-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TY2WArYapd6T5lkqJaDd9ZnO+VkJ0ROVdyb0c64WgPBfzXtdDTI24R/MwXJgbK9M Bob1kh9WOR8sSn0ltlaRzQ== 0000950142-05-002387.txt : 20050825 0000950142-05-002387.hdr.sgml : 20050825 20050824183035 ACCESSION NUMBER: 0000950142-05-002387 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20050825 DATE AS OF CHANGE: 20050824 GROUP MEMBERS: ALVARADO CAPITAL PARTNERS, L.P. GROUP MEMBERS: BKF CAPITAL GROUP, INC. GROUP MEMBERS: JOHN A. LEVIN & CO., INC. GROUP MEMBERS: LEVCO ALTERNATIVE FUND, LTD. GROUP MEMBERS: LEVCO GP, INC. GROUP MEMBERS: PURCHASE ASSOCIATES II, L.P. GROUP MEMBERS: PURCHASE ASSOCIATES, L.P. FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEVIN JOHN A & CO INC /NY/ CENTRAL INDEX KEY: 0000811349 IRS NUMBER: 133134273 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: ONE ROCKFELLER PLZ 25TH FL CITY: NEW YORK STATE: NY ZIP: 10020 MAIL ADDRESS: STREET 1: ONE ROCKEFELLER PLZ CITY: NEW YORK STATE: NY ZIP: 10020 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHOPKO STORES INC CENTRAL INDEX KEY: 0000878314 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 410985054 STATE OF INCORPORATION: WI FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-41879 FILM NUMBER: 051046962 BUSINESS ADDRESS: STREET 1: 700 PILGRIM WAY CITY: GREEN BAY STATE: WI ZIP: 54304 BUSINESS PHONE: 9204972211 MAIL ADDRESS: STREET 1: PO BOX 19060 CITY: GREEN BAY STATE: WI ZIP: 54307-9060 SC 13D/A 1 sc13da2_shopko.txt AMENDMENT NO. 2 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D/A Under the Securities Exchange Act of 1934 (AMENDMENT NO. 2)* SHOPKO STORES, INC. ------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 SHARE ----------------------------------- (Title of Class of Securities) 824911101 -------------- (CUSIP Number) NORRIS NISSIM, ESQ. JOHN A. LEVIN & CO., INC. ONE ROCKEFELLER PLAZA NEW YORK, NEW YORK 10020 TEL. NO.: (212) 332-8400 -------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to JOHN C. KENNEDY, ESQ. PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019-6064 AUGUST 24, 2005 --------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject to this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box .. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes.) ================================================================================ CUSIP NO. 824911101 SCHEDULE 13D PAGE 2 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Levco Alternative Fund, Ltd. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Cayman Islands - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,521,800 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,521,800 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,521,800 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 3 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Purchase Associates, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 93,400 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 93,400 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 93,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.3% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 4 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Purchase Associates II, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 129,000 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 129,000 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 129,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 5 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Alvarado Capital Partners, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 12,000 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 12,000 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) less than 0.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 6 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Levco GP, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Cayman Islands - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 234,000 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 234,000 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 234,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 7 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON John A. Levin & Co., Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,818,400 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,818,400 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,818,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IA - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 8 OF 11 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON BKF Capital Group, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,818,400 NUMBER OF ---------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 0 EACH ---------------------------------- REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 1,818,400 ---------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,818,400 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.0% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP NO. 824911101 SCHEDULE 13D PAGE 9 OF 11 Pursuant to Rule 13d-2(a) of Regulation 13D-G of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Act"), the undersigned hereby amend their Schedule 13D Statement, dated July 14, 2005, as amended by Amendment No. 2, dated August 23, 2005 (as amended, the "Schedule 13D"), relating to the common stock, par value $.01 per share (the "Common Stock"), of ShopKo Stores, Inc., a Wisconsin corporation (the "Company"). This Amendment No. 1 to the Schedule 13D is being filed on behalf of each of the following persons (each a "Reporting Person" and collectively, the "Reporting Persons"): (i) Levco Alternative Fund, Ltd., a Cayman Islands company ("Levco"), (ii) Purchase Associates, L.P., a Delaware limited partnership ("Purchase"), (iii) Purchase Associates II, L.P., a Delaware limited partnership ("Purchase II"), (iv) Alvarado Capital Partners, L.P., a Delaware limited partnership ("Alvarado"), (v) Levco GP, Inc., a Delaware corporation ("Levco GP"), (vi) John A. Levin & Co., Inc., a Delaware corporation ("Levin & Co.") and (vii) BKF Capital Group, Inc., a Delaware corporation ("BKF"). Item 1. SECURITY AND ISSUER. No material change. Item 2. IDENTITY AND BACKGROUND. No material change. Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. No material change Item 4. PURPOSE OF TRANSACTION. This Item 4 is hereby amended by adding the following: "After an evaluation of options, Levco, Purchase, Purchase II, Alvarado, Levco GP and Levin & Co., filed a Preliminary Proxy Statement on Schedule 14A (the "Proxy Statement") dated August 24, 2005 with the Securities and Exchange Commission in connection with the September 14, 2005 special meeting of the shareholders of the Issuer. The Proxy Statement relates to the solicitation of proxies in opposition to the proposed Merger. A copy of the Proxy Statement has been attached as Exhibit 6. Except as stated above, there has been no change in the plans and intentions of the Reporting Persons." Item 5. INTEREST IN SECURITIES OF THE ISSUER. No material change. Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Not applicable. Item 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 5: Joint Filing Agreement, dated August 24, 2005, among the Reporting Persons. Exhibit 6: Preliminary Proxy Statement on Schedule 14A as filed with the Securities and Exchange Commission dated August 24, 2005. CUSIP NO. 824911101 SCHEDULE 13D PAGE 10 OF 11 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: August 24, 2005 LEVCO ALTERNATIVE FUND, LTD. By: John A. Levin & Co., Inc., its investment adviser By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES II, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel ALVARADO CAPITAL PARTNERS, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel CUSIP NO. 824911101 SCHEDULE 13D PAGE 11 OF 11 LEVCO GP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel JOHN A. LEVIN & CO., INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel BKF CAPITAL GROUP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel EX-99 2 ex-5sc13da2_shopko.txt EXHIBIT 5 EXHIBIT 5 --------- JOINT FILING AGREEMENT Each of the undersigned hereby acknowledges and agrees, in compliance with the provisions of Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement is attached as an Exhibit (the "Schedule 13D"), and any amendments thereto, will be filed with the Securities and Exchange Commission jointly on behalf of the undersigned. This Agreement may be executed in one or more counterparts. Dated: August 24, 2005 LEVCO ALTERNATIVE FUND, LTD. By: John A. Levin & Co., Inc., its investment adviser By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel PURCHASE ASSOCIATES II, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel ALVARADO CAPITAL PARTNERS, L.P. By: Levco GP, Inc., its managing general partner By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel LEVCO GP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel JOHN A. LEVIN & CO., INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel BKF CAPITAL GROUP, INC. By: /s/ Norris Nissim ------------------------------------------------ Name: Norris Nissim Title: Vice President and General Counsel EX-99 3 ex-6sc13da2_shopko.txt EXHIBIT 6 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 14A (RULE 14a-101) SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [_] Filed by a Party other than the Registrant [X] Check the appropriate box: [X] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [_] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting material Pursuant to Rule 14a-11(c) or Rule 14a-12 SHOPKO STORES, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) LEVCO ALTERNATIVE FUND, LTD., PURCHASE ASSOCIATES, L.P., PURCHASE ASSOCIATES II, L.P., ALVARADO CAPITAL PARTNERS, L.P., JOHN A. LEVIN & CO., INC. AND LEVCO GP, INC. - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) PAYMENT OF FILING FEE (Check the appropriate box): [X] No fee required. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: __________ 2) Aggregate number of securities to which transaction applies: _____________ 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): _____________________________ __________________________________________________________________________ 4) Proposed maximum aggregate value of transaction: _________________________ 5) Total fee paid: __________________________________________________________ [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: __________________________________________________ 2) Form, Schedule or Registration Statement No.: ____________________________ 3) Filing Party: ____________________________________________________________ 4) Date Filed: ______________________________________________________________ ================================================================================ PRELIMINARY COPY SUBJECT TO COMPLETION, DATED AUGUST 24, 2005 Levco Alternative Fund, Ltd., Purchase Associates, L.P., Purchase Associates II, L.P., Alvarado Capital Partners, L.P., John A. Levin & Co., Inc. and Levco GP, Inc. August 24, 2005 Fellow Shareholders: The attached proxy statement and the enclosed yellow proxy card are being furnished to you, the shareholders of Shopko Stores, Inc. ("Shopko"), in connection with the solicitation of proxies by Levco Alternative Fund, Ltd., Purchase Associates, L.P., Purchase Associates II, L.P., Alvarado Capital Partners, L.P., John A. Levin & Co., Inc. and Levco GP, Inc. for use at the special meeting of shareholders of Shopko, and at any adjournments or postponements thereof (the "Special Meeting"), relating to Shopko's proposed acquisition (the "Merger") by entities directly and indirectly owned by an investment group consisting of entities advised by or affiliated with Goldner Hawn Johnson & Morrison Incorporated, a Minneapolis-based private equity firm, and Mr. Jack W. Eugster, a member of the board of directors of ShopKo. In connection with the proposed Merger, ShopKo entered into an Agreement and Plan of Merger, dated as of April 7, 2005, with Badger Retail Holding, Inc. and Badger Acquisition Corp., which are entities directly and indirectly owned by Goldner Hawn. Pursuant to the attached proxy statement, we are soliciting proxies from holders of shares of Shopko common stock to vote AGAINST the proposed Merger. The Special Meeting will be held on September 14, 2005 at 11:00 a.m. local time at the offices of Sidley Austin Brown & Wood LLP, Bank One Plaza, 10 South Dearborn Street, 55th Floor, Room 2C, Chicago, Illinois 60603. We urge you to carefully consider the information contained in the attached proxy statement and then support our efforts by signing, dating and returning the enclosed YELLOW proxy card today. The attached proxy statement and the enclosed YELLOW proxy card are first being furnished to the shareholders on or about September 6, 2005. If you have already voted for management's proposals relating to the merger, you have every right to change your vote by signing, dating and returning a later dated proxy card. If you have any questions or require any assistance with your vote, please contact MacKenzie Partners, Inc., which is assisting us, at their address and toll-free numbers listed on the following page. Thank you for your support, LEVCO ALTERNATIVE FUND, LTD. PURCHASE ASSOCIATES, L.P. PURCHASE ASSOCIATES II, L.P. ALVARADO CAPITAL PARTNERS, L.P. JOHN A. LEVIN & CO., INC. LEVCO GP, INC. -2- ================================================================================ IF YOU HAVE ANY QUESTIONS, REQUIRE ASSISTANCE IN VOTING YOUR YELLOW PROXY CARD, OR NEED ADDITIONAL COPIES OF OUR PROXY MATERIALS, PLEASE CALL MACKENZIE PARTNERS AT THE PHONE NUMBERS LISTED BELOW. [GRAPHIC OMITTED] [LOGO - MACKENZIE PARTNERS, INC.] 105 Madison Avenue New York, NY 10016 proxy@mackenziepartners.com (212) 929-5500 (Call Collect) or TOLL-FREE (800) 322-2885 ================================================================================ -3- PRELIMINARY COPY SUBJECT TO COMPLETION, DATED AUGUST 24, 2005 2005 SPECIAL MEETING OF SHAREHOLDERS OF SHOPKO STORES, INC. ___________________ PROXY STATEMENT OF LEVCO ALTERNATIVE FUND, LTD., PURCHASE ASSOCIATES, L.P., PURCHASE ASSOCIATES II, L.P., ALVARADO CAPITAL PARTNERS, L.P., JOHN A. LEVIN & CO., INC. AND LEVCO GP, INC. ___________________ This Proxy Statement and the accompanying yellow proxy card are being furnished to you, the shareholders ("Shareholders") of SHOPKO STORES, INC. ("ShopKo" or the "Company"), in connection with the solicitation of proxies by Levco Alternative Fund, Ltd. ("Levco"), Purchase Associates, L.P. ("Purchase"), Purchase Associates II, L.P. ("Purchase II"), Alvarado Capital Partners, L.P. ("Alvarado"), John A. Levin & Co., Inc. ("Levin & Co.") and Levco GP, Inc. ("Levco GP") (collectively, the "Participants"), to be used at the 2005 Special Meeting (the "Special Meeting") of Shareholders of ShopKo which is scheduled to be held at 11:00 a.m. local time on September 14, 2005 at the offices of Sidley Austin Brown & Wood LLP, Bank One Plaza, 10 South Dearborn Street, 55th Floor, Room 2C, Chicago, Illinois 60603, and at any adjournments, postponements or continuations thereof. Definitive copies of this Proxy Statement and the accompanying yellow proxy card are intended to first be furnished to Shareholders on or about September 6, 2005. As you know, on April 8, 2005, ShopKo announced its proposed acquisition (the "Merger") by entities directly and indirectly owned by an investment group consisting of entities advised by or affiliated with Goldner Hawn Johnson & Morrison Incorporated, a Minneapolis-based private equity firm ("Goldner Hawn"), and Mr. Jack W. Eugster ("Mr. Eugster"), a member of the board of directors (the "Board of Directors") of ShopKo. In connection with the proposed Merger, ShopKo entered into an Agreement and Plan of Merger, dated as of April 7, 2005 (the "Merger Agreement"), with Badger Retail Holding, Inc. and Badger Acquisition Corp., which are entities directly and indirectly owned by Goldner Hawn (collectively with Goldner Hawn, the "Acquirors"). At the Special Meeting, ShopKo is asking Shareholders to consider and vote upon (i) a proposal to approve the Merger Agreement, (ii) a proposal to adjourn the Special Meeting if necessary or appropriate to permit further solicitation of proxies by ShopKo if there are not sufficient votes at the time of the Special Meeting to approve the Merger Agreement, and (iii) such other business as may properly come before the Special Meeting or any adjournments or postponements of the Special Meeting. -4- We oppose the proposed Merger and Merger Agreement and the adjournment of the Special Meeting because we believe that: o the Board of Directors did not fully explore alternative transactions, including a leveraged recapitalization, which could be more beneficial to shareholders, o the $24 per share Merger consideration is inadequate and does not fully reflect the Company's value; it requires an equity contribution from the Acquirors of only $30 million (or, in our opinion, potentially less based on developments since the April 8, 2005 announcement of the Merger), o the process for negotiating and approving the Merger was flawed because of conflicts of interest that, in our opinion, irrevocably tainted the legitimacy of the process, and o the terms of the Merger have the practical effect of inhibiting other, more attractive, alternatives than the Merger. You should refer to the information set forth under the heading "REASONS TO DEFEAT THE PROPOSED MERGER" for a more detailed explanation of our reasons for opposing the proposed Merger and Merger Agreement and the adjournment of the Special Meeting. FOR THOSE REASONS WE URGE YOU TO DEFEAT THE PROPOSED MERGER BY SIGNING, DATING AND RETURNING THE ACCOMPANYING YELLOW PROXY CARD VOTING AGAINST THE APPROVAL OF THE MERGER AND MERGER AGREEMENT AND THE ADJOURNMENT OF THE SPECIAL MEETING. IMPORTANT YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF SHOPKO (THE "COMMON STOCK") YOU OWN (THE "SHARES"). WE URGE YOU TO SIGN, DATE, AND RETURN THE ENCLOSED YELLOW PROXY CARD TODAY TO VOTE AGAINST THE COMPANY'S MERGER PROPOSALS. We do not believe that the Merger is in the best interest of the Shareholders. A vote AGAINST the Merger will enable you to send a message to the Company and its Board of Directors that you are committed to maximizing the value of your Shares. o If your Shares are registered in your own name, please sign and date the enclosed YELLOW proxy card and return it to MacKenzie Partners, Inc., in the enclosed envelope today. o If any of your Shares are held in the name of a brokerage firm, bank, bank nominee or other institution on the Record Date, only it can vote such Shares and only upon receipt of your specific instructions. Accordingly, please contact the person responsible for your account and instruct that person to execute on your behalf the YELLOW proxy card. -5- We urge you to confirm your instructions in writing to the person responsible for your account and to provide a copy of such instructions to MacKenzie Partners, Inc., who is assisting in this solicitation, at the address and telephone numbers set forth below, and on the back cover of this Proxy Statement, so that we may be aware of all instructions and can attempt to ensure that such instructions are followed. YOU MAY ALSO BE ABLE TO VOTE BY TELEPHONE OR INTERNET. SINCE THERE IS NOT MUCH TIME UNTIL THE SPECIAL MEETING, PLEASE CALL MACKENZIE PARTNERS FOR ASSISTANCE IN VOTING YOUR SHARES BY TELEPHONE OR INTERNET: [GRAPHIC OMITTED] [LOGO - MACKENZIE PARTNERS, INC.] 105 Madison Avenue New York, NY 10016 proxy@mackenziepartners.com (212) 929-5500 (Call Collect) or TOLL-FREE (800) 322-2885 According to the Company's proxy statement filed with the Securities and Exchange Commission (the "SEC"), on August 9, 2005 (the "Company's Proxy Statement"), the approval of the Merger Agreement by the Shareholders requires the affirmative vote of at least a majority of the shares of ShopKo Common Stock outstanding on August 1, 2005, the record date (the "Record Date"). Only holders of record of ShopKo's Common Stock as of the close of business on the Record Date established by ShopKo are entitled to notice of, and to attend and to vote at the Special Meeting and any adjournments or postponements thereof. According to the Company's Proxy Statement, as of the Record Date, there were outstanding approximately 30,170,251 shares of Common Stock. Shareholders of record at the close of business on the Record Date will be entitled to one vote at the Special Meeting for each share of Common Stock of ShopKo held on the Record Date. As of the Record Date, the Participants beneficially own an aggregate of 1,818,400 shares of Common Stock, representing approximately 6% of the outstanding shares of Common Stock. As of the Record Date: (i) Levco beneficially owns an aggregate of 1,521,800 shares of Common Stock, representing approximately 5.1% of the outstanding shares of Common Stock; (ii) Purchase beneficially owns an aggregate of 93,400 shares of Common Stock, representing approximately 0.3% of the outstanding shares of Common Stock; (iii) Purchase II beneficially owns an aggregate of 129,000 shares of Common Stock, representing approximately 0.4% of the outstanding shares of Common Stock; (iv) Alvarado beneficially owns an aggregate of 12,000 shares of Common Stock, representing approximately 0.1% of the outstanding shares of Common Stock; (v) Levco GP beneficially owns an aggregate of 234,400 shares of Common Stock, representing approximately 0.8% of the outstanding shares of Common Stock -6- and (vi) Levin & Co. beneficially owns an aggregate of 1,818,400 shares of Common Stock, representing approximately 6% of the outstanding shares of Common Stock. Each of the Participants intends to vote such shares AGAINST the Merger Agreement. YOUR VOTE IS EXTREMELY IMPORTANT TO DEFEAT THE PROPOSED MERGER AND THE APPROVAL OF THE MERGER AGREEMENT. WE URGE YOU TO MARK, SIGN, DATE AND RETURN THE ACCOMPANYING YELLOW PROXY CARD TO VOTE "AGAINST" THE MERGER AND MERGER AGREEMENT AND THE ADJOURNMENT OF THE SPECIAL MEETING. WE URGE YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY SHOPKO. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BY DELIVERING THE LATER-DATED ACCOMPANYING YELLOW PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE, OR BY VOTING IN PERSON AT THE SPECIAL MEETING. IT IS VERY IMPORTANT THAT YOU DATE THE ACCOMPANYING YELLOW PROXY CARD. SEE "VOTING PROCEDURES" AND "PROXY PROCEDURES" BELOW. -7- REASONS TO DEFEAT THE PROPOSED MERGER We oppose the proposed Merger and urge the Shareholders to defeat the Merger by voting against the Merger and Merger Agreement and the adjournment of the Special Meeting for the following reasons: I. THE BOARD OF DIRECTORS DID NOT FULLY EXPLORE ALTERNATIVE TRANSACTIONS, INCLUDING A LEVERAGED RECAPITALIZATION, WHICH COULD BE MORE BENEFICIAL TO SHAREHOLDERS. If a more thorough and diligent process had been undertaken, we do not believe that the Board of Directors would have been able to determine that the Merger was fair to, and in the best interests of, the Shareholders. We believe that based on the fair value of the Company's real estate assets, other alternative transactions were available to the Company, including a leveraged recapitalization, which would have been more beneficial to shareholders than the proposed Merger and which a thorough and diligent process would have permitted the Board of Directors to consider. Pursuant to the Merger, the Acquirors will be purchasing the Company for approximately $1.1 billion, using just $30 million of equity, or $1 per share. The remaining approximately $1 billion will be financed through debt that is largely secured by the Company's real estate. Based on the size of the loan facility to be secured by the Company's real estate and the appraisal requirement contained in the "alternative real estate loan commitment letter" included in the Company's Proxy Statement materials, we believe that the lenders have assumed that the Company's real estate will have an appraised value of approximately $935 million. We question why the Company has been keeping the results of the appraisals of its real estate from its own shareholders and we call on the Company to make public the results of these appraisals since real estate constitutes a significant portion of the Company's assets so that the Shareholders are able to vote on the Merger on a fully informed basis. We have attempted to value the Company in a recapitalization based on a review of management's base case business plan for the next four years. If, for example, the Company had effected a recapitalization using similar leverage as the Merger and therefore paid a $23 per share special dividend (only $1 less than the Merger value to shareholders), we estimated future free cash flows of the business (utilizing our assumptions of the interest payments and income tax such a recapitalization would entail) for the next several fiscal years would have been the following: -8-
- ------------------------------------------------------------------------------------------------------------- ($ in millions, except per share) FY2006 FY2007 FY2008 FY2009 - ------------------------------------------------------------------------------------------------------------- EBITDA (a) $172 $167 $190 $193 - ------------------------------------------------------------------------------------------------------------- ESTIMATED INTEREST EXPENSE ($76) ($76) ($76) ($76) - ------------------------------------------------------------------------------------------------------------- ESTIMATED INCOME TAX ($3) $0 ($11) ($15) - ------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES (a) ($59) ($61) ($58) ($42) - ------------------------------------------------------------------------------------------------------------- FREE CASH FLOW (a) $34 $30 $45 $60 - ------------------------------------------------------------------------------------------------------------- FREE CASH FLOW PER SHARE $1.09 $0.96 $1.44 $1.92 - -------------------------------------------------------------------------------------------------------------
(a) From Shopko's management base case assumption for fiscal year 2005-2009 beginning on p.86 of the Company's Proxy Statement filed on Schedule 14A on August 9, 2005. The foregoing chart illustrates that free cash flow even after leveraging the Company would have been $34 million or $1.09 per share in fiscal year 2006 and would have remained around the same in fiscal year 2007 and improved in the subsequent fiscal years. The Company would have annual free cash flow of more than 100% of the Acquirors' equity investment in the Merger. We disagree with the Company's advisors' proposition that a recapitalized ShopKo would have resulted in lower shareholder value and that leveraging the Company would have caused the Company to have a zero or negative equity valuation under several of their scenarios. The Company's advisors arrive at this valuation by assigning a multiple of EBITDA to the Company and concluding that the resulting value would not have exceeded the debt load on the levered recapitalized company. However, even their own analysis shows that a recapitalized Company would still generate significant free cash flow over the next five years -- at least $29 million(1) per year (twice that amount if capital expenditures are kept to the 2005 levels estimated by the Company in its August 18th earnings release). We are at a loss to understand how a recapitalized Company that generates free cash flow can have a negative valuation. If the remaining business would not be viable in a levered recapitalized scenario, and the Company's ability to operate effectively would become as dire as the Board has suggested, then we wonder why Mr. Jack Eugster, former Chairman of the Board, is buying such a significant equity stake in the Company under such conditions. While we do not mean to suggest that a special dividend of exactly $23 per share would necessarily achieve the greatest achievable shareholder value, we believe the foregoing illustrates what we believe are the inadequate economics of the Merger and demonstrates one of many alternative scenarios that should have been considered by the Board of Directors. Although a recapitalization entails risk, it is our firm belief that a leveraged recapitalization, even with a special dividend of less than $23 per share, would have been likely to deliver value to the Company's shareholders in excess of the $24 per share that will be received by the Shareholders if the proposed Merger is permitted to be consummated. In addition, we see no reason why many of the risks associated with a recapitalization the Company cites to justify the Merger instead of a recapitalization would apply to a levered public company any more than to a levered private company. In particular, we believe that: - ------------------- (1) See p. 2 of the Merrill Lynch discussion materials, Amendment No. 2, Schedule 13E-3 filed on August 9, 2005. -9- o a similarly capitalized public and private company should have few or no differences in the way they negotiate with vendors. If anything, we believe vendors would likely prefer a public company since their financial statements are publicly available; o the execution risks for public and private companies with similar debt loads should not be materially different; o both a private and public company would have similar debt refinancing risks; and o a public company should not be at a disadvantage to a private company for the design and implementation of competitive management compensation arrangements. II. THE $24 PER SHARE MERGER CONSIDERATION IS INADEQUATE AND DOES NOT FULLY REFLECT THE COMPANY'S VALUE. Based upon information set forth in the Company's public filings and the presentations to the Board of Directors by their financial advisors, we believe that the intrinsic value of ShopKo is far greater than the $24 per share value placed upon the Company in the Merger. We believe that since $23 of the $24 per share Merger consideration will be funded by borrowings against the Company's real estate, the value of the Company clearly exceeds $24 per share. To illustrate, we have performed an asset valuation of the Company based on the Company's recent SEC filings and the presentation by the Company's financial advisors to the Special Committee included therein. Our analysis yields an asset value as high as $32.88 per share as follows:
- ------------------------------------------------------------------------------------------------------------- ASSET VALUE (MILLIONS) PER SHARE - ------------------------------------------------------------------------------------------------------------- TANGIBLE BOOK VALUE (a) $623 $19.90 - ------------------------------------------------------------------------------------------------------------- ADJUSTED TANGIBLE ASSET VALUE FROM LENDER ASSUMED REAL $834 $26.65 ESTATE APPRAISAL (b) - ------------------------------------------------------------------------------------------------------------- PRESCRIPTION FILES (c) $129-$151 $4.12-$4.82 - ------------------------------------------------------------------------------------------------------------- CONTINUED DEFERRAL OF TAX LIABILITY (d) $44 $1.41 - ------------------------------------------------------------------------------------------------------------- ASSET VALUE $1,007-$1,029 $32.18-$32.88 - -------------------------------------------------------------------------------------------------------------
(a) From page 4, intangible assets subtracted from shareholder equity, of the Condensed Consolidated Balance Sheet included in Shopko's Form 10-Q filed on June 3, 2005. -10- (b) From page 4, intangible assets subtracted from shareholder equity assuming property value of $935 million, of the Condensed Consolidated Balance Sheet included in Shopko's Form 10-Q filed on June 3, 2005. (c) From page 21 of the Merrill Lynch discussion materials submitted to the Special Committee, dated April 7, 2005, filed as Exhibit (c)(9) to Shopko's Schedule 13E-3. (d) From page 59, note E to the Consolidated Financial Statement included in Shopko's Form 10-K filed on April 1, 2005. In addition, it appears that the Company's net debt has decreased from $296 million to $241 million(2) in just the last few months, seemingly reducing the cash needed by the Acquirors to consummate their acquisition of the Company by $55 million. In light of the fact that the Merger contemplates a mere $30 million of equity, this would appear to not only negate the need for any equity contribution by the Acquirors, but even potentially allow the Acquirors to pay themselves a $25 million cash dividend upon closing. This only further underscores what we believe to be the grossly inadequate price for which the Special Committee has agreed to permit the sale of the Company to a group that includes the Company's former Chairman of the Board. It also appears, based on a comparison of the April 2nd presentation made to the Special Committee by its financial advisor and the Company's Proxy Statement, that the transaction fees associated with the proposed Merger have declined from an initial estimate of $116 million(3) to $90 million.(4) This $26 million savings, on top of the reduction of $55 million in net debt, represents $81 million less cash needed against what is a planned equity contribution of just $30 million. We believe that these reductions in net debt and deal cost savings should benefit the Shareholders. We are at a loss to understand how the Board of Directors' process resulted in fees as high a $116 million, or even $90 million, on a transaction size of $1 billion. We ask the Board of Directors to more fully detail the breakdown of where these fees are going. We have already asked the Company whether any of these fees are being paid to the equity sponsors. We have not yet received any answer from the Company. The Company's August 18th earnings release indicated that capital expenditures for fiscal 2005 are now estimated at $35 million. This is a reduction of $32 million when compared to management's March 2005 projection of $67 million.(5) This reduction will effectively double the estimate of the Company's free cash flow utilized by the Special Committee's own financial advisors. - ------------------ (2) See ShopKo's earnings release dated August 18, 2005 and the Balance Sheet included in ShopKo's Form 10-Q filed on June 3, 2005. (3) See Page 29 of the Merrill Lynch discussion materials submitted to the Special Committee on April 2, 2005. (4) See p. 75 of the Company's Proxy Statement filed on Schedule 14A on August 9, 2005. (5) See p. 87 of the Company's Proxy Statement filed on Schedule 14A on August 9, 2005. -11- Based on the three factors outlined above, we question how the Special Committee can continue to conclude that the sale of the Company at a price of $24 per share to the Acquirors is in the best interests of the Company's shareholders. III. THE PROCESS FOR NEGOTIATING AND APPROVING THE MERGER WAS FLAWED BECAUSE OF CONFLICTS OF INTEREST THAT, IN OUR OPINION, IRREVOCABLY TAINTED THE LEGITIMACY OF THE PROCESS. We believe the way the Committee arrived at the Merger was flawed. For example, the Company's Chairman at the start of this process, Mr. Eugster, was offered the opportunity to acquire 10% of the equity in this transaction at its apparent attractive valuation, unlike the shareholders. Moreover, Mr. Eugster's pay package could result in payments to him that have the effect of reimbursing him for his entire out of pocket cost associated with his equity investment in the Merger. IV. THE TERMS OF THE MERGER HAVE THE PRACTICAL EFFECT OF INHIBITING OTHER, MORE ATTRACTIVE, ALTERNATIVES THAN THE MERGER. We believe that the $27 million termination fee in the Merger Agreement is excessive relative to the fact that the entire contemplated equity contribution of the Acquirors in this deal is $30 million (or, in our opinion, potentially less based on developments since the April 8, 2005 announcement of the Merger, as discussed above). In addition, this termination fee provision has the practical effect of inhibiting anyone, including the Shareholders, from proposing other, more attractive, alternatives, such as a recapitalization, than the Merger because a "no" vote at the Special Meeting followed by a transaction that is more beneficial to the Shareholders could result in a $27 million payment to the Acquirors. PARTICIPANTS IN SOLICITATION OF PROXIES The participants in the solicitation of proxies are Levco, Purchase, Purchase II, Alvarado, Levin & Co. and Levco GP. ShopKo is not a participant in the solicitation of proxies. Levin Management Co., which in turn is the sole shareholder of Levin & Co., which in turn is the sole shareholder of Levco GP. The principal business of Levco GP is to act as general partner of investment partnerships, including Purchase, Purchase II and Alvarado. Levin & Co. is an investment adviser registered under the Investment Advisers Act of 1940, as amended, that specializes in managing equity portfolios for institutional and individual investors primarily in the United States. Levin & Co. acts as an investment adviser to Levco and manages a separate client account which holds the ShopKo's Common Stock. The principal business of Levco, Purchase, Purchase II and Alvarado is to acquire, hold and dispose of investments in various companies. Levco is a Cayman Islands company. Purchase, Purchase II and Alvarado are Delaware limited partnerships. Levco GP and Levin & Co. are Delaware corporations. The principal business address of each of the Participants, other than Levco, is One Rockefeller Plaza, New York, New York, 10020. -12- The principal business address of Levco is BISYS Hedge Fund Services (Cayman) Limited, c/o Q&H Corporate Services Ltd., Harbour Centre, George Town, Grand Cayman, Cayman Island. As of August 1, 2005, the Participants may be deemed to be the beneficial owners of 1,818,400 shares of the Common Stock, which represent approximately 6% of outstanding shares of Common Stock. The following employees of the Participants may also participate in soliciting proxies from Shareholders in opposition to the Merger and Merger Agreement and the adjournment of the Special Meeting: Henry Levin, Jonathan Reiss, Rosty Raykov and Gabe Tsuboyama. None of these employees own beneficially any interest in securities of either ShopKo or the Acquirors, and none will receive any special compensation in connection with such solicitation. INFORMATION REGARDING SHOPKO AND THE MERGER According to the Company's Proxy Statement, ShopKo is a Wisconsin corporation with its principal executive office located at 700 Pilgrim Way, Green Bay, Wisconsin 54304; Telephone No. (920) 429-2211. ShopKo operates retail stores throughout the Midwest, Pacific Northwest, Western Mountain, North Central and Rocky Mountain regions under the "ShopKo" and "Pamida" names. The ShopKo stores, which are located primarily in mid-size and larger communities, focus on meeting customers' needs for home, family basics, casual apparel and seasonal products, with a special emphasis on retail health through in-store pharmacies and optical centers. ShopKo is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith is required to file reports, proxy statements and other information with the SEC. Reports, registration statements, proxy statements and other information filed by ShopKo with the SEC, including the Company's Proxy Statement, are publicly available at the SEC website: www.sec.gov. We note that the Company's Proxy Statement contains information regarding: o a summary term sheet of the Merger; o the terms of the Merger Agreement and the Merger and related transactions; o any reports, opinions and/or appraisals received by ShopKo in connection with the Merger; o past contacts, transactions and negotiations by and among the parties to the Merger and their respective affiliates and advisors; o federal and state regulatory requirements that must be complied with and approvals that must be obtained in connection with the Merger; o security ownership of certain beneficial owners and management of the Company, including 5% owners; -13- o the number of Shares outstanding as of the Record Date; o the trading prices of ShopKo stock over time; o the establishment of a quorum; o the vote required for approval; o the treatment of abstentions and "broker non-votes;" o the compensation paid and payable to ShopKo directors and executive officers; o the requirements for the submission of shareholder proposals to be considered for inclusion in the Company's proxy statement for the 2005 annual meeting of Shareholders, in the event that the Merger Agreement and the Merger are not approved by the Shareholders; and o ShopKo, Goldner Hawn and Mr. Eugster and their respective affiliates. Unless otherwise noted, the information in this proxy statement concerning ShopKo, Goldner Hawn and Mr. Eugster has been taken from or is based upon the Company's Proxy Statement. Neither the Participants nor any of their respective affiliates is responsible for the accuracy of information set forth in the Company's Proxy Statement. OTHER MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING Other than as described above, the Participants know of no other business to be presented at the Special Meeting, but if other matters do properly come before the Special Meeting, the persons appointed in the proxy will use their discretion to vote the shares of Common Stock represented by proxy cards in accordance with their judgment on such matters. According to the Company's Proxy Statement, if the Merger is completed, there will be no public participation in any future meetings of the Shareholders. If the Merger is not completed, however, Shareholders will continue to be entitled to attend and participate in meetings of Shareholders. If the Merger is not completed, ShopKo will inform the Shareholders, by press release or other means determined by ShopKo, of the date by which shareholder proposals must be received by ShopKo for inclusion in the proxy materials relating to ShopKo's 2005 annual meeting. VOTING PROCEDURES According to the Company's Proxy Statement, all votes cast by proxy or in person at the Special Meeting will be tabulated by the inspector of election appointed for the Special Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. The Company's Proxy Statement indicates that: (i) Shares entitled to vote at the Special Meeting may take action on a matter at the Special Meeting only if a quorum of those shares exists with respect to that matter. Accordingly, -14- the presence, in person or by proxy, of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Special Meeting is necessary to constitute a quorum for the transaction of business at the Special Meeting. If a share is represented for any purpose at the Special Meeting, other than for the purpose of objecting to the Special Meeting or the transacting of business at the Special Meeting, it will be deemed present for purposes of determining whether a quorum exists. Shares of Common Stock represented by proxies reflecting abstentions and properly executed broker non-votes are counted for purposes of determining whether a quorum exists at the Special Meeting. If a quorum is not present, ShopKo intends to adjourn or postpone the meeting until a quorum is obtained. (ii) If you are a Shareholder and abstain from voting on the proposed Merger, your shares will be counted for determining whether a quorum is present at the Special Meeting. An abstention has the legal effect of a vote "AGAINST" the proposed Merger and Merger Agreement and the adjournment of the Special Meeting. (iii) Approval of the Merger and Merger Agreement and the adjournment of the Special Meeting requires the affirmative vote of 15,085,126 shares of Common Stock, being a majority of the shares of Common Stock outstanding on the Record Date. (iv) Brokers who hold shares in "street name" for clients typically have the authority to vote on "routine" proposals when they have not received instructions from beneficial owners. Absent specific instructions from the beneficial owner of the shares, however, brokers are not allowed to exercise their voting discretion with respect to the approval of non-routine matters, such as approval of the Merger Agreement. Proxies submitted without a vote by brokers on these matters are referred to as "broker non-votes." A "broker non-vote" has the legal effect of a vote "AGAINST" the proposed Merger. For more details regarding such procedures and the related matters please refer to the Company's Proxy Statement. Whether or not you are able to attend the Special Meeting, you are urged to complete the accompanying yellow proxy card and return it in the enclosed self-addressed, prepaid envelope. All valid proxies received prior to the meeting will be voted. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED "AGAINST" THE MERGER AND MERGER AGREEMENT AND THE ADJOURNMENT OF THE SPECIAL MEETING AND IN THE PROXY HOLDERS' DISCRETION AS TO OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING. PROXY PROCEDURES IN ORDER FOR YOUR VIEWS TO BE REPRESENTED AT THE SPECIAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING YELLOW PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. The accompanying yellow proxy card will be voted at the Special Meeting in accordance with your instructions on such card. -15- REVOCATION OF PROXIES Any Shareholder who has mailed a proxy card to ShopKo may revoke it before it is voted by mailing the accompanying yellow proxy card duly executed to the Participants bearing a LATER date. The Company's Proxy Statement indicates that proxies may be revoked at any time prior to voting by: (i) by sending a written notice to the Secretary of ShopKo to the address specified below stating that you would like to revoke your proxy; (ii) by completing and submitting a new, later-dated proxy card by mail to ShopKo at the address noted below; (iii) by voting by telephone after previously voting or submitting your proxy card; (iv) by voting over the Internet after previously voting or submitting your proxy card; or (v) by attending the Special Meeting and voting in person. Attendance at the Special Meeting alone will not revoke your proxy. You must also vote at the Special Meeting in order to revoke your previously submitted proxy. You should send any notice of revocation or your completed new, later-dated yellow proxy card, as the case may be, to the Secretary of ShopKo at ShopKo's executive offices located at 700 Pilgrim Way, Green Bay, Wisconsin 54304. For more details regarding such procedures and the related matters please refer to the Company's Proxy Statement. If your shares are held in "street name," you must contact your broker or other nominee and follow the directions provided to you in order to change your vote. Only holders of record as of the close of business on the Record Date will be entitled to vote. If you were a Shareholder on the Record Date, you will retain your voting rights at the Special Meeting even if you sell such shares after the Record Date. Accordingly, it is important that you vote the shares held by you on the Record Date, or grant a proxy to vote such shares on the accompanying yellow proxy card, even if you sell such shares after the Record Date. DISSENTERS' RIGHT OF APPRAISAL ShopKo is a Wisconsin corporation. According to the Company's Proxy Statement, under Wisconsin law, Shareholders do not have the right to exercise dissenters' rights in connection with the Merger. If the Merger Agreement is approved and the Merger is completed, Shareholders who voted against the Merger and Merger Agreement will be treated the same as other Shareholders and their shares of Common Stock will automatically be converted into the right to receive the Merger consideration of $24.00 per share. COST AND METHOD OF SOLICITATION Solicitation of proxies will be made by the Participants stated under the heading "PARTICIPANTS IN SOLICITATION OF PROXIES." The Participants have retained MacKenzie Partners, Inc. ("Proxy Solicitor") to conduct the solicitation, for which Proxy Solicitor is to receive customary fees, plus reimbursement for its reasonable out-of-pocket expenses. The Participants have agreed to indemnify Proxy Solicitor against certain liabilities and expenses, including certain liabilities under the federal securities laws. Insofar as indemnification for liabilities arising under the federal securities laws may be permitted to Proxy Solicitor pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy and is therefore unenforceable. Proxies may be solicited by mail, courier services, -16- Internet, advertising, telephone or telecopier or in person. It is anticipated that Proxy Solicitor will employ approximately twenty five persons to solicit proxies from Shareholders for the Special Meeting. Costs related to the solicitation of proxies, including expenditures for attorneys, accountants, public relations and financial advisers, proxy solicitors, advertising, printing, transportation and related expenses, will be borne by the Participants. CERTAIN INFORMATION REGARDING ARRANGEMENTS/UNDERSTANDINGS WITH RESPECT TO SECURITIES OF SHOPKO The Participants are required to and have made Schedule 13D filings with respect to their ownership of Common Stock. Such Schedule 13D filings are publicly available on the SEC's website: www.sec.gov. FUTURE SHAREHOLDER PROPOSALS The following description of the requirements for making shareholder proposals as Shopko's 2005 annual meeting was taken from the Company's Proxy Statement. If the Merger is completed, there will be no public participation in any future meetings of shareholders of ShopKo. If the Merger is not completed, however, shareholders will continue to be entitled to attend and participate in meetings of shareholders. If the Merger is not completed, ShopKo will inform its shareholders, by press release or other means determined reasonable by ShopKo, of the date by which shareholder proposals must be received by ShopKo for inclusion in the proxy materials relating to ShopKo's 2005 annual meeting, which proposals must comply with the rules and regulations of the SEC then in effect. FORWARD-LOOKING STATEMENTS This proxy statement contains certain forward-looking statements concerning the financial condition and business of ShopKo. Generally, the words "will," "may," "should," "continue," "believes," "expects," "intends," "anticipates" or similar expressions identify forward-looking statements. These forward-looking statements involve certain risks and uncertainties. A number of factors, but known and unknown, could cause actual results to differ materially from those contemplated by the forward-looking statements. ADDITIONAL INFORMATION Neither the Participants nor any of their respective affiliates is responsible for the accuracy of information set forth in the Company's Proxy Statement or any other public filings or statements made by ShopKo, Goldner Hawn and Mr. Eugster. Date: , 2005 LEVCO ALTERNATIVE FUND, LTD. PURCHASE ASSOCIATES, L.P. PURCHASE ASSOCIATES II, L.P. ALVARADO CAPITAL PARTNERS, L.P. JOHN A. LEVIN & CO., INC. LEVCO GP, INC. -17- IMPORTANT Tell the Board of Directors what you think! Your vote is important. No matter how many Shares you own, vote your proxy AGAINST the Merger proposal by taking three steps: o SIGNING the enclosed YELLOW proxy card, o DATING the enclosed YELLOW proxy card, and o MAILING the enclosed YELLOW proxy card TODAY in the envelope provided (no postage is required if mailed in the United States). If any of your Shares are held in the name of a brokerage firm, bank, bank nominee or other institution, only it can vote such Shares and only upon receipt of your specific instructions. Accordingly, please contact the person responsible for your account and instruct that person to execute the YELLOW proxy card representing your Shares. We urge you to confirm in writing your instructions to MacKenzie Partners, Inc. at the address provided below so that the we will be aware of all instructions given and can attempt to ensure that such instructions are followed. If you have any questions or require any additional information concerning this Proxy Statement, please contact MacKenzie Partners, Inc. at the address set forth below. [GRAPHIC OMITTED] [LOGO - MACKENZIE PARTNERS, INC.] 105 Madison Avenue New York, NY 10016 proxy@mackenziepartners.com (212) 929-5500 (Call Collect) or TOLL-FREE (800) 322-2885 PRELIMINARY COPY YELLOW PROXY SPECIAL MEETING OF SHAREHOLDERS OF SHOPKO STORES, INC. TO BE HELD ON SEPTEMBER 14, 2005 THIS PROXY IS SOLICITED ON BEHALF OF LEVCO ALTERNATIVE FUND, LTD., PURCHASE ASSOCIATES, L.P., PURCHASE ASSOCIATES II, L.P., ALVARADO CAPITAL PARTNERS, L.P., JOHN A. LEVIN & CO., INC. AND LEVCO GP, INC. The undersigned hereby constitutes and appoints Henry Levin, Jonathan Reiss, Rosty Raykov and Gabe Tsuboyama and each or any of them, as true and lawful agents and proxies with full power of substitution in each to represent the undersigned, and to vote all shares of common stock, par value $ 0.01 per share ("Common Shares"), of ShopKo Stores, Inc. ("ShopKo") which the undersigned would be entitled to vote if personally present, at the Special Meeting of Shareholders of ShopKo scheduled to be held at the offices of Sidley Austin Brown & Wood LLP, Bank One Plaza, 10 South Dearborn Street, 55th Floor, Room 2C, Chicago, Illinois 60603 at 11:00 a.m., local time, on September 14, 2005 and at any adjournments, postponements or reschedulings thereof, on all matters coming before the Special Meeting. This is not a solicitation on behalf of, or in support of, the Board of Directors of ShopKo. You are encouraged to specify your choice by marking the appropriate box on the reverse side of this card. This Proxy when properly executed will be voted in the manner directed herein by the undersigned Shareholder. IF NO DIRECTION IS MADE WITH RESPECT TO THE VOTING OF COMMON SHARES, THIS PROXY WILL BE VOTED "AGAINST" THE PROPOSALS DESCRIBED ON THE REVERSE SIDE OF THIS PROXY. The persons listed above cannot vote your Common Shares unless you sign and return this card. Definitive copies of this proxy card are intended to first being furnished to shareholders on or about September 6, 2005. (Continued on the reverse side) (Continued from the reverse side) [X] Please mark your vote as in this example PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE THE PARTICIPANTS STRONGLY RECOMMEND A VOTE "AGAINST" THE FOLLOWING PROPOSALS: 1. The approval of the Agreement and Plan of Merger, dated as of April 7, 2005 (the "Merger Agreement"), with Badger Retail Holding, Inc. and Badger Acquisition Corp., which are entities directly and indirectly owned by Goldner Hawn Johnson & Morrison Incorporated, a Minneapolis-based private equity firm, a copy of which is attached as Appendix A to the proxy statement of ShopKo, dated August 9, 2005. FOR [_] AGAINST [_] ABSTAIN [_] 2. The approval of a proposal to adjourn the Special Meeting if necessary or appropriate to permit further solicitation of proxies by ShopKo if there are not sufficient votes at the time of the Special Meeting to approve the Merger Agreement FOR [_] AGAINST [_] ABSTAIN [_] IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. Dated: , 2005 ____________________________________ Signature(s) (Title, if any) ____________________________________ Signature if held jointly Note: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. -----END PRIVACY-ENHANCED MESSAGE-----