Eaves was told that his opportunities would be severely restricted next season, with the forward’s mature approach in negotiations being praised by the club.
Ilicali said: “Eaves is a very strong character and one of the most popular players in this team. But everybody respects that a team has to change to go forward.
“You look at the table and you see this team was not a candidate for the Premier League. To be a candidate, you have to bring in new players and if you bring new players, what will happen to the ex-players?
“Will he be happy if we bring two players in front of him?
“For the player, it is his life and I don’t want to make anybody unhappy. If he (Eaves) stays here, then will he will play if we bring in two options as we have some options in our head?
“This is the best solution for some players, including our captain too.”
Kesler added: “When I spoke with Tom, he was such a class act and very realistic. He said: ‘I don’t want to be the second or third option, thanks for your honesty – I will move on’.”
Smallwood, who turns 32 in December, was offered a ‘short team deal’ according to Kesler.
But with the midfielder seeking a longer contract, City took the decision to allow him to leave for free to pursue fresh opportunities, despite having a one-year option which they could have activated in his existing contract.
One-year options have been taken up on Matt Ingram, Callum Elder, Josh Emmanuel, George Honeyman and Mallik Wilks.
Kesler said: “We offered him (Smallwood) a shorter term deal. He was a tremendous support to us, but there needs to be change to achieve the owners’ success and our ambition, This is a club and it is not about players.
“It was a fair negotiation and in the end, we decided to open his path.
“We could have taken his option and then looked in the market for other opportunities. But the chairman was more than fair to give him the freedom to look for other options.”