0000030908-95-000004.txt : 19950914 0000030908-95-000004.hdr.sgml : 19950914 ACCESSION NUMBER: 0000030908-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950729 FILED AS OF DATE: 19950912 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE FOOD CENTERS INC CENTRAL INDEX KEY: 0000030908 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 363548019 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17871 FILM NUMBER: 95572861 BUSINESS ADDRESS: STREET 1: RTE 67 KNOXVILLE RD CITY: MILAN STATE: IL ZIP: 61264 BUSINESS PHONE: 3097877730 MAIL ADDRESS: STREET 1: PO BOX 6700 CITY: ROCK ISLAND STATE: IL ZIP: 61204-6700 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 29, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission File Number 0-17871 EAGLE FOOD CENT ERS, INC. (Exact name of registrant as specified in the charter) Delaware 36-3548019 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Rt. 67 & Knoxville Rd., Milan, Illinois 61264 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (309) 787-7730 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of the Registrant's Common Stock, par value one cent ($0.01) per share, outstanding at August 30, 1995 was 11,176,994. Page 1 of 10 pages PART I - FINANCIAL INFORMATION Item 1: Financial Statements EAGLE FOOD CENTERS, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (unaudited)
Quarter Ended Two Quarters End July 29, 1995 July 30, 1994 July 29, 1995 July 30, 1994 Sales. . . . . . . . . . . . . . . . . $ 249,045 $ 252,222 $ 494,575 $ 502,319 Cost of Goods Sold . . . . . . . . . . 186,945 189,917 371,050 377,492 Gross Margin. . . . . . . . . . . . 62,100 62,305 123,525 124,827 Operating Expenses: Selling, General & Administrative . 56,946 56,375 112,885 109,962 Voluntary Severance Program . . . . 0 6,917 0 6,917 Depreciation and Amortization . . . 6,125 5,847 12,365 11,671 Operating Income (Loss). . . . . (971) (6,834) (1,725) (3,723) Interest Expense . . . . . . . . . . . 3,940 3,572 7,906 7,066 Earnings (Loss) Before Income Tax (Benefit) and Extraordinary Charge. (4,911) (10,406) (9,631) (10,789) Income Tax (Benefit) . . . . . . . . . (245) (4,078) (482) (4,100) Earnings (Loss) Before Extraordinary Charge. . . . . . . . . . . . . . . (4,666) (6,328) (9,149) (6,689) Extraordinary Charge . . . . . . . . . 625 0 625 0 Net Earnings (Loss). . . . . . . . . . $ (5,291) $ (6,328) $ (9,774) $ (6,689) Earnings (Loss) per Share: Before Extraordinary Charge . . . . $ (0.42) $ (0.58) $ (0.82) $ (0.61) Extraordinary Charge. . . . . . . . (0.06) 0 (0.06) 0 Net Earnings (Loss) . . . . . . . . $ (0.48) $ (0.58) $ (0.88) $ (0.61) Weighted Average Common Shares Outstanding 11,147,000 11,051,994 11,099,000 11,051,994
See notes to consolidated financial statements. EAGLE FOOD CENTERS, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) ASSETS
July 29, January 28, 1995 1995 (Unaudited) (Audited) Current assets: Cash and cash equivalents. . . . $ 3,064 $ 4,096 Restricted assets - marketable securities, at market . . . . 7,049 5,239 Accounts receivable. . . . . . . 10,412 11,035 Income taxes receivable. . . . . 2,042 7,213 Inventories. . . . . . . . . . . 75,980 83,939 Prepaid expenses and other . . . 3,718 2,663 Total current assets. . . . . 102,265 114,185 Property and equipment (net) . . . 155,238 167,749 Other assets: Deferred debt issuance costs . . 2,643 2,960 Excess of cost over fair value of net assets acquired. . 2,609 2,650 Property held for sale/leaseback 20,963 20,710 Other. . . . . . . . . . . . . . 3,500 3,230 Total other assets. . . . . . 29,715 29,550 Total assets. . . . . . . . . $287,218 $311,484
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . $ 40,784 $ 44,738 Payroll and employee benefits. . 14,897 14,678 Accrued liabilities. . . . . . . 13,337 11,982 Closed facilities liability. . . 19,207 8,203 Accrued taxes. . . . . . . . . . 8,040 8,117 Bank revolving credit loan . . . 15,908 22,000 Current portion of long-term debt . . . . . . . . 3,760 3,667 Total current liabilities . . 115,933 113,385 Long-term debt: Senior Notes . . . . . . . . . . 100,000 100,000 Capital lease obligations. . . . 16,310 18,216 Total long-term debt. . . . . 116,310 118,216 Other liabilities: Reserve for closed facilities. . 12,364 27,082 Other deferred liabilities . . . 9,578 10,316 Total other liabilities . . . 21,942 37,398 Shareholders' equity: Preferred stock, $.01 par value, 100,000 shares authorized . . -- -- Common stock, $.01 par value, 18,000,000 shares authorized, 11,500,000 shares issued . . . 115 115 Capital in excess of par value . 53,541 53,541 Common stock in treasury, at cost, 448,006 shares. . . . (2,850) (2,850) Other. . . . . . . . . . . . . . (65) (387) Accumulated (deficit) . . . . . (17,708) (7,934) Total shareholders' equity. . 33,033 42,485 Total liabilities and shareholders' equity. . . . $287,218 $311,484
See notes to consolidated financial statements. EAGLE FOOD CENTERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)
Two Quarters Ended July 29, 1995 July 30, 1994 Cash flows from operating activities: Net earnings (loss) . . . . . . . . . . . . . . $ (9,774) $ (6,689) Adjustments to reconcile net earnings (loss) to cash provided from operating activities: Extraordinary charge before income tax effect . 658 0 Depreciation and amortization . . . . . . . . . 12,365 11,671 LIFO charge . . . . . . . . . . . . . . . . . . 500 250 Deferred charges and credits. . . . . . . . . . 1,665 2,774 (Gain) loss on disposal of assets . . . . . . . 506 174 Changes in assets and liabilities: Receivables and other assets. . . . . . . . . . 4,124 (2,386) Inventories . . . . . . . . . . . . . . . . . . 7,459 4,336 Accounts payable. . . . . . . . . . . . . . . . (3,954) (4,557) Accrued and other liabilities . . . . . . . . . 758 1,724 Reserve for closed facilities . . . . . . . . . (4,690) (3,793) Net cash provided by operating activities . . 9,617 3,504 Cash flows from investing activities: Additions to property and equipment . . . . . . (1,198) (8,378) Additions to property held for sale/leaseback . (253) (864) Purchases of marketable securities. . . . . . . (1,487) 0 Cash proceeds from dispositions of property and equipment . . . . . . . . . . . 879 648 Net cash used in investing activities . . (2,059) (8,594) Cash flows from financing activities: Retirement of debt. . . . . . . . . . . . . . . 0 (30) Net revolving credit borrowing (repayment). . . (6,092) 5,000 Principal payments of capital lease obligations . . . . . . . . . . . . . . (1,814) (1,347) Deferred financing costs. . . . . . . . . . . . (684) (175) Net cash provided (used) by financing activities . . . . . . . . . . . . . . . (8,590) 3,448 (Decrease) in cash and cash equivalents . . . . (1,032) (1,642) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 4,096 8,056 Cash and cash equivalents at end of period. . . $ 3,064 $ 6,414 Supplemental disclosures of cash flow information: Cash paid for interest . . . . . . . . . . . $ 8,611 $ 6,713 Cash paid for income taxes . . . . . . . . . $ (5,690) $ (1,360) Noncash investing and financing activities Capital lease additions. . . . . . . . . . . $ 0 $ 2,076 Unrealized (loss) gain on securities . . . . $ 323 $ 0
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Accounting Policies The accompanying unaudited financial statements have been prepared in accordance with the summary of significant accounting policies set forth in the notes to the audited financial statements contained in the Company's Form 10-K filed with the Securities and Exchange Commission on April 28, 1995. In the opinion of management, the accompanying unaudited financial statements reflect all adjustments necessary for a fair statement of the results of operations and financial position for the interim periods presented. Operating results for the 26 weeks ended July 29, 1995 are not necessarily indicative of the results that may be expected for the fiscal year ending February 3, 1996. Legal Proceedings The legal actions between the Company and National NLP, Inc. have been terminated. The court granted judgement in favor of Eagle on all issues. The countersuit filed by NLP claiming there was a contract was dismissed. Extraordinary Charge The Company completed an agreement with Congress Financial Corporation (Central) for a $40.0 million Revolving Credit Facility (subsequently expanded to $50.0 million). The early termination of the prior Revolving Credit Agreement resulted in an extraordinary charge of $625,000 (net of tax). This charge represents the unamortized deferred charges related to the replaced Revolving Credit Agreement. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Sales for the Company's second fiscal quarter ended July 29, 1995 were $249.0 million, a decrease of $3.2 million or 1.3% from the second quarter of 1994. Same store sales for the quarter increased 1.9%. For the two quarters ended July 29, 1995 sales were $494.6 million, a decrease of $7.7 million or 1.5% from the first two quarters of 1994. Same store sales for the two quarters increased 0.6% compared to 1994. The Company is operating seven fewer stores as of the end of the second quarter of 1995 compared to the end of the second quarter of 1994. Gross margin was 24.94% of sales for the quarter ended July 29, 1995 compared to 24.70% of sales in the comparable quarter of 1994. Gross margin improvement resulted from more effective promotions, better buying practices and distribution expense reductions. For the two quarters ended July 29, 1995 gross margin was 24.98% of sales compared to 24.85% of sales for the same time period in 1994. Selling, general and administrative expenses were 22.87% of sales for the quarter ended July 29, 1995 compared to 22.35% of sales in the comparable quarter of 1994. For the two quarters ended July 29, 1995, selling, general and administrative expenses were 22.83% of sales versus 21.89% of sales for the same period in 1994. The year-to-year increase primarily reflects increases in store employee costs due to union wage and benefit increases, increases in supply costs and $1.2 million of non-recurring charges related to a lease termination and severance payments. Depreciation and amortization expenses increased to $6.1 million or 2.46% of sales for the quarter ended July 29, 1995 compared to $5.8 million or 2.32% of sales in the same quarter in 1994. For the two quarters ended July 29, 1995, depreciation and amortization expenses increased to $12.4 million or 2.5% of sales compared to $11.7 million or 2.32% of sales for the same period in 1994. The higher depreciation expenses are primarily related to two new stores that were opened since the second quarter of 1994 and a new capital lease for store computer equipment. Net interest expense in the quarter ended July 29, 1995 increased to $3.9 million or 1.58% of sales compared to $3.6 million or 1.42% of sales in the comparable quarter of 1994. The increase in interest expense was due to an increase in short term borrowings under the Revolving Credit Agreement. Net interest expense for the two quarters ended July 29, 1995 was $7.9 million or 1.60% of sales compared to $7.1 million or 1.41% of sales in the comparable 1994 time period. There were $15.9 million of borrowings outstanding against the Revolving Credit Agreement as of July 29, 1995. The net loss for the second quarter ended July 29, 1995 was $5.3 million or $0.48 per share compared to a net loss of $6.3 million or $0.58 per share for the comparable 1994 period. The 1995 net loss includes an extraordinary charge of $625,000 related to the refinancing of the revolving credit facility and $1.2 million of non-recurring charges related to a lease termination and severance payments. The 1994 net loss includes a $4.3 million after tax charge for a voluntary severance program. Excluding the extraordinary and non-recurring charges in 1995 and the severance program costs in 1994, the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter were $6.3 million in 1995 compared to $5.9 million in the comparable quarter of 1994. The net loss for the two quarters ended July 29, 1995 was $9.8 million or $0.88 per share compared to a loss of $6.7 million or $0.61 per share in the comparable 1994 period. Excluding the extraordinary and non-recurring charges and the voluntary severance expense in the respective years, results of operations for the first two quarters would have been a loss of $0.72 per share in 1995 compared to a loss of $0.22 per share in 1994. Liquidity and Capital Resources Cash provided by operating activities totaled $9.6 million for the two quarters ended July 29, 1995 compared to cash provided of $3.5 million in the comparable two quarters of 1994. Reductions in inventory and accounts receivable and other assets provided $7.5 million and $4.1 million, respectively, in cash for the 1995 period. Capital expenditures for the two quarters ended July 29, 1995 totaled $1.2 million compared to $8.4 million in the first two quarters of 1994. No stores were opened in the second quarter and two stores were closed. Costs associated with the closings are covered by the store closing reserve. The Company expects to spend approximately $6.0 million for capital expenditures in fiscal 1995, unless business conditions change. Working capital at July 29, 1995 was negative $13.7 million and the current ratio was .88 to 1, compared to $32.6 million and 1.30 to 1 at July 30, 1994 and $800,000 or 1.01 to 1 at January 28, 1995. There were $15.9 million in borrowings outstanding against the Revolving Credit Agreement as of July 29, 1995. The Company has reclassified $11.0 million to current liabilities in connection with its intentions to buy out of the Westville lease obligation within the next twelve months. Before this reclassification, working capital at July 29, 1995 was negative $2.7 million and the current ratio would have been approxiametly 1 to 1. Subsequent Events The Company expects to complete a buyout of its lease obligation on the closed warehouse location in Westville, Indiana. In conjunction with this transaction, the Company has incurred $11.2 million of letters of credit to secure the Company's proposed settlement ot the lease obligation. The Company expects that all costs associated with the Westville lease termination will be covered by the reserve previously established. The Company has expanded its revolving credit facility from $40.0 to $50.0 million under the same terms and conditions to accommodate the issuance of these letters of credit. The credit facility requires that availibility is determined using a borrowing base calculation on eligible inventory. The Company has sold and leased back one store in a transaction which closed since the end of the second quarter realizing proceeds of $2.4 million. PART II - OTHER INFORMATION Item 1: Legal Proceedings The legal actions between the Company and National NLP, Inc. have been terminated. The court granted judgement in favor of Eagle on all issues. The countersuit filed by NLP claiming there was a contract was dismissed. Item 4: Submission of Matters to a Vote of Security Holders At the Company's 1995 Annual Meeting of Shareholders on June 21, 1995, the shareholders elected the following persons to its Board of Directors for a one year term: Martin J. Rabinowitz Peter B. Foreman Robert J. Kelly Michael J. Knilans Pasquale V. Petitti Alain M. Oberrotman Herbert T. Dotterer Marc C. Particelli Steven M. Friedman William J. Snyder In the matter of the election of directors, 9,847,843 votes were cast in favor of each director, no votes were cast against, and holders of 616,411 shares abstained or did not vote. In the matter of ratification of the 1995 Stock Incentive Plan, 7,860,283 votes were cast in favor, 950,473 votes against, and 1,653,498 shares abstained or did not vote. In the matter of ratification of the appointment of Deloitte & Touche, LLP as independent auditors, 10,417,954 votes were cast in favor of approval, 34,197 votes were cast against, and holders of 12,103 shares abstained or did not vote. All votes were in the majority, and thus the directors were declared elected, the 1995 Stock Incentive Plan declared ratified, and the appointment of auditor proposal declared approved. Item 6: Exhibits and Reports on Form 8 K A: Exhibits SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized: EAGLE FOOD CENTERS, INC. Dated: September 8, 1995 /s/ Robert J. Kelly Robert J. Kelly President and Chief Executive Officer Dated: September 8, 1995 /s/ Herbert T. Dotterer Herbert T. Dotterer Sr. Vice President - Finance and Chief Financial Officer Exhibit Number Description 3.1-- Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Registration Statement on Form S-1 No. 33-29404 and incorporated herein by reference). 3.2-- By-laws of the Company (filed as Exhibit 3.2 to the Registration Statement on Form S-1 No. 33-29404 and incorporated herein by reference). 4.1-- Form of Note (filed as Exhibit 4.3 to the Registration Statement on Form S-1 No. 33-59454 and incorporated herein by reference). 4.2-- Form of Indenture, dated as of April 26, 1993, between the Company and First Trust National Association, as trustee (filed as Exhibit 4.4 to the Registration Statement on Form S-1 No. 33-59454 and incorporated herein by reference). 10.1-- Transaction Agreement, dated as of October 9, 1987, between EFC and Lucky Stores, Inc. (filed as Exhibit 10.8 to the Registration Statement on Form S-1 No. 33-20450 and incorporated herein by reference). 10.2-- Assignment and Assumption Agreement, dated November 10, 1987, among EFC, Lucky Stores, Inc. and Pasquale V. Petitti regarding the Deferred Compensation Agreement (filed as Exhibit 10.11 of the Registration Statement on Form S-1 No. 33-20450 and incorporated herein by reference). 10.3-- Trademark License Agreement, dated November 10, 1987, between Lucky Stores, Inc. and EFC (filed as Exhibit 10.19 to the Registration Statement on Form S-1 No. 33-20450 and incorporated herein by reference). 10.4-- Letter Agreement, dated June 10, 1988, between the Company's predecessor and Lucky Stores, Inc. amending the Trademark License Agreement (filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended January 28, 1989 (the "1988 10-K") and incorporated herein by reference). 10.5-- Management Information Services Agreement, dated November 10, 1987, between Lucky Stores, Inc. and the Company's predecessor (filed as Exhibit 10.20 to the Registration Statement on Form S-1 No. 33-20450 and incorporated herein by reference). 10.6-- Letter Agreement, dated June 10, 1988, between the Company's predecessor and Lucky Stores, Inc. Stores, Inc. amending the Management Information Services Agreement (filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended January 28, 1989 and incorporated herein by reference). 10.7-- Non-Competition Agreement, dated November 10, 1987, between the Company's predecessor and Lucky Stores, Inc. (filed as Exhibit 10.21 to the Registration Statement on Form S-1 No. 33-20450 and incorporated herein by reference). 10.8-- Credit Agreement, dated as of April 26, 1993, among the Company, as borrower, the lenders party thereto and Caisse Nationale de Credit Agricole, Chicago Branch, and the First National Bank of Chicago as co-agents; as amended by First Amendment to Credit Agreement dated as of October 15, 1993, a Second Amendment to Credit Agreement and Waiver dated as of January 28, 1994, and a Third Amendment to Credit Agreement dated April 29, 1994. 10.9-- Letter Agreement, dated April 28, 1988, among American Stores Company, the Company's predecessor and Odyssey Partners (filed as Exhibit 10.29 to the Registration Statement on Form S-1 No. 33-20450 and incorporated herein by reference). 10.10-- Eagle Food Centers, Inc. Stock Incentive Plan, adopted in June 1990 (filed as Exhibit 19 to the Company's Annual Report on Form 10-K for the year ended February 1, 1992 and incorporated herein by reference). 10.11-- Agreement, dated as of February 8, 1993, by and between the Company and Oakridge Properties, Ltd. (filed as Exhibit 10.17 to the Registration Statement on Form S-1 No. 33-59454 and incorporated herein by reference). 10.12-- Form of Irrevocable Trust Agreement, to be dated as of April 26, 1993, among the Company, Eagle Capital Corporation II and Shawmut Bank Connecticut, National Association, as trustee (filed as Exhibit 10.18 to the Registration Statement on Form S-1 No. 33-59454 and incorporated herein by reference). 10.13-- Performance Equity Plan of the Company as amended March 12, 1992. (Filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended January 30, 1993 and incorporated herein by reference.) 10.14-- Fourth Amendment to the Credit Agreement and waiver dated September 7, 1994. Fifth Amendment to the Credit Agreement and waiver dated December 9, 1994. Sixth Amendment to the Credit Agreement dated January 27, 1995. 10.15-- Seventh Amendment to the Credit Agreement and waiver dated April 24, 1995. 10.16-- Loan and Security Agreement, dated as of May 22, 1995, among the Company, as borrower, and the lender party thereto, Congress Financial Corporation (Central). 10.17*-- First Amendment to the Loan and Security Agreement dated August 21, 1995. 10.18*-- 1995 Stock Incentive Plan as approved on June 21, 1995. 10.19*-- Employment agreement dated May 10, 1995 between the Company and Robert J. Kelly, its President and C.E.O. 12.1-- Computation of Ratio of Earnings to Fixed Charges (filed as Exhibit 12.1 to the Registration Statement on Form S-1 No. 33-59454 and incorporated herein by reference). 22.-- Subsidiaries of the Registrant. 27*-- Financial Data Schedule (for SEC use only). *Filed herewith.
EX-10.17 2 Exhibit 10.17 AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT This AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT ("Amend- ment") dated as of August , 1995 by and between Congress Financial Corporation (Central) ("Lender") and Eagle Food Centers, Inc. ("Borrower"). R E C I T A L S: WHEREAS, Lender and Borrower are parties to that certain Loan and Security Agreement dated as of May 25, 1995; as the same has been amended on or prior to the date hereof, (the "Loan Agreement"; capitalized terms used and not defined herein shall have the meanings assigned to them in the Loan Agreement as amended hereby); WHEREAS, the Borrower has requested that Lender consent to an amendment to the Loan Agreement as more fully described herein; and WHEREAS, Lender has granted its consent to such amendment upon the terms and conditions contained herein. NOW, THEREFORE, in consideration of the premises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Amendment. Immediately upon the satisfaction of each of the conditions precedent set forth in Section 2 of this Amendment, Section 1.35 of the Loan Agreement is amended by replacing the dollar amount which appears therein with the dollar amount "$50,000,000." Section 2. Conditions to Effectiveness of Amendment. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent: 2.1 Documents. (a) Amendment. The Lender shall have received a duly executed counterpart of this Amendment from Borrower. (b) Participation Agreement Amendments. Each Person which has acquired a participation interest in any or all of Lender's rights under the Loan Agreement shall have executed and delivered to Lender an amendment, in form and substance satisfactory to Lender, to the applicable participation agreement. 2.2 Certified Resolutions, etc. Lender shall have received a certificate, in form and substance satisfactory to the Lender, of the secretary or assistant secretary of the Borrower dated the effective date of this Amendment (the "Effective Date"), certifying (i) the resolutions of its Board of Directors approving and authorizing the execution, delivery and performance by it of this Amendment and the continued effectiveness thereof, (ii) that there have been no changes in its certificate of incorporation or by-laws since May 25, 1995, or if there have been changes in its certificate of incorporation or by-laws since May 25, 1995, certifying its certificate of incorporation and/or by-laws, as the case may be, as in effect on the Effective Date and (iii) specimen signatures of its officers authorized to sign this Amendment. 2.3 Consents, Licenses, Approval, etc. All consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by the Borrower of this Amendment or the Loan Agreement, as amended by this Amendment, or the validity or enforceability thereof, or in connection with any of the transactions effected pursuant to this Amendment or the Loan Agreement, as amended by this Amendment, shall be in full force and effect. 2.4 No Injunction. No law or regulation shall have been adopted, no order, judgment or decree of any governmental authority shall have been issued, and no litigation shall be pending or threatened, which in the reasonable judgment of Lender would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the execution, delivery or performance by the Borrower of this Amendment or the Loan Agreement, as amended by this Amendment. 2.5 Opinion. Lender shall have received a favorable legal opinion, dated the Effective Date, of counsel to the Borrower in form and substance satisfactory to Lender. Section 3. Representations and Warranties. In order to induce Lender to enter into this Amendment, Borrower represents and warrants to Lender, upon the effectiveness of this Amendment, which representations and warranties shall survive the execution and delivery of this Amendment, that: 3.1 No Default; etc. No Event of Default and no event or condition which, merely with notice or the passage of time or both, would constitute an Event of Default, has occurred and is continuing after giving effect to this Amendment or would result from the execution or delivery of this Amendment or the consummation of the transactions contemplated hereby. 3.2 Corporate Power and Authority: Authorization. Borrower has the corporate power and authority to execute and deliver this Amendment and to carry out the terms and provisions of the Loan Agreement, as amended by this Amendment, and the execution and delivery by Borrower of this Amendment and the Loan Agreement, as amended by this Amendment, and the performance by the Borrower of its obligations hereunder and thereunder have been duly authorized by all requisite corporate action by Borrower. 3.3 Execution and Delivery. Borrower has duly executed and delivered this Amendment. 3.4 Enforceability. This Amendment and the Loan Agreement, as amended by this Amendment, constitute the legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' right generally, and by general principles of equity. 3.5 Representations and Warranties. All of the representations and warranties contained in the Loan Agreement and in the other Financing Agreements (other than those which speak expressly only as of a different date) are true and correct as of the date hereof after giving effect to this Amendment and the transactions contemplated hereby. Section 4. Payment of Amendment Fees and Expenses. Upon the effectiveness of this Amendment, Borrower shall pay Lender a fee of $100,000 in compensation for the increase in the commitment, which fee shall be fully earned at such time. Lender shall charge the amount thereof together with any costs and expenses incurred in connection with this Amendment directly to the loan account(s) of the Borrower as contemplated by Sections 6.4 and 9.17 of the Loan Agreement. Section 5. Miscellaneous. 5.1 Effect; Ratification. The amendment set forth herein is effective solely for the purposes set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of the Loan Agreement or of any other Financing Agreement or (ii) prejudice any right or rights that Lender may now have or may have in the future under or in connection with the Loan Agreement or any other Financing Agreement. Each reference in the Loan Agreement to "this Agreement", "herein", "hereof" and words of like import and each reference in the other Financing Agreements to the "Loan Agreement" shall mean the Loan Agreement as amended hereby. This Amendment shall be construed in connection with and as part of the Loan Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Agreement and each other Financing Agreement, except as herein amended or waived, are hereby ratified and confirmed and shall remain in full force and effect. 5.2 Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original but all together one and the same instrument. 5.3 GOVERNING LAW. This Amendment shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of Illinois. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By Title: EAGLE FOOD CENTERS, INC. By Title: EX-10.18 3 Exhibit 10.18 EAGLE FOOD CENTERS, INC. 1995 STOCK INCENTIVE PLAN Effective Date: June 21, 1995 1. Purpose. The purpose of the Plan is to provide additional incentive to those officers, employees, advisors, consultants and nonemployee members of the Board of Directors of the Company and its Subsidiaries whose substantial contributions are essential to the continued growth and success of the Company's business in order to strengthen their commitment to the Company and its Subsidiaries, to motivate such officers and employees to faithfully and diligently perform their assigned responsibilities and to attract and retain competent and dedicated individuals whose efforts will result in the long-term growth and profitability of the Company. An additional purpose of the Plan is to build a proprietary interest among the Company's Non-Employee Directors and thereby secure for the Company s stockholders the benefits associated with common stock ownership by those who will oversee the Company's future growth and success. To accomplish such purposes, the Plan provides that the Company may grant Incentive Stock Options, Nonqualified Stock Options, Non-Employee Director Options, Restricted Stock, Stock Bonuses or Stock Appreciation Rights. The provisions of the Plan are intended to satisfy the requirements of Section 16(b) of the Exchange Act. 2. Definitions. For purposes of this Plan: (a) "Advisor" or "Consultant" means an advisor or consultant who is an independent contractor with respect to the Company, and who provides bona fide services (other than in connection with the offer or sale of securities in a capital raising transaction) to the executive officers or Board of Directors with regarding to major functions, positions or operations of the Company's business; who is not an employee, officer, director or holder of more than 10% of the outstanding voting securities of the Company; and whose services the Committee determines is of vital importance to the overall success of the Company. (b) Agreement means the written agreement evidencing the grant of an Award and setting forth the terms and conditions thereof. (c) Award means, individually or collectively, a grant under this Plan of Options, Stock Appreciation Rights, Restricted Stock or Stock Bonuses. (d) Board means the Board of Directors of the Company. (e) Change in Capitalization means any increase, reduction, or change or exchange of Shares for a different number or kind of shares or other securities of the Company by reason of a reclassification, recapitalization, merger, consolidation, reorganization, issuance of warrants or rights, stock dividend, stock split or reverse stock split, combination or exchange of Shares, repurchase of Shares, change in corporate structure or otherwise. (f) Change in Control shall be deemed to have occurred if the conditions set forth in any one or more of the following paragraphs shall have been satisfied: (i) any person (as defined in Sections 13(d) and 14(d) of the Exchange Act) (other than Odyssey Partners, L.P. or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of Shares of the Company), is or becomes the Beneficial Owners, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company s then outstanding securities; or (ii) the stockholders of the Company approve (a) a plan of complete liquidation of the Company; or (b) an agreement for the sale or disposition of all or substantially all the Company s assets; or (c) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least 50% of the combined voting securities of the Company (or such surviving entity) outstanding immediately after such merger or consolidation; or (iii) the Board of Directors agrees by a two-third (2/3) vote, that a Change in Control of the Company has occurred, or is about to occur and, within six (6) months, actually does occur. However, in no event shall a Change in Control be deemed to have occurred, with respect to a Participant, if that Participant is a material equity participant of a purchasing group which consummates the Change in Control transaction. A Participant shall be deemed a material equity participant for purposes of the preceding sentence if the Participant is an equity participant or has agreed to become an equity participant in the purchasing company or group (except for (i) passive ownership of less than 3% of the Shares of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not deemed to be significant, as determined prior to the Change in Control by a majority of the disinterested Directors). (g) Code means the Internal Revenue Code of 1986, as amended. (h) Committee means a committee appointed by the Board to administer the Plan and to perform the functions set forth herein. Unless otherwise determined by the Board, the Committee shall be the Compensation Committee of the Board. (i) Company means Eagle Food Centers, Inc., an Iowa corporation, or any successor thereto. (j) Disability means the inability, due to illness or injury, to engage in any gainful occupation for which the individual is suited by education, training or experience, which condition continues for at least six (6) months. (k) Eligible Employee means any officer, employee, advisor or consultant, of the Company or a Subsidiary or Parent of the Company designated by the Committee as eligible to receive Awards subject to the conditions set forth herein. (l) Exchange Act means the Securities Exchange Act of 1934, as amended. (m) "Executive Officer" shall mean an officer of the Company named by the Board of Directors as an executive officer for purposes of required reporting under Section 16 of the Exchange Act. (n) Fair Market Value means the fair market value of the Shares as determined by the Committee in its sole discretion; provided, however, that (A) if the Shares are the admitted to trading on a national securities exchange, the Fair Market Value on any date shall be the last sale price reported for the Shares on such exchange on such date or on the last date preceding such date on which a sale was reported, (B) if the Shares are admitted to quotation on the National Association of Securities Dealers Automated Quotation System ( NASDAQ ) or other comparable quotation system and have been designated as a National Market System ( NMS ) security, the Fair Market Value on any date shall be the last sale price reported for the Shares on such system on such date or on the last day preceding such date on which a sale was reported or (C) if the Shares are admitted to quotation on NASDAQ and have not been designated an NMS security, or the Shares are traded in the non-NASDAQ over the counter market, the Fair Market Value on any date shall be the average of the highest bid and lowest asked prices of the shares on such system or market on such date. (o) Incentive Stock Option means an Option within the meaning of Section 422 of the Code. (p) Non-Employee Director means a member of the Board who is not an employee of the Company or a Subsidiary. (q) Non-Employee Director Option means an Option granted under Section 11 hereof. (r) Nonqualified Stock Option means an Option, including a Non-Employee Director Option, that is not an Incentive Stock Option. (s) Option means an Incentive Stock Option, a Nonqualified Stock Option, or either or both of them, as the context requires. (t) Participant means a person to whom an Award has been granted under the Plan. (u) Parent means any corporation in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock of one of the other corporations in such chain. (v) "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock is restricted in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and is subject to a substantial risk of forfeiture, as provided in Section 10 below. (w) Plan means the Eagle Food Centers, Inc. 1995 Stock Incentive Plan, as amended from time to time. (x) "Restricted Stock" means a Stock Award granted to a Participant pursuant to Section 10 below which the Committee has determined should be subject to one or more restrictions on transfer for a specified Period of Restriction. (y) Securities Act means the Securities Act of 1933, as amended. (z) Shares means shares of the common stock, $.01 par value per share, of the Company (including any new, additional or different stock or securities resulting from a Change in Capitalization), as the case may be. (aa) Stock Appreciation Right means a right to receive all or some portion of the increase in the value of Shares as provided in Section 7 hereof. (bb) "Stock Bonus" shall mean a grant of Shares to an Employee, Advisor or Consultant pursuant to Section 10 below. (cc) Subsidiary means any corporation in an unbroken chain of corporations, beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (dd) Ten-Percent Stockholder means an Eligible Employee, who, at the time an Incentive Stock Option is to be granted to such Eligible Employee, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, a Parent or a Subsidiary within the meaning of Sections 424(e) and 424(f), respectively, of the Code. 3. Administration. (a) The Plan shall be administered by the Committee, which Committee shall at all times satisfy the provisions of Rule 16b-3 under the Exchange Act. The Committee shall hold meetings at such times as may be necessary for the proper administration of the Plan. The Committee shall keep minutes of its meetings. A majority of the Committee shall constitute a quorum and a majority of a quorum may authorize any action. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made at a meeting duly held. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, Options, or Stock Appreciation Rights, and all members of the Committee shall be fully indemnified by the Company with respect to any such action, determination or interpretation. The Company shall pay all expenses incurred in the administration of the Plan. (b) Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time: (i) to determine those Eligible Employees to whom Awards shall be granted under the Plan and the number of Shares subject to such Awards to be granted to each Eligible Employee and to prescribe the terms and conditions (which need not be identical) of each Award , including the purchase price per share of each Award ; (ii)to construe and interpret the Plan, the Awards granted hereunder and to establish, amend and revoke rules and regulations for the administration of the Plan, including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Agreement, and (subject to the provisions of Section 13 below) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan, in the manner and to the extent it shall deem necessary or advisable to make the Plan fully effective, and all decisions and determinations by the Committee in the exercise of this power shall be final and binding upon the Company or a Subsidiary or Parent, and the Participants, as the case may be; (iii) to determine the duration and purposes for leaves of absence which may be granted to a Participant without constituting a termination of employment or service for purposes of the Plan; and (iv) generally, to exercise such powers and to perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan. 4. Stock Subject to Plan. (a) The maximum number of Shares that may be issued or transferred pursuant to Awards granted under this Plan is 2,000,000 (or the number and kind of shares of stock or other securities that are substituted for those Shares or to which those Shares are adjusted upon a Change in Capitalization), and the Company shall reserve for the purposes of the Plan, out of its authorized but unissued Shares or out of Shares held in the Company's treasury, or partly out of each, such number of Shares as shall be determined by the Board. (b) Whenever any outstanding Award or portion thereof expires, is canceled or is otherwise terminated (other than by exercise of the Award ), the Shares allocable to the unexercised portion of such Award may again be the subject of Awards hereunder, to the extent permitted by Rule 16b-3 under the Exchange Act. 5. Eligibility. Subject to the provisions of the Plan, the Committee shall have full and final authority to select those Eligible Employees who will receive Awards. 6. Options. The Committee may grant Options in accordance with the Plan, the terms and conditions of which shall be set forth in an Agreement. Each Option and Agreement shall be subject to the following conditions: (a) Purchase Price. The purchase price or the manner in which the purchase price is to be determined for Shares under each Option shall be set forth in the Agreement; provided, however, that the purchase price per Share under each Nonqualified Stock Option shall not be less than 50% of the Fair Market Value of a Share at the time the Option is granted, 100% in the case of an Incentive Stock Option generally and 110% in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder. (b) Duration. Options granted hereunder shall be for such term as the Committee shall determine; provided, however, that no Option shall be exercisable after the expiration of ten (10) years from the date it is granted (five (5) years in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder). The Committee may, subsequent to the granting of any Option, extend the term thereof but in no event shall the term as so extended exceed the maximum term provided for in the preceding sentence. (c) Non-transferability. No Option granted hereunder shall be transferable by the Participant to whom such Option is granted otherwise than by will or the laws of descent and distribution, and an Option may be exercised during the lifetime of such Participant only by the Participant or such Participant's guardian or legal representative. The terms of such Option shall be binding upon the beneficiaries, executors, administrators, heirs and successors of the Participant. (d) Vesting. Subject to subsection 6(e) below, unless otherwise provided herein or set forth in the Agreement, each Option shall become exercisable as to 33 1/3 percent of the Shares covered by the Option on the first anniversary of the date the Option was granted and as to an additional 33 1/3 percent of the Shares covered by the Option on each of the following two (2) anniversaries of such date of grant. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Option expires. The Committee may accelerate the exercisability of any Option or portion thereof at any time. (e) Accelerated Vesting. Notwithstanding the provisions of subsection 6(d) above, each Option granted to a Participant shall become immediately exercisable in full upon the occurrence of a Change in Control. (f) Termination of Employment. In the event that a Participant ceases to be employed by the Company or any Subsidiary, any outstanding Options held by such Participant shall, unless the Agreement evidencing such Option provides otherwise, terminate as follows: (i) If the Participant's termination of employment is due to his death or Disability, the Option (to the extent exercisable at the time of the Participant's termination of employment) shall be exercisable for a period of one (1) year following such termination of employment, and shall thereafter terminate; and (ii) If the Participant's termination of employment is for any other reason (including a Participant's ceasing to be employed by a subsidiary as a result of the sale of such Subsidiary or an interest in such Subsidiary), the Option (to the extent exercisable at the time of the Participant's termination of employment) shall be exercisable for a period of thirty (30) days following such termination of employment, and shall thereafter terminate. Notwithstanding the foregoing, the Committee may provide, either at the time an Option is granted or thereafter, that the Option may be exercised after the periods provided for in this Section 6(f), but in no event beyond the term of the Option. (g) Method of Exercise. The exercise of an Option shall be made only by a written notice delivered to the Secretary of the Company at the Company's principal executive office, specifying the number of shares to be purchased and accompanied by payment therefore and otherwise in accordance with the Agreement pursuant to which the Option was granted. The purchase price for any Shares purchased pursuant to the exercise of an Option shall be paid in full upon such exercise in cash, by check, or, at the discretion of the Committee and upon such terms and conditions as the Committee shall approve, by transferring Shares to the Company or by such other method as the Committee may determine. Any Shares transferred to the Company as payment of the purchase price under an Option shall be valued at their Fair Market Value on the day preceding the date of exercise of such Option. If requested by the Committee, the Participant shall deliver the Agreement evidencing the Option or the Agreement evidencing any Stock Appreciation Right to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement to the Participant. Not less than 100 Shares may be purchased at any time upon the exercise of an Option unless the number of Shares so purchased constitutes the total number of Shares then purchasable under the Option. (h) Rights of Participants. No Participant shall be deemed for any purpose to be the owner of any Shares subject to any Option unless and until (i) the Option shall have been exercised pursuant to the terms thereof, (ii) the Company shall have issued and delivered the Shares to the Participant, and (iii) the Participant's name shall have been entered as a stockholder of record on the books of the Company. Thereupon, the Participant shall have full voting, dividend and other ownership rights with respect to such Shares. 7. Stock Appreciation Rights. The Committee may, in its discretion, grant a Stock Appreciation Right alone (a Free Standing Stock Appreciation Right ) or in conjunction with the grant of an Option (a Related Stock Appreciation Right ), in either case, in accordance with the Plan, and the terms and conditions of such Stock Appreciation Right shall be set forth in an Agreement. A Related Stock Appreciation Right shall cover the same Shares covered by the related Option (or such lesser number of Shares as the Committee may determine) and shall, except as provided in this Section 7 be subject to the same terms and conditions as the related Option. (a) Grant of Stock Appreciation Rights. (i) Time of Grant of Related Stock Appreciation Right. A Related Stock Appreciation Right may be granted either at the time of grant, or at any time thereafter during the term of the Option; provided, however, that Related Stock Appreciation Rights related to Incentive Stock Options may only be granted at the time of grant of the Option. (ii) Purchase Price. The purchase price or the manner in which the purchase price is to be determined for Shares covered by each Free Standing Stock Appreciation Right shall be set forth in the Agreement; provided, however, that the purchase price per Share under each Free Standing Stock Appreciation Right shall not be less than 50% of the Fair Market Value of a Share at the time the Free Standing Stock Appreciation Right is granted. The purchase price or the manner in which the purchase price is to be determined for Shares covered by each Related Stock Appreciation Right shall be set forth in the Agreement for the related Option. (iii) Payment. A Stock Appreciation Right shall entitle the holder thereof, upon exercise of the Stock Appreciation Right or any portion thereof, to receive payment of an amount computed pursuant to Section 7 (a) (vi) below. (iv) Exercise. Free Standing Stock Appreciation Rights generally will be exercisable at such time or times, and may be subject to such other terms and conditions, as shall be determined by the Committee, in its discretion, and such terms and conditions shall be set forth in the Agreement; provided, however, that no Free Standing Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date it is granted. No Free Standing Stock Appreciation Right granted hereunder shall be transferable by the Participant to whom such right is granted otherwise than by will or the laws of descent and distribution, and a Free Standing Stock Appreciation Right may be exercised during the lifetime of such Participant only by the Participant or such Participant's guardian or legal representative. The terms of such Free Standing Stock Appreciation Right shall be binding upon the beneficiaries, executors, administrators, heirs and successors of the Participant. Subject to subsection 7(a)(v) below, a Related Stock Appreciation Right shall be exercisable at such time or times and only to the extent that the related Option is exercisable, and will not be transferable except to the extent the related Option may be transferable. A Related Stock Appreciation Right granted in conjunction with an Incentive Stock Option shall be exercisable only if the Fair Market Value of a Share on the date of exercise exceeds the purchase price specified in the related Incentive Stock Option. (v) Accelerated Vesting. Notwithstanding the provisions of subsection 7(a)(iv) above, each Stock Appreciation Right granted to a Participant shall become immediately exercisable in full upon the occurrence of a Change in Control. (vi) Amount Payable. Upon the exercise of a Stock Appreciation Right, the Participant shall be entitled to receive an amount determined by multiplying (A) the excess of the Fair Market Value of a Share on the date of exercise of such Stock Appreciation Right over (i) with respect to a Related Stock Appreciation Right, the per Share purchase price under the related Option, and (ii) with respect to a Free Standing Stock Appreciation Right, the per Share purchase price set forth in the Agreement, by (B) the number of Shares as to which such Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit at the time it is granted. (vii) Treatment of Related Options and Related Stock Appreciation Rights Upon Exercise. Upon the exercise of a Related Stock Appreciation Right, the related Option shall be canceled to the extent of the number of Shares as to which the Related Stock Appreciation Right is exercised and upon the exercise of an Option granted in conjunction with a Related Stock Appreciation Right, the Related Stock Appreciation Right shall be canceled to the extent of the number of Shares as to which the related Option is exercised or surrendered. (b) Method of Exercise. Stock Appreciation Rights shall be exercised by a Participant only by a written notice delivered in person or by mail to the Secretary of the Company at the Company's principal executive office, specifying the number of Shares with respect to which the Stock Appreciation Right is being exercised. If requested by the Committee, the Participant shall deliver the Agreement evidencing the Stock Appreciation Right being exercised and with respect to a Related Stock Appreciation Right, the Agreement evidencing any related Option to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement or Agreements to the Participant. (c) Form of Payment. Payment of the amount determined under Sections 7(a)(vi) above, may be made solely in whole Shares in a number determined based upon their Fair Market Value on the date of exercise of the Stock Appreciation Right or, alternatively, at the sole discretion of the Committee, solely in cash, or in a combination of cash and Shares as the Committee deems advisable. In the event that a Stock Appreciation Right is exercised within the sixty-day period following a Change in Control, any amount payable shall be solely in cash. If the Committee decides to make full payment in Shares, and the amount payable results in a fractional Share, payment for the fractional Share will be made in cash. Notwithstanding the foregoing, to the extent required by Rule l6b-3 under the Exchange Act, no payment in the form of cash may be made upon the exercise of a Stock Appreciation Right pursuant to Section 7(a)(vi) above, to an officer of the Company or a Subsidiary who is subject to Section 16(b) of the Exchange Act, unless the exercise of such Stock Appreciation Right is made during the period beginning on the third business day and ending on the twelfth business day following the date of release for publication of the Company's quarterly or annual statements of earnings. 8. Loans. (a) The Company or any Parent or Subsidiary may make loans to a Participant in connection with the exercise of an Option, subject to the following terms and conditions and such other terms and conditions not inconsistent with the Plan including the rate of interest, if any, as the Committee shall impose from time to time. (b) No loan made under the Plan shall exceed the sum of (i) the aggregate purchase price payable pursuant to the Option with respect to which the loan is made, plus (ii) the amount of the reasonably estimated income taxes payable by the Participant with respect to the exercise of the Option reduced by (iii) the aggregate par value of the Shares being acquired pursuant to exercise of the Option. In no event may any such loan exceed the Fair Market Value, at the date of exercise, of the Shares received pursuant to such exercise. (c) No loan shall have an initial term exceeding ten (l0) years; provided, however, that loans under the Plan shall be renewable at the discretion of the Committee; and provided, however, that the indebtedness under each loan shall become due and payable, as the case may be, on a date no later than (i) one (1) year after termination of the Participant's employment due to death or disability, or (ii) the date of termination of the Participant's employment for any reason other than death or disability. (d) Loans under the Plan may be satisfied by a Participant, as determined by the Committee, in cash or, with the consent of the Committee, in whole or in part by the transfer to the Company of Shares whose Fair Market Value on the date of such payment is equal to part or all of the outstanding balance of such loan. (e) A loan shall be secured by a pledge of Shares with a Fair Market Value of not less than the principal amount of the loan. After any repayment of a loan, pledged Shares no longer required as security may be released to the Participant. (f) Every loan shall meet all applicable laws, regulations and rules of the Federal Reserve Board and any other governmental agency having jurisdiction. 9. Adjustment Upon Changes in Capitalization. (a) In the event of a Change of Capitalization, the Committee shall conclusively determine the appropriate adjustments, if any, to the maximum number and class of shares of stock with respect to which Awards may be granted under the Plan, and to the number and class of shares of stock as to which Awards have been granted under the Plan, and the purchase price therefor, if applicable. (b) Any such adjustment in the Shares or other securities subject to outstanding Incentive Stock Options (including any adjustments in the purchase price) shall be made in such manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code. 10. Stock Bonuses. (a) Grant of Stock Bonuses. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares to Employees, Advisors and Consultants either outright or subject to such restrictions as the Committee shall determine pursuant to this Section 10, and in such amounts as the Committee shall determine. (b) Restricted Stock Agreement. If the Committee grants Shares subject to restrictions, each such grant shall be evidenced by a Restricted Stock Agreement that shall specify the Period of Restriction, or Periods, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine. (c) Transferability. Except as provided in this Section 10, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Agreement. However, in no event may any Restricted Stock granted under this Plan to an Executive Officer or Director become vested in a Participant prior to twelve (12) months following the date of its grant. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only by such Participant. (d) Other Restrictions. The Committee shall impose such other restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, restrictions based upon the achievement of specific (Company-wide, divisional, and/or individual) performance goals, and/or restrictions under applicable Federal or state securities laws; and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. (e) Certificate Legend. In addition to any legends placed on certificates pursuant to subsection 10(d), each certificate representing Shares of Restricted Stock granted pursuant to the Plan shall bear the following legend: "The sale or other transfer of the Shares of Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Eagle Food Centers, Inc. 1995 Stock Incentive Plan and in a Restricted Stock Agreement dated ____________. A copy of the Plan and such Restricted Stock Agreement may be obtained from the Secretary of Eagle Food Centers, Inc." (f) Removal of Restrictions. Except as otherwise provided in this Section, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Participant shall be entitled to have the legend required by subsection 10(e) removed from his Stock certificate. (g) Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. (h) Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder shall be entitled to receive all dividends and other distributions paid with respect to those Shares while they are so held. If any such dividends or distributions are paid in Shares of Stock, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. (i) Termination of Employment. In the event that a Participant experiences a termination of employment with the Company for any reason, including death, Disability, or retirement, (as defined under the then-established rules of the Company), any and all of the Participant's Shares of Restricted Stock still subject to restrictions as of the date of termination shall automatically be forfeited and returned to the Company; provided, however, that the Committee, in its sole discretion, may waive the restrictions remaining on any or all Shares of Restricted Stock, pursuant to this Section 10, and add such new restrictions to those Shares of Restricted Stock as it deems appropriate. 11. Non-Employee Director Options. Notwithstanding any of the other provisions of the Plan to the contrary, the provisions of this Section 11 shall apply to grants of Options to Non-Employee Directors. Except as set forth in this Section 11, the other provisions of the Plan shall apply to Non-Employee Director Options to the extent not inconsistent with this Section. (a) General. Non-Employee Directors may elect annually to receive payment of all or any portion of the fees for their services as Directors in the form of options ( Non- Employee Director Options ) to acquire Company Common Stock in accordance with this Section 11 and may not be granted Stock Appreciation Rights or Incentive Stock Options under this Plan. Non-Employee Directors may elect annually to receive the compensation for services as a Director for the following year (not including reimbursement of expenses) in the form of Non-Employee Director Options. The Non-Employee Director Options will be granted at the commencement of the 12-month period for which the election has been made. The number of Non- Employee Director Options granted to an electing non- employee Director in any year shall be an amount whose value, as determined by an independent valuation expert retained by the employee members of the Board of Directors, is equivalent on the date of grant to the cash compensation which the Director would otherwise have been entitled to receive for the year. No Agreement with any Non-Employee Director may alter the provisions of this Section and no Non-Employee Director Option may be subject to a discretionary acceleration of exercisability. (b) Initial Election. On the effective date of this Plan, each Non-Employee Director may elect as of such date to receive Non-Employee Director Options for the year period commencing on that date. (c) Election by New Non-Employee Directors. Each Non- Employee Director who, after the effective Date of this Plan, is elected or appointed to the Board for the first time will, at the time such director is elected or appointed, be able to elect to receive Non-Employee Director Options for the year period commencing on the date of election. (d) Vesting. Non-Employee Director Options shall become exercisable one year after the date of grant (or such longer period as the employee members of the Board of Directors may set) and shall be exercisable at a price equal to the market price of the Company s Common Stock at the close of business on the day prior to the date of grant. Non-Employee Director Options shall become immediately exercisable upon a Director s death, disability or upon a Change in Control. If a Director s tenure ends for a reason other than death, disability or Change in Control, then the number of Non-Employee Director Options granted for the year in which the tenure ends shall be reduced to reflect the amount of compensation actually earned by the Director in that year and the remaining Non-Employee Director Options granted in that year shall be immediately exercisable. (e) Duration. Except as otherwise provided in this Section, each Non-Employee Director Option shall be for a term of 10 years. The Committee may not provide for an extended exercise period beyond the periods set forth in this Section. 12. Release of Financial Information. A copy of the Company's annual report to stockholders shall be delivered to each Participant if and at the time any such report is distributed to the Company's stockholders. Upon request, by any Participant, the Company shall furnish to such Participant a copy of its most recent annual report and each quarterly report and current report filed under the Exchange Act since the end of the Company's prior fiscal year. 13. Termination and Amendment of the Plan. The Plan shall terminate on the day preceding the tenth anniversary of its effective date, except with respect to Awards outstanding on such date, and no Awards may be granted thereafter. The Board may sooner terminate or amend the Plan at any time, and from time to time; provided, however, that, except as provided in Section 9 hereof, no amendment shall be effective unless approved by the stockholders of the Company where stockholder approval of such amendment is required (a) to comply with Rule 16b-3 under the Exchange Act or (b) to comply with any other law, regulation or stock exchange rule. Notwithstanding anything in this Section 13 to the contrary, subsequent to the registration of a class of equity securities of the Company under Section 12 of the Exchange Act, Section 11 relating to Options for Non Employee Directors shall not be amended more than once in any six-month period, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules or regulations thereunder. Except as provided in Section 9 hereof, rights and obligations under any Award granted before any amendment of the Plan shall not be adversely altered or impaired by such amendment, except with the consent of the Participant. 14. Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. 15. Limitation of Liability. As illustrative of the limitations of liability of the Company, but not intended to be exhaustive thereof, nothing in the Plan shall be construed to: (a) give any employee any right to be granted an Award other than at the sole discretion of the Committee; (b) give any person any rights whatsoever with respect to Shares except as specifically provided in the Plan; (c) limit in any way the right of the Company or its Parent or Subsidiaries to terminate the employment of any person at any time; or (d) be evidence of any agreement or understanding, expressed or implied, that the Company, its Parent or Subsidiaries, will employ any person in any particular position, at any particular rate of compensation or for any particular period of time. 16. Regulations and Other Approvals; Governing Law. (a) This Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Delaware. (b) The obligation of the Company to sell or deliver Shares with respect to Options granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. (c) Any provisions of the Plan inconsistent with Rule l6b-3 under Exchange Act shall be inoperative and shall not affect the validity of the Plan. (d) Except as otherwise provided in Section 13, the Board may make such changes as may be necessary or appropriate to comply with the rules and regulations of any government authority or to obtain for Participants granted Incentive Stock Options, the tax benefits under the applicable provisions of the Code and regulations promulgated thereunder. (e) Each Award is subject to the requirement that, if at any time the Committee determines, in its absolute discretion, that the listing, registration or qualification of Shares issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Shares, no Awards shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions as acceptable to the Committee. (f) In the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Committee may require a Participant receiving Shares pursuant to the Plan, as a condition precedent to receipt of such Shares, to represent to the Company in writing that the Shares acquired by such Participant are acquired for investment only and not with a view to distribution. 17. Miscellaneous. (a) Multiple Agreements. The terms of each Award may differ from, other Awards granted under the Plan at the same time, or at any other time. The Committee may also grant more than one Award to a given Participant during the term of the Plan, either in addition to, or in substitution for, one or more Awards previously granted to that Participant. The grant of multiple Awards may be evidenced by a single Agreement or multiple Agreements, as determined by the Committee. (b) Withholding of Taxes. The Company shall have the right to deduct from any payment of cash to any an amount equal to the federal, state and local income taxes and other amounts required by law to be withheld with respect to any Award. Notwithstanding anything to the contrary contained herein, if a Participant is entitled to receive Shares upon exercise of an Option or Stock Appreciation Right, the Company shall have the right to require such Participant, prior to the delivery of such Shares, to pay to the Company the amount of any federal, state or local income taxes and other amounts that the Company is required by law to withhold. Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value, on the date the tax is to be determined, equal to the amount required to be withheld. All elections shall be irrevocable, and be made in writing, signed by the Participant in advance of the day that the transaction becomes taxable. The Agreement evidencing any Incentive Stock Options granted under this Plan shall provide that if the Participant makes a disposition, within the meaning of Section 424(c) of the Code and regulations promulgated thereunder, of any Share or Shares issued to such Participant pursuant to such Participant's exercise of the Incentive Stock Option, and such disposition occurs within the two-year period commencing on the day after the date of grant of such Option or within the one-year period commencing on the- day after the date of transfer of the Share or Shares to the Participant pursuant to the exercise of such Option, such Participant shall, within ten (10) days of such disposition, notify the Company thereof and thereafter immediately deliver to the Company any amount of federal, state or local income taxes and other amounts that the Company informs the Participant the Company is required to withhold. (c) Designation of Beneficiary. Each Participant may, with the consent of the Committee, designate a person or persons to receive in the event of such Participant's death, any Award or any amount of Shares payable pursuant thereto, to which such Participant would then be entitled. Such designation shall be made upon forms supplied by and delivered to the Company and may be revoked or changed in writing. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant s death, the Company shall deliver such Options, Stock Appreciation Rights, Restricted Stock and/or amounts payable to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Options, Stock Appreciation Rights, Restricted Stock and/or amounts payable to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. (d) Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. (e) Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. (f) Successors. All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 18. Effective Date. The effective date of the Plan is June 21, 1995. EX-10.19 4 Exhibit 10.19 EMPLOYMENT AGREEMENT AGREEMENT made as of the 10th day of May, 1995 between EAGLE FOOD CENTERS, INC., a Delaware corporation with principal offices presently located at Route 67 and Knoxville Road, Milan, Illinois 61264 (hereinafter referred to as the "Corporation"), and ROBERT J. KELLY, presently residing at 1520 Fawn Valley Road, Glendora, California 91740 (hereinafter referred to as "Employee"). W I T N E S S E T H : WHEREAS, the Corporation desires that Employee shall be employed by the Corporation as its President and Chief Executive Officer, and Employee is desirous of such employment, upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereto hereby agree as follows: 1. Employment. The Corporation shall employ Employee, and Employee shall serve the Corporation, as its President and Chief Executive Officer of the Corporation, upon the terms and conditions hereinafter set forth. 2. Term. The employment of Employee by the Corporation hereunder shall commence as of the date hereof and, unless sooner terminated in the manner hereinafter provided, shall continue for a term of three years until May 22, 1998; provided, however, that if Employee does not arrive at the Corporation's offices and commence his employment hereunder within 30 days after the date hereof, this Agreement shall be null and void. 3. Office; Duties; Extent of Services. (a) During the term of his employment hereunder, Employee shall serve as President and Chief Executive Officer of the Corporation, faithfully and to the best of his ability, under the direction and supervision of the Board of Directors of the Corporation (the "Board of Directors") and the Chairman of the Board of the Corporation (the "Chairman of the Board"). Employee shall transmit or shall cause to be transmitted necessary instructions and advice to all subordinate officers of the Corporation and its subsidiary companies and all other proper persons. Employee also shall perform such other duties and services and shall exercise such other powers for the Corporation and for any of its subsidiary companies, including, but not limited to, acting as an officer and/or director of any such subsidiary companies, as from time to time may be assigned to him by the Board of Directors or the Chairman of the Board, and shall enter into such supplemental agreement or agreements with any such subsidiary company or subsidiary companies with respect thereto (containing terms which are not inconsistent with the provisions hereof) as may be requested by the Board of Directors or the Chairman of the Board, all without further compensation other than that for which provision is made in this Agreement. (b) Employee agrees that he shall devote his best efforts, energies and skills to the discharge of his duties and responsibilities hereunder. To this end, Employee agrees that he shall devote his full business time and attention to the business and affairs of the Corporation and he shall not, without the prior written approval of the Chairman of the Board or the Board of Directors, directly or indirectly, engage or participate in, or become an officer or director of, or become employed by, or render advisory or other services in connection with, any other business enterprise. 4. Salary; Bonus Arrangements and Purchase of Stock. (a) During the term of his employment hereunder, the Corporation shall pay to Employee a salary for his services at the rate of $350,000 per annum (the "Base Salary"), payable in accordance with the normal payroll practices and procedures of the Corporation, and subject to such increase or increases as may be approved by the Board of Directors and evidenced by a writing signed by the Chairman of the Board. The Corporation shall pay Employee a signing bonus on the date of Employee's arrival at the Corporation's offices in an amount equal to $150,000; provided, however, that if Employee's employment hereunder is terminated within six (6) months after the date hereof by the Corporation for "cause" (as hereinafter defined) or by Employee for any reason other than "Good Reason" (as hereinafter defined), Employee shall promptly return such $150,000 signing bonus to the Corporation. (b) During the term of this Agreement, Employee shall be eligible to receive bonus compensation at the end of each fiscal year of the Corporation in an amount determined by the Board of Directors. The Corporation and Employee shall use reasonable efforts to agree on mutually acceptable performance targets for such bonus compensation. Bonus compensation may be up to 100% of the Base Salary during any year of Employee's employment hereunder; provided, however, that bonus compensation shall be at least $125,000 for the first fiscal year of Employee's employment hereunder. Such bonus compensation shall be prorated for the final fiscal year of Employee's employment hereunder. (c) Simultaneously with the execution and delivery of this Agreement, Employee has purchased 125,000 shares of common stock of the Corporation (the "Common Stock") at $2.25 per share. In connection with such purchase, Employee has delivered to the Corporation a full recourse promissory note, in the form attached hereto as Exhibit A, in an initial principal amount equal to the purchase price for such shares and the Corporation has delivered such shares to Employee. Such promissory note is secured by a pledge of such shares. 5. Stock Option. (a) The Corporation hereby grants Employee an option (the "Option") to purchase up to 600,000 shares of Common Stock. The Option will be a stock option that does not qualify as an "incentive stock option" under Section 422(b) of the Internal Revenue Code of 1986, as amended (i.e., a non-qualified stock option). (b) Except as otherwise provided in this Agreement, the Option shall be exercisable, on a cumulative basis, at the times and prices as follows: (i) up to 200,000 of the total shares subject to the Option may be purchased by Employee on or after the first anniversary of the date hereof at a price equal to $2.50 per share; (ii) up to an additional 200,000 shares of the total shares subject to the Option may be purchased by Employee on or after the second anniversary of the date hereof at a price equal to $3.50 per share; and (iii) the balance of the total number of shares subject to the Option may be purchased by Employee on or after the third anniversary of the date hereof at a price equal to $4.50 per share. Subject to earlier termination as described below, the portion of the Option granted pursuant to clause (b)(i) above shall expire on the sixth anniversary of the date hereof, the portion of the Option granted pursuant to clause (b)(ii) above shall expire on the seventh anniversary of the date hereof, and the portion of the Option granted pursuant to clause (b)(iii) above shall expire on the eighth anniversary of the date hereof. Except as provided in the immediately following sentence, if the employment of Employee with the Corporation shall terminate by reason of Employee's death, permanent disability (as defined herein), by the Corporation for any reason other than for "cause" (as described herein) or by Employee for Good Reason (as defined herein), the Option shall immediately become exercisable by Employee (or Employee's legal representative, beneficiary or estate, as the case may be), for any and all of such number of shares subject to the Option, at any time up to and including six months after the effective date of such termination of employment. If the employment of Employee with the Corporation shall terminate for any reason other than that provided in the immediately preceding sentence, including, without limitation, termination by the Corporation for "cause" (as described herein) or termination by Employee for any reason other than Good Reason, the Option shall terminate and become null and void, as of the effective date of such termination. In the event of a Change in Control (as defined below), the Option shall immediately become exercisable for any or all of such number of shares subject to the Option. For purposes of this Agreement, a "Change in Control" means the occurrence of either of the following events: (a) the sale of the Corporation (other than to Odyssey Partners, L.P. or any subsidiary or affiliate of Odyssey Partners, L.P. so long as such subsidiary or affiliate remains a subsidiary or affiliate, as the case may be, of Odyssey Partners, L.P.), or (b) the merger of the Corporation with another corporation (other than with any subsidiary or affiliate of Odyssey Partners, L.P. so long as such subsidiary or affiliate remains a subsidiary or affiliate, as the case may be, of Odyssey Partners, L.P.). (c) Subject to the limitations on exercise provided in this Agreement, the Option shall be exercised by Employee as to all or part of the shares covered thereby by giving written notice of exercise to the Corporation, specifying the number of shares to be purchased (unless the number purchased is the total balance for which the Option is then exercisable; provided, however, that in no event shall the Option be exercised for a fraction of a share or for less than 100 shares) and specifying a business day not more than 10 days from the date such notice is given for the payment of the purchase price against delivery of the shares being purchased. On the date specified in the notice of exercise the Corporation shall deliver such shares to Employee and Employee shall deliver to the Corporation an amount of cash equal to the aggregate purchase price for such shares. (d) If the Corporation (1) pays a stock dividend on its Common Stock, (2) subdivides its outstanding shares of Common Stock into a greater number of shares, (3) combines its outstanding shares of Common Stock into a smaller number of shares, or (4) issues by reclassification of its Common Stock any shares of its capital stock, then the number and kind of shares into which the Option granted to Employee under Paragraph 5(a) hereof is exercisable shall be adjusted so that Employee upon exercise of the Option shall be entitled to receive the kind and number of shares of the Corporation that Employee would have owned or have been entitled to receive after the happening of any of the events described above had the Option been exercised immediately prior to the happening of such event or any record date with respect thereto. The exercise price for the Option shall be adjusted by the inverse of any such adjustment to the number of shares into which the Option is exer- cisable. An adjustment made pursuant to this paragraph (d) shall become effective on the date of the dividend payment, subdivision, combination or issuance retroactive to the record date with respect thereto, if any, for such event. The adjustment to the number of shares into which the Option is exercisable described in this paragraph (d) shall be made each time any event listed in clauses (1) through (4) of this paragraph (d) occurs. 6. Expenses Other than Relocation Expenses. It is contemplated that, in connection with his employment hereunder, Employee may be required to incur reasonable and necessary travel, business entertainment and other business expenses. The Corporation agrees to pay, or reimburse Employee for, all reasonable and necessary travel, business entertainment and other business expenses incurred or expended by him incident to the performance of his duties and responsibilities hereunder, upon submission by Employee to the Chairman of the Board (or his designee or designees) of vouchers or expense statements satisfactorily evidencing such expenses. In addition, Employee shall be entitled to a $25,000 automobile allowance in accordance with the Corporation's existing policy regarding such allowances. 7. Relocation and Relocation Expenses. (a) Employee agrees to move to a new residence within one hour commuting distance of Milan, Illinois (the "Principal Office City"), not later than August 15, 1995 in accordance with the provisions of this Paragraph 7. Following such date, if the Corporation changes the location of its Principal Office City during the then remaining term of Employee's employment hereunder, then concurrently with such change Employee agrees to move to a new residence within one hour commuting distance of such new Principal Office City. (b) Employee may continue to reside at Employee's present residence located at 1520 Fawn Valley Road, Glendora, California 91740 ("Employee's Present Residence") until a date not later than August 15, 1995. During such time as Employee resides at Employee's Present Residence (including any transitory period during which Employee is in the process of moving from Employee's Present Residence to Employee's new residence within one hour commuting distance of the Principal Office City), but not later than August 15, 1995: (i) Employee may commute between Employee's Present Residence and the Principal Office City, whereby Employee on a regular basis, shall travel to the Corporation's offices in the Principal Office City each Monday morning and may leave the Principal Office City each Friday afternoon; (ii) the Corporation agrees to pay, or reimburse Employee for, all reasonable and necessary living expenses incurred or expended by him in the Principal Office City and in commuting to and from the Principal Office City, including, but not limited to, air fare, accommodations, meals, telephone and taxi expenses, upon submission by Employee to the Chairman of the Board (or his designee or designees) of vouchers or expense statements satisfactorily evidencing such expenses; and (iii) the Corporation agrees to pay, or reimburse Employee for, all reasonable and necessary expenses incurred or expended by Employee in connection with occasional trips (not to exceed a reasonable number of trips per year as determined by the Chairman of the Board) to the Principal Office City by Employee's immediate family, including, but not limited to, air fare, accommodations, meals, telephone and taxi expenses, upon submission by Employee to the Chairman of the Board (or his designee or designees) of vouchers or expense statements satisfactorily evidencing such expenses. (c) The Corporation agrees to pay, or reimburse Employee for, all reasonable and necessary moving expenses incurred by Employee in moving (including any such expenses incurred in connection with moving his immediate family) from Employee's Present Residence to a new residence within one hour commuting distance of the Principal Office City not later than January 1, 1996, including, but not limited to, bills of any movers, telephone, television, electrician, plumber, locksmith charges, and tips and gratuities, upon submission by Employee to the Chairman of the Board (or his designee or designees) of vouchers or expense statements satisfactorily evidencing such expenses. (d) If Employee elects to do so, the Corporation will arrange and pay all reasonable fees and out of pocket expenses for a firm to enter into a home repurchase program (the "relocation firm") with Employee for the sale of Employee's present residence. The relocation firm will make an offer to purchase Employee's present residence based on the average of two independent market appraisals from firms which are selected by mutual agreement of the relocation firm and Employee. (i) Employee shall have not less than 30 days within which he may accept or reject such offer. (ii) If Employee accepts such offer, the Corporation agrees that it will pay Employee the amount (if any, but not to exceed $100,000) by which (A) $100,000 exceeds (B) the sale proceeds payable to Employee, net of amounts used to repay all mortgage indebtedness, selling, closing and any related expenses. (iii) If the relocation firm's offer is not accepted by Employee within the period set forth in paragraph 7(d)(i), Employee shall be free to sell his residence upon whatever terms and conditions as he desires. 8. Employee Benefits; Vacations. Employee shall be entitled to participate in any and all life insurance, medical insurance, disability insurance, directors' and officers' liability insurance and any other employee benefit plan or plans which from time to time may be generally made available during the term of Employee's employment hereunder by the Corporation to executives of the Corporation of Employee's rank and status, or of similar rank and status, to the extent that Employee qualifies under the eligibility provisions of any such plan or plans. Employee shall be entitled to vacations (taken consecutively or in segments), aggregating four (4) weeks in any year of the term of Employee's employment hereunder, in accordance with the Corporation's vacation policy, to be taken at times consistent with the effective discharge of Employee's duties. 9. Permanent Disability. In the event of the permanent disability (as hereinafter defined) of Employee during the term of his employment hereunder, the Corporation shall have the right, upon written notice to Employee, to terminate his employment hereunder, effective upon the giving of such notice. Upon such termination, the salary to which Employee would be otherwise entitled pursuant to Paragraph 4(a) hereof shall continue to be paid to Employee through the end of the month in which such termination occurs and Employee shall also be entitled to all accrued and unpaid bonus compensation owing to him under Paragraph 4(b) hereof and to exercise the Option to the extent not then exercised in accordance with Paragraphs 5(b) and 5(c) hereof; provided, however, that notwithstanding any such termination of Employee's employment hereunder due to the permanent disability of Employee, Employee shall be entitled to receive the Base Salary through the date which is eighteen months after the date of such termination. Employee shall accept such payments in full discharge and release of the Corporation of and from any further obligations under this Agreement, but Employee shall continue to have the obligations provided for in Paragraph 12 hereof. For purposes of this Paragraph 9, "permanent disability" shall be defined as (a) "permanent disability" within the meaning of the disability insurance policy or policies then maintained by the Corporation for the benefit of employees of the Corporation, or (b) if no such policy shall then be in effect, or if more than one such policy shall then be in effect in which the term "permanent disability" shall be assigned different definitions, then "permanent disability" shall be defined for purposes hereof to mean any physical or mental disability or incapacity which renders Employee incapable of fully performing the services required of him in accordance with his obligations under Paragraph 3 hereof for a period of 120 consecutive days or for shorter periods aggregating 120 days during any twelve-month period. 10. Death. In the event of the death of Employee during the term of his employment hereunder, the salary to which Employee would be otherwise entitled pursuant to Paragraph 4(a) hereof shall continue to be paid through the end of the month in which death occurs to the last beneficiary designated by Employee by written notice to the Corporation, or, failing such designation, to his estate and such beneficiary or estate shall also be entitled to all accrued and unpaid bonus compensation owing to Employee under Paragraph 4(b) hereof and to exercise the Option to the extent not then exercised in accordance with Paragraphs 5(b) and 5(c) hereof; provided, however, that notwithstanding any termination of Employee's employment hereunder due to Employee's death, such beneficiary or estate shall be entitled to receive the Base Salary through the date which is eighteen months after the date of such termination. Employee shall have the right to name, from time to time, any one person as beneficiary hereunder or, with the consent of the Chairman of the Board, he may make other forms of designation of beneficiary or beneficiaries. Employee's designated beneficiary or beneficiaries or personal representative, as the case may be, shall accept the payments provided for in this Paragraph 10 in full discharge and release of the Corporation of and from any further obligations under this Agreement. 11. Termination. (a) Employee's employment hereunder may be terminated by the Corporation for "cause" at any time if Employee shall commit any of the following "Acts of Default": (i) Employee shall have refused to perform any of his obligations as set forth herein in any material respect or Employee shall have taken any action which causes material harm to the Corporation or its operations, and Employee shall have failed to cure such failure or action within five (5) days after receiving written notice thereof from the Board of Directors or the Chairman of the Board; (ii) Employee shall have committed an act of fraud, theft or dishonesty against, or shall breach a fiduciary obligation to, the Corporation and/or any of its subsidiary companies; or (iii) Employee shall be convicted of (or plead nolo contendere to) any felony or any misdemeanor (whether or not involving the Corporation and/or any of its subsidiary companies) involving moral turpitude or which might, in the opinion of the Board of Directors, cause embarrassment to the Corporation and/or any of its subsidiary companies. In the event the Corporation elects to terminate the employment of Employee for "cause" pursuant to this Paragraph 11(a), the Chairman of the Board shall send written notice to Employee terminating such employment and describing the action of Employee constituting the Act of Default, and thereupon the Corporation shall have no further obligations under this Agreement, with the exception of the obligation to pay Employee, promptly after such termination, any accrued or unpaid salary earned by Employee through and including the effective date of such termination and any accrued and unpaid bonus compensation owing to Employee pursuant to Paragraph 4(b) hereof, but Employee shall continue to have the obligations provided for in Paragraph 12 hereof. Nothing contained in this Paragraph 11 shall constitute a waiver or release by the Corporation of any rights or claims it may have against Employee for actions or omissions which may give rise to an event causing termination of this Agreement pursuant to this Paragraph 11(a). (b) Employee may terminate his employment hereunder for Good Reason. For purposes of this Agreement, "Good Reason" shall mean any assignment to Employee of any material duties other than those contemplated by, or any limitation of Employee's powers in any respect not contemplated by, Paragraph 3 hereof; provided, however, that Employee first delivers written notice thereof to the Chairman of the Board and the Corporation shall have failed to cure such non-permitted assignment or limitation within thirty (30) days after receipt of such written notice. Any termination by Employee pursuant to this Paragraph 11(b) shall be communicated by written Notice of Termination to the Chairman of the Board. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. In the event of any termination of Employee's employment hereunder pursuant to this Paragraph 11(b), Employee shall be entitled to the Base Salary through the date which is eighteen months after the date of such termination, and Employee shall also be entitled to all accrued and unpaid bonus compensation owing to him under Paragraph 4(b) hereof and to exercise the Option to the extent not then exercised in accordance with Paragraphs 5(b) and 5(c) hereof. In the event of any termination of employment by Employee for Good Reason, Employee shall have no further obligations under this Agreement other than the obligations provided for in Section 12 hereof. (c) If this Agreement is not terminated sooner as provided in this Agreement, it shall terminate at the end of the three year term, unless the Corporation elects to extend it for an additional term (in which case it shall terminate at the end of such additional term). If Employee's employment is terminated under this Paragraph 11(c), the Corporation shall pay Employee continuation of the Base Salary at Employee's then current rate of Base Salary for twelve (12) months. 12. Restrictive Covenants and Confidentiality; Injunctive Relief. (a) Employee agrees, as a condition to the performance by the Corporation of its obligations hereunder, particularly its obligations under Paragraph 4 hereof, that during the term of his employment hereunder and during the further period of one (1) year after the termination of such employment, Employee shall not, without the prior written approval of the Chairman of the Board, directly or indirectly through any other individual or entity: (i) solicit, raid, entice or induce any individual or entity that presently is or at any time during the term of his employment hereunder shall be, or who has indicated an interest in becoming, a supplier of the Corporation, and/or any of its subsidiary companies, to become a supplier of any other individual or entity, and Employee shall not approach any such individual or entity for such purpose or authorize or knowingly approve the taking of such actions by any other individual or entity; or (ii) solicit, raid, entice or induce any individual who presently is or at any time during the term of his employment hereunder shall be an employee of or consultant to the Corporation and/or any of its subsidiary companies, to leave such employment or consulting position or positions or to become employed by or become a consultant to any other individual or entity, and Employee shall not approach any such employee or consultant for such purpose or authorize or knowingly approve the taking of such actions by any other individual or entity. (b) Recognizing and acknowledging that confidential information may exist, from time to time, with respect to the business and/or activities of the Corporation and/or its subsidiary companies, and that the knowledge, information and relationship with suppliers and agents, including, but not limited to, supplier lists and/or other such lists, and that the knowledge of the Corporation's and/or its subsidiary companies' business methods, systems, plans and policies and other confidential information which he has heretofore and shall hereafter establish, receive or obtain as an employee of the Corporation and/or its subsidiary companies or otherwise, are valuable and unique assets of the respective businesses of the Corporation and its subsidiary companies, Employee agrees that, during and after the term of his employment hereunder, he shall not (otherwise than pursuant to his duties hereunder), without the prior written approval of the Chairman of the Board, disclose any such knowledge or information pertaining to the Corporation and/or any of its subsidiary companies, their business, activities, personnel or policies, to any individual or entity, for any reason or purpose whatsoever, or use for his own benefit or for the benefit of any other individual or entity, any such knowledge or information. The provisions of this Paragraph 12(b) shall not apply to information which is or shall become generally known to the public or the trade (except by reason of Employee's breach of his obligations hereunder), information which is or shall become available in trade or other publications and information which Employee is required to disclose by order of, or subpoena issued by, a court of competent, jurisdiction or other governmental authority (but only to the extent specifically ordered by such court or other governmental authority); provided, however, that Employee shall give the Corporation prior written notice of the circumstances under which Employee is so required to make disclosure of such information, as well as the intended disclosure so that the Corporation has the opportunity to seek a protective order or follow such other course or courses of action as the Corporation, in its sole discretion, may deem appropriate. (c) The provisions of this Paragraph 12 shall survive the termination of Employee's employment hereunder, irrespective of the reason therefor. (d) Employee recognizes and acknowledges that the services to be rendered by him are of a special, unique and extraordinary character and, in connection with such services, he will have access to confidential information vital to the Corporation's and/or its subsidiary companies' businesses. By reason of this, Employee consents and agrees that if he violates any of the provisions of this Agreement with respect to diversion of the Corporation's and/or its subsidiary companies' suppliers or employees, or confidentiality, the Corporation and its subsidiary companies would sustain irreparable harm, and, therefore, in addition to any other remedies which the Corporation may have under this Agreement or otherwise, the Corporation and/or its subsidiary companies shall be entitled to apply to any court of competent jurisdiction for an injunction restraining Employee from committing or continuing any such violation or violations of this Agreement, and Employee shall not object to any such application or applications. Nothing in this Agreement shall be construed as prohibiting the Corporation and/or its subsidiary companies from pursuing any other remedy or remedies, including, without limitation, recovery of damages. 13. Transactions Offered to the Corporation; Proprietary Materials. During the term of his employment hereunder, Employee agrees to bring to the attention of the Board of Directors or the Chairman of the Board, all proposals, business opportunities or investments of whatever nature, in areas in which the Corporation and/or any of its subsidiary companies is active or may be interested in becoming active, which are created or devised by Employee or come to the attention of Employee and which might reasonably be expected to be of interest to the Corporation and/or any of its subsidiary companies. Without limiting the generality of the foregoing, Employee acknowledges and agrees that memoranda, notes, records and other documents made or compiled by Employee or made available to Employee during the term of this Agreement concerning the business and/or activities of the Corporation and/or any of its subsidiary companies shall be the Corporation's property and shall be delivered by Employee to the Chairman of the Board upon termination of this Agreement or at any other time at the request of the Board of Directors or the Chairman of the Board. 14. Deductions and Withholding. Employee agrees that the Corporation shall withhold from any and all payments paid or payable to Employee, or on Employee's behalf, pursuant to this Agreement, an amount equal to any taxes required by any governmental regulatory authority to be withheld or otherwise deducted and paid by the Corporation in respect of such payments. In connection with the exercise of the Option, the Corporation may require Employee to reimburse the Corporation for any such withholding tax liability in respect of the issuance of shares upon such exercise. In lieu thereof, the Corporation shall have the right to withhold the amount of such taxes from any other sums due or to become due from the Corporation. The Corporation may, in its discretion, hold the stock certificate to which Employee is entitled upon the exercise of the Option as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated. In addition, the Corporation shall be authorized, without the prior written consent of Employee, to effect any such withholding upon exercise of the Option by retention of shares issuable upon such exercise having a fair market value at the date of exercise which is equal to the amount to be withheld; provided, however, that the Corporation shall not be authorized to effect such withholding without the prior written consent of Employee if such withholding would subject Employee to liability under Section 16(b) of the Securities Exchange Act of 1934, as amended. 15. Prior Agreements. This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto respecting the employment of Employee by the Corporation. 16. Representations and Warranties of the Parties. (a) Employee (x) represents and warrants to the Corporation that (i) he is not under any obligation, restriction or limitation, contractual or otherwise, to any other individual or entity which would prohibit or impede him from performing his duties and responsibilities hereunder, and that he is free to enter into and perform the terms and provisions of this Agreement, (ii) he is in good physical health and does not have any permanent disability, and (iii) he is purchasing or acquiring the Common Stock acquired hereunder for his own account, for investment only and not with a view to the resale or distribution thereof in violation of any federal or state securities laws, and (y) agrees that any subsequent resale or distribution of any of such Common Stock shall be made only pursuant to either (A) an effective registration statement under the Securities Act of 1933, as amended, covering such Common Stock and under applicable state securities laws or (B) specific exemptions from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws. In the event that Employee exercises the Option, in connection therewith Employee shall deliver to the Corporation a written statement to the effect set forth in clauses (x)(iii) and (y) above. (b) This Agreement has been duly authorized by all necessary corporate action on the part of the Corporation and has been duly executed and delivered on behalf and in the name of the Corporation by its Chief Executive Officer. 17. Effectiveness. This Agreement shall become effective when, and only when, the Corporation shall have received (i) counterparts of this Agreement signed by the Corporation and Employee, and (ii) a copy of a physician's report, dated a recent date, as to the health of Employee, in form and substance satisfactory to the Corporation. 18. Waiver. Waiver by either party hereto of any breach or default by the other party of any of the terms and provisions of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. 19. Notices. All notices required to be given under this Agreement shall be in writing and sent by registered mail or certified mail, postage prepaid, return receipt requested. Such notices shall be deemed to have been validly served, given or delivered three (3) business days after deposit in the United States mail addressed to the party or parties to be notified at the following addresses: If to the Corporation: Chairman of the Board of Directors Eagle Food Centers, Inc. Route 67 and Knoxville Road Milan, Illinois 61264 with a copy to: Simeon Gold, Esq. Weil, Gotshal & Manges 767 Fifth Avenue New York, New York 10153 If to Employee: Robert J. Kelly 1520 Fawn Valley Road Glendora, California 91740 Either party may change the address to which notices, requests, demands and other communications hereunder shall be sent by sending written notice of such change of address to the other party in the manner above stated. 20. Assignability and Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the heirs, executors, administrators, successors and legal representatives of Employee, and shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. The obligations of Employee may not be delegated and, except as expressly provided in Paragraph 9 above relating to the designation of beneficiaries, Employee may not assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement, or any of his rights hereunder, without the prior written consent of the Corporation, and any such attempted assignment, transfer, pledge, encumbrance, hypothecation or other disposition without such consent shall be null and void and without effect. This Agreement may be assigned by the Corporation, in its sole discretion, to any one or more of its subsidiary companies or to another individual or entity in connection with the merger or consolidation of the Corporation with another corporation, partnership or other business enterprise or the sale of all or substantially all of the assets and business of the Corporation to another individual or entity. 21. Complete Understanding; Amendments, Etc. This Agreement constitutes the complete understanding and entire agreement between the parties hereto with respect to the employment of Employee hereunder, and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. This Agreement shall not be altered, modified, amended or terminated (other than in accordance with the provisions hereof) except by written instrument signed by the party against whom enforcement may be sought. 22. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois. 23. Paragraph Headings. The paragraph headings contained in this Agreement are for reference purposes only and shall not limit, define or affect in any way the meaning or interpretation of this Agreement or any portion or portions thereof. 24. Separability. In case any one or more of the provisions of this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected thereby. 25. Attorneys' Fees. Each party hereto agrees that if the other party shall prevail in any action or proceeding arising hereunder or in connection herewith, such other party shall be entitled to reimbursement of reasonable attorneys' fees and disbursements related to such action or proceeding. IN WITNESS WHEREOF, the parties hereto have entered into this Agreement and duly set their hands on the day and year first above written. By: Martin J. Rabinowitz, Chairman of Board PROMISSORY NOTE $281,250.00 May 10, 1995 Milan, Illinois FOR VALUE RECEIVED, the undersigned, Robert J. Kelly, a resident of the State of California ("Borrower"), hereby unconditionally promises to pay to the order of EAGLE FOOD CENTERS, INC. ("Lender") at its address set forth below, or such other address as Lender shall specify to Borrower in writing, the principal sum of Two Hundred Eighty-One Thousand Two Hundred Fifty United States Dollars ($281,250.00) on May 10, 1998, subject to the provisions of the immediately following paragraph. Borrower further promises to pay interest to Lender on the unpaid principal balance hereof from the date hereof until such maturity date at a rate per annum equal to 6.46%. Interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual number of days elapsed. Interest shall be payable quarterly in arrears on the first day of each calendar quarter during the term hereof commencing July 1, 1995 and upon demand by Lender of payment in full of this Note. If the indebtedness evidenced hereby is not paid in full when due, Borrower shall be obligated thereafter to pay interest on such overdue amount until the date such amount is paid in full at a rate per annum equal to 3% above the rate otherwise applicable hereunder. Borrower and Lender are parties to the Employment Agreement, dated as of May 10, 1995 (as amended, supplemented or otherwise modified from time to time, the "Employment Agreement"). Notwithstanding the immediately preceding paragraph, in the event that either (i) Borrower's employment with Lender is terminated by Lender for "cause" (as described in Paragraph 11(a) of the Employment Agreement) or (ii) Borrower terminates his employment with Lender for any reason other than "Good Reason" (as defined in the Employment Agreement), the indebtedness evidenced hereby (with accrued interest thereon) shall immediately become due and payable without further notice, demand or presentment by Lender; provided, however, that if Borrower terminates his employment with Lender for "Good Reason", such indebtedness (with accrued interest thereon) shall become due and payable without further notice, demand or presentment by Lender on the date six months after the date of such termination (or if such day is not a business day, on the immediately preceding business day). Borrower may prepay this Note in whole or in part without premium or penalty upon prior written notice to Lender received no later than 10:00 a.m. (Milan, Illinois time) on the date of such prepayment. Any prepayment shall be accompanied by payment of the accrued and unpaid interest due and owing on the principal amount so prepaid to the date of such prepayment. All payments of principal and interest hereunder shall be made without set-off or counterclaim of any nature and in lawful money of the United States of America. If any payment hereunder is due and payable on any day which is a Saturday, Sunday or other day on which commercial banks in Milan, Illinois are authorized or required by law to close, the time for the making of such payment shall be extended to the next succeeding business day and, with respect to payments of principal, interest shall be payable thereon during such extension at the rate provided herein. Lender shall not by any act, delay, omission or otherwise be deemed to have waived any rights or remedies hereunder. Such rights and remedies are cumulative and not exclusive of any rights or remedies provided by law. No waiver shall be valid unless signed by Lender. No amendment hereof, unless signed by Lender, and no course of dealing between Borrower and Lender, shall be effective to modify or discharge this Note. Except as otherwise specifically provided herein, all notices, requests, demands or other communications to Lender or Borrower shall be deemed to have been given or made when mailed, or personally delivered in writing, to Lender or Borrower, as the case may be, to the recipient's address set forth below, or such other address as either Lender or Borrower shall hereafter specify to the other in writing. This Note shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of Lender. This Note is secured by a pledge of the common stock of Lender purchased by Borrower from Lender simultaneously with the execution and delivery of the Employment Agreement. Lender shall have full recourse to Borrower for the repayment of the indebtedness evidenced by this Note. This Note shall be governed by and construed in accordance with the laws of the State of Illinois. IN WITNESS WHEREOF, this Note has been duly executed and delivered by Borrower on the date and year first written above. ___________________________ Robert J. Kelly Lender's Address: Borrower's Address: Eagle Food Centers, Inc. 1520 Fawn Valley Road Route 67 and Knoxville Road Glendora, CA 91740 Milan, Illinois 61264 STATE OF ________ ) COUNTY OF ________ ) On this, the ____ day of _____, 1995, before me, the subscriber, a notary public in and for the State and County aforesaid, personally appeared Robert J. Kelly, and who acknowledged that he, Robert J. Kelly, executed the foregoing Note for the purposes therein contained. WITNESS my hand and seal the day and year aforesaid. Notary Public [Notary Seal] My commission expires: PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as of May 10, 1995, by and between ROBERT J. KELLY of 1520 Fawn Valley Road, Glendora, California 91740 (the "Pledgor") and EAGLE FOOD CENTERS, INC., a Delaware corporation, with its principal offices presently located at Route 67 and Knoxville Road, Milan, Illinois 61264 (the "Company"). W I T N E S S E T H: WHEREAS, the Pledgor and the Company have entered into an Employment Agreement dated May 10, 1995, pursuant to which the Pledgor has agreed to purchase and the Company has agreed to sell 125,000 shares of common stock of the Company, payable in the principal amount of Two Hundred Eighty-One Thousand Two Hundred Fifty Dollars ($281,250.00), which borrowing is evidenced by the Pledgor's Promissory Note in such principal amount (the "Note"); and WHEREAS, the parties hereto wish to secure in the manner set forth in this Agreement the payment of all of the Pledgor's indebtedness created under the Note, whether on account of principal, interest, or otherwise (all of the foregoing indebtedness and obligations being hereinafter collectively called the "Debt"); NOW, THEREFORE, in consideration of the Debt and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Pledgor, the parties hereto covenant and agree as follows: 1. Collateral. The Pledgor hereby assigns, transfers, pledges, and sets over unto the Company, and its successors and assigns, one hundred twenty-five thousand (125,000) shares of common stock of the Company, evidenced by one (1) stock certificate numbered _____, a copy of which is attached hereto, as security for the payment of the Debt, together with all cash, stock, and other dividends paid upon, all securities or instruments and other property received in addition to or in exchange for, and all rights to subscribe for securities incident to, such property (all such property, dividends, security, and rights being hereinafter collectively called the "Collateral"). 2. Security Interest. The Pledgor agrees that the Company shall have, and there is hereby granted to and created in favor of the Company, a security interest under the Illinois Uniform Commercial Code (the "Code") in and to the Collateral hereby assigned and pledged and in and to the proceeds thereof as security for the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the Note. The Pledgor will faithfully preserve and protect said security interest in the Collateral and the proceeds thereof. Promptly upon request of the Company from time to time, the Pledgor will do all such acts and things, and will execute and deliver all such stock powers and other documents and instruments, including, without limitation, further pledges, assignments, financing statements, and continuation statements, as the Company may deem necessary or advisable in order to preserve, perfect, and protect the Company's security interest in the Collateral and the proceeds thereof and to assure that the Company may exercise and enforce its rights hereunder, or otherwise by law, with respect to the Collateral and such proceeds. 3. Perfection of Security Interest. For the purposes of perfecting the Company's security interest in the Collateral, the Pledgor has delivered to the Company possession of the Collateral. 4. Representations and Warranties. Pledgor is the legal and beneficial owner of the Collateral free and clear of any lien, except for the lien created by this Agreement. No consent, authorization, approval, or other action by, and no notice to or filing with, any governmental authority is required for the pledge by Pledgor of the Collateral pursuant to this Agreement or for the due execution, delivery or performance of this Agreement by Pledgor. 5. Transfers and Other Liens. Pledgor agrees that he will not (i) sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Collateral, or (ii) create or permit to exist any lien upon or with respect to any of the Collateral, except for the lien created pursuant to this Agreement. 6. Remedies on Default. If Pledgor shall default in payment of the Note and such default remains uncured after not less than ten (10) days' written notice to Pledgor of such default (a "Default"), then, and in any such event, the Company shall have such rights and remedies with respect to the Collateral or any part thereof and the proceeds thereof as are provided by the Code and such other rights and remedies with respect thereto which it may have at law, in equity, or under this Agreement including, without limitation, to the extent not inconsistent with the provisions of the Code or other applicable law, the right to (i) transfer into the Company's name, or into the names of its nominee or nominees for the benefit of the Company, all or any portion of the Collateral in its possession and thereafter receive cash dividends paid thereon, vote the same, give all consents, waivers and ratification in respect thereof, and otherwise act with respect thereto as though it were the outright owner thereof and (ii) sell all or any portion of the Collateral in its possession at any public or private sale, upon ten (10) days' prior notice to the Pledgor, at such place or places, at such time or times, upon such terms (whether for cash or credit), and in such manner as the Company may determine. Upon the occurrence of a Default and upon notice by the Company to Pledgor, all rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7 below shall cease. Upon the occurrence of a Default, all rights of Pledgor to receive the dividends which it would otherwise be authorized to receive and retain pursuant to Section 7 below shall cease. 7. Rights With Respect to Collateral in Absence of Default. Unless and until a Default has occurred and is continuing or exists, all cash payments made on account of the Collateral, whether in the form of principal, interest, or dividends, shall be paid to the Pledgor in accordance with his interest therein and the Pledgor shall be entitled to exercise any voting rights with respect to any of the Collateral to which voting rights attach and give all consents, waivers, and ratification in respect thereof. The Pledgor agrees to deliver to and deposit with the Company in pledge, forthwith upon receipt thereof at any time, to be held by the Company under and subject to the terms of this Agreement, all stock dividends and other dividends (other than cash) received by the Pledgor and paid upon any security included in the Collateral, all securities received as a distribution on account of any securities included in the Collateral, all securities received in exchange for or in renewal of any securities included in the Collateral, while this Agreement is in effect. 8. Security Interest Absolute. All rights of the Company and security interests hereunder, and all obligations of Pledgor hereunder, shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of any provision of the Employment Agreement, the Note or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, or any increase in the amount of, all or any of the obligations evidenced by the Note, or any other amendment or waiver of any term of, or any consent to any departure from any requirement of, the Employment Agreement or the Note; (iii) any exchange, release or non-perfection of any lien on any other collateral; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a borrower or a pledgor. 9. Termination; Successors and Assigns. Upon payment in full of the Debt, this Agreement shall terminate and be of no further force and effect, and the Company shall return to the Pledgor such of the Collateral as is then in its possession. Until such time, however, this Agreement shall bind the Pledgor, its successors and assigns, and shall inure to the benefit of the Company, and its successors and assigns. 10. Applicable Law. This Pledge shall be deemed to be a contract under the laws of the State of Illinois and for all purposes shall be governed by and construed in accordance with the laws of such State. 11. Notice. All notices and other communications provided to any party hereto under this Agreement shall be in writing or by telex or by facsimile and addressed, delivered or transmitted to such party at its address, telex or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by prepaid courier service, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when received. A communication, demand or notice given pursuant to this Section shall be addressed: a. If to the Company, at: Chairman of the Board of Directors Eagle Food Centers, Inc. Route 67 and Knoxville Road Milan, Illinois 61264 with a copy to: Simeon Gold, Esq. Weil, Gotshal & Manges 767 Fifth Avenue New York, New York 10153 b. If to the Pledgor, at: Robert J. Kelly 1520 Fawn Valley Road Glendora, California 91740 The Pledgor or the Company may change the respective address upon which he or it shall receive notice hereunder by written notice of such change to the other party as provided in this Section. 12. Effectiveness. This Agreement shall become effective upon execution by both parties hereto, which may be in duplicate counterpart. 13. Incorporation of Terms. The Pledgor hereby acknowledges that his rights hereunder are subject to all of the agreements, conditions, covenants, provisions and stipulations contained in the Note, which are to be kept and performed by Pledgor and the Company and which are hereby made a part of this Agreement to the same extent and with the same force and effect as if they were fully set forth herein. 14. Amendments, etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by Pledgor herefrom shall in any event be effective unless the same shall be in writing, signed by the Company, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 15. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity and without invalidating the remaining provisions of this Agreement. IN WITNESS WHEREOF, this document is signed by the parties hereto on that date, month and year first above written. PLEDGOR: Robert J. Kelly EAGLE FOOD CENTERS, INC. By:__________________________ Title: EX-27 5
5 6-MOS FEB-03-1996 JUL-29-1995 3,064,000 7,049,000 13,083,000 629,000 75,980,000 102,265,000 284,678,000 129,440,000 287,218,000 115,933,000 100,000,000 115,000 0 0 32,918,000 287,218,000 494,575,000 494,575,000 371,050,000 371,050,000 0 66,000 7,906,000 (9,631,000) (482,000) (9,149,000) 0 625,000 0 (9,774,000) (0.88) (0.88)