SHOPKO STORES INC, DEF 14A, 2000-04-17

SHOPKO STORES INC
DEF 14A, 2000-04-17
VARIETY STORES

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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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 240.14a-11(c) or 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:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

<PAGE>

[SHOPKO LOGO]

SHOPKO STORES, INC.

NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 2000

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 24, 2000 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 February 3,
2001;

3) To approve the ShopKo Stores, Inc. 2000 Executive Long-Term 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, 2000 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 17, 2000
<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 24, 2000 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 2000 Executive Long-Term
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 17, 2000.

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, 2000 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,
29,585,050 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 August 16, 1999, James L. Reinertsen, M.D. resigned from the Company's
Board of Directors. At that time, John G. Turner was elected to the Board for
a term expiring at the 2001 Annual Meeting of Shareholders.

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. Jack W. Eugster and Stephen E. Watson are nominated to serve
three-year terms expiring at the 2003 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.
Eugster and Watson 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 29, 2000, concerning
Messrs. Eugster, Watson 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 2003

Jack W. Eugster; 54; 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 Donaldson Co., and Jostens, Inc.

Stephen E. Watson; 55; 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-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 2001

Jeffrey C. Girard; 51; director of the Company since June, 1991; President of
Girard & Co. of Minneapolis, Minnesota, a private consulting company, and
from 1997 to 1999 was an Adjunct Professor at the Carlson School of
Management, University of Minnesota; 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. Mr. Girard is also a
director of ProVantage Health Services, Inc. ("ProVantage"), a subsidiary of
the Company.

Dale P. Kramer; 60; director of the Company since August, 1991; Chairman of
the Board from July, 1997 to March, 2000; 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. Mr. Kramer is also a director
of ProVantage.

2
<PAGE>

John G. Turner; 60; director of the Company since August, 1999; Chairman and
Chief Executive Officer of ReliaStar Financial Corp. since 1993. He has held
numerous executive offices within Reliastar and its corporate predecessors,
The NWNL Companies, Inc. and Northwestern National Life Insurance Company,
since 1967. Mr. Turner is also a director of ReliaStar Financial Corp. and
Hormel Foods Corporation.

Directors Whose Terms Expire at
the Annual Meeting in 2002

William J. Podany; 53; director of the Company since July, 1997; Chairman of
the Board since March, 2000; and 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. Mr. Podany is also a director of
ProVantage.

Gregory H. Wolf; 43; director of the Company since November, 1998; Chairman
and Chief Executive Officer of nextHR.com since January, 2000. nextHR.com is
an application service provider of human resource asset management services.
He was previously an officer of Humana, Inc; a provider of managed healthcare
products and services, from October, 1995 to August, 1999, having first
served as Senior Vice President of Sales and Marketing; as Chief Operating
Officer from July 1996 to September, 1996; President from September, 1996
through November, 1997; and 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 ProVantage, Insystems Technologies and
Shreyer Honors College and Institute for Innovation and Learning and a
National Trustee for the Boys and Girls Clubs of America.

Board of Directors Meetings and Committees

The Board of Directors held ten meetings in the fiscal year ended January
29, 2000. 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 actions and recommendations to the full Board of Directors. The
Compensation and Stock Option Committee met two times in the fiscal year ended
January 29, 2000.

The Audit Committee is currently comprised of Messrs. Girard (Chairman) and
Watson. The duties of the Audit Committee are to oversee the actions of the
Company toward: (i) maintaining the reliability and integrity of the Company's
accounting policies and financial reporting and disclosure practices; (ii)
establishment and maintenance of processes to assure that an adequate system
of

3
<PAGE>

internal control is functioning within the Company; (iii) establishment and
maintenance of processes to assure compliance by the Company with applicable
laws and regulations; and (iv) overseeing the Company's relations with the
independent public accountants. The Audit Committee met two times in the
fiscal year ended January 29, 2000.

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, Wolf and Watson were
granted options to purchase 2,000 shares of common Stock at $35.1250 per share
on May 26, 1999. Additionally, on August 16, 1999, Mr. Turner was granted an
option to purchase 4,762 shares of common Stock at $32.1250 per share.

Mr. Kramer has entered into an agreement with the Company whereby Mr.
Kramer provides certain consulting services to the Company. Pursuant to the
agreement, the Company pays Mr. Kramer an annual fee of $130,000 (which
includes fees payable to Mr. Kramer for his services as a director of the
Company) and reimburses Mr. Kramer's reasonable out of pocket expenses. The
agreement has a term of two years.

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 (extended for up to five years for a
director's initial deferral under the Plan). As of January 29, 2000, 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 (19 persons). Except as otherwise
noted, information with respect to directors and executive officers is as of
January 29, 2000.

<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Name of Beneficial Owner Ownership(1)(2)(3) Percent
- ------------------------ ------------------ -------
<S> <C> <C>
Mellon Financial Corporation (4).................... 2,673,584 8.79%
One Mellon Center
Pittsburgh, Pennsylvania 15258

T. Rowe Price Associates, Inc. (5).................. 2,207,800 7.2%
100 E. Pratt Street
Baltimore, Maryland 21202

American Express Financial Corporation (6).......... 1,600,614 5.3%
IDS Tower 10
Minneapolis, Minnesota 55440

Dale P. Kramer (7).................................. 370,000 1.22%

Jack W. Eugster..................................... 19,897 *

Jeffrey C. Girard................................... 4,000 *

William J. Podany (7)............................... 113,000 *

John G. Turner...................................... 1,400 *

Stephen E. Watson................................... 4,689 *

Gregory H. Wolf..................................... 5,000 *

Michael J. Bettiga (7).............................. 54,640 *

Roger J. Chustz (7)................................. 48,000 *

Paul F. Freischlag, Jr.............................. -- *

Michael J. Hopkins (7).............................. 34,000 *

All directors and executive officers as a group (19 737,486 2.4%
persons)...........................................
</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.
(2) Includes shares which may be acquired within 60 days pursuant to stock
options as follows: Mr. Kramer 280,000 shares, Mr. Podany 88,000 shares,
Mr. Chustz 48,000 shares, Mr. Eugster 18,897 shares, Mr. Girard 3,000
shares, Mr. Watson 4,689 shares, Mr. Hopkins 34,000 shares, Mr. Bettiga
52,240 shares and all directors and executive officers as a group, 281,908
shares.
(3) The following directors and named executive officers also beneficially own
shares of ProVantage Common Stock: Mr. Kramer 8,150 shares, Mr. Girard
1,630 shares, Mr. Wolf 4,890 shares, and Mr. Bettiga 2,030 shares.
Individually and in the aggregate, Company directors and executive
officers own less than 1% of the outstanding ProVantage Common Stock.

5
<PAGE>

(4) Based on Schedule 13G filed January 31, 2000. According to this filing,
Mellon Financial Corporation has sole voting power as to 2,038,684 shares,
shared voting power as to 114,800 shares, sole dispositive power as to
2,368,884 shares and shared dispositive power as to 263,700 shares.
(5) Based on Schedule 13G filed on February 8, 2000. According to this filing,
T. Rowe Price Associates, Inc. has sole voting power with respect to
440,200 shares and sole dispositive power with respect to all 2,207,800
shares.
(6) Based on Schedule 13G filed on February 8, 2000. According to this filing,
American Express Financial Corporation has shared voting power as to
1,386,295 shares and shared dispositive power as to all 1,600,614 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 29, 2000, such executive officers' approximate ShopKo Stock Fund
account balances were as follows: Mr. Kramer $204,877, Mr. Podany $63,704,
Mr. Chustz $14,381, Mr. Hopkins $41,542, and Mr. Bettiga $23,038.

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, with the exception of one Form 4 which was filed by Mr.
Turner on November 9, 1999 and one Form 4 which was filed by Mr. Hopkins on
December 27, 1999. These forms were filed within thirty (30) days of their
respective due dates.

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
all individuals who served as the Company's Chief Executive Officer during
Fiscal Year 1999 and the Company's other four most highly compensated
executive officers:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long term
Compensation
Annual Compensation Awards
------------------------------ -----------------------
Securities
Other Restricted Underlying
Annual Stock Options/ All Other
Name and Bonus Compensation Awards SARs Compensation
Principal Position Year(1) Salary($) ($)(2) ($)(3) ($) (#)($)(4) ($)(5)
- ------------------------ ------- --------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dale P. Kramer.......... 1999 350,480 507,806 23,471 -- 0 92,276(7)
Chairman, President & 1998 627,692 753,231 2,073 -- 0 613,751
CEO (6)................ 1997 592,308 720,000 699 245,625(8) 100,000 452,393

William J. Podany....... 1999 625,000 750,000 0 -- 175,000 64,816(10)
Chairman, President & 1998 523,007 523,077 145 -- 0 321,102
CEO (9)................ 1997 492,308 500,000 2 -- 70,000 233,923

Paul F. Freischlag, Jr.. 1999 348,846 279,077 0 -- 10,000 466(12)
Sr. Vice President 1998 161,058 128,846 0 -- 40,000 9,403
Chief Financial Officer 1997 -- -- -- -- -- --
(11)

Michael J. Hopkins...... 1999 322,385 285,354 0 -- 25,000 31,264(13)
President, Pamida 1998 249,077 174,354 197 -- 0 189,300
1997 224,000 158,200 200 -- 40,000 138,338

Michael J. Bettiga...... 1999 262,880 184,016 0 -- 10,000 29,851(14)
Sr. Vice President 1998 236,406 165,484 151 -- 0 188,922
Stores/ Retail Health 1997 222,154 156,800 108 -- 40,000 132,922
Operations

Roger J. Chustz......... 1999 252,350 176,645 2,353 -- 10,000 29,589(15)
Sr. Vice President 1998 251,785 176,249 75 -- 0 190,491
GMM/Apparel 1997 243,077 171,500 9 -- 40,000 143,044
</TABLE>
- --------
(1) Refers to fiscal years ended on the following dates: 1997: January 31,
1998; 1998: January 30, 1999; and 1999: January 29, 2000.
(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) Does not include options to purchase ProVantage Common Stock granted in
1999 as follows: Mr. Kramer 4,762 shares, Mr. Podany 11,905 shares, Mr.
Freischlag 6,666 shares, and Mr. Bettiga 4,500 shares. These options were
granted in July, 1999 at ProVantage's initial public offering price of
$18.00 per share.
(5) 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.

7
<PAGE>

(6) Mr. Kramer served as President and CEO of the Company until March, 1999
and as Chairman of the Board until March, 2000.
(7) All Other Compensation for Mr. Kramer includes the following: Company
paid portion of individual life insurance policy: $1,702; 401(k) Company
match: $4,207; and Profit Sharing Plan contributions: $86,367.
(8) Upon his retirement in March, 1999, all of Mr. Kramer's restricted stock
fully vested.
(9) Mr. Podany became President and CEO in March, 1999, and Chairman of the
Board in March, 2000.
(10) All Other Compensation for Mr. Podany includes the following: Company
paid portion of individual life insurance policy: $174; 401(k) Company
match: $5,231; and Profit Sharing Plan contributions: $59,411.
(11) Mr. Freischlag joined the Company in July, 1998.
(12) All other Compensation for Mr. Freischlag consisted of Company paid
portion of individual life insurance policy: $174; and relocation
expenses of $292.
(13) All Other Compensation for Mr. Hopkins includes the following: Company
paid portion of individual life insurance policy: $174; 401(k) Company
match: $5,275; and Profit Sharing Plan contributions: $25,815.
(14) All Other Compensation for Mr. Bettiga includes the following: Company
paid portion of individual life insurance policy: $174: 401(k) Company
match: $4,464; and Profit Sharing Plan contributions: $25,213.
(15) All Other Compensation for Mr. Chustz includes the following: Company
paid portion of individual life insurance policy: $174; 401(k) Company
match: $5,000; and Profit Sharing Plan contributions: $24,415.

Option Grants Table

The following table sets forth information about stock option grants during
the fiscal year ended January 29, 2000 to the six executive officers named in
the Summary Compensation Table.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Securities Options/SARs Stock Price Appreciation
Underlying Granted to Exercise or For Option Term
Options/SARs Employees in Base Price Expiration ---------------------------
Name Granted (#) (1) Fiscal Year ($/Share) Date 5%($) 10%($)
- ---- --------------- ------------ ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dale P. Kramer.......... 4,762(2) * 18.00 7/12/09 53,906 136,605
William J. Podany....... 100,000 10% 31.00 3/17/09 1,949,570 4,940,602
75,000 7.5% 23.3125 11/10/09 1,099,583 2,786,559
11,905(2) 2.1% 18.00 7/12/09 134,766 341,513
Paul F. Freischlag, Jr.. 10,000 1% 23.3125 11/10/09 146,611 371,541
6,666(2) 1.2% 18.00 7/12/09 75,460 191,224
Michael J. Hopkins...... 15,000 1.5% 37.625 7/14/09 354,932 899,468
10,000 1% 23.3125 11/10/09 146,611 371,541
Michael J. Bettiga...... 10,000 1% 23.3125 11/10/09 146,611 371,541
4,500(2) * 18.00 7/12/09 50,940 129,089
Roger J. Chustz......... 10,000 1% 23.3125 11/10/09 146,611 371,541
</TABLE>
- --------
* Less than 1%
(1) Forty percent (40%) of Company 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.

8
<PAGE>

(2) Options to acquire ProVantage Common Stock. The vesting schedule for
ProVantage stock options is the same as that for Company stock options.

Option Exercise and Fiscal Year End Value Table

The following table sets forth information with respect to the six
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 29, 2000.

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-
Acquired Options/SARs at Fiscal the-Money Options/SARs at
on Value Year-End (#) Fiscal Year-End ($)
Exercise Realized ----------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable (1) Exercisable Unexercisable
- ---- -------- -------- ----------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dale P. Kramer.......... 0 0 280,000 4,762 776,100 0
William J. Podany....... 0 0 88,000 198,905 258,750 0
Paul F. Freischlag, Jr.. 0 0 0 56,666 0 0
Michael J. Hopkins...... 0 0 34,000 31,000 0 0
Michael J. Bettiga...... 0 0 52,240 20,500 91,829 0
Roger J. Chustz......... 0 0 48,000 16,000 75,470 0
</TABLE>
- --------
(1) Includes options to purchase ProVantage Common Stock as follows: Mr.
Kramer 4,762 shares, Mr. Podany 11,905 shares, Mr. Freischlag 6,666
shares, and Mr. Bettiga 4,500 shares.

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.

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 29, 2000, the multiple referred to in this paragraph is three for Mr.
Podany and two each for Messrs. Freischlag, Hopkins, Bettiga and Chustz. Each
individual would also receive his salary through the date of termination and
all other

9
<PAGE>

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.

Key executives are eligible for participation in the Company's Supplemental
Executive Retirement Plan, ("SERP") which was adopted by the Compensation
Committee as of February 1, 1999. This unfunded, non-qualified plan is
intended to supplement retirement benefits to eligible officers who retire
after attaining age 50 with 10 or more years of service with the Company. The
principal objective of the SERP is to provide a competitive level of
retirement income in order to attract, retain and motivate key executives
selected by the Compensation Committee. The Chief Executive Officer and the
other executives named in the Summary Compensation Table above are currently
eligible for participation in the SERP. The maximum retirement benefit
provided by the SERP is 40% of the executive's final average total
compensation, offset by the actuarial equivalent value of employer
contributions to qualified and non-qualified plans and certain social security
benefits.

Other Compensation

The Company provides certain personal benefits and other noncash
compensation to its executive officers. For the fiscal year ended January 29,
2000, 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.

10
<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.

The Company's philosophy is to target medium levels of compensation and
benefits, with top quartile compensation levels attainable for superior
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 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 paid by other retail companies having approximately
2-3 billion dollars in annual sales.

11
<PAGE>

An analysis of the survey group compensation level indicates that, as it
relates to base salary, the Company's executives, on an overall average 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, 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 29, 2000. 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 executives 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.

12
<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, 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 29, 2000 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 2-3 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 29, 2000, 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.

In November 1999, the Company awarded nonqualified stock options to the
Chief Executive Officer, along with other key employees, as disclosed in the
compensation tables. These awards vest over a period of five years, beginning
two years after the grant date, and were granted at an exercise price equal to
fair market value as of the day of grant. This grant was made pursuant to the
Company's intention to grant stock options to key employees on a bi-annual
basis.

In the Compensation Committee's opinion, the total compensation package for
the Chief Executive Officer in 1999 appropriately reflects the Company's
improved financial performance and the Chief Executive Officer's individual
efforts in carrying out his overall responsibility for the Company.

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

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<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 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 24,
1995 in the Company's Common Stock and in each of the comparison groups, and
assumes reinvestment of dividends.

[LINE CHART OF SHOPKO]
ShopKo Stores Wilshire 5000 S&P Retail Composite
------------- ------------- --------------------
Measurement Pt-
2/24/95 $100.00 $100.00 $100.00
2/23/96 $127.01 $134.07 $110.38
2/21/97 $181.55 $163.88 $135.85
1/31/98 $301.61 $205.59 $187.02
1/30/99 $372.63 $261.67 $306.56
1/29/00 $218.16 $298.91 $307.00

14
<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 February 3, 2001 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 February 3, 2001 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. 2000 EXECUTIVE LONG-TERM INCENTIVE PLAN

The goals of the ShopKo Stores, Inc. 2000 Executive Long-Term Incentive
Plan (the "Incentive Plan") are (i) to attract and retain high quality
individuals eligible to participate in the Incentive Plan; (ii) to motivate
participants, by means of appropriate incentives, to achieve long-range goals
and (iii) to provide total compensation opportunities that are competitive
with those of other similar companies. The Board of Directors adopted the
Incentive Plan on February 23, 2000, subject to shareholder approval. The
following summary of the material features of the Incentive Plan is subject in
all respects to the complete text of the Incentive Plan, a copy of which is
attached to this Proxy Statement as Appendix A.

The Board of Directors has approved the Incentive Plan for fiscal year 2000
and subsequent years unless and until terminated by the Company's Compensation
and Stock Option Committee ("Compensation Committee"). It is expected that all
of the Company's Executive Officers, approximately 13 people, will participate
in the Incentive Plan. The Incentive Plan rewards eligible executives with an
incentive award if certain long-term performance goals set by the Compensation
Committee are met. 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 long-term
incentives awarded to the participants and the Company's performance. The
Compensation Committee will periodically fix, during the first ninety days of
a performance period, the length of performance periods, the performance
criteria to be achieved before any award will be payable, and award levels to
be paid to participants upon the Company's attainment of performance criteria.
The performance criteria among which the Compensation Committee may select
include sales, earnings, earnings per share, pre-tax earnings, return on
equity, return on assets, return on enterprise value or asset management. The
performance criteria may include or exclude items of an unusual, non-recurring
or extraordinary nature including, without limitation, changes in accounting
methods, changes in inventory methods, changes in

15
<PAGE>

corporate taxation, unusual accounting gains and losses, changes in financial
accounting standards, or other extraordinary events causing changes in the
Company's performance, all as the Compensation Committee may deem necessary or
desirable to accomplish the purposes of the Incentive Plan.

The Compensation Committee retains the sole discretion to determine the
performance periods, the performance objectives to be achieved, award levels
and the measure of whether and to what extent such objectives have been met.
Performance periods, performance criteria and the award levels granted for
achieving the goals may vary from performance period to performance period,
and may be amended from time to time by the Compensation Committee, if the
Committee determines such a change is necessary to maintain the motivational
impact of the Incentive Plan, provided that such adjustments shall not result
in any Participant receiving a greater amount than the Participant would have
receieved if the adjustment had not been made.

If and to the extent the performance criteria set by the Compensation
Committee are achieved during a performance period, an award will be made to
each participant. The award will be in an amount between zero and 120% of the
participant's then-current annual base salary. Awards can be paid in the
Company's common stock ("Common Stock"), cash, or a combination thereof, as
determined in the sole discretion of the Compensation Committee.

Subject to the Compensation Committee's authority to make adjustments in
the event of certain corporate transactions, the aggregate number of shares of
Common Stock which may be issued under the Incentive Plan is 300,000 shares.
No award to a participant for any single performance period shall exceed
$3,000,000.

At its February, 2000 and April, 2000 meetings, the Compensation Committee
established performance criteria and award levels for the two and four fiscal
year periods commencing January 30, 2000, subject to shareholder approval. If
shareholder approval is not obtained, no awards will be made under the Plan.
For both the two and four year periods, the performance criteria will be
cumulative net operating profit, on an after tax basis, and a ratio known as
"NOREAV", which is calculated by dividing the Company's net operating profit
by the Company's average enterprise value (debt plus shareholder equity minus
minority interest). Each of these criteria will be weighted equally in
determining the amount of the participants' awards.

The Compensation Committee has determined threshold, midppoint and high
performance goals for cumulative net operating profit and NOREAV for the two
and four year periods commencing January 30, 2000/1/. Each participant's award
level will depend on the Company's performance level, the participant's
current base salary and a predetermined percentage. For example, if the
threshold performance goal is achieved for a performance period, Mr. Podany
would be eligible to receive an award of 30% of his then-current base salary.
If the midpoint performance goal is achieved for a performance period, Mr.
Podany would be eligible to receive an award of 60% of his then-current base
salary. If the high performance goal is achieved, Mr. Podany would be eligible
to receive an award equal to 120% of his then-curent base salary. The
percentage of base salary to be paid to the other executives named above in
the Summary Compensation Table upon achievenment of threshold, midpoint and
high performance goals, respectively are as follows: Mr. Hopkins: 25%, 50%,
100%; Mr. Freischlag: 20%, 40%, 80%; and Messrs. Bettiga and Chustz: 17.5%,
35% and 70%. If the Company's performance level is less than the threshold
level, participants would not receive an award. If the Company's 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 awards will be made for any performance period
in which the threshold performance level is not achieved.
- --------
/1/Because the Committee believes that operating profit and NOREAV targets
represent confidential business information, the disclosure of which would
adversely affect the Company, the Committee has determined it is in the best
interest of the Company not to publish such information.

16
<PAGE>

Subject to the restrictions described above, the Incentive Plan may be
terminated or amended at any time 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 Incentive Plan, except for increases
resulting from certain corporate transactions involving the Company.

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 2001 ANNUAL MEETING

Nominations, other than by or at the direction of the Board of Directors,
of candidates for election as directors at the 2001 Annual Meeting and any
other shareholder proposed business to be brought before the 2001 Annual
Meeting must be submitted to the Company not later than January 24, 2001. 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 2001 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 18, 2000. 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 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 17, 2000

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<PAGE>

APPENDIX A

SHOPKO STORES, INC.
2000 EXECUTIVE LONG TERM INCENTIVE PLAN

1. Purpose. ShopKo Stores, Inc. established the 2000 Executive Long Term
Incentive Plan (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 and (iii) to provide total
compensation opportunities that are competitive with those of other similar
companies.

2. Definitions. As used in the Plan, the following terms have the meanings
indicated:

(a) "Award Table" means a table similar in type to Exhibit A, with
changes necessary to adapt to the Performance Goals selected by the
Committee for each Performance Period and to display other objective
factors necessary to determine the amount, if any, of the award for the
Performance Period.

(b) "Board" means the Board of Directors of the Company.

(c) "Change of Control" means the occurrence of any event defined as a
"Change of Control" pursuant to the terms of the Company's 1998 Stock
Incentive Plan.

(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) "Disability" means a condition rendering a Participant 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 more
than 120 days.

(h) "Eligible Employee" means any employee of the Company or a Related
Company.

(i) "Fair Market Value" of a share of Stock means:

(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 average of
the closing sale prices of a share of Stock on the principal exchange
on which the Stock is then listed or admitted to trading for the thirty
(30) trading day period ending with the last trading day prior to the
date on which the determination is being made.

(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 average of
the lowest reported bid price and highest reported asked price of the
Stock 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, for the
thirty (30) trading day period ending with the last trading day prior
to the date on which the determination is being made.

(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) "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.

(k) "Participant" means any Eligible Employee of the Company designated
by the Committee to participate in the Plan.
<PAGE>

(l) "Performance Goal" means one or more measurable objectives, as
determined by the Committee, such as sales, earnings, earnings per share,
pre-tax earnings, return on equity, return on assets, return on enterprise
value or asset management, 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 Period. Performance Goals need
not be the same for all Participants and may be established separately for
the Company as a whole or for its various groups, divisions, subsidiaries
and affiliates, all as the Committee may determine, in its discretion.

(m) "Performance Period" means a period of time fixed by the Committee
within which the Company's performance will be measured to determine
whether awards shall be paid.

(n) "Plan" means the ShopKo Stores, Inc. 2000 Executive Long-Term
Incentive Plan.

(o) "Related Company" means any corporation, joint venture, limited
liability company, or other business entity in which the Company has a
significant direct or indirect equity interest as determined by the
Committee in its sole discretion.

(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 a Related Company, or due to early retirement with the
consent of the Committee.

(q) "Salary" means a Participant's base salary at the time of
measurement, determined in accordance with principles employed for
reporting salary to the Company's shareholders in the annual Proxy
Statement.

(r) "Stock" means shares of common stock of the Company.

3. Participation. Plan Participants shall be selected by the Committee,
upon the recommendation of senior management. A person who first becomes a
Participant after the commencement of a Performance Period shall be eligible
to receive a pro rata award, based on the number of full weeks remaining in
the Performance Period after he or she becomes a Participant. If a Participant
transfers to another position which entitles the Participant to a higher or
lower award payout level, the Participants' award will be prorated at the end
of the Performance Period based upon the number of weeks the Participant held
each position. An Eligible Employee who has been granted or made eligible for
an award under the Plan may be granted or made eligible for additional awards
under the Plan if the Committee shall so determine.

4. Determination of Awards.

(a) During the first ninety (90) days of each Performance Period, the
Committee will complete and adopt an Award Table. 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 will be
determined by interpolation. The Committee may adjust the Performance Goals
from time to time during a Performance Period if the Committee determines
such a change is necessary to maintain the motivational impact of the Plan,
provided that any such adjustments shall not result in any Participant
receiving a greater amount than the Participant would have received if the
Performance Goals had not been adjusted.

(b) Before any award may be paid for a Performance Period, the Committee
shall certify that the Performance Goals and other requirements of the Plan
have been satisfied for the Performance Period and establish the amount of
the awards. No payments shall be made unless and until the Committee makes
this certification.

A-2
<PAGE>

(i) no award to a Participant with respect to a Performance Period
shall exceed $3,000,000; and

(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.

5. Payment of Awards.

(a) If the Committee has made the certification required pursuant to
Section 4(b), subject to the provisions of Section 4(c), awards shall be
payable not later than 90 days following the last day of the Performance
Period 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. Whenever the Company
proposes 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 stock or, in the discretion of the Committee,
the Company may withhold from the stock to be delivered shares sufficient
to satisfy all or a portion of such tax withholding requirements. All
awards under the Plan are subject to federal, state and local income and
payroll tax withholding in accordance with applicable law.

(b) A Participant shall receive no award for a Performance Period if the
Participant is not in Good Standing on the last day of the Performance
Period or the Participant's employment with the Company terminates prior to
the last day of the Performance Period for any reason other than death,
Disability or Retirement. A Participant who terminates employment due to
the Participant's death, Disability or Retirement shall be eligible to
receive a pro rata award, if an award is otherwise payable hereunder, based
on the number of full months elapsed in the Performance Period 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 Period, 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.

(d) Payment amounts may be paid in shares of Stock or cash, or in any
combination thereof as determined by the Committee, subject to the
limitations set forth in Section 6 below. The value of a share of Stock
used for this purpose shall be the Fair Market Value of the Stock
calculated as of the last day of the applicable Performance Period. The
Committee, in its discretion, may impose such conditions, restrictions and
contingencies with respect to shares of Stock granted pursuant to the Plan
as the Committee determines to be desirable.

6. Shares of Stock Subject to Plan.

(a) Subject to Subsection 6(b) hereof, the maximum number shares of
Stock that may be delivered to Participants and their beneficiaries under
the Plan shall be Three Hundred Thousand (300,000) shares.

(b) 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 or this Plan 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 of Stock which may be
delivered under the Plan; and (ii) the Performance Goals subject to
outstanding awards; as well as any other adjustments that the Committee
determines to be equitable.

A-3
<PAGE>

7. 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.

8. 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.

9. 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. Nothing contained in the Plan shall be constituted as a
guarantee that the assets of the Company shall be sufficient to pay any
benefits to any person. 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 a Participant's 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
any at-will employee, including Participants, at any time for any reason
whatsoever, with or without cause.

10. Impact of Change of Control. Subject to the provisions of Subsection
6(b) (relating to the adjustment of shares), upon the occurrence of a Change
of Control, all Performance Periods shall terminate as of the close of the
fiscal year prior to the year in which the Change of Control occurs and each
Participant in the employ of the Company immediately prior to the Change of
Control shall be entitled to a prorated portion of any award determined based
on attainment of the Performance Goals for the shortened period. The Committee
will determine if and to what extent the Performance Goals have been met as of
the close of the applicable fiscal year.

11. Effective Date. The Plan shall be effective as of January 30, 2000,
contingent on approval of the Plan by the shareholders of the Company at the
Company's 2000 annual meeting of its shareholders. The Plan shall be unlimited
in duration and, in the event of Plan termination, shall remain in effect for
the duration of any Performance Periods established by the Committee.

12. Successors. The Plan shall be binding on the Participants and their
personal representatives. Subject to Section 10 above, 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.

13. Amendment and Termination. The Board may, at any time, amend or
terminate the Plan; provided, however, that (a) without further approval of
the shareholders of the Company, no amendment shall increase the number of
shares of Stock which may be delivered pursuant to awards hereunder, except
for increases resulting from Subsection 6(b) (relating to the adjustment of
shares);

A-4
<PAGE>

and (b) adjustments to Performance Goals shall not result in any Participant
receiving a greater amount than the Participant would have received if the
Performance Goals had not been adjusted.

14. 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.

15. Governing Law. The Plan shall be construed, administered and governed
in all respects under and by the applicable laws of the State of Wisconsin,
without giving effect to its conflicts of law provisions.

A-5
<PAGE>

EXHIBIT A

AWARD TABLE
PERFORMANCE PERIOD FROM THROUGH

<TABLE>
<CAPTION>
Threshold Midpoint 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.............. % % %
Division Presidents................... % % %
Chief Financial Officer............... % % %
Senior Vice Presidents................ % % %
</TABLE>

During the first 90 days of each Performance Period, the Committee shall
set the Performance Goals using the following process:

1. Specify objective performance criteria to be used as the Performance
Goals for the Performance Period (i.e., such as sales, earnings, earnings
per share, pretax earnings, return on equity, return on assets, return on
enterprise value or asset management, 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 Period.

2. Fix the Threshold Performance Goal below which no award is payable,
and the threshold percentage of Salary for each level of Participants. (A)

3. Fix the Midpoint Performance Goal and target percentage of Salary for
each level of Participants. (B)

4. Fix the High Performance Goal which results in maximum permitted
award and the maximum percentage of Salary for each level of Participants.
(C)

5. If the result achieved for the Performance Period 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-6
<PAGE>

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----------------------
COMPANY #
CONTROL #
----------------------

. Please detach here .
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Share Amounts

____ ____
| |
| |

The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.

1. Election of directors:

Jack W. Eugster Stephen E. Watson

[_] Vote FOR all [_] Vote WITHHELD
nominees from all nominees

(Instructions: To withhold authority to vote --------------------------
for any indicated nominee, write | |
the number(s) of the nominee(s) in the | |
box provided to the right.) --------------------------

2. Proposal to ratify appointment of Deloitte & Touche LLP to audit the
financial statements of the Company for the fiscal year ending February 3,
2001

[_] For [_] Against [_] Abstain

3. Proposal to approve Shopko Stores, Inc. 2000 Executive Long-Term 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.

THIS PROXY WILL BE VOTED AS DIRECTED, Date _________________________, 2000
IF NO CHOICE IS SPECIFIED, PROXIES (Month) (Day)
WILL BE VOTED FOR ALL ITEMS.

Address Change? Mark Box [_] -----------------------------------------
Indicate changes below: 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.
Address Area
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: ____

--------------------------------------------------------------------

| Proxy # Account # Issue or Issuer # |
|____ ____|
--------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------

SHOPKO STORES, INC.

2000 ANNUAL MEETING OF SHAREHOLDERS

Wednesday, May 24, 2000
10:00 a.m.

Radisson Inn
2040 Airport Dr
Green Bay, Wisconsin

Agenda
. Elect two directors to serve for
three year terms.
. Ratify the appointment of Deloitte &
Touche LLP to audit the financial
statements of the Company for the
fiscal year ending February 3, 2001.
. Approve the Shopko Stores, Inc. 2000
Executive Long-Term Incentive Plan.
. Transact such other business as may
properly come before the meeting.

- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
[SHOPKO LOGO] Shopko Stores, Inc.
700 Pilgrim Way, Green Bay, Wisconsin 54307 proxy
- --------------------------------------------------------------------------------

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 24, 2000 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.

This Proxy will be voted as directed, if no choice is specified, proxies will
be voted for all items.

See reverse for voting instructions.

- --------------------------------------------------------------------------------