G filed on February 9, 1999.
(6) Based on Schedule 13G filed on March 15, 1999. According to this filing,
Cramer Rosenthal McGlynn, LLC has shared voting power and shared
dispositive power as to all 1,425,300 shares.
(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, 1999, such executive officers' approximate ShopKo Stock Fund
account balances were as follows: Mr. Kramer $332,624, Mr. Podany $45,081,
Mr. Chustz $20,389, Mr. Hopkins $44,327, and Mr. Bettiga $37,985.
(8) Includes 50,000 shares of restricted stock granted pursuant to the
Company's 1993 Restricted Stock Plan, as amended.
(9) Includes 25,000 shares of restricted stock granted pursuant to the
Company's 1993 Restricted Stock Plan, as amended.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Based solely upon the Company's review of Forms 3, 4 and 5 received by it
during the last fiscal year pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended, all of such forms were filed on a timely basis by
reporting persons.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table (the "Summary Compensation Table") sets forth the
compensation paid by the Company for each of the last three fiscal years to
the Company's Chief Executive Officer and its other four most highly
compensated executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------- -----------------------
Awards
-----------------------
Securities
Other Underlying
Annual Restricted Options/ All Other
Name and Principal Bonus Compensation Stock SARs Compensation
Position Year(1) Salary ($) ($)(2) ($)(3) Awards ($) (#) ($)(4)
- - ----------------------- ------- ---------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dale P. Kramer......... 1999 627,692 753,231 2,073 -- 0 613,751(5)
President & CEO 1998 592,308 720,000 699 245,625(6) 100,000 452,393
1997 500,000 500,000 5,721 595,000 0 22,332
William J. Podany...... 1999 523,007 523,077 145 -- 0 321,102(7)
Executive Vice 1998 492,308 500,000 2 -- 70,000 233,923
President & President 1997 390,793 312,635 2,750 371,875(8) 0 47,445
and COO of Retail
Stores Division
Roger J. Chustz........ 1999 251,785 176,249 75 -- 0 190,491(9)
Sr. Vice President 1998 243,077 171,500 9 -- 40,000 143,044
GMM/Apparel 1997 220,000 154,000 10 -- 0 11,359
Michael J. Hopkins..... 1999 249,077 174,354 197 -- 0 189,300(10)
Sr. Vice President 1998 224,000 158,200 200 -- 40,000 138,338
GMM/Home 1997 199,231 25,644 -- -- 0 11,334
Michael J. Bettiga..... 1999 236,406 165,484 151 -- 0 188,922(11)
Sr. Vice President 1998 222,154 156,800 108 -- 40,000 132,576
GMM/Retail 1997 190,769 50,400 -- -- 0 8,250
Health Services
</TABLE>
- - -------
(1) Refers to fiscal years ended on the following dates: 1997: February 22,
1997; 1998: January 31, 1998; and 1999: January 30, 1999.
(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; and a
Retention Bonus.
(5) All Other Compensation for Mr. Kramer includes the following: Company
paid portion of individual life insurance policy: $3,889; 401(k) Company
match: $6,485; Profit Sharing Plan contributions: $67,663; and Retention
Bonus $535,714.
(6) Mr. Kramer holds an aggregate of 50,000 shares of restricted stock with
an aggregate value as of January 30, 1999 of $1,587,500. This valuation
does not take into account the diminution in value attributable to the
restrictions applicable to the shares. 10,000 shares of Mr. Kramer's
restricted stock vest in full on November 12, 1999. The remaining 40,000
shares of restricted stock vest upon the achievement of a targeted fair
market value of ProVantage Health Services, 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 stock.
7
<PAGE>
(7) All Other Compensation for Mr. Podany includes the following: Company
paid portion of individual life insurance policy: $1,311; 401(k) Company
match: $6,243; Profit Sharing Plan contributions: $45,691; and Retention
Bonus: $267,857.
(8) Mr. Podany holds an aggregate of 25,000 shares of restricted stock with
an aggregate value as of January 30, 1999 of $793,750. This valuation
does not take into account the diminution in value attributable to the
restrictions applicable to the shares. Mr. Podany's shares of restricted
stock fully vest on April 17, 2001. Pursuant to the 1993 Restricted Stock
Plan, dividends are paid on all shares of restricted stock at the same
rate as on unrestricted stock.
(9) All Other Compensation for Mr. Chustz includes the following: Company
paid portion of individual life insurance policy: $1,004; 401(k) Company
match: $5,311; Profit Sharing Plan contributions: $23,462; and Retention
Bonus: $160,714.
(10) All Other Compensation for Mr. Hopkins includes the following: Company
paid portion of individual life insurance policy: $1,004; 401(k) Company
match: $5,629; Profit Sharing Plan contributions: $21,953; and Retention
Bonus: $160,714.
(11) All Other Compensation for Mr. Bettiga includes the following: Company
paid portion of individual life insurance policy: $1,004; 401(k) Company
match: $5,556; Profit Sharing Plan contributions: $21,648; and Retention
Bonus: $160,714.
Option Exercise and Fiscal Year End Value Table
The following table sets forth information with respect to the five
executive officers named in the Summary Compensation Table concerning stock
options exercised during the last fiscal year and the number and value of
options outstanding on January 30, 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-the-
Acquired Options/SARs at Fiscal Money Options/SARs at Fiscal
on Value Year-End (#) Year-End ($)
Exercise Realized ------------------------- -------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- - ---- -------- --------- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dale P. Kramer.......... 0 0 180,000 100,000 3,138,600 1,175,000
William J. Podany....... 45,000 1,032,388 15,000 85,000 326,250 1,057,500
Roger J. Chustz......... 0 0 14,000 40,000 259,220 424,375
Michael J. Hopkins...... 0 0 0 40,000 0 424,375
Michael J. Bettiga...... 0 0 18,240 40,000 331,229 424,375
</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 Wisconsin
Statutes. The Company has entered into agreements to indemnify its directors
and certain officers, and may enter into similar agreements to indemnify
additional 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
Wisconsin 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.
8
<PAGE>
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 (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. As of
January 30, 1999, the multiple referred to in this paragraph is three for Mr.
Kramer and two for each of Messrs. Podany, Chustz, Hopkins, and Bettiga. 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 30,
1999, 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.
9
<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 2-3
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 to 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.
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 in the medium range paid by other retail companies
having approximately 2-3 billion dollars in annual sales.
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.
10
<PAGE>
Long-term incentives are currently provided primarily through grants of
stock options and restricted stock. Under the Company's 1991 Stock Option
Plan, 1995 Stock Option Plan and the 1998 Stock Incentive 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.
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, 1998, 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 30, 1999 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
11
<PAGE>
comprehensive retail study including companies having approximately 2-3
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 30, 1999, 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 a Retention Bonus of
$535,714. The primary basis for the Committee's determination to grant such
Retention Bonus was to provide a strong incentive for him to continue to serve
the Company as Chief Executive Officer.
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
12
<PAGE>
<TABLE>
2/25/94 2/24/95 2/23/96 2/21/97 1/31/98 1/30/99
<S> <C> <C> <C> <C> <C> <C>
ShopKo 100 81 102 147 244 302
S&P Retail 100 94 109 126 182 308
Wilshire 5000 100 99 136 169 212 260
</TABLE>
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 Index 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 25,
1994 in the Company's Common Stock and in each of the comparison groups, and
assumes reinvestment of dividends.
13
<PAGE>
ITEM 2
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 29, 2000 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 29, 2000 requires that the votes cast in
favor of ratification exceed the votes cast opposing ratification. The Board
recommends a vote FOR such ratification. Proxies solicited by the Board will,
unless otherwise directed, be voted in favor of such ratification.
ITEM 3
APPROVAL OF THE SHOPKO STORES, INC. 1999 EXECUTIVE INCENTIVE PLAN
The complete text of the ShopKo Stores, Inc. 1999 Executive Incentive Plan
(the "Incentive Plan") is set forth in Appendix A. The following summary of the
material features of the Incentive Plan does not purport to be complete and is
qualified in its entirety by reference to Appendix A.
The Board of Directors has approved the Incentive Plan for fiscal year 1999
and subsequent years unless and until terminated by the Compensation Committee.
It is expected that approximately 300 key employees will participate in the
Incentive Plan. The Incentive Plan is based upon the Company's current approach
for determining the annual incentives (bonuses) of the Company's executives.
The Incentive Plan rewards eligible executives with an incentive award if the
performance goals set by the Compensation Committee pursuant to the terms of
the Incentive Plan are met. The Incentive Plan, as adopted, is subject to
approval by the Company's shareholders and will only take effect if such
approval is obtained. If shareholder approval is not obtained, the Incentive
Plan will not take effect, and the Company's existing executive incentive plan
will remain in effect. The Incentive Plan is intended to meet the requirements
of Section 162(m) of the Internal Revenue Code, and the regulations thereunder,
so that compensation received will be performance-based compensation excludable
from the $1 million limitation on deductible compensation.
The Incentive Plan establishes a correlation between the annual incentives
awarded to the Participants and the Company's financial performance. Each year,
the Compensation Committee will fix, during the first 120 days of a Performance
Year, the performance criteria and goals to be achieved before any award will
be payable. The performance criteria among which the Compensation Committee may
select include Earnings Per Share, Earnings, Contribution to Corporate Profit,
Return on Average Equity or Return on Average Assets, to be used singularly or
in combination, as the Compensation Committee determines. The performance
criteria and the percentage of base salary awarded for achieving the goals set
by the Compensation Committee may vary from year to year.
If and to the extent the performance criteria set by the Compensation
Committee are achieved, an award pool will be established. Funds in the award
pool will be used to pay individual awards, based on a percentage of each
Participant's base salary earned for the performance period. For
14
<PAGE>
example, if the targeted performance or "norm" level is achieved for fiscal
year 1999, the Chairman would be eligible to receive an award of 60% of base
salary. If the performance achieved for fiscal year 1999 is less than
threshold, the Chairman will not receive an award. If the high performance
level is achieved, the Chairman will be eligible to receive an award equal to
120% of base salary. If the performance falls between the performance goals
established by the Compensation Committee, the Incentive Plan provides that the
award will be determined by interpolation, except that no award pool will be
established if the threshold performance level is not achieved. In succeeding
Performance Years, the awards may be larger or smaller depending upon a variety
of factors, such as the extent to which performance targets are attained, the
Participant's base salary for that Performance Year, and the individual award
percentages, but in no event will a Participant receive an award in excess of
$2,500,000 in any year. The Compensation Committee and senior management, with
the consent of the Committee, retain full discretion to reduce or eliminate any
award which may be earned by a Participant under the Incentive Plan. Any
amounts to be received under the Incentive Plan for fiscal 1999 are not yet
determinable. However, if the threshold performance level is achieved for
fiscal 1999, it is expected that bonus amounts for the five executive officers
named in the Summary Compensation Table will be between 16.6% and 120% of base
salary.
The Incentive Plan may be amended by the Compensation Committee at any time
provided that shareholder approval of any such amendment will be required to
the extent necessary under Section 162(m).
Vote Required to Approve the Incentive Plan; Board's Recommendation
Approval of the Incentive Plan requires that the votes cast to approve the
Incentive Plan exceed the votes cast opposing the approval of the Incentive
Plan. The Board recommends a vote FOR such approval. Proxies solicited by the
Board will, unless otherwise directed, be voted in favor of such ratification.
PROPOSALS OF SHAREHOLDERS FOR 2000 ANNUAL MEETING
Nominations, other than by or at the direction of the Board of Directors, of
candidates for election as directors at the 2000 Annual Meeting and any other
shareholder proposed business to be brought before the 2000 Annual Meeting must
be submitted to the Company not later than January 27, 2000. Such shareholder
proposed nominations and other shareholder proposed business must be made in
accordance with the Company's By-Laws which provide, among other things, that
shareholder proposed nominations and shareholder proposed business must be
accompanied by certain information concerning the proposal and the shareholder
submitting the proposal. To be considered for inclusion in the proxy statement
solicited by the Board of Directors, shareholder proposals for consideration at
the 2000 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 21, 1999. 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.
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
15
<PAGE>
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.
By Order of the Board of Directors
Richard D. Schepp
Secretary
Dated: April 19, 1999
16
<PAGE>
APPENDIX A
SHOPKO STORES, INC.
1999 EXECUTIVE INCENTIVE PLAN
1. Purpose. The ShopKo Stores Inc. Compensation & Stock Option Committee
(the "Committee") adopted as of March 17, 1999 this 1999 Executive Incentive
Plan (the "Plan"). The Plan is intended to establish a correlation between the
annual incentives awarded to the participants and the Company's financial
performance, thereby rewarding the participants with an incentive award if the
performance goals, as fixed by the Committee pursuant to the terms of the
Plan, are met. Subject to approval by the ShopKo Stores, Inc. (the "Company")
shareholders, the Plan will be applicable to Fiscal Year 1999 and subsequent
years unless and until terminated by the Committee. Upon shareholder approval
of the Plan, the Company's existing Executive Incentive Plan shall be
terminated for Participants in the Plan. If shareholder approval is not
obtained, the Plan will not take effect, and the Company's existing Executive
Incentive Plan will remain in effect. The Plan is intended to meet the
requirements of Section 162(m) of the Internal Revenue Code, and the
regulations thereunder, so that compensation received pursuant to the Plan
will be performance-based compensation excludable from the $1 million
limitation on deductible compensation.
2. Definitions. As used in the Plan, the following terms have the meanings
indicated:
(a) "Award Pool" means the aggregate total of dollars available for
distribution to Participants, determined each fiscal year in accordance
with the Award Table.
(b) "Award Table" means a table similar in type to Exhibit A, with
changes necessary to adapt to the performance criteria selected by the
Committee for the Performance Year and to display other objective factors
necessary to determine the amount, if any, of the incentive award for the
Performance Year.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Committee" means the Compensation & Stock Option Committee of the
Board.
(f) "Company" means ShopKo Stores, Inc. and its subsidiaries including
subsidiaries of subsidiaries and partnerships and other ventures in which
the Company or any subsidiary has a significant equity interest, as
determined in the sole discretion of the Committee.
(g) "Contribution to Corporate Profit" means a business unit's earnings
before interest and taxes computed in accordance with generally accepted
accounting principles and adjusted to eliminate the following if the impact
on such contribution is material: (i) gain or loss attributable to the
disposition of investments in subsidiaries and (ii) extraordinary and
nonrecurring items of gain or loss.
(h) "Disability" means a condition that entitles the Participant to
disability payments under the terms of the Company's long-term disability
plan.
(i) "Earnings" means the after-tax consolidated net income of the
Company computed in accordance with generally accepted accounting
principles and adjusted to eliminate the following if the impact on net
income is material: (i) gain or loss attributable to the disposition of
investment in subsidiaries, and (ii) extraordinary and nonrecurring items
of income or loss.
(j) "Earnings Per Share" means the portion of the Company's Earnings
allocable to each outstanding share of common stock during the accounting
period, based on the average number of shares outstanding, computed on a
fully-diluted basis in accordance with generally accepted accounting
principles.
(k) "Good Standing" means a Participant who is a current employee of the
Company and who is not in the written warning stage or a final warning
stage of the Company's formal disciplinary process.
(l) "Participant" means any employee of the Company designated to
participate in the Plan.
A-1
<PAGE>
(m) "Performance Goal" means one or more measurable objectives, as
determined by the Committee, such as Earnings Per Share, Earnings,
Contribution to Corporate Profit, Return on Average Equity, or Return on
Average Assets, which may be used singularly or in combination, as the
Committee determines, to measure the performance of the Company for the
purpose of determining whether, and to what extent, an award will be
payable under the Plan for the Performance Year.
(n) "Performance Year" means the Company's fiscal year. The initial
Performance Year is the Company's fiscal year ending January 29, 2000.
(o) "Plan" means the ShopKo Stores, Inc. 1999 Executive Incentive Plan.
(p) "Retirement" or "Retires" means the termination of employment of a
Participant on or after attaining age 55 with at least 10 years of service
with the Company, or due to early retirement with the consent of the
Committee.
(q) "Return on Average Assets" or "ROAA" means Earnings for the
accounting period divided by total average assets.
(r) "Return on Average Equity" or "ROAE" means Earnings for the
accounting period divided by total average equity.
(s) "Salary" means base salary earned for each Performance Year
determined in accordance with principles employed for reporting salary to
the Company's shareholders in the annual Proxy Statement.
3. Participation. Participation in the Plan shall be determined by the
Committee, upon the recommendation of senior management. A person who first
becomes a Participant after the commencement of a Performance Year shall be
eligible to receive a pro rata award pursuant to Section 4, based on the
number of full weeks remaining in the Performance Year after he or she becomes
a Participant. If a Participant transfers to another position which is equal
or higher in award payout level, the Participants' award will be prorated at
year end based upon the number of weeks the Participant held each position. If
a Participant transfers to a lower award level position, or a position which
is not eligible for an award, the Participant will receive the award (if any)
which the Participant would have received had the Participant been in the
lower-level position for the entire Performance Year.
4. Determination of Awards.
(a) During the first one hundred twenty (120) days of each Performance
Year, the Committee will complete and adopt an Award Table substantially in
the form attached as Exhibit A. The Award Table will fix the objective
components for determining whether awards will be paid, and the percentage of
Participants' Salary for which Participants will qualify if the Company
achieves threshold, target and high Performance Goal levels. If the Company's
actual performance level falls between the Performance Goals set forth in the
Award Table, the amount of the Award Pool will be determined by interpolation.
(b) Before any award may be paid for a Performance Year, the Committee
shall certify that the Performance Goals and other requirements of the Plan
have been satisfied for the Performance Year and establish the Award Pool. No
payments shall be made unless and until the Committee makes this
certification.
(c) Even though the Performance Goals have been met:
(i) no award to a Participant with respect to a Performance Year shall
exceed $2,500,000;
A-2
<PAGE>
(ii) the Committee expressly reserves the right to reduce or eliminate
entirely any award if it determines it is in the best interests of the
Company to do so. Such determination shall be conclusive and binding;
(iii) Senior Management shall have the express right, with the consent
of the Committee, to reduce or eliminate entirely any proposed award to an
individual if it determines it is in the best interests of the Company to
do so. Such determination shall be conclusive and binding; and
(iv) the aggregate amount of awards shall not exceed the amount in the
Award Pool established as set forth above.
5. Payment of Awards.
(a) If the Committee has made the certification required pursuant to
Section 4(b), subject to senior management's review pursuant to Section 4(c)
and the other provisions of Section 4(c), awards shall be payable not later
than 60 days following the last day of the Performance Year for which they are
computed. Notwithstanding the foregoing, a Participant may defer receipt of an
award by filing a timely election pursuant to the Company's Deferred
Compensation Plan. All awards under the Plan are subject to federal, state and
local income and payroll tax withholding.
(b) A Participant shall receive no award for a year if the Participant is
not in Good Standing on the last day of the Performance Year or the
Participant's employment with the Company terminates prior to the last day of
the Performance Year for any reason other than death, Disability, Retirement,
or a Change in Control as defined in the Company's 1998 Stock Incentive Plan.
A Participant who terminates employment for one of the reasons described in
the preceding sentence shall be eligible to receive a pro rata award, if an
award is otherwise payable pursuant to Section 4, based on the number of full
months elapsed in the Performance Year ending with the date the event
occurred. A Participant shall not forfeit an award if the Participant's
employment terminates after the end of the applicable Performance Year, but
prior to the distribution of the award for such year.
(c) If a Participant dies and is subsequently entitled to receive an award
under the Plan, the award shall be paid to the Participant's estate.
6. Administration. The Plan shall be administered by the Committee. The
Committee may adopt rules and regulations for carrying out the Plan, and the
Committee may take such actions as it deems appropriate to ensure that the
Plan is administered in the best interests of the Company. The Committee has
the authority to construe and interpret the Plan, resolve any ambiguities, and
make determinations with respect to the eligibility for or amount of any
award. The interpretation, construction and administration of the Plan by the
Committee shall be final and conclusive. The Committee may consult with
counsel, who may be counsel to the Company, and shall not incur any liability
for any action taken in good faith in reliance upon the advice of counsel.
7. Rights. Participation in the Plan and the right to receive awards under
the Plan shall not give a Participant any proprietary interest in the Company
or any of its assets. A Participant shall for all purposes be a general
creditor of the Company. The interests of a Participant cannot be assigned,
anticipated, sold, encumbered or pledged and shall not be subject to the
claims of his creditors. Nothing in the Plan shall confer upon any Participant
the right to continue in the employ of the Company, or shall interfere with or
restrict in any way the right of the Company to discharge a Participant at any
time for any reason whatsoever, with or without cause.
8. Successors. The Plan shall be binding on the Participants and their
personal representatives. If the Company becomes a party to any merger,
consolidation, reorganization or other corporate transaction, the Plan shall
remain in full force and effect as an obligation of the Company or its
successor in interest.
A-3
<PAGE>
9. Amendment and Termination. The Committee may amend or terminate the Plan
at any time as it deems appropriate; provided that to the extent required to
meet the requirements of Code Section 162(m) for performance-based
compensation, any amendment that makes a material change to the Plan must be
approved by the shareholders of the Company.
10. Interpretation. If any provision of the Plan would cause the Plan to
fail to meet the Code Section 162(m) requirements for performance-based
compensation, then that provision of the Plan shall be void and of no effect.
A-4
<PAGE>
EXHIBIT A
AWARD TABLE
PERFORMANCE YEAR 19
<TABLE>
<CAPTION>
Threshold Target High
Performance Performance Performance
Level (A) Level (B) Level (C)
% of % of % of
Title Salary Salary Salary
- - ----- ----------- ----------- -----------
<S> <C> <C> <C>
Chairman.................................... --% --% --%
President, CEO.............................. --% --% --%
Executive Vice President.................... --% --% --%
Chief Financial Officer..................... --% --% --%
Senior Vice Presidents...................... --% --% --%
Vice Presidents............................. --% --% --%
Directors................................... --% --% --%
Others...................................... --% --% --%
</TABLE>
During the first 90 days of each Performance Year, the Committee shall set
the Performance Goals using the following process:
1. Specify performance criteria to be used as the Performance Goals for
the Performance Year (i.e., such as Earnings Per Share, Earnings,
Contribution to Corporate Profit, Return on Average Equity or Return on
Average Assets, which may be used singularly or in combination, as the
Committee determines), to measure the performance of the Company for the
purpose of determining whether an award will be payable under the Plan for
the Performance Year.
2. Fix the threshold Performance Goal below which no award is payable
(A), and the threshold percentage of salary for each level of Participants.
3. Fix the target Performance Goal (B) and target percentage of salary
for each level of Participants.
4. Fix the High Performance Goal which results in maximum permitted
award (C) and the maximum percentage of salary for each level of
Participants.
5. If the result achieved for the Performance Year is less or greater
than the goal specified in B, but greater than the goal specified in A, the
percentage award payable will be determined by interpolating, as provided
in the Plan, between A and B and B and C, as the case may be, with C being
the maximum.
A
<PAGE>
SHOPKO STORES, INC. PROXY
700 Pilgrim Way
P.O. Box 19060
Green Bay, Wisconsin 54307
1999 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 William J. Podany 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 Wisconsin corporation,
to be held on Wednesday, May 26, 1999 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: William J. Podany and Gregory H. Wolf
[_]VOTE FOR all nominees listed, except those whose name(s) is (are)
written below.
---------------------------------------------------------------------------
[_]VOTE WITHHELD for all nominees.
2. PROPOSAL TO RATIFY APPOINTMENT OF DELOITTE & TOUCHE LLP
For [_] Against [_] Abstain [_]
3. PROPOSAL TO APPROVE SHOPKO STORES, INC. 1999 EXECUTIVE INCENTIVE PLAN
For [_] Against [_] Abstain [_]
4. In their discretion, the Proxy is authorized to vote upon such other
business as may properly come before the meeting.
(over)
THIS PROXY WILL BE VOTED AS DIRECTED, Dated: _______________, 1999
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
PLEASE MARK, SIGN, DATE AND RETURN ATTENDING THE ANNUAL MEETING IN
THIS PROXY
CARD PROMPTLY USING THE ENCLOSED PERSON. NUMBER OF
ENVELOPE. SHAREHOLDERS ATTENDING:
