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-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)(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:
------------------------------------------------------------------------
EAGLE FOOD CENTERS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 27, 2001
Dear Shareholder:
You are hereby invited to attend the 2001 Annual Meeting of Shareholders of
Eagle Food Centers, Inc. which will be held on Wednesday, June 27, 2001 at 9:00
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 eight persons to serve as directors of the Company until
the 2002 Annual Meeting of Shareholders or until their successors shall
have been elected and shall have qualified.
2. A proposal to ratify the appointment of KPMG LLP as independent public
accountants for the current fiscal year.
3. A proposal to amend the Certificate of Incorporation to accomplish a
reverse stock split.
4. A shareholder proposal to urge the sale of the Company.
5. 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 4, 2001 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 4, 2001 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 21, 2001
Milan, Illinois
May 21, 2001
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 27, 2001,
at 9:00 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 4, 2001, 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 25,
2001.
Only holders of record of the Common Stock of the Company, $.01 par value per
share, at the close of business on May 4, 2001, are entitled to notice of and to
vote at the annual meeting. As of May 4, 2001, the Company had 12,971,884 shares
of Common Stock outstanding, each of which is entitled to one vote on each
proposal presented. The holders of 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, for the ratification of the selection of
auditors, for the amendment to the Certificate of Incorporation and against the
shareholder proposal to urge the sale of the Company.
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, by telephone or otherwise for which they will not receive additional
compensation.
The Eagle Food Centers, Inc. 2000 Annual Report and financial statements for
the fiscal year ended February 3, 2001, 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.
PROPOSALS TO SHAREHOLDERS
ELECTION OF DIRECTORS
PROPOSAL 1
The Board of Directors currently consists of eight members, all of whom have
been nominated to be elected at the 2001 Annual Meeting of Shareholders to serve
until the 2002 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 eight 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.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE EIGHT NOMINEES LISTED
BELOW.
Name Age Position(s) Held
- ---- --- ----------------
Robert J. Kelly 56 Chairman of the Board of Directors
Jeffrey L. Little 50 Chief Executive Officer and President, Director
S. Patric Plumley 52 Senior Vice President - Chief Financial Officer
and Secretary, Director
Peter B. Foreman 65 Director
Steven M. Friedman 46 Director
Alain M. Oberrotman 50 Director
Jerry I. Reitman 63 Director
William J. Snyder 58 Director
The business experience of each of the nominees during the past five years is as
follows:
Mr. Kelly was named Chairman of the Board of Directors for the Company on
March 30, 1998. Mr. Kelly also held the titles of Chief Executive Officer and
President from May 10, 1995 through January 31, 2000. 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 38 years of experience in
the supermarket industry.
Mr. Little was named Chief Executive Officer and President on January 31, 2000
and became a director in September 2000. Mr. Little was Vice President,
Marketing for Fleming Companies and President of ABCO Foods (a division of
Fleming) from January 1998 to January 2000. From August 1989 to December 1997,
Mr. Little was with Haggen, Inc. serving in various capacities as Senior Vice
President Operations, Vice President Sales/Marketing and Vice President
Perishables. Mr. Little has 33 years of experience in the supermarket industry.
Mr. Plumley, who was named Director in September 2000, was named Senior Vice
President - Chief Financial Officer and Secretary on March 1, 1999, served the
Company as Vice President - Chief Financial Officer and Secretary from March 30,
1998 and Vice President and Corporate Controller from September 15, 1997 until
his promotions. Prior to September 1997, Mr. Plumley served as Senior Vice
President of American Stores' Super Saver Division from 1994 to 1997 and Senior
Vice President of Lucky Stores, Inc. from 1990 to 1994. Mr. Plumley has 28 years
of experience in the supermarket industry.
Mr. Foreman is President of Sirius Corporation, a private investment
management firm. Prior to 1993, Mr. Foreman was a Principal at Harris Associate
LP since 1976. Mr. Foreman has been a director of the Company since June 1989.
Mr. Foreman also serves as a director of Glacier Water Services, Inc.
Mr. Friedman is a General Partner of EOS Partners, LP, 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 LP from April 1988 until December 1993.
Mr. Oberrotman is currently employed in merchant banking and consulting and
previously was a Principal
with Odyssey Partners LP from October 1992 to May 1997. Mr. Oberrotman became a
director of the Company in June 1996.
Mr. Reitman is Vice Chairman, Partner of the Callahan Group, a full service
management consulting company in Chicago, Illinois, a lecturer at Northwestern
University, author, and an advisor to Senior Management on direct marketing,
integrated communications, and strategic positioning. Previously, Mr. Reitman
was Executive Vice President of Worldwide Direct Marketing for the Leo Burnett
Agency. Mr. Reitman became a director of the Company in December 1998. Mr.
Reitman also serves on the board of directors of CADMUS Communication (CDMS).
Mr. Snyder is a senior shareholder in the law firm of Snyder, Schwarz, Park &
Nelson P.C., Attorneys at Law, Rock Island, Illinois since March 1983 and has
maintained an active law practice for 35 years in the Quad-City area. The law
firm of Snyder, Schwarz, Park & Nelson, P.C., has acted as legal counsel to the
Company for many years and has received legal fees from the Company in various
amounts. Mr. Snyder has been a director of the Company since June 1989.
The directors of the Company 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 non-employee directors of the Company receive an annual retainer of
$22,500 and fees of $750 for each board meeting and $1,000 for each committee
meeting attended plus reimbursement of travel expenses. Mr. Snyder does not
receive fees as director, but does receive legal fees for his services as a
board and committee member.
CERTAIN TRANSACTIONS
Snyder, Schwarz, Park & Nelson 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 $275,437, $279,055, and $380,446 for services
rendered in fiscal 2000, 1999, and 1998, respectively. These amounts include
remuneration for the services of Mr. Snyder as a director of the Company. The
Board has determined that the fees paid for services rendered from Snyder,
Schwarz, Park & Nelson P.C. were fair and competitive.
Mr. Oberrotman was paid $15,000 and $121,619, including expenses, in fiscal
2000 and fiscal 1999, respectively, for services rendered as a consultant in
connection with the restructuring of the Senior Notes of the Company. The Board
has determined that the fees paid for services rendered by Mr. Oberrotman 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 business of the Company through discussions
with the Chairman and the Chief Executive Officer, and other directors and
officers, by reviewing reports and analyses, and by participating in board and
committee meetings.
The Board of Directors held eight meetings during fiscal 2000, including
meeting to review and discuss the Company's reorganization. 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
the meetings of the board and committees on which they served.
The Board of Directors has an Audit Committee and a Compensation Committee.
The reports of these committees are included herein. 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.
LIMITATION OF LIABILITY OF DIRECTORS
As permitted by the Delaware General Corporation Law, the Certificate of
Incorporation of the Company 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 duty of loyalty to
the Company or its shareholders by the director, (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 payment of dividends or unlawful stock repurchase or redemption), or
(iv) for any transaction from which the director derived an improper personal
benefit.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The Summary Compensation Table below shows compensation information for the
Chief Executive Officer of the Company and the four 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
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ------------
SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
------------------ ---- ------- ------ ------------ ----------- ------------
Jeffrey L. Little, 2000 $331,250 $ 57,978 (1) 600,000 $197,397 (3)
Chief Executive
Officer,
President
Robert J. Kelly, 2000 $221,271 $ 0 (1) 0 $ 15,121 (4)
Chairman of the Board 1999 369,513 225,957 (1) 0 278,132 (5)
1998 360,500 500,000 (6) (1) 0 354,146 (7)
S. Patric Plumley, 2000 $183,462 $ 32,111 (1) (8) 100,000 $ 85,908 (9)
Senior Vice President, 1999 155.421 95,999 (1) (8) 15,000 7,272 (10)
Chief Financial
Officer, 1998 117,162 0 (1) (8) 10,000 49,481 (11)
Secretary
Stanley W. Stephens, 2000 $127,500 (2) $ 22,316 (1) 75,000 $ 88,642 (12)
Senior Vice President,
Retail
Clark Jordan, 2000 $108,750 (2) $ 19,034 (1) 50,000 $ 58,518 (13)
Vice President,
Operations
- ----------
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) Mr. Stephens and Mr. Jordan each began working for the Company in May of
fiscal 2000.
(3) Mr. Little received a signing bonus of $100,000, temporary living expenses
of $12,855, taxable moving expenses of $61,927, non-taxable moving expenses
of $15,243, full dollar value of premiums paid by the Company on Executive
Term Life policy of $2,122 and a 401(k) matching amount of $5,250.
(4) Mr. Kelly received a 401(k) matching amount of $5,250 and full dollar value
of premiums paid by the Company on an Executive Term Life policy of $9,871.
(5) Mr. Kelly received full dollar value of premiums paid by the Company on a
compensatory split-dollar executive life insurance policy of $14,073, full
dollar value of premiums paid by the Company on
Executive Term Life policy of $10,386, debt forgiveness of $248,673,
including taxes, for a note given to the Company regarding the purchase of
stock and a 401(k) matching amount of $5,000.
(6) Mr. Kelly received a signing bonus of $500,000 at his contract extension
date of April 12, 1998.
(7) Mr. Kelly received a taxable reimbursement for moving expenses of $96,425,
full dollar value of premiums paid by the Company on compensatory
split-dollar executive life insurance policies of $4,048, debt forgiveness
of $248,673, including taxes, for a note given to the Company regarding the
purchase of stock and a 401(k) matching amount of $5,000.
(8) Along with other key employees, Mr. Plumley agreed to cancellation and
reissue of options on 40,000 shares as follows: 15,000 shares issued
September 15, 1997 at $5.00 per share, expiring September 15, 2007, were
cancelled and reissued at $1.25 per share, expiring September 15, 2005;
10,000 shares issued September 15, 1998 at $2.50 per share, expiring
September 15, 2008, were cancelled and reissued at $1.25 per share,
expiring September 15, 2006; and 15,000 shares issued April 1, 1999 at
$2.938 per share, expiring April 1, 2009, were cancelled and reissued at
$1.25 per share, expiring April 1, 2007. (See REPORT ON REPRICING OF
OPTIONS/SARS regarding the cancellation and reissuance of certain options
during fiscal 2000.) Mr. Plumley received a new option grant for 60,000
shares on May 31, 2000.
(9) Mr. Plumley received a 401(k) matching amount of $5,250, a retention bonus
of $78,495 and full dollar value of premiums paid by the Company on an
Executive Term Life policy of $2,163.
(10) Mr. Plumley received a 401(k) matching amount of $5,000 and full dollar
value of premiums paid by the Company on an Executive Term Life policy of
$2,272.
(11) Mr. Plumley received taxable moving expenses of $35,914, non-taxable moving
expenses of $8,567 and a 401(k) matching amount of $5,000.
(12) Mr. Stephens received a signing bonus of $30,000, temporary living expenses
of $5,122, taxable moving expenses of $34,054, non-taxable moving expenses
of $15,945 and a 401(k) matching amount of $3,521.
(13) Mr. Jordan received a signing bonus of $25,000, temporary living expenses
of $2,559, taxable moving expenses of $21,821, non-taxable moving expenses
of $8,395 and full dollar value of premiums paid by the Company on an
Executive Term Life policy of $743.
OPTIONS/SAR GRANTS IN FISCAL YEAR 2000
As part of individual employment contracts and agreements, options were
granted to Jeffrey L. Little, President and Chief Executive Officer, Stanley W.
Stephens, Senior Vice President, Retail and Clark Jordan, Vice President,
Operations. Additional shares were granted to S. Patric Plumley, Senior Vice
President and Chief Financial Officer. No other named Executive Officer was
granted stock options in fiscal year 2000.
OPTION GRANTS IN FISCAL YEAR 2000
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
---------------------------- VALUE AT
NUMBER OF PERCENT OF ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (5)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ------------- ----------- --------- --------- -- ---
Jeffrey L. Little 600,000 54.23% (1) 01/31/10 0 347,133
S. Patric Plumley 60,000 5.42% 1.25 05/31/10 25,763 85,449
S. Patric Plumley (2) 15,000 1.36% 1.25 09/15/05 988 6,157
S. Patric Plumley (2) 10,000 0.90% 1.25 09/15/06 1,316 5,765
S. Patric Plumley (2) 15,000 1.36% 1.25 04/01/07 3,011 11,387
Stanley W. Stephens 75,000 6.78% (3) 05/08/10 0 50,561
Clark Jordan 50,000 4.52% (4) 05/08/10 0 38,707
- ----------
Notes:
(1) As part of his employment contract, the Company granted Mr. Little the
option to purchase up to 600,000 shares of stock of the Company. Under
the terms of his option, up to 200,000 shares may be purchased by Mr.
Little on or after the first anniversary (01/31/01) of his employment at
$1.26 per share, up to an additional 200,000 shares may be purchased on
or after the second anniversary (01/31/02) of his employment at $2.26 per
share and the final 200,000 shares may be purchased on or after the third
anniversary (01/31/03) of his employment at $3.26 per share. The options
have an expiration date of January 31, 2010.
(2) Along with other key employees, Mr. Plumley agreed to cancellation and
reissue of options on 40,000 shares as follows: 15,000 shares issued
September 15, 1997 at $5.00 per share, expiring September 15, 2007, were
cancelled and reissued at $1.25 per share, expiring September 15, 2005;
10,000 shares issued September 15, 1998 at $2.50 per share, expiring
September 15, 2008, were cancelled and reissued at $1.25 per share,
expiring September 15, 2006; and 15,000 shares issued April 1, 1999 at
$2.938 per share, expiring April 1, 2009, were cancelled and reissued at
$1.25 per share, expiring April 1, 2007. (See REPORT ON REPRICING OF
OPTIONS/SARS regarding the cancellation and reissuance of certain options
during fiscal 2000.)
(3) As part of his employment contract, the Company granted Mr. Stephens the
option to purchase up to 75,000 shares of stock of the Company. Under the
terms of his option, up to 25,000 shares may be purchased by Mr. Stephens
on or after the first anniversary (05/08/01) of his employment at $1.00
per share, up to an additional 25,000 shares may be purchased on or after
the second anniversary (05/08/02) of his employment at $2.00 per share
and the final 25,000 shares may be purchased on or after the third
anniversary (05/08/03) of his employment at $3.00 per share. The options
have an expiration date of May 8, 2010.
(4) As part of his employment agreement, the Company granted Mr. Jordan the
option to purchase up to 50,000 shares of stock of the Company. Under the
terms of his option, up to 20,000 shares may be purchased by Mr. Jordan
on or after the first anniversary (05/08/01) of his employment at $1.00
per share, up to an additional 15,000 shares may be purchased on or after
the second anniversary (05/08/02) of his employment at $2.00 per share
and the final 15,000 shares may be purchased on or after the third
anniversary (05/08/03) of his employment at $3.00 per share. The options
have an expiration date of May 8, 2010.
(5) Caution is recommended in interpreting the financial significance of
these figures. The amounts under the columns labeled "5%" and "10%" are
included pursuant to certain rules promulgated by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, in the price of the common stock of the Company. These amounts
are based on the assumption that the named executive holds the options
granted for the full term of the options and that the market price of the
underlying security appreciates in value from the date of the grant to
the end of the option term at the annualized rates of 5% and 10%,
respectively, compounded annually over the term of the options. The
actual value of the options will vary in accordance with the market price
of the common stock of the Company.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR VALUES
The following table shows information regarding the values of certain
unexercised options owned by the named executive officers at the end of the last
completed fiscal year. No options or stock appreciation rights were exercised
during the fiscal year. No stock appreciation rights were granted during fiscal
2000 or were outstanding at the end of fiscal 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES TABLE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FEBRUARY 3, 2001 AT FEBRUARY 3, 2001 (1)
SHARES --------------------------- -----------------------
ACQUIRED EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
ON VALUE ------------ ---------------- ------------ ---------------
EXERCISE REALIZED (#) (#) ($) ($)
-------- -------- --- --- --- ---
Robert J. Kelly 0 0 600,000 0 0 0
Jeffrey L. Little 0 0 200,000 400,000 0 0
S. Patric Plumley 0 0 20,000 80,000 0 0
Stanley W. Stephens 0 0 0 75,000 0 0
Clark Jordan 0 0 0 50,000 0 0
- ----------
Notes:
(1) Market value of underlying securities at February 3, 2001 ($0.625) minus the
base price.
COMPENSATION COMMITTEE REPORT
The Compensation Committee for fiscal 2000 was composed of two non-employee
members from the Board of Directors. The members were Mr. Friedman and Mr.
Reitman. Mr. Kelly attended meetings as a non-voting participant. 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.
The executive officer compensation program is comprised of salary, cash
incentive compensation and other benefits, including pension and medical
benefits that are available to other employees of 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 fiscal
2000 and above target amounts in fiscal 1999 based on the financial results
for each year. The corporate plan did not provide a bonus payout for fiscal
1998.
LONG-TERM INCENTIVE
The Committee intends to utilize stock options as the vehicle to provide a
long-term focus. Stock options were issued in fiscal 2000 and in fiscal 1999.
CHIEF EXECUTIVE OFFICER COMPENSATION
As of January 31, 2000, the Company retained Mr. Jeffrey Little as its
President and Chief Executive Officer. The Company and Mr. little entered into
an Employment Contract with an initial term of three years ending January 31,
2003. The Employment Contract provides for a base salary at the rate of $325,000
per year. In addition, the Company paid a signing bonus of $100,000 at the
commencement of his employment. Also, Mr. Little will be eligible to receive
bonus compensation, in an amount determined by the Board of Directors based upon
mutually acceptable performance targets, of 50% of the base salary, with a
maximum potential of 100% should the Company exceed budgeted expectations. In
the event the Company terminates Mr. Little's Employment other than for "cause",
Mr. Little will receive a payment in a lump sum equal to eighteen (18) months of
compensation, continued health and dental insurance coverage for a period of
eighteen (18) months, any accrued and unused vacation pay and professional
outplacement services up to the sum of $20,000.
The Company has also granted Mr. Little the option to purchase up to 600,000
shares of stock of the Company. Under the terms of his option, up to 200,000
shares may be purchased by Mr. Little on or after the first anniversary date of
his employment at $1.26 per share, up to an additional 200,000 shares may be
purchased on or after the second anniversary of his employment at $2.26 per
share and the final 200,000 shares may be purchased on or after the third
anniversary of the employment of Mr. Little at $3.26 per share with the
expiration of options at January 31, 2010. This option becomes immediately
exercisable in the event of the termination of employment of Mr. Little by
reason of his death or permanent disability, by the Company for any reason other
than "cause" (as defined in the Employment Contract), or by Mr. Little for
"good reason" (as defined in the Employment Contract). Mr. Little received
relocation and temporary housing expenses and is entitled to regular Company
benefits and 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 PLANS
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. The Company makes all contributions. Effective October 1, 1990, the
pension plans were amended to provide for voluntary early retirement at age 55.
The annual benefits payable beginning at age 65 to the executive officers are as
follows: Mr. Kelly--$11,426; Mr. Little--$2,010; Mr. Plumley--$6,351; Mr.
Stephens--$2,010; and Mr. Jordan--$1,605. This plan was frozen as of December
31, 2000 and no future benefits will accrue after that date.
The Company maintains a tax-qualified defined contribution plan covering both
salaried and non-union hourly employees. Under this plan, employees may
contribute up to 17% of eligible earnings up to a maximum of $10,500 during the
plan year. The plan year begins on January 1 and ends on December 31. The plan
includes a discretionary Company matching contribution of up to 50% of the first
10% of employee contributions or a maximum match of 5% of eligible earnings. The
matching contribution becomes partially vested after two years of service and
fully vested after five years. Effective January 1, 2001, the Company amended
the plan to include a profit sharing contribution of 3% of eligible earnings.
The profit sharing contribution is immediately vested. The profit sharing
contribution was added in fiscal 2001 to replace the defined benefit plan
described above.
STOCK INCENTIVE PLAN
The Company has a Stock Incentive Plan which was ratified by the shareholders
at the 2000 Annual Shareholders Meeting. The Plan provides the Compensation
Committee with the discretion to make grants until September 12, 2010 to all
salaried employees of the Company who are not in a bargaining unit, in the form
of Non-qualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights and Restricted Stock. The plan contains a provision allowing non-employee
Directors of the Company to elect annually to receive payment of all or any
portion of the fees for their services as Directors in the form of options to
acquire Company Common Stock. The Plan authorized one million shares of common
stock. There were 1,000,000 shares available as of February 3, 2001 for future
grants.
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
Non-qualified 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 were 38,013
shares available as of February 3, 2001 for future grants.
In order to protect all of the rights of the participant in the event of a
Change in Control of the Company, the 2000 and 1995 Stock Incentive Plans
provide for the immediate vesting of all outstanding awards upon the occurrence
of such an event. A Change in Control of the Company is deemed to occur if any
one or more of the following conditions are fulfilled: (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
assets of the Company, 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, in no event shall a Change in Control 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.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Jeffrey L. Little, President and Chief Executive Officer, has an employment
contract which is described above.
On December 15, 1999, the Company and Robert Kelly entered into a contract
pursuant to which the Company agreed to extend his employment through December
31, 2001 and Mr. Kelly agreed to continue as Chairman of the Board of Directors.
Prior to December 15, 1999, Mr. Kelly's Employment Contract provided for a base
salary of $360,500. Mr. Kelly's current Employment Agreement provided for a base
salary of $350,000 per year during the agreed upon period of transition of
duties to the new Chief Executive Officer and President. After the transition
period, the agreement provides Mr. Kelly with $190,000 per year as Chairman of
the Board of Directors and for services provided in the ongoing operation of the
Company through December 31, 2001.
Also, through fiscal 1999, Mr. Kelly was eligible to receive bonus
compensation, in an amount determined by the Board of Directors based upon
mutually acceptable performance targets, of 50% of the base salary with a
maximum potential of 100% should the Company exceed budgeted expectations.
Mr. Kelly purchased 125,000 shares of common stock of the Company at the time
of his original employment by delivering to the Company a promissory note with
the purchase price of the shares based upon the closing sale price of the common
stock of the Company on the business day immediately preceding the date of the
Employment Contract. Under the April 12, 1998 amendment to his Employment
Contract, the foregoing loan (and interest) was forgiven in 50% increments for
each year of service completed by Mr. Kelly, commencing as of December 31, 1997.
The company also provided Mr. Kelly with a tax gross up of the loan forgiveness.
Mr. Kelly has an option to purchase 600,000 shares of Company stock as follows:
200,000 shares of stock of the Company at $2.50 per share which expire May 22,
2001, 200,000 shares at $3.50 per share which expire May 22, 2002 and 200,000
shares at $4.50 per share which expire May 22, 2003, all of which are
contingently exercisable within two years of termination of employment under a
Change of Control agreement dated December 15, 1999.
Under the recent amendments to his Employment Contract, Mr. Kelly will also be
entitled (1) in the event of a Change of Control of the Company occurring within
two years of termination of his employment for any reason other than cause, to
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 the ten year expiration period as provided for under
the stock incentive plans of the Company), and (2) upon termination of his
employment for any reason other than cause, extended payment by the Company of
all premiums associated with the split dollar life insurance policy in effect
for Mr. Kelly, for a period equal to each year of service from December 31,
1997. The recent amendments to the Employment Contract of Mr. Kelly 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 service area of the Company.
The Company has an Employment Contract effective as of May 8, 2000, as
revised, with a term of three years, with Stanley W. Stephens, Senior Vice
President - Retail. Under the terms of this Contract, Mr. Stephens received a
signing bonus of $30,000 and a base salary of $170,000. In addition, Mr.
Stephens is entitled to participate in the Eagle Bonus Plan at the Senior Vice
President targeted norm of 50% of average annual salary with a maximum potential
of 100% should the Company exceed budgeted expectations.
The Company has also granted Mr. Stephens the option to purchase up to 75,000
shares of stock of the Company. Under the terms of his option, up to 25,000
shares may be purchased by Mr. Stephens on or after the first anniversary date
of his employment at $1.00 per share, up to an additional 25,000 shares may be
purchased on or after the second anniversary of his employment at $2.00 per
share and the final 25,000 shares may be purchased on or after the third
anniversary of the employment of Mr. Stephens at $3.00 per share with the
expiration of options at May 8, 2010. This option becomes immediately
exercisable in the event of the termination of employment of Mr. Stephens by
reason of his death or permanent disability, by the Company for any reason other
than "cause" (as defined in the Employment Contract), or by Mr. Stephens for
"good reason" (as defined in the Employment Contract). Mr. Stephens received
relocation and temporary housing expenses and is entitled to regular Company
benefits and four weeks of vacation per year. Mr. Stephens has entered into
a Change in Control Agreement with the Company dated April 11, 2000 which
provides eighteen months of salary, continued health and dental insurance for
eighteen months, as well as outplacement assistance if his employment is
terminated due to a change of control (defined above).
RETENTION AGREEMENT
The Company entered into a Retention Agreement with certain key employees in
the event that the Company commenced a voluntary case under Chapter 11 of the
United States Bankruptcy Code. The agreement provided a bonus for continuing
services provided that the employee is still employed by the Company six months
after consummation of a plan of reorganization in the Chapter 11 Case. On May
31, 2000 the Retention Agreements were modified to provide for the payment of
the bonuses should the employee's employment by the Company be terminated prior
to such six month period as a result of (i) a sale of all or substantially all
of the assets of the Company, whether in separate transaction or as part of a
plan of reorganization for the company, or (ii) a merger, consolidation,
liquidation, dissolution or similar transaction involving the Company. The
Company did commence Chapter 11 proceedings on February 29, 2000. On July 7,
2000 the United States District Court for the District of Delaware confirmed the
Company's plan of reorganization, which plan the Company consummated on August
7, 2000.
CHANGE OF CONTROL
The Company entered into a Change of Control Agreement with certain key
employees, which provides that upon a change of control (defined above) all
options granted to those employees to acquire stock in the Company shall
immediately vest. In addition, the Agreement provides that if the employee is
terminated other than for cause within the two year period following the
effective date of a change of control or resigns for good reason within the six
month period following the effective date of the change in control, the employee
will be entitled to: (i) a prorated bonus based on the Company bonus plan, (ii)
payment of accrued vacation, (iii) professional outplacement at a cost of up to
$20,000 and (iv) based on the employment level of the employee, payment of lump
sum compensation and continued health and dental coverage for a period of twelve
or eighteen months. The Agreement terminates if a change of control has not
occurred within one year of its date.
REPORT ON REPRICING OF OPTIONS/SARS
Stock options are a key part of the Company's compensation program for its
management and other key employees. Without viable stock options, the Company
will find it more difficult to retain and motivate key employees. A compensation
package including options is essential to provide an incentive to key employees
to further the long-term growth and profitability of the Company and improve
employee morale. Options with little potential to exceed market price are not
viable, and will not further any of the purposes of stock option grants under
the Plan. Certain key employees agreed to the cancellation and reissue of their
options during fiscal 2000. This will benefit the Company by allowing the
Company to better meet the objectives of its stock option compensation under the
Plan. The following table shows the results of the cancellation and reissue for
the affected named executive officer.
TEN-YEAR OPTION/SAR REPRICINGS
Market Exercise
Number of price of price at
securities stock at time of Length of original
underlying time of repricing New option term
options/SARs repricing or exercise remaining at date
repriced or or amendment amendment price of repricing or
Name Date amended(#) ($)(2) ($) ($) Amendment(1)
----- ----- ----------- ------- -------- -------- -------------------
S. Patric Plumley 05/31/00 15,000 1.03 5.0000 1.2500 7 years, 3.5 months
S. Patric Plumley 05/31/00 10,000 1.03 2.5000 1.2500 8 years, 3.5 months
S. Patric Plumley 05/31/00 15,000 1.03 2.9380 1.2500 9 years, 10 months
(1) The original option term was reduced by two years on cancellation and
reissue.
(2) Last reported closing price before trading was suspended February 29, 2000.
Respectfully submitted,
Steven M. Friedman, Chairman Jerry I. Reitman
AUDIT COMMITTEE REPORT
The Audit Committee is composed of three directors who are not officers of the
Company, and operates under a written charter adopted by the Board of Directors
(See Exhibit A). The members of the Audit Committee are listed at the end of
this report.
Under the terms of the charter and listing standards of the Nasdaq Stock
Market, Inc., all of the Audit Committee members are considered to be
independent, except for Mr. Snyder. Mr. Snyder may not be considered independent
because he is a partner with Snyder, Schwarz, Park and Nelson, PC, a law firm
that received over $200,000 from the Company during each of the past three
fiscal years. The Company's Board of Directors determined that it is in the best
interests of the Company and its shareholders for Mr. Snyder to serve on the
Audit Committee, notwithstanding this relationship, because of Mr. Snyder's
extensive knowledge of the Company gained through many years as legal counsel
and member of the Board of Directors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States of America and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee those processes. The Audit Committee
also recommends to the Board of Directors, subject to stockholder ratification,
the appointment of the Company's independent auditors.
In this regard, the Audit Committee has reviewed and discussed the audited
financial statements for fiscal 2000 with management and discussed other
matters related to the audit with the independent auditors. Management
represented to the Audit Committee that the Company's consolidated financial
statements were prepared in accordance with accounting principles generally
accepted in the United States of America. The Audit Committee discussed with the
independent auditor matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees), as amended by Statements
on Auditing Standards Nos. 89 and 90.
The independent auditors also provided to the Audit Committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with management and the independent auditors the firm's independence.
The Committee considered whether the information technology and other non-audit
consulting services provided by the independent auditors are compatible with
maintaining the auditor's independence and concluded that such services have not
impaired the auditors' independence.
Based on the Audit Committee's discussions with management and the independent
auditors and the Audit Committee's review of the representations of management
and the report of the independent auditors to the Audit Committee, the Audit
Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Company's Annual Report on Form 10-K
for the year ended February 3, 2001 filed with the Securities and Exchange
Commission.
Fees paid to the independent auditor's firm are as follows (in thousands):
Audit Fees - Fiscal Year ending February 3, 2001, including quarterly reviews $132
Financial Information Systems Design and Implementation Fees $-0-
All Other Fees $ 10
Respectfully submitted,
Peter B. Foreman, Chairman Alain M. Oberrotman William J. Snyder
PERFORMANCE PRESENTATION
Shown below is a line graph comparing total shareholder return for the
Company, the Russell 2000 and the S&P Retail Stores (Food) since the Company's
stock resumed trading at the exit from Chapter 11, as required by Item 402(l) of
SEC Regulation S-K.
[GRAPH]
Eagle Food Centers Russell 2000 S&P 500 Retail
08/2000 100 100 100
01/2001 30.3 106.63 102.11
Note: Companies comprising the S&P Retail Stores (Food) Index include:
Albertson's, Inc., Kroger Co., Safeway, Inc. and Winn-Dixie Stores, Inc.
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. A total of
12,791,884 shares of Common Stock were outstanding on May 8, 2001.
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAMES OF BENEFICIAL OWNERS OWNERSHIP(1) CLASS
-------------------------- ------------ -----
Odyssey Partners, LP (2)(5) 4,211,730 30.83%
Dimensional Fund Advisors, Inc. (3) 731,400 5.35%
Robert J. Kelly (4) 725,000 5.31%
Steven M. Friedman (5)(2) 227,345 1.66%
Jeffrey L. Little (6) 220,515 1.61%
Peter B. Foreman 151,022 1.11%
The Friedman Family Foundation (5) 40,000 *
Stanley W. Stephens (7) 27,946 *
S. Patric Plumley (8) 23,750 *
Clark Jordan (9) 20,000 *
Jerry I. Reitman 2,000 *
William J. Snyder (10) 1,000 *
Alain M. Oberrotman 0 *
Directors and Executive Officers as a group (10 persons)
including certain of the persons listed above. 1,438,578 10.53%
- ----------
*Owns less than 1%.
Notes:
(1) Unless otherwise noted, each person has sole investment and voting power
with respect to the shares indicated.
(2) Odyssey Partners LP, 280 Park Avenue, West Tower, 21st Floor, New York, NY
10017, 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, LP.
Includes 227,345 shares of Common Stock in which Steven M. Friedman, a
director of the Company and former general partner of Odyssey Partners, LP,
has an economic interest. Odyssey Partners, LP retains sole voting power
over the shares owned by Odyssey Partners, LP in which Mr. Friedman has an
interest. Does not include shares of Common Stock owned by the Friedman
Family Foundation (see footnote (5) below), 632,136 shares of Common Stock
owned by The Jerome Levy Foundation, as to which Mr. Leon Levy may be deemed
to have beneficial ownership, 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.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts. (These
investment companies and investment vehicles are the "Portfolios.") In its
role as investment advisor and investment manager, Dimensional possessed
both investment and voting power over 731,400 shares of Eagle Food Centers,
Inc. stock as of December 31, 2000. The Portfolios own all securities
reported in this statement, and Dimensional disclaims beneficial ownership
of such securities. The business office address of Dimensional Fund Advisors
Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.
(4) Mr. Kelly purchased 125,000 shares of Common Stock of the Company at the
time of the execution of his Employment Agreement. The beneficial ownership
includes options for 600,000 shares that are exercisable as of May 8, 2001.
(5) 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, LP in which Mr. Friedman has an economic interest.
(6) The beneficial ownership represents 20,515 shares that are owned by Mr.
Little plus the exercisable portion of 600,000 shares under a stock option
issued January 31, 2000. A total of 200,000 shares have vested as of May 8,
2001.
(7) The beneficial ownership represents 2,946 shares that are owned by Mr.
Stephens plus the exercisable portion
of 75,000 shares under a stock option issued May 8, 2000. A total of 25,000
shares have vested as of May 8, 2001.
(8) The beneficial ownership represents the exercisable portion of options on
100,000 shares issued to Mr. Plumley. A total of 23,750 shares have vested
as of May 8, 2001
(9) The beneficial ownership represents the exercisable portion of 50,000 shares
under a stock option issued to Mr. Jordan on May 8, 2000. A total of 20,000
shares have vested as of May 8, 2001.
(10) The profit sharing plan of Snyder, Schwarz, Park & Nelson P.C., the law
firm of which Mr. Snyder is a member, owns 1,000 shares of Common Stock.
OWNERSHIP OF PRINCIPAL SHAREHOLDERS
Odyssey Partners, LP, Beneficial Owners and Company Directors and Officers
currently hold the right to vote, or have the right to acquire through the
exercise of options, shares of Common Stock of the Company representing 47.70%
of shares that would be outstanding upon the exercise of such options.
STOCK ISSUED IN CONJUNCTION WITH THE COMPANY'S PLAN OF REORGANIZATION
The Company filed a voluntary petition under Chapter 11 of the Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware on February
29, 2000. Pursuant to the Company's Plan of Reorganization, 15% of the
fully-diluted common stock of the Company was issued to the holders of the
Senior Notes, of which 10% will be returned to the Company if the Company is
sold or the debt is retired prior to October 15, 2001. If the Company is sold or
the debt is retired after October 14, 2001 and prior to October 15, 2002, 5% of
the common stock will be returned to the Company. None of the common stock will
be returned to the Company if the Company is not sold or the debt retired prior
to October 15, 2002.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the directors of
the Company and executive officers, and persons who own more than ten percent of
a registered class of the equity securities of the Company, 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 knowledge of the Company, 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 three fiscal years ended February 3, 2001, all
Section 16(a) filing requirements applicable to its officers, directors, and
greater than ten-percent beneficial owners were in compliance except for the
following, which were inadvertently filed late: Mr. Jeffrey Little and Mr. Stan
Stephens each with one report disclosing one transaction each; Mr. Byron Magafas
and Mr. Frank Klun each with two reports disclosing one transaction each; and
Mr. S. Pactric Plumley with three reports each disclosing one transaction.
RATIFICATION OF THE
SELECTION OF AN INDEPENDENT AUDITOR
PROPOSAL 2
KPMG LLP, 666 Grand Avenue, Des Moines, Iowa, independent certified public
accountants, have performed an audit of the financial statements of the Company
for the fiscal year ended February 3, 2001. Services provided by KPMG LLP
included work related to the examination of the annual financial statements and
reviews of unaudited quarterly financial information.
The Board of Directors, upon recommendation of its Audit Committee, has
appointed KPMG LLP to audit the books and accounts of the Company for the fiscal
year ending February 2, 2002 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 from KPMG 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.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF KPMG LLP AS INDEPENDENT AUDITOR. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS SHAREOWNERS SPECIFY OTHERWISE IN THEIR
PROXIES.
PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO ACCOMPLISH A REVERSE STOCK SPLIT
PROPOSAL 3
The Board of Directors believes that it is in the best interests of the
Company to amend the Company's certificate of incorporation to accomplish a
reverse stock split which will result in each four outstanding shares of the
Company's common stock being automatically reclassified and changed into one
share of the Company's common stock. The proposal to approve a reverse stock
split is intended to assist the Company in maintaining its listing on the Nasdaq
market.
By letter dated November 13, 2000, the Nasdaq Stock Market, Inc. ("Nasdaq")
informed the Company that the Company had not maintained a minimum market value
of public float and a minimum bid price for 30 consecutive trading days as
required for continued listing on the Nasdaq National Market. Nasdaq staff had
determined that the Company's common stock would be subject to delisting from
quotation on the Nasdaq National Market at the opening of business on February
14, 2001. The Company filed a request for an appeal in connection with the
Nasdaq staff's decision to delist the Company's common stock. The Company's
request for an appeal of Nasdaq's decision has suspended the delisting process
pending resolution of that appeal. The Company has prepared a plan that is
intended to achieve compliance with the Nasdaq listing requirements and to
result in the listing of the Company's shares on the Nasdaq SmallCap Market. A
significant element of that plan is the proposed reverse stock split that is
intended to increase the minimum bid price for the Company's shares. The
continued listing of the Company's common stock on the Nasdaq SmallCap
Market is contingent upon the adoption of this proposal as well as on
the other Nasdaq listing requirements. The proposal will not increase or
decrease the amount of stated capital or paid-in surplus of the Company or
change the relative holdings of any shareholder, except that holders of
fractional share interests of less than one share that occur as a result of
the reclassification and change shall be paid in money by the Company the
value of their fractional shares.
If the proposal is approved, section FOURTH of the certificate of
incorporation will be amended to read as follows:
FOURTH: The total number of shares which the corporation shall
have authority to issue is four million six hundred thousand (4,600,000)
shares, consisting of four million five hundred thousand (4,500,000)
shares of common stock, of the par value of $.04 per share (hereinafter
called "Common Stock") and one hundred thousand (100,000) shares of
preferred stock, of the par value of $.0l per share (hereinafter called
"Preferred Stock"). All of the shares of Common Stock of the corporation
of the par value of $.01 issued and outstanding, or held as treasury
shares, immediately prior to the time this amendment becomes effective
shall be and are by this means automatically reclassified and changed
(without any further act) into shares of the par value of $.04, the number
of which shall equal the quotient derived from dividing the number of such
shares by 4. This amendment shall become effective without increasing or
decreasing the amount of stated capital or paid-in surplus of the
corporation, and shall constitute a 1 for 4 reverse stock split, provided
that no fractional shares of less than one share shall be issued. The
holders of fractional share interests of less than one share that occur as
a result of the foregoing reclassification and change shall be paid in
money by the corporation the value of their fractional shares.
The Board has unanimously adopted resolutions setting forth the proposed
amendment to the certificate of incorporation, declaring its advisability and
directing that the proposed amendment be submitted to the shareowners for their
approval at the annual meeting. If approved by the shareowners, the amendment
will
become effective upon filing of an appropriate certificate with the Secretary of
State of the State of Delaware.
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREOWNERS VOTE "FOR" THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREOWNERS
SPECIFY OTHERWISE IN THEIR PROXIES.
SHAREHOLDER PROPOSAL
PROPOSAL 4
Management has been advised that a shareholder intends to present the
following proposal at the annual meeting. The name, address and share ownership
of the proponent will be furnished to any person upon oral or written request to
Mr. S. Patric Plumley, Secretary, Eagle Food Centers, Inc., Route 67 and
Knoxville Road, Milan, Illinois 61264.
SHAREHOLDER PROPOSAL
The shareholders of Eagle Food Centers, Inc. urge the Board of Directors to
promptly place the Company up for sale to the highest bidder.
SUPPORTING STATEMENT
The Annual Reports of Eagle Food Centers, Inc., over the past several years
clearly depict a company that is struggling to turn a profit. Poor profit
performance also means shareholders are failing to get the best value for their
equity investment. In addition, there is no evidence that the bleak picture for
shareholders will be changing any time soon. Under such circumstances, offering
the Company for sale will provide a mechanism for maximizing shareholder value
by allowing the market to set a true value for the Company. Moreover, the
Company will be able to take advantage of and participate in the continuing
consolidation in the retail food industry rather than be left behind.
The Company has generously compensated management, both during the term of
employment as well as after termination. The time has come to protect
shareholder value by selling the Company now, thereby preserving the remaining
equity in Eagle Food Centers. It is the purpose of this proposal to bring about
a sale to maximize shareholder value.
WE URGE YOU TO VOTE FOR THIS PROPOSAL
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREOWNERS VOTE "AGAINST" THIS
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
SHAREOWNERS SPECIFY OTHERWISE IN THEIR PROXIES.
2002 SHAREHOLDER PROPOSALS
Any shareholder who desires to present a proposal qualified for inclusion in
the proxy materials of the Company for the 2002 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 25, 2002.
ADDITIONAL INFORMATION
Included with this Proxy Statement is the Annual Report of the Company
indicating the general scope and nature of the business of the Company together
with a summary of the activities and financial results of the Company for fiscal
2000. Shareholders may upon written request and without charge, obtain a copy of
the Securities and Exchange Commission Annual Report on Form 10-K of the
Company. Exhibits to the Form 10-K are also available. The Company may 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.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters that 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 21, 2001
Exhibit A
EAGLE FOOD CENTERS, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee of the Board of Directors assists the Board in fulfilling
its responsibility for oversight of the quality of the accounting, auditing and
reporting practices of the Corporation and other such duties as directed by the
Board. The Committee is expected to maintain free and open communication with
the independent accountants, the internal auditors and the management of the
Corporation. In discharging this oversight role, the Committee is empowered to
investigate any matter brought to its attention, with full power to retain
outside counsel or other experts for this purpose.
The Board of Directors shall appoint one member of the Audit Committee as
chairperson. He or she shall be responsible for leadership of the Committee,
including preparing the agenda, presiding over the meetings, making Committee
assignments and reporting to the Board of Directors. The chairperson will also
maintain regular liaison with the Chief Executive Officer, Chief Financial
Officer, the lead independent audit partner and the Director of Internal Audit.
MEMBERSHIP
The membership of the Committee shall consist of at least three directors who
are generally knowledgeable in financial and auditing matters, including at
least one member with accounting or related financial management expertise. Each
member shall be free of any relationship that, in the opinion of the Board,
would interfere with his or her individual exercise of independent judgment, and
shall meet the director independence requirements for serving on audit
committees as set forth in the corporate governance standards of Nasdaq,
including provisions for one non-independent Audit Committee member with Board
approval and disclosure in the annual proxy statement.
RESPONSIBILITIES
The Audit Committee's primary responsibilities include:
o Recommending to the Board the independent accountant to be selected or
retained to audit the financial statements of the Corporation. In so doing,
the Committee will request from the auditor a written affirmation that the
auditor is in fact independent, discuss with the auditor any relationships
that may impact the auditor's independence, and recommend to the Board any
actions necessary to oversee the auditor's independence.
o Overseeing the independent auditor relationship by discussing with the
auditor the nature and rigor of the audit process, receiving and reviewing
audit reports, and providing the auditor full access to the Committee to
report on any and all appropriate matters.
o Providing guidance and oversight to the internal audit activities of the
Corporation including reviewing the organization, plans and results of such
activities.
o Reviewing the audited financial statements and discussing them with
management and the independent auditor. These discussions shall include
consideration of the quality of the Company's accounting principles as
applied in its financial reporting, including review of estimates, reserves
and accruals, review of judgmental areas, review of audit adjustments
whether or not recorded and such other inquiries as may be appropriate.
Based on the review, the Committee shall make its recommendation to the
Board as to the inclusion of the Company's audited financial statements in
the Company's annual report on Form 10-K.
o Reviewing with management and the independent auditor the quarterly
financial information prior to the Company's filing of Form 10-Q. This
review may be performed by the Committee, its chairperson, or a member of
the Committee designated by the chairperson.
o Discussing with management, the internal auditors and the external auditors
the quality and adequacy of the Company's internal controls.
o Reporting Audit Committee activities to the full Board and issuing annually
a report to be included in the proxy statement for submission to the
shareholders.
o The Audit Committee will perform other functions consistent with this
Charter, the Corporation's by-laws and governing law as the Committee or the
Board deems necessary or appropriate.
This charter shall be reviewed, updated and approved annually by the Board of
Directors.
- --------------------------------------------------------------------------------
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 27, 2001
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
4, 2001, at the Annual Shareholders Meeting of Eagle Food Centers, Inc. to be
held on June 27, 2001 at 9:00 a.m., Central Daylight Time, at the Milan
Community Center, Rt. 67 & 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 21, 2001.
IF NO DIRECTION AS TO THE MANNER OF VOTING THE PROXY IS MADE, THE PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS, FOR PROPOSAL 2, FOR PROPOSAL 3 AND AGAINST
PROPOSAL 4 AS INDICATED ON THE REVERSE SIDE HEREOF.
Election of Directors:
Nominees: Robert J. Kelly, Steven M. Friedman, Peter B. Foreman, Jeffrey L. Little
Alain M. Oberrotman, Jerry I. Reitman, William J. Snyder, S. Patric Plumley
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
[LOGO EAGLE COUNTRY MARKET]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[X] Please mark your [
votes as in this
example.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH BELOW. IF
NO SELECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD OF
DIRECTORS, FOR PROPOSAL 2, FOR PROPOSAL 3 AND AGAINST PROPOSAL 4.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, FOR PROPOSAL 2, FOR
PROPOSAL 3 AND AGAINST PROPOSAL 4.
- --------------------------------------------------------------------------------
FOR WITHHELD as to ALL Nominees
1. Election of [ ] [ ]
Directors.
(See reverse)
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of the selection of KPMG LLP as [ ] [ ] [ ]
Independent Auditors.
3. Amendment to Certificate of Incorporation to [ ] [ ] [ ]
accomplish reverse stock split.
4. Shareholder proposal to urge sale of the [ ] [ ] [ ]
Company.
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
- --------------------------------------------------------------------------------