<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Eagle Food Centers, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 17, 1998
Dear Shareholder:
You are hereby invited to attend the 1998 Annual Meeting of Shareholders of
Eagle Food Centers, Inc. which will be held on Wednesday, June 17, 1998, at
10:00 a.m., Central Daylight Time, at the Milan Community Center, Route 67 and
92nd Avenue, Milan, Illinois. The matters to be considered and voted upon at the
Annual Meeting of Shareholders are:
1. The election of seven persons to serve as directors of the Company until
the 1999 Annual Meeting of Shareholders or until their successors shall
have been elected and shall have qualified.
2. A proposal to ratify the appointment of Deloitte & Touche LLP as
independent public accountants for the current fiscal year.
3. Such other business as may properly come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 8, 1998, as
the record date for determining the shareholders entitled to notice of and to
vote at the meeting or any adjournment or postponements thereof.
All shareholders of record at the close of business on May 8, 1998, are
invited to attend the meeting in person. However, to ensure your shares will be
voted in the event you are not able to attend, please fill in, sign, and date
the enclosed proxy, and return it in the enclosed envelope as soon as possible.
The attached Proxy Statement contains more detailed information with respect to
the business to be transacted at the meeting.
S. Patric Plumley
Secretary
May 18, 1998
Milan, Illinois
1
<PAGE>
May 18, 1998
EAGLE FOOD CENTERS, INC.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Eagle Food Centers, Inc. (the
"Company"), to be voted at the Annual Meeting of Shareholders to be held on June
17, 1998, at 10:00 a.m., Central Daylight Time at the Milan Community Center,
Route 67 and 92nd Avenue, Milan, Illinois, and at any adjournments or
postponements thereof. Proxies are solicited to give all shareholders of record
at the close of business on May 8, 1998, an opportunity to vote upon the items
listed on the accompanying proxy card. This Proxy Statement, the Notice of
Annual Meeting, and the proxy card are intended to be mailed to shareholders
commencing on May 18, 1998.
Only holders of record of the Company's Common Stock, $.01 par value per
share, at the close of business on May 8, 1998, are entitled to notice of and to
vote at the annual meeting. As of May 8, 1998, the Company had outstanding
10,948,773 shares of Common Stock each of which is entitled to one vote on each
proposal presented. A majority of the outstanding shares of Common Stock present
in person or represented by proxy will constitute a quorum for the transaction
of business at the meeting. In the election of directors, a plurality of votes
cast in person or by proxy shall elect. Shareholders are not entitled to
cumulative voting in the election of directors. Each other proposal requires a
majority of the votes cast on the proposal to approve. Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions are counted in tabulations
of the votes cast on proposals presented to the shareholders, whereas broker
non-votes are not counted for purposes of determining whether a proposal has
been approved.
All proxies delivered pursuant to this solicitation may be revoked at any
time at the option of the shareholder by giving written notice to the Secretary
of the Company, by submitting a later dated proxy, or by voting in person at the
meeting.
Upon timely receipt of each properly signed proxy card, the shares
represented thereby will be voted in accordance with the directions indicated on
the proxy card. If no instructions are indicated, the shares will be voted for
the election of the nominated directors and for the ratification of the
selection of auditors.
The cost of soliciting proxies will be borne by the Company. Officers,
directors, and regular employees of the Company may solicit proxies personally,
by mail, or by telephone and telegraph for which they will not receive
additional compensation.
The Eagle Food Centers, Inc. 1997 Annual Report and financial statements
for the fiscal year ended January 31, 1998, with comparative figures for prior
periods, accompany this Proxy Statement. The Annual Report and the financial
statements included therein are incorporated in this Proxy Statement by
reference.
The mailing address of the principal executive offices of the Company is
Rt. 67 and Knoxville Road, Milan, Illinois, 61264.
2
<PAGE>
PROPOSALS TO SHAREHOLDERS
ELECTION OF DIRECTORS
Proposal 1
The Board of Directors currently consists of seven members, all of whom
have been nominated to be elected at the 1998 Annual Meeting of Shareholders to
serve until the 1999 Annual Meeting of Shareholders or until their successors
have been elected and qualified. The table below sets forth certain information
regarding the nominees. The accompanying proxy, in the absence of instructions
to the contrary, will be voted for the election of the following seven persons
unless the authority to vote is withheld. If any nominee is unable to serve, or
for good cause will not serve, favorable and uninstructed proxies will be voted
for a substitute nominee designated by the Board of Directors.
The Board of Directors recommends a vote "FOR" each of the seven nominees listed
below.
<TABLE>
<CAPTION>
Name Age Position(s) Held
- ---- --- ----------------
<S> <C> <C>
Robert J. Kelly 53 Chairman of the Board, Chief Executive Officer
Paul D. Barnett 37 Director
Peter B. Foreman 62 Director
Steven M. Friedman 43 Director
Michael J. Knilans 71 Director
Alain M. Oberrotman 47 Director
William J. Snyder 55 Director
</TABLE>
The business experience of each of the nominees during the past five years is as
follows:
Mr. Kelly joined the Company as President and Chief Executive Officer in
May 1995 and became a director in June 1995. On March 30, 1998, Mr. Kelly was
named Chairman of the Board of Directors for the Company. Prior to May 1995, Mr.
Kelly was Executive Vice President, Retailing for The Vons Companies, Inc. and
was employed by that Company since 1963. Mr. Kelly has 35 years of experience in
the supermarket industry.
Mr. Barnett is a Managing Principal of Odyssey Investment Partners, LLC.
Prior to joining Odyssey Investment Partners in July 1997, Mr. Barnett had been
a Principal of Odyssey Partners, L.P. since 1993. Odyssey Investment Partners,
LLC is the successor firm to Odyssey Partners L.P. leveraged buyout activities.
Prior to joining Odyssey Partners, he was a managing Director of Mancuso & Co.,
a private merchant banking firm, where he was employed from 1990 through 1993.
Mr. Barnett has served as a Director of the Company since 1997.
Mr. Foreman is President of Sirius Corporation, a private investment
management firm. Prior to 1993, Mr. Foreman was a Principal at Harris Associate
L.P. since 1976. Mr. Foreman also serves as a director of Glacier Water
Services, Inc. and a director of PCA International, Inc. Mr. Foreman has been a
director of the Company since June 1989.
Mr. Friedman is a General Partner of Eos Partners, L.P., a private
investment firm, a position he has held since January 1994. Mr. Friedman has
served as a director of the Company since November 1987 and was a General
Partner of Odyssey Partners from April 1, 1988 until December 1993. Mr. Friedman
also serves as a director of The Caldor Corporation.
3
<PAGE>
Mr. Knilans served as the President of Big Bear, Inc., a supermarket chain
in Ohio, from June 1983 to June 1989 when he retired. Mr. Knilans has been a
director of the Company since June 1989. Mr. Knilans also serves as a director
of the Cardinal Fund, Columbus, Ohio and director and member of the Audit and
Compensation Committees of the Golub Corporation.
Mr. Oberrotman is currently self employed in merchant banking consulting
and previously was a Principal with Odyssey Partners L.P., and prior to that he
was a Principal of Hambro International Equity Partners, a venture capital firm,
from September 1990 to October 1992. Mr. Oberrotman became a director of the
Company in June 1996.
Mr. Snyder is a senior shareholder in the law firm of Snyder & Schwarz,
P.C., Rock Island, Illinois where he has been employed since March 1983. Mr.
Snyder and the firm have performed legal services in the past for the Company
and the Company expects such services to continue in the future. Mr. Snyder has
been a director of the Company since June 1989.
The Company's directors are elected annually to serve until the next annual
meeting of shareholders and until their successors have been elected and
qualified. None of the directors or executive officers listed herein is related
to any other director or executive officer.
COMPENSATION OF DIRECTORS
The Company's non-employee directors receive an annual retainer of $15,000
and fees of $750 for each board meeting and $500 for each committee meeting
attended plus reimbursement of travel expenses. Mr. Snyder does not receive
director's fees, but does receive legal fees for his services as a board and
committee member.
CERTAIN TRANSACTIONS
Snyder & Schwarz, P.C., the law firm of which Mr. Snyder, a director of the
Company, is a member, serves as counsel to the Company. The Company paid that
law firm $310,117, $240,109, and $393,857 for services rendered in fiscal 1997,
fiscal 1996, and fiscal 1995, respectively. These amounts include remuneration
for Mr. Snyder's services as a director of the Company.
The Board has determined that the fees paid for services rendered from
Snyder & Schwarz, P. C. were fair and competitive.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors is responsible for establishing broad corporate
policies and for overseeing the overall performance of the Company. The
directors are kept informed of the Company's business through discussions with
the Chairman and Chief Executive Officer, and other directors and officers, by
reviewing reports and analyses, and by participating in board and committee
meetings.
4
<PAGE>
The Board of Directors held five meetings during fiscal 1997. In addition, from
time to time, members of the Board of Directors and committees act by unanimous
written consent pursuant to Delaware law. All directors attended at least 75% of
all board and committee meetings held during the periods for which they were
directors.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board does not have a nominating committee. The Board of Directors acts as a
committee of the whole with respect to functions that would be performed by a
nominating committee.
The Audit Committee is composed of Mr. Knilans, Mr. Foreman, Mr. Snyder and
Mr. Oberrotman, all of whom are non-employee directors. The Committee met four
times during fiscal 1997. The Committee recommends the engagement of an
independent auditor and reviews the scope and results of the Company's audits,
the Company's internal accounting controls, and the professional services
rendered by the Company's independent auditors.
The Compensation Committee is composed of Mr. Barnett, Mr. Friedman and Mr.
Foreman, all are non-employee directors. The Committee met twice during fiscal
1997. The Committee reviews and approves all salary arrangements and other
remuneration for officers of the Company.
Limitation of Liability of Directors
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation provides that a director of the Company will not be
personally liable to the Company or its shareholders for monetary damages for
breach of the fiduciary duty of care as a director, including breaches which
constitute gross negligence. By its terms and in accordance with the Delaware
General Corporation Law, this provision does not eliminate or limit the
liability of a director of the Company (i) for breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law (relating
to unlawful payments of dividends or unlawful stock repurchases or redemptions),
or (iv) for any transaction from which the director derived an improper personal
benefit.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The Summary Compensation Table below shows compensation information for the
Chief Executive Officer of the Company and the two other most highly compensated
executive officers who were serving at the end of the last fiscal year whose
total annual salary and bonus exceeded $100,000 for the fiscal years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===================================================================================================================================
Annual Compensation Long-Term Compensation
=================================================================================================
Name and Principal Position Fiscal Salary Bonus Other Annual Securities LTIP All Other
Year Compensation Underlying Payouts Compensation
Options (#)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Kelly 1997 $360,500 $214,317 (1) 0 $0 $33,642 (2)
-------------------------------------------------------------------------------------------------
Chairman and 1996 350,000 350,000 (1) 0 0 31,583 (2)
-------------------------------------------------------------------------------------------------
Chief Executive Officer 1995 249,038 300,000 (3) (1) 600,000 2500 (6)
- -----------------------------------------------------------------------------------------------------------------------------------
Herbert T. Dotterer, 1997 138,698 96,322 (1) 25,000 0 $7,568 (2)
-------------------------------------------------------------------------------------------------
Chief Financial Officer 1996 123,425 123,425 (1) 0 0 5509 (2)
-------------------------------------------------------------------------------------------------
and Senior Vice President- 1995 117,212 17,250 (1) 25,000 0 3,926 (6)
-------------------------------------------------------------------------------------------------
Finance and Administration (7)
- -----------------------------------------------------------------------------------------------------------------------------------
David S. Norton 1997 142,990 81,433 (1) 0 0 $12,142 (2)
-------------------------------------------------------------------------------------------------
Senior Vice President- 1996 130,925 130,925 32,646 (1) (4) 0 0 10,083 (2)
-------------------------------------------------------------------------------------------------
Retail 1995 72,116 20,817 (5) (1) 75,000 0 2125 (6)
===================================================================================================================================
</TABLE>
Notes:
(1) Received other annual compensation consisting of perquisites and personal
benefits valued at less than the lesser of ten percent of total annual
salary and bonus or $50,000.
(2) Amount represents the full dollar value of premiums paid by the Company on
compensatory split-dollar executive life insurance policies and a 401(K)
matching contribution paid by the Company for each executive.
(3) Mr. Kelly received a signing bonus of $150,000 pursuant to the terms of his
employment agreement.
(4) Amount represents moving expenses of $32,148 as well as the taxable amount
of insurance premiums paid by the Company on behalf of Mr. Norton.
6
<PAGE>
(5) Mr. Norton received a signing bonus of $10,000 pursuant to the terms of his
employment contract in addition to the bonus received in fiscal year 1995.
(6) Amounts represent the full dollar value of premiums paid by the Company on
compensatory split-dollar executive life insurance policies for each
executive.
(7) Mr. Dotterer's employment with the Company terminated March 30, 1998.
Options/SAR Grants in Fiscal Year 1997
As part of a general option grant made to qualified employees, on February 4,
1997, Mr. Herbert Dotterer, former Senior Vice President of Finance and Chief
Financial Officer, was awarded stock options on 25,000 shares of Company stock,
vesting over a four year period. No other named Executive Officer was granted
stock options in fiscal year 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1997
===============================================================================================================================
Potential realizable value
at assumed annual rates
Individual Grants of stock price
appreciation for option term
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Number of Percent of
Securities total options
underlying granted to Exercise or
Options employees in base price Expiration 5% (2) 10% (2)
Name granted (#) Fiscal Year ($/Sh) (3) Date
- -------------------------------------------------------------------------------------------------------------------------------
Herbert T. Dotterer (1) 25,000 8.77% 4.00 2-04-2007 62,889 159,374
===============================================================================================================================
</TABLE>
Notes:
1) Options were granted for a term of ten years on February 4, 1997. One-
fourth of the options become exercisable on each of the first four
anniversaries of the grant date.
2) Caution is recommended in interpreting the financial significance of these
figures. The amounts under the columns labeled "5%" and "10%" are included
pursuant to certain rules promulgated by the Securities and Exchange
Commission and are not intended to forecast future appreciation, if any, in
the price of the Company's common stock. These amounts are based on the
assumption that the named executive holds the options granted for the full
term of the options and that the price of the Company's common stock
appreciates at assumed rates of 5% and 10%, respectively, compounded
annually over the term of the options. The actual value of the options will
vary in accordance with the market price of the Company's common stock.
3) Represents the market price of the Company's common stock at the closing
date of the grant.
7
<PAGE>
Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Values
The following table shows information regarding the values of certain
unexercised options owned by the named executive officers at the end of the last
completed fiscal year. No options or stock appreciation rights were exercised
during the fiscal year. No stock appreciation rights were granted during fiscal
1997 or were outstanding at the end of fiscal 1997.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values Table
<TABLE>
<CAPTION>
===========================================================================================================================
Number of Securities Underlying Value of Unexercised
Unexercised in-the-Money Options
Options at January 31,1998 at January 31, 1998 (1)
- ---------------------------------------------------------------------------------------------------------------------------
Shares
Acquired Value
Name On Realized Exercisable # Nonexercisable # Exercisable $ Nonexercisable $
Exercise
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Kelly 0 0 400,000 200,000 425,000 0
- ---------------------------------------------------------------------------------------------------------------------------
Herbert T. Dotterer 0 0 21,750 31,250 34,484 33,203
- ---------------------------------------------------------------------------------------------------------------------------
David S. Norton 0 0 50,000 25,000 53,125 0
===========================================================================================================================
</TABLE>
Note:
(1) Market value of underlying securities at January 31,1998 ($4.0625) minus
the base price.
Long Term Incentive Plan Awards Table
The Company did not make any Long Term Incentive Plan awards in fiscal 1997.
Compensation Committee Report
The Compensation Committee for fiscal 1997 was composed of three non-
employee members from the Board of Directors. The members were Mr. Rabinowitz,
Mr. Friedman and Mr. Foreman. Mr. Kelly attended meetings as a non-voting
member. Mr. Rabinowitz resigned from the Board of Directors on March 30, 1998.
The Committee establishes objectives for the executive compensation program and
reviews and approves all salary and other remuneration for the executive
officers of the Company. The objectives of the executive compensation program
are to:
1. Promote the attainment of Company goals by emphasizing a greater portion of
compensation subject to performance goals.
2. Attract and retain qualified talent.
3. Enhance shareholder value by providing opportunities for equity ownership
through performance-based programs.
8
<PAGE>
The executive officer compensation program is comprised of salary, cash
incentive compensation and other benefits, including pension and medical
benefits which are available to other employees in the Company.
Base Salary
- -----------
There is no formal Compensation Committee policy regarding the determination
of salaries; however, consideration is given to several factors including
individual work experience, performance, and comparable salaries within the
retail food industry.
Annual Incentive Bonuses
- ------------------------
Annual bonus potentials depend upon job levels and are set at a stated percent
of the base compensation. Bonuses are paid based on an allocation formula
primarily derived from performance against budgeted sales and earnings targets.
The corporate plan paid out below target amounts in 1997 and above target
amounts in 1996 based on the financial results for each year. The entire annual
incentive bonuses paid for 1995 were on a discretionary basis except for bonuses
paid pursuant to contractual guarantees.
Long-Term Incentive
- -------------------
The Committee intends to utilize stock options as the vehicle to provide a
long-term focus for fiscal 1995 and later fiscal years. Stock options were
issued at the beginning of fiscal year 1997.
Chief Executive Officer Compensation
- ------------------------------------
As of May 10,1995, the company retained Mr. Robert Kelly as its President and
Chief Executive Officer. Mr. Kelly was named Chairman of the Board on March 30,
1998. The Company and Mr. Kelly entered into an Employment Agreement with an
initial term of three years ending May 22, 1998. Effective April 12, 1998, the
Company and Mr. Kelly agreed to extend his employment through December 31, 1999
and to certain other amendments to his Employment Agreement (as discussed
below). The Employment Agreement provides for a base salary at the rate of
$360,500 per year. In addition, the Company paid a signing bonus of $150,000 at
the commencement of his employment, and in connection with the recent amendment
and extension of the term, the Company has agreed to pay Mr. Kelly $500,000
within ten days of the amendment's effective date. Also, Mr. Kelly is eligible
to receive bonus compensation in an amount determined by the Board of Directors
based upon mutually acceptable performance targets up to 100% of the base
salary. The bonus compensation in the first year of Mr. Kelly's employment was
$150,000. The bonus in the second year was $350,000 and $214,317 in the third
year.
Mr. Kelly purchased 125,000 shares of common stock of the Company at the time
of the Employment Agreement by delivering to the Company a promissory note with
the purchase price of the shares based upon the closing sale price of the
Company's common stock on the business day immediately preceding the date of the
Employment Agreement. Under recent amendments to his Employment Agreement, the
foregoing loan (and interest) will be forgiven in 50% increments for each year
of service completed by Mr. Kelly, commencing as of December 31, 1997, and shall
be forgiven in its entirety if the Company terminates Mr. Kelly's employment
without cause or Mr.
9
<PAGE>
Kelly terminates employment for "good reason" (as defined in the Employment
Agreement). The company has also agreed to provide Mr. Kelly with a tax gross up
to the extent of any such loan forgiveness.
The Company has also granted Mr. Kelly the option to purchase up to 600,000
shares of the Company's stock. Under the terms of his option, up to 200,000
shares may be purchased by Mr. Kelly on or after the first anniversary date of
his employment at a price equal to $2.50 per share, up to an additional 200,000
shares may be purchased on or after the second anniversary of his employment at
a price equal to $3.50 per share, and the balance of the shares may be purchased
on or after the third anniversary of Mr. Kelly's employment at a price equal to
$4.50 per share. This option becomes immediately exercisable in the event of the
termination of Mr. Kelly's employment by reason of his death or permanent
disability, by the Company for any reason other than "cause" (as defined in the
Employment Agreement), or by Mr. Kelly for "good reason" (as defined in the
Employment Agreement).
Under the recent amendments to his Employment Agreement, Mr. Kelly will also
be entitled to (1) an extended exercise period for each group of options, based
on a one year extension for each completed year of service from December 31,
1997 (up to a maximum exercise period of ten years), (2) extended payment by the
company of all premiums associated with the split dollar life insurance policy
in effect for Mr. Kelly, for each year of service from December 31, 1997, and
(3) reimbursement, on an after tax basis for certain moving costs. The recent
amendments to Mr. Kelly's Employment Agreement also subject Mr. Kelly to a one
year non-competition restriction following the termination of his employment,
prohibiting Mr. Kelly from engaging in any supermarket business conducted in the
Company's service area. The Employment Agreement provides Mr. Kelly with four
weeks of vacation per year.
Compensation Committee Interlocks and Insider Information
The Compensation Committee is comprised exclusively of directors who are not
and have never been Company employees. No Company executive officer serves on
the Compensation Committee or as a director of another company for which any
member of the Compensation Committee serves as a director or executive officer.
Summary of Compensation Plans
Retirement Plan
- ---------------
The Company maintains a tax-qualified defined benefit pension plan covering
both salaried and non-union hourly employees. The benefit formula under such
plan is the sum of 1% of annual compensation for each year up to the Social
Security Wage Base for that year and 1.33% of annual compensation over the
Social Security Wage Base with a minimum benefit of $360 per year multiplied by
years of credited service. There is full vesting of benefits after five years of
service. All contributions are made by the Company. Effective October 1, 1990,
the pension plans were amended to provide for voluntary early retirement at age
55. Assuming continued employment with the Company until retirement at age 65,
the estimated annual benefits payable beginning at age 65 to the named executive
officers are as follows: Mr. Kelly--$28,328; Mr. Norton--$31,125. Mr. Dotterer's
employment with the Company terminated on March 30, 1998, with a retirement
benefit of $14,154 based on ten years of service.
10
<PAGE>
Stock Incentive Plan
- --------------------
The Company has a Stock Incentive Plan which was ratified by the shareholders
at the 1995 Annual Shareholders Meeting. The Plan provides the Compensation
Committee with the discretion to make grants until June 20, 2005 to all salaried
employees of the Company who are not in a bargaining unit, in the form of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Limited Stock Appreciation Rights, and Restricted Stock. Grants of Stock
Appreciation Rights, Limited Stock Appreciation Rights, and Restricted Stock are
intended to be confined to key employees in special situations. The Plan
originally authorized two million shares of common stock. There are 721,500
shares available as of January 31,1998 for future grants.
Employment Contracts and Termination of Employment and Change-in-Control
- ------------------------------------------------------------------------
Arrangements
- ------------
Robert J. Kelly, Chairman and Chief Executive Officer, has an employment
contract which is described above.
The Company also has an Employment Agreement with David S. Norton, the
Company's Senior Vice President - Retail. This Agreement provides that Mr.
Norton will have a base salary of $125,000 per year (subsequent to employment,
the base salary was increased to $149,092) and will be entitled to participate
in the Eagle Bonus Plan at the Senior Vice President targeted norm of 50% of
base salary. Payout is contingent on Company performance with final
determination solely vested with the Board of Directors. Mr. Norton's bonus in
1997 was $81,433 (57% of his base salary) and in 1996 was $130,925 (100% of his
base salary). Mr. Norton received a one-time bonus of $10,000 upon his
employment with the Company. In addition, under the terms of his Employment
Agreement, he is entitled to receive options to purchase Company common stock in
the amount of 25,000 shares at a purchase price of $2.50 per share on the one-
year anniversary of his employment, 25,000 shares at a purchase price of $3.50
per share on the two-year anniversary of his employment, and 25,000 shares at
$4.50 per share on the three-year anniversary of his employment. The options
must be exercised within ten years of award or within 30 days following
termination of employment. The options immediately vest upon a change of
ownership, defined as a sale of more than 50% of the Company's common stock to
any entity other than the public. The Employment Agreement entitles Mr. Norton
to four weeks of vacation and standard Company employment benefits. In addition,
the Agreement provides that if Mr. Norton is terminated, he will receive 18
months of compensation based upon his base salary at the time of separation plus
health benefits during the 18 month period.
The Company has an Employment Agreement effective as of September 15,1997 with
S. Patric Plumley, the Vice President - Chief Financial Officer and Secretary of
the Company. Under the terms of this Agreement, Mr. Plumley received a signing
bonus of $10,000 and a base salary of $80,000. The $80,000 salary was increased
as of March 30,1998 to $120,000. In addition, Mr. Plumley is entitled to
participate in the Eagle Bonus Plan at the Administrative Vice President
targeted norm of 30% (increased to 50% on March 30, 1998) of average annual
salary with a maximum potential of 60% (increased to 100% as of March 30,1998)
should the Company exceed budgeted expectations. The Company also awarded Mr.
Plumley stock options for 15,000 shares at the closing price on his date of
employment with 25% of the shares to vest at each of the first four anniversary
dates of the grant and the options to be exercised within ten years of award or
within 30 days following termination of employment. Mr. Plumley also is to
receive options on an additional
11
<PAGE>
10,000 shares on the first anniversary of his employment with a price equal to
the closing price on that date and a vesting schedule similar to the original
award of options. Mr. Plumley also received relocation and temporary housing
expenses and is entitled to regular Company benefits and four weeks of vacation
per year. Under the terms of the Agreement, Mr. Plumley is entitled to one
year of salary and average bonus if his employment is terminated due to a change
of control.
In order to protect all of the participant's rights in the event of a
Change in Control (as defined below) of the Company, the 1995 Stock Incentive
Plan provides for the immediate vesting of all outstanding awards upon the
occurrence of such an event. For purposes of such Plan, a Change in Control of
the Company is deemed to occur if: (i) any person or entity (with the exception
of Odyssey Partners) acquires 50% or more of the voting securities of the
Company; (ii) the shareholders approve a plan of complete liquidation, an
agreement for sale or disposition of substantially all of the Company's assets,
or a materially dilutive merger or consolidation of the Company; or (iii) the
Board of Directors agrees by a two-thirds vote that a Change in Control has
occurred or is about to occur and within six months actually does occur.
However, for purposes of such Plan, no Change in Control would be deemed to
occur with respect to any Plan participant who is a material equity participant
of the purchasing group that consummates a Change in Control.
Performance Graph
Shown below is a line graph comparing a five-year cumulative total
shareholder return for the Company, the S & P Retail Stores (Food), and the
Russell 2000.
Comparision of Five-Year Cumulative Total Return*--Eagle Food Centers, S&P 500
Retail Food Stores, and Russell 2000
================================================================================
--Eagle Food -- S&P 500 Retail -- Russell 2000
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
==============================================================
Date Eagle Food Centers S&P 500 Retail Russell 2000
--------------------------------------------------------------
<S> <C> <C> <C>
01/93 $100.00 $100.00 $100.00
01/94 $ 89.66 $ 96.60 $118.62
01/95 $ 22.41 $105.15 $111.49
01/96 $ 29.31 $132.98 $144.98
01/97 $ 55.17 $155.91 $172.33
01/98 $ 56.03 $213.20 $230.40
--------------------------------------------------------------
</TABLE>
*Total return assumes reinvestment of dividends on a quarterly basis.
Note: Companies comprising the S & P Retail Stores (Food) Index include:
Albertson's, Inc.; American Stores Co.; Giant Food Inc.; Great Atlantic &
Pacific Tea Co.; Kroger Co.; and Winn-Dixie Stores Inc.
12
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of shares of Common Stock by (a) each person or group that is known to
the Company to be the beneficial owner of more than 5% of the outstanding
shares, (b) each director and named executive officer of the Company, and (c)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount
and Nature Percent
Names of Beneficial Owners of Beneficial of
- -------------------------- Ownership(1) Class(2)
------------- --------
<S> <C> <C>
Odyssey Partners, L.P. (3) (4) (8) 4,211,730 38.47
Robert J. Kelly (6) 725,000 6.62
Jerome Levy Foundation (10) 632,136 5.77
Dimensional Fund Advisors Inc. (5) 578,800 5.29
Steven M. Friedman (8) 227,345 2.08
Peter B. Foreman 151,022 1.38
Alain M. Oberrotman (3) 75,000 *
David S. Norton 50,000 *
The Friedman Family Foundation (9) 40,000 *
William J. Snyder (7) 1,000 *
Michael J. Knilans 500 *
Paul Barnett 0 *
Directors and Executive Officers 6,272,589 54.09%
as a group (10) persons including
certain of the persons listed above.
</TABLE>
*Owns less than 1% of the total outstanding Common Stock of the Company.
1) Unless otherwise noted, each person has sole investment and voting power
with respect to the shares indicated.
2) 10,946,873 shares of Common Stock were outstanding on January 31, 1998.
3) Mr. Oberrotman owns an option to purchase 75,000 shares owned by Odyssey
Partners, L.P. Odyssey Partners, L.P., retains sole voting and dispositive
power over Mr.Oberrotman's shares.
4) The business office address of Odyssey Partners L. P., is 280 Park Avenue,
West Tower, 21st Floor, New York, NY 10017.
5) Dimensional Fund Advisors Inc. (Dimensional), a registered investment
adviser, is deemed to have beneficial ownership of 578,800 shares of Eagle
Food Centers, Inc. stock as of December 31, 1997, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares. The business
office address of Dimensional Fund Advisors Inc. is 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401.
6) Mr. Kelly purchased 125,000 shares of Common Stock of the Company at the
time of the
13
<PAGE>
execution of his Employment Agreement. The beneficial ownership includes
600,000 shares which are exercisable under a stock option awarded in fiscal
1995.
7) The profit sharing plan of Snyder & Schwarz, P.C., the law firm of which Mr.
Snyder is a member, owns 1,000 shares of Common Stock.
8) Odyssey Partners L.P., a private investment partnership in liquidation, owns
4,211,730 shares, which may be deemed to be beneficially owned by each of
Messrs. Stephen Berger, Leon Levy, Jack Nash, Joshua Nash and Brian Wruble,
who collectively constitute all of the general partners of Odyssey Partners,
L.P. Includes 227,345 shares of Common Stock in which Stephen M. Friedman, a
director of the Company and former general partner of Odyssey Partners,
L.P., has an economic interest. Odyssey Partners, L.P. retains sole voting
power over the shares owned by Odyssey Partners, L.P. in which Mr. Friedman
has an interest. Does not include shares of Common Stock owned by The
Friedman Family Foundation, or The Jerome Levy Foundation (see footnotes (9)
and (10) below) or 461,201 shares of Common Stock owned by The Nash Family
Foundation, a charitable foundation, as to which Messrs. Nash may be deemed
to have beneficial ownership.
9) Represents 40,000 shares of Common Stock owned by The Friedman Family
Foundation, a charitable foundation, as to which Steven M. Friedman may be
deemed to have beneficial ownership. Does not include 227,345 shares owned
by Odyssey Partners, L.P. in which Mr. Friedman has an economic interest.
10) Represents 632,136 shares of Common Stock owned by The Jerome Levy
Foundation, a charitable foundation, as to which Leon Levy may be deemed to
have beneficial ownership. Does not include 4,211,730 shares owned by
Odyssey Partners, L.P., as to which Mr. Levy may be deemed to have
beneficial ownership by virtue of being a general partner of Odyssey
Partners, L.P.
Ownership of Principal Shareholders
Odyssey Partners, L.P., Beneficial Owners and Company Directors and
Officers currently hold the right to vote 54.09% of the issued and outstanding
shares of Common Stock of the Company. As long as Odyssey Partners, L.P.,
Beneficial Owners and Company Directors and Officers own a majority of the
outstanding voting stock of the Company, they will be able, acting together as a
group, to elect the entire Board of Directors of the Company and to approve any
action requiring shareholder approval.
Compliance With Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the two fiscal years ended January 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors, and
greater than ten-percent beneficial owners were in compliance.
14
<PAGE>
RATIFICATION OF THE
SELECTION OF AN INDEPENDENT AUDITOR
Proposal 2
Deloitte & Touche LLP, 101 W. Second Street, Davenport, Iowa, independent
certified public accountants, have performed an audit of the financial
statements of the Company for the fiscal year ended January 31, 1998. Services
provided by Deloitte & Touche LLP included work related to the examination of
the annual financial statements, reviews of unaudited quarterly financial
information and preparation of state and federal income tax returns.
The Board of Directors, upon recommendation of its Audit Committee, has
appointed Deloitte and Touche LLP to audit the books and accounts of the Company
for the fiscal year ending January 30, 1999 and is seeking ratification of this
appointment by the Shareholders. It is intended that the shares represented by
the proxy will be voted (unless the proxy indicates to the contrary) for
ratification of the appointment.
A representative of Deloitte & Touche LLP is expected to attend the annual
meeting of shareholders and will be provided the opportunity to make a
statement, if desired, and is expected to be available to respond to appropriate
questions.
The Board of Directors recommends a vote "FOR" the ratification of the
selection of the independent auditor.
1999 SHAREHOLDER PROPOSALS
Any shareholder who desires to present a proposal qualified for inclusion
in the Company's proxy materials for the 1999 Annual Shareholders Meeting must
forward the proposal in writing to the Secretary of the Company at the address
shown on the first page of this proxy statement in time to arrive at the Company
no later than January 18, 1999.
ADDITIONAL INFORMATION
Included with this Proxy Statement is the Company's Annual Report
indicating the general scope and nature of the Company's business together with
a summary of the activities and financial results of the Company for fiscal
1997. Shareholders may upon written request and without charge, obtain a copy of
the Company's Securities and Exchange Commission Annual Report on Form 10-K.
Exhibits to the Form 10-K are also available. The Company will require payment
of a fee covering its reasonable expenses in furnishing such exhibits. Address
any request to Mr. S. Patric Plumley, Secretary, Eagle Food Centers, Inc., Rt.
67 and Knoxville Rd., Milan, Illinois, 61264.
15
<PAGE>
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which may come
before the meeting. However, if any matters other than those referred to above
should properly come before the meeting, it is the intent of the persons named
in the enclosed proxy to vote such proxy in accordance with their discretion.
BY ORDER OF THE BOARD OF DIRECTORS
S. Patric Plumley, Secretary
Dated May 18, 1998
16
<PAGE>
Eagle Food Centers, Inc. PROXY/VOTING INSTRUCTION CARD
Milan, Illinois
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting on June 17, 1998
The undersigned hereby appoints Robert J. Kelly and S. Patric Plumley as true
and lawful proxies each with the power to appoint substitutes, and to vote the
shares of common stock of the Company held of record by the undersigned on May
8, 1998, at the Annual Shareholders Meeting of Eagle Food Centers, Inc. to be
held on June 17,1998 at 10:00 a.m., Central Daylight Time, at the Milan
Community Center, Rt. 87 & 92nd Avenue, Milan, Illinois, and at any adjournments
thereof, on all the matters coming before said meeting including any matters
which the Board of Directors is not aware of on May 18, 1998.
IF NO DIRECTION AS TO THE MANNER OF VOTING THE PROXY IS MADE, THE PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL 2 AS INDICATED ON THE
REVERSE SIDE HEREOF.
Election of Directors:
Nominees: Robert J. Kelly, Paul D. Barnell, Steven M. Friedman,
Peter B. Foreman, Michael J. Knilans, Alain M. Oberrotman,
William J. Snyder
You are encouraged to specify your choices by marking the appropriate boxes on
the reverse side. However, you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxy Committee
cannot vote your shares unless you sign, date and return this card.
_____________
| SEE REVERSE |
| SIDE |
|_____________|
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
[EAGLE LOGO]
<PAGE>
6400
- --------------------------------------------------------------------------------
[X] Please mark your
votes as in the
example.
This proxy will be voted in accordance with the instructions set forth
below. If no selection is made, this proxy will voted FOR the election of the
Board of Directors and FOR proposal 2.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposal 2.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD as to ALL Nominees FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Ratification of the selection [_] [_] [_]
Directors of Deloitte & Touche LLP
(See opposite as Independent Auditors.
side).
</TABLE>
For, except authority to vote for the following nominee(s), is withheld:
- ------------------------------------------------------------------------
SIGNATURE(S) ___________________________________________ DATE_________
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. If the signer is a Corporation please sign full
Corporate name by duly authorized officer. If a partnership, please sign in
Partnership by authorized person.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
