<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Pursuant to (S)240.14a-11(c) or (S)240.14a-12
FURR'S/BISHOP'S, INCORPORATED
(Name of Registrant as Specified In Its Charter)
FURR'S/BISHOP'S, INCORPORATED
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
......................................................................
2) Aggregate number of securities to which transaction applies:
......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
5) Total fee paid:
......................................................................
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.....................................................................
2) Form, Schedule or Registration Statement No.:
.....................................................................
3) Filing Party:
.....................................................................
4) Date Filed:
.....................................................................
<PAGE>
FURR'S/BISHOP'S, INCORPORATED
6901 QUAKER AVENUE
LUBBOCK, TEXAS 79413
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON
THURSDAY, NOVEMBER 21, 1996
Notice is hereby given that the 1996 Annual Meeting of Stockholders of
Furr's/Bishop's, Incorporated (the "Company") will be held at 10:00 a.m. local
time on Thursday, November 21, 1996, in the Holiday Inn Civic Center at 801
Avenue Q, Lubbock, Texas for the following purposes:
1. To elect six directors to serve for one-year terms;
2. To ratify the Company's execution and delivery of Indemnification
Agreements between the Company and each of its directors; and
3. To transact such other business as may properly be brought before
the meeting and any and all adjournments thereof.
The holders of record of the Company's Common Stock at the close of
business on September 25, 1996 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Stockholders who are unable to attend the Annual Meeting in person are
requested to complete and date the enclosed proxy card and return it promptly in
the envelope provided. No postage is required if mailed in the United States.
Stockholders who attend the Annual Meeting may revoke their proxy and vote their
shares in person.
By Order of the Board of Directors
Alton R. Smith
Secretary
<PAGE>
FURR'S/BISHOP'S, INCORPORATED
6901 QUAKER AVENUE
LUBBOCK, TEXAS 79413
------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, NOVEMBER 21, 1996
------------
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Furr's/Bishop's, Incorporated, a Delaware
corporation ("FBI" or the "Company"), for use at the 1996 Annual Meeting of
Stockholders to be held at 10:00 a.m. local time on Thursday, November 21, 1996
in the Holiday Inn Civic Center, 801 Avenue Q, Lubbock, Texas and at any
adjournment or postponement thereof (the "Annual Meeting"). Only holders of
record of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), at the close of business on September 25, 1996 (the "Record Date") will
be entitled to notice of and to vote at the Annual Meeting with respect to all
proposals set forth on the attached Notice of Annual Meeting of Stockholders.
The Board of Directors is not currently aware of any other matters which will
come before the Annual Meeting.
Shares of Common Stock represented by properly executed proxy cards
received by the Company at or prior to the Annual Meeting will be voted
according to the instructions indicated on the proxy card. Unless contrary
instructions are given, the persons named on the proxy card intend to vote the
shares of Common Stock so represented FOR the election of nominees for director
named in this Proxy Statement and FOR ratification of the Indemnification
Agreements between the Company and each of its directors. As to any other
business which may properly come before the Annual Meeting, the persons named on
the proxy card for the Common Stock will vote according to their best judgement.
Any holder of Common Stock has the power to revoke his or her proxy at any
time before it is voted at the Annual Meeting by delivering a written notice of
revocation to the Secretary of the Company, by a duly executed proxy bearing a
later date, or by voting by ballot at the Annual Meeting.
This Proxy Statement and the accompanying proxy card are being mailed to
the Company's stockholders on or about October 10, 1996. The cost of preparing,
assembling, and mailing this proxy soliciting material and Notice of Annual
Meeting of Stockholders will be paid by the Company. Additional solicitation of
holders of Common Stock by mail, telephone, telegraph, or by personal
solicitation may be done by directors, officers and regular employees of the
Company, for which they will receive no additional compensation. Brokerage
houses and other nominees, fiduciaries and custodians nominally holding shares
of the Company's Common Stock as of the Record Date will be requested to forward
proxy soliciting material to the beneficial owners of such shares, and will be
reimbursed by the Company for their reasonable expenses.
<PAGE>
THE RESTRUCTURING
The Company recently completed a comprehensive restructuring of its and its
subsidiaries' financial obligations (the "Restructuring"). As part of the
Restructuring, Cafeteria Operators, L.P., a Delaware limited partnership and
indirect wholly owned partnership subsidiary of the Company ("Cafeteria
Operators" or the "Partnership"), executed the Amended and Restated Indenture
(the "Indenture") dated as of November 15, 1995 between Cafeteria Operators and
Fleet National Bank of Massachusetts (f/k/a Shawmut Bank, N.A.), as trustee,
pursuant to which, among other things, the terms of $40.0 million aggregate
principal amount outstanding under Cafeteria Operators' 11% Senior Secured Notes
due June 30, 1998 (the "11% Notes") issued pursuant to the Indenture dated as of
March 27, 1992 between the Company and Shawmut Bank, N.A., as collateral agent
(the "Old Indenture"), were amended, with the consent of the holders of the 11%
Notes at such time (the "Original 11% Noteholders"), to constitute $40.0 million
(subject to the issuance of additional notes in payment of the first interest
installment) aggregate principal amount of 12% Senior Secured Notes issued
pursuant to the Indenture. In addition, Cafeteria Operators issued a 12% Note
in the original principal amount of $1.7 million to the Trustees of General
Electric Pension Trust in settlement of a $5.4 million judgment against
Furr's/Bishop's Cafeterias, L.P., a Delaware limited partnership and indirect
wholly owned partnership subsidiary of the Company. As part of the
Restructuring, Wells Fargo Bank, National Association ("Wells Fargo") received
an option to purchase 2.5% of the outstanding Common Stock (the "Wells Fargo
Option") in satisfaction of approximately $6.1 million principal amount (plus
approximately $1.6 million of accrued and unpaid interest) of indebtedness of a
subsidiary of the Company.
As a result of the Restructuring, indebtedness of Cafeteria Operators in
the amount of approximately $153 million aggregate principal amount (plus
approximately $46.6 million in accrued and unpaid interest) outstanding under
the Old Indenture was exchanged by holders on January 2, 1996 of the 11% Notes
(the "Exchanging 11% Noteholders") for an aggregate of 95% of the limited
partnership interests of Cafeteria Operators and the right to put to the Company
their 95% limited partnership interests in Cafeteria Operators in exchange for
95% of the outstanding Common Stock (the "Put Option"). In addition,
outstanding warrants to purchase capital stock of the Company held by certain of
the Exchanging 11% Noteholders were canceled.
On March 12, 1996, a majority of the Exchanging 11% Noteholders exercised
the Put Option and, accordingly, all Exchanging 11% Noteholders put their
aggregate 95% limited partnership interests to the Company in exchange for 95%
of the outstanding Common Stock. On March 15, 1996, Wells Fargo exercised the
Wells Fargo Option thereby becoming the beneficial owner of 2.5% of the
outstanding Common Stock. As of September 25, 1996, the Exchanging 11%
Noteholders no longer owned any limited partnership interests of Cafeteria
Operators; however, they and their successors and assigns owned an aggregate of
95% of the outstanding Common Stock.
The transactions contemplated in the Restructuring were approved by the
Company's stockholders on January 2, 1996. As a result of the Restructuring, a
change in control of the Company was effected. Prior to the completion of the
Restructuring, Kevin E. Lewis, Chairman of the Board, President and Chief
Executive Officer of the Company, beneficially owned approximately 64.1% of the
Company's then outstanding Common Stock which included both Class A and Class B
Common Stock. The parties listed under "Voting Securities and Principal
Holders" currently own approximately 85.1% of the outstanding Common Stock of
the Company. Following the Restructuring, as of September 25, 1996, no
individual holder of the Company's Common Stock owned more than 18% of the total
outstanding Common Stock. See "Voting Securities and Principal Holders".
2
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
COMMON STOCK
The Company has one class of voting common equity securities, the
Common Stock, which carries one vote per share.
At the Record Date there were issued and outstanding 48,670,672 shares
of Common Stock. The presence in person or by proxy of the holders of a
majority of the votes entitled to be cast by the outstanding shares of Common
Stock shall constitute a quorum for matters to be voted on.
The vote required for approval of all matters submitted to a vote of
the holders of Common Stock of the Company shall be determined based on a
majority of votes cast with the six director nominees receiving the most votes
being elected. Under applicable Delaware law, in tabulating the vote, broker
non-votes will be disregarded and will have no effect on the outcome of the
vote.
The following table sets forth information, as of September 25, 1996, with
respect to all stockholders known by the Company to be the beneficial owners of
more than five percent (5%) of the outstanding shares of Common Stock (the only
class of securities of the Company generally entitled to vote). Except as noted
below, each person has sole voting and investment power with respect to the
shares shown.
3
<PAGE>
<TABLE>
<CAPTION>
AMOUNTS AND PERCENT
NATURE OF OF TOTAL
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING
BENEFICIAL OWNER OF COMMON STOCK OWNERSHIP COMMON STOCK
- -------------------------------- ------------- -------------
<S> <C> <C>
Teachers Insurance and Annuity Association of America 8,607,637 17.7%
730 Third Avenue
New York, NY 10011
Cudd & Co. 8,499,857(1) 17.5%
1345 Avenue of the Americas
New York, NY 10105
John Hancock Mutual Life Insurance Company 5,477,994 11.3%
P.O. Box 111
Boston, MA 02117
The Northwestern Mutual Life Insurance Company 5,471,679 11.2%
720 East Wisconsin Avenue
Milwaukee, WI 53202
The Mutual Life Insurance Company of New York 4,105,339 8.4%
1740 Broadway
New York, NY 10019
Principal Mutual Life Insurance Company 3,286,701 6.8%
711 High Street
Des Moines, IA 50392
Rock Finance, L.P. 2,998,860 6.2%
1560 Sherman Avenue
Evanston, IL 60201
SC Fundamental Value Fund, L.P. 2,949,620(2) 6.1%
712 5th Avenue
New York, NY 10019
</TABLE>
- -------------------------------------
(1) These shares of the Common Stock (the "Equitable Shares") are held of record
by EQ Asset Trust 1993, a Delaware business trust (the "Trust"). The
Equitable Companies Incorporated ("Equitable") is the beneficiary and owner
of the Trust. The Trust is managed by Alliance Capital Management, L.P.
("Alliance") pursuant to a Collateral Management Agreement. A wholly owned
subsidiary of Equitable is the general partner of Alliance; through wholly
owned subsidiaries, Equitable owns a majority of the equity interest in
Alliance. The Equitable Shares and such Collateral Management Agreement
have been pledged to The Chase Manhattan Bank, N.A., as trustee for the
benefit and security of holders of certain notes of the Trust. AXA
beneficially owns approximately 60.7% of Equitable's outstanding common
stock as well as certain convertible preferred stock of Equitable. AXA is
indirectly controlled by the Mutuelles AXA (five French mutual insurance
companies, acting as a group). AXA and the Mutuelles AXA and certain of
their affiliates disclaim beneficial ownership of the Equitable shares.
(2) Excludes 1,502,322 shares held by SC Fundamental Value BVI Ltd. Gary N.
Siegler and Peter M. Collery, controlling persons of the general partner of
the SC Fundamental Value Fund, L.P. and the investment manager of the SC
Fundamental BVI Ltd., may be deemed to be beneficial owners of all shares
held of record by such entities.
4
<PAGE>
PROPOSAL - ELECTION OF DIRECTORS
The By-laws of the Company provide that the directors be elected for one-year
terms. At each annual meeting, directors who are elected by the holders of
Common Stock, succeed the directors whose terms expire at that meeting and hold
office until the next annual meeting and their successors are duly elected and
qualified.
On September 17, 1996, one member of the existing Board of Directors informed
the Company that he would not be standing for re-election at the Annual Meeting.
As a result, at its September 17, 1996 meeting, the Board of Directors voted,
effective November 21, 1996, to reduce the size of the Board to six (6) members
and nominated the remaining six existing Board members to serve for one year
terms.
Six directors (constituting the entire Board of Directors after the Annual
Meeting) are to be elected at the Annual Meeting. The Nominees for Election at
the 1996 Annual Meeting are: Suzanne Hopgood, Kevin E. Lewis, Gilbert C. Osnos,
Kenneth F. Reimer, Sanjay Varma and E. W. Williams, Jr. The By-laws of the
Company provide that the directors shall be elected by a plurality of the votes
cast at the Annual Meeting; therefore, the six director nominees receiving the
most votes will be elected.
On November 15, 1993, the Partnership entered into an amendment of a master
sublease agreement pursuant to which it leased 43 properties from Kmart
Corporation ("Kmart"). Pursuant to the amendment and subject to the terms and
conditions thereof, two properties were removed from the master sublease, and
the aggregate monthly rent for the period August 1, 1993 through and including
December 31, 1996 has been reduced by 25% and the aggregate monthly rent for the
period January 1, 1997 through and including December 31, 1999 has been reduced
by 20%. The reductions in rent on the 41 properties remaining under the master
sublease are subject to termination by Kmart if Kevin E. Lewis ceases to be
Chairman of the Board of Directors of the Company.
Unless otherwise specified, the enclosed proxy will be voted in favor of each
of the Nominees for Election, named above, to serve until the next annual
meeting of stockholders and until their successors shall have been duly elected
and shall qualify. All Nominees for Election have consented to be named and
have indicated their intent to serve if elected. Although the Board of
Directors anticipates that all of the nominees will be available to serve as
directors of the Company, should any one or more of them be unwilling or unable
to serve, it is intended that the proxies will be voted FOR the election of a
substitute nominee or nominees designated by the Board of Directors.
Information as to the Nominees for Election is provided in the Description of
Current Directors below.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL - ELECTION OF DIRECTORS" TO BE IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR"
APPROVAL THEREOF.
5
<PAGE>
As of September 25, 1996, according to information furnished to the Company,
each director, certain executive officers and all executive officers and
directors as a group, owned beneficially the indicated number of percentage of
outstanding Common Stock:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF COMMON STOCK
- ------------------------ ----------------- -----------------------
<S> <C> <C>
Directors:
Russell A. Belinsky 0 0.0
Suzanne Hopgood 0 0.0
Kevin E. Lewis 819,102 (1) 1.7
Gilbert C. Osnos 0 0.0
Kenneth F. Reimer 0 0.0
Sanjay Varma 0 0.0
E.W. Williams, Jr. 44,934 (2) 0.1
Executive Officers:
Donald M. Dodson 2,063 (3) *
John R. Egenbacher 3,519 (4) *
Jim H. Hale 5,764 (5) *
Alton R. Smith 696 (6) *
All officers and directors as a group 878,854 (7) 1.8
- -------------------------------------
</TABLE>
* Owns less than 0.01%
(1) Includes warrants to purchase 535,827 shares of common stock at $1.11 per
share.
(2) Includes warrants to purchase 28,765 shares of common stock at $1.11 per
share.
(3) Includes warrants to purchase 1,319 shares of common stock at $1.11 per
share.
(4) Includes warrants to purchase 2,253 shares of common stock at $1.11 per
share.
(5) Includes warrants to purchase 3,691 shares of common stock at $1.11 per
share.
(6) Includes warrants to purchase 445 shares of common stock at $1.11 per
share.
(7) Includes warrants to purchase 574,076 shares of common stock at $1.11 per
share.
Each of the current directors has been a director of the Company since January
2, 1996, except (i) Kevin E. Lewis who was elected to the Board of Directors,
and appointed Chairman of the Board, on June 24, 1993 and (ii) E.W. Williams,
Jr. who was elected to the Board of Directors in 1991.
DESCRIPTION OF CURRENT DIRECTORS - (TERMS TO EXPIRE IN 1996)
Russell A. Belinsky (Age 36) has been Managing Director of Chanin and Company
since 1990. The company is a specialty investment banking firm, providing a
wide range of services to middle market companies in the areas of financially
distressed situations, mergers and acquisitions and private placements. Mr.
Belinsky is currently a director of Fairfield Communities, Inc., one of the
nation's leading vacation ownership companies.
Suzanne Hopgood (Age 47) has served as President of the Hopgood Group since
founding the company in 1985. The company provides consulting and brokerage
services to clients with hotel investments.
Kevin E. Lewis (Age 31) was elected Chairman of the Board of the Company on
June 24, 1993 and President
6
<PAGE>
and Chief Executive Officer of the Company in July 1994. Prior to serving as
Chairman of the Board of the Company, Mr. Lewis was a managing director in the
New York office of Houlihan, Lokey, Howard & Zukin, Inc., an investment banking
firm, where he had previously served as a Senior Vice President (December, 1991
- - April, 1993), Vice President (1989 - 1991) and Associate (1988 - 1989). Mr.
Lewis was a director of The LVI Group, Inc. from December 1991 to May 1993 and
has been a director of Robertson-Ceco Corporation since July, 1993.
Gilbert C. Osnos (Age 66) has been President of Gilbert C. Osnos & Co., Inc.
since 1981, and a partner in Grisanti Galef & Osnos Associates since 1981. Mr.
Osnos began with Grisanti Galef in 1979, became a partner in 1981. Gilbert C.
Osnos & Co., Inc. was also formed in 1981 doing business as Grisanti Galef &
Osnos Associates. Mr. Osnos was a director of the Turnaround Management
Association from 1988 to 1993 and Chairman in 1990-91 and a director of Trivest
Financial Services Corporation and Reprise Capital from 1989 to 1991. Mr. Osnos
has served on the boards of directors of Mrs. Fields, Inc. since 1993 and
American Mirrex since March, 1996.
Kenneth F. Reimer (Age 57) has been Chairman and Chief Executive Officer of
Reimer Enterprises, Inc. and Cactus Enterprises, Inc. engaging in management
consulting activities and investment in child care centers since 1993. Mr.
Reimer was a director of S. A. Telecommunications, Inc. from 1993 to 1995.
Prior to that, Mr. Reimer was CEO, President and a director of Roma Corporation
from 1984 to 1993.
Sanjay Varma (Age 46) is the principal of Rosestar Management, LLC, an
affiliate of Crescent Real Estate Equities, Ltd. since 1994. Mr. Varma was
Executive Vice President of Walt Disney Company, responsible for the Euro Disney
Resort from 1989 to 1994 and Walt Disney World Resorts from 1986 to 1989. Prior
to 1986, Mr. Varma was Area Vice President of Food & Beverage for the Marriott
Hotels where he worked for eight years.
E.W. Williams, Jr. (Age 69) is Chairman of the Board of the Citizens Bank in
Slaton, Texas and Bank of Commerce in McLean, Texas; Chairman of the Executive
Committee of the Hale County State Bank, Plainview, Texas and First National
Bank in Clayton, New Mexico. Mr. Williams is also Chairman of LubCo BancShares,
Inc., HaleCo BancShares, Inc., GrayCo BancShares, Inc. and Union BancShares,
Inc. and is Chairman of the Board of Coyote Lake Feedyard, Inc., Muleshoe,
Texas. Mr. Williams has held each of these positions for longer than five
years. Mr. Williams was previously a director and executive committee member of
the Texas Tech University President's Council; founder of the West Texas A&M
University President's Council, and was previous director of the Southern
Methodist University Foundation and Alumni Association. Mr. Williams also
served as Chairman of the Amarillo Hospital District. Mr. Williams currently
has farming and ranching interests in Garza County and Bailey County, Texas.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater than ten-percent shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such forms received by it, or written
representations from certain reporting persons that no Exchange Act Form 5 forms
were required for those persons, the Company believes that, during fiscal 1995,
all filing requirements were complied with by its officers, directors, and
greater than ten-percent beneficial owners.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held 27 meetings during the fiscal year 1995.
7
<PAGE>
The Board of Directors has two standing committees, the Audit Committee and
the Compensation Committee. In addition, from time to time the Board may
establish committees of limited duration for special purposes. The Company does
not have a nominating committee.
The Audit Committee, which held one meeting during fiscal year 1995, presently
consists of Ms. Suzanne Hopgood and Messrs. Kenneth Reimer and E.W. Williams,
Jr. The Committee's responsibilities include reviewing (i) the scope and
findings of the annual audit, (ii) accounting policies and procedures and the
Company's financial reporting and (iii) the internal controls employed by the
Company.
The Compensation Committee, which held three meetings during fiscal year 1995,
presently consists of Messrs. Gilbert Osnos, Sanjay Varma and E.W. Williams, Jr.
The Committee's responsibilities include (i) making recommendations to the Board
of Directors on salaries, bonuses and other forms of compensation for the
Company's Officers and other key management and executive employees, (ii)
administering the Company's 1995 Stock Option Plan, and (iii) reviewing
management recommendations for grants of stock options and any proposed plans or
practices of the Company relating to compensation of its employees and
directors. See "Executive Compensation-Report of the Compensation Committee."
Of the current Board of Directors, only Kevin E. Lewis and E.W. Williams, Jr.
were members of the Board of Directors in 1995. Mr. Lewis and Mr. Williams each
attended at least 75 percent of all meetings of the Board of Directors and
committees to which he was assigned, that were held during fiscal year 1995.
DIRECTOR FEES
Non-employee directors of the Company receive a fee of $1,500 per month and
$1,000 per board meeting attended as compensation for their services. In
addition, non-employee directors who are members of any Committee of the Board
receive $500 for each meeting attended. Notwithstanding the foregoing, non-
employee director compensation shall not exceed $30,000 in any fiscal year.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
Donald M. Dodson 58 Vice President Operations Services
John R. Egenbacher 41 Vice President Real Estate
Jim H. Hale 55 Vice President Field Operations
Alton R. Smith 44 Executive Vice President
</TABLE>
Donald M. Dodson has been Vice President of Operations Services since 1993 and
was formerly Vice President Food and Beverage from 1990 until 1993. He was Vice
President of Operations from 1987 to 1990. Mr. Dodson joined the Company in
1958 and managed several cafeterias before becoming a District Manager in 1968.
John R. Egenbacher has been Vice President of Real Estate since 1993 and was
formerly Manager of Real Estate from 1987 to 1993.
Jim H. Hale has been Vice President of Field Operations since April 1996 and
was formerly a Regional Vice President since 1975. Mr. Hale joined the Company
in 1964 and managed several cafeterias before being promoted to regional
management.
Alton R. Smith has been Executive Vice President of the Company since 1993,
Secretary since 1995 and was formerly Executive Vice President and Chief
Financial Officer from 1989 until 1993. He was Vice President and Controller of
the Company between 1986 and 1989. Prior to 1986, Mr. Smith held various
positions with the Company, including Controller and Assistant Secretary from
1985 until 1986, Assistant Controller and Assistant
8
<PAGE>
Secretary from 1982 to 1985, Director of Taxation from 1978 to 1982 and Tax
Manager from 1974 to 1978. He is a certified public accountant and joined the
Company in 1974.
EXECUTIVE COMPENSATION
Executive Compensation
The chart set forth below contains information concerning the annual and long-
term compensation for services in all capacities to the Company and its
subsidiaries for the fiscal years ended January 2, 1996, January 3, 1995 and
December 28, 1993, of those persons who were, at January 2, 1996 (i) the chief
executive officer, and (ii) the other four most highly compensated executive
officers of the Company and its subsidiaries for the 1995 fiscal year (the
"Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------- ----------------------
Awards Payouts
-------- ---------
Stock Long-Term
Name and Principal Options Incentive All Other
Position Year Salary Bonus Other (Shares) Payouts Compensation
- ----------------------------- ---- ------- ------ ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kevin E. Lewis 1995 406,539 50,000 - - - -
Chairman, President and 1994 463,400 42,000 - - - -
Chief Executive Officer 1993 251,853(a) - - - - -
Alton R. Smith 1995 120,994 5,000 - - - -
Executive 1994 121,500 - - - - -
Vice President 1993 121,500 - - 15,000 - -
Jim H. Hale 1995 106,474 19,000 - - - -
Vice President 1994 100,000 8,395 - - - -
Field Operations 1993 91,250 21,047 - - - -
Donald M. Dodson 1995 120,994 2,500 - - - -
Vice President 1994 125,000 10,000 - - - -
Operations Services 1993 135,563 - - - - -
John R. Egenbacher 1995 111,314 2,500 - - - -
Vice President 1994 100,000 7,500 - - - -
Real Estate 1993 92,000 7,500 - - - -
- --------------------------
</TABLE>
(a) The salary of Mr. Lewis includes a partial year beginning June, 1993.
Option Grants
- -------------
No grants of stock options were made during the fiscal year ended January 2,
1996 to the Named Officers which are reflected in the Summary Compensation
Table. No stock appreciation rights were granted during fiscal 1995.
Option Exercises and Fiscal Year-End Values
- -------------------------------------------
At January 2, 1996, there were no options outstanding. All options that had
been granted to executive officers in prior years had terminated either by the
termination of the employee or by agreement between the Company and the holders
of the options.
Report of Compensation Committee
- --------------------------------
The following report shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Exchange Act,
except to the extent the Company specifically incorporates this information by
reference, and shall not be deemed filed under such acts.
9
<PAGE>
In awarding executive compensation, the Company seeks to attract and retain
the most qualified personnel for meeting the needs and objectives of the
Company, and to motivate such individuals to achieve the Company's goals through
compensation arrangements which reward executives based on individual
contributions, as well as the Company's overall results. The key elements of
the Company's executive compensation arrangements include base salary, annual
bonus and stock options. Base salaries are generally determined by evaluating
each individual's responsibilities and relative experience, including a
comparison of the base salaries of executives with comparable positions at other
companies. In comparing base salary levels against those of such companies, the
Board of Directors considered the competitiveness of the entire compensation
package offered to the Company's executive officers as compared to that of
executives with comparable positions at such other companies, however, salary
levels established for the Company's executive officers were not targeted to
correspond to any particular salary level paid by such other companies. Annual
bonuses are determined and stock options are granted by evaluating both the
performance of the Company (including revenue and cash flow generation and stock
price performance) and the individual officers. The financial performance of
definable business units or markets is considered with respect to executives
with responsibility for such units or markets. In addition, other non-financial
performance measures such as improvements in customer relations, increase in
market share and operational efficiencies are also considered. More
specifically, in addition to the factors discussed above, when determining the
annual salary and bonus of the Company's President and Chief Executive Officer,
Kevin E. Lewis, the Compensation Committee took into account the unique
difficulties presented in attempting to restructure a financially troubled
company, the extreme time demands and pressures placed on the chief executive
officer of such a company, the additional duties assumed as a result of the
departure of other senior management and Mr. Lewis' past experience and present
ability to complete the type of complex restructuring proposed by the Company.
In the spring of 1996, after completing the Restructuring, Mr. Lewis recommended
and the Compensation Committee approved a reduction in his base salary from
$420,000 to $350,000.
On June 7, 1996, the Company, the Partnership and Kevin E. Lewis entered into
the Consulting and Indemnity Agreement and General Release (the "Consulting
Agreement") pursuant to which, among other things, Mr. Lewis would resign as
President and Chief Executive Officer effective September 30, 1996 and will
resign his position as Chairman of the Board on December 31, 1996, unless
requested by the Board of Directors to continue until December 31, 1997. On
September 17, 1996 at the request of the Board of Directors, Mr. Lewis agreed to
remain President and Chief Executive Officer beyond September 30, 1996 with no
change to the financial terms of the Consulting Agreement. After his
resignation as President and Chief Executive Officer, Mr. Lewis will serve as a
consultant to the Company until December 31, 1997. Pursuant to the Consulting
Agreement, Mr. Lewis will receive an annual base salary of $350,000, pro-rated
through the end of 1996 and $250,000 through the end of 1997. Mr. Lewis
received $75,000 upon the execution of the Consulting Agreement, $75,000 on
September 30, 1996 and will receive $100,000 on December 31, 1997. In addition,
Mr. Lewis is entitled to receive $100,000 if requested to assist in certain
negotiations on behalf of the Company and additional compensation based upon the
success of such negotiations. Furthermore, the Company agreed to pay, among
other things, certain legal expenses of Mr. Lewis incurred in connection with
the negotiation of the Consulting Agreement and certain travel and moving
related expenses.
On January 25, 1995, each of Kevin E. Lewis, Alton R. Smith, Donald M. Dodson,
Carlene Stewart, John R. Egenbacher and Danny K. Meisenheimer entered into an
employment agreement with the Company pursuant to which he or she was paid an
annual base salary of $420,000, $125,000, $125,000, $115,000, $115,000 and
$90,000, respectively, for the period ending January 25, 1996. In determining
the compensation, the outside directors of the Company took into account a
comparison of the base salaries of officers holding similar positions of certain
of the companies referred to above. On June 16, 1995, the Board of Directors
voted to extend the agreements for the individuals set forth above, except Kevin
E. Lewis, at his request, until a date six months after the consummation of the
Restructuring. As a result, the termination date on the employment agreements,
other than the agreement with Mr. Lewis, was extended to July 2, 1996 at which
time they terminated in accordance with their terms. Mr. Lewis's employment
agreement expired by its terms on January 25, 1996.
10
<PAGE>
The foregoing report has been furnished by Gilbert Osnos, Sanjay Varma and
E.W. Williams, Jr.
Shareholder Return Performance Presentation
- -------------------------------------------
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
New York Stock Exchange Market Value Index and the SIC Code Index for Eating
Places for the two fiscal years ending January 3, 1995 and January 2, 1996.
[GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
FISCAL YEAR ENDING
COMPANY 1991 1991 1992 1993 1994 1995
FURR/BISHOP'S 100 12.00 32.00 28.00 6.00 7.47
INDUSTRY INDEX 100 142.36 181.91 208.89 182.94 250.51
BROAD MARKET 100 129.41 135.50 153.85 150.86 195.61
Certain Compensation Plans
- --------------------------
FBI has a qualified defined benefit pension plan (the "Pension Plan") covering
employees and former employees of the Partnership and its affiliates, including
those who were participants in the Kmart Corporation Employees' Retirement
Pension Plan ( the "Kmart Pension Plan"). The Pension Plan assumed all of the
obligations of the Kmart Pension Plan relating to benefits that accrued for
employees and former employees of certain of FBI's subsidiaries through the
consummation of the acquisition of such subsidiaries from Kmart. Kmart agreed
to transfer an amount of plan assets equal to the actuarially computed
accumulated benefits applicable to the Furr's and Bishop's employees in the
Kmart Pension Plan.
Benefits for service prior to 1987 were based on the provisions of the Kmart
Pension Plan and are frozen for such service. Effective December 31, 1988, the
Pension Plan was frozen for highly compensated participants and effective June
30, 1989 benefit accruals of all participants in the Pension Plan were frozen
indefinitely.
The Pension Plan covers all employees who are at least 21 years old and have
one year or more of participation service and is integrated with Social
Security. A participant's benefit under the Pension Plan will be the greater of
(i) a benefit provided by the participant's "cash balance account" defined
below, or (ii) the sum of (x) the participant's accrued benefit under the Kmart
Pension Plan plus (y) for each year of service after 1986, 0.75% of the
participant's "considered pay" for the year plus (z) 0.75% of considered pay
exceeding the Social Security integration level for the year. "Considered pay"
is comprised of total W-2 compensation, excluding extraordinary items, such as
moving expenses and imputed income, and including pre-tax amounts deferred under
the Employees' Savings Plan described below. The Social Security integration
level is one-half of the Social Security Taxable Wage Base for the year, rounded
to the next highest $1,000. A participant's cash balance account will contain
an amount equal to the sum of (i) 2% of 1986 considered pay multiplied by the
number of years of benefit service prior to 1987, plus (ii) 2% of considered pay
for each year thereafter, plus (iii) 6% interest per annum. The normal form of
benefit under the Pension Plan will be a life annuity for an unmarried
participant and a 50% joint and survivor annuity in the case of a married
participant. Alternatively, participants may elect an optional form of payment
which is the actuarial equivalent of the life annuity. Participants are fully
vested in accrued benefits under the Pension Plan after five years of vesting
service. Unreduced benefits are payable at age 65, or, if earlier, when age
plus years of service equals ninety.
11
<PAGE>
The following table shows the amounts payable using the pension plan formula
and the benefits accrued under the predecessor plans.
Approximate Annual Pension at Age 65*
- -------------------------------------
<TABLE>
<CAPTION>
Total Service As of 12/31/88
Current -------------------------------------
Compensation 5 Years 15 Years 25 Years 35 Years
- ------------ ------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 75,000 $ 3,700 $ 9,500 $15,400 $21,400
100,000 5,000 13,500 21,800 30,100
125,000 6,300 17,300 28,000 38,600
150,000 7,700 21,100 34,200 47,200
175,000 9,000 25,000 40,300 55,700
200,000 10,400 28,800 46,500 64,200
225,000 11,700 32,600 52,700 72,800
325,000 17,000 48,300 77,800 94,023
</TABLE>
* Estimates of frozen pension plan benefits.
The total plan years of service at June 30, 1989 (the date benefit accruals
were frozen) of the five Named Officers of FBI and its subsidiaries are Kevin E.
Lewis 0, Alton R. Smith 15, Donald M. Dodson 31, Jim H. Hale 26, and John R.
Egenbacher 1. If Mr. Smith, Mr. Dodson, Mr. Hale and Mr. Egenbacher were to
retire on their respective retirement dates, they would receive monthly payments
of $848, $3,265, $2,027 and $148, respectively.
The Partnership established an Employees 401K Plan which is qualified under
Sections 401(a) and 401(k) of the Code (the "401K Plan"). Under the 401K Plan,
participants may elect to make pre-tax contributions, in an amount equal to from
1% to 12% of "considered pay", which consists of total W-2 compensation for
personal services, excluding extraordinary pay, such as moving expenses and
imputed income. Pre-tax contributions were limited to $9,240 in 1995.
Additionally, the Partnership may make discretionary contributions to the 401K
Plan. Employees will be eligible to participate in the 401K Plan at age 21 with
one year of participation service.
Participants' contributions are always fully vested. The Board of Directors
of the Company will either designate the Partnership and the Company
contributions as fully vested when made, or the Partnership and the Company
contributions will be subject to a vesting schedule under which 100% of the
Partnership and the Company contributions are vested after seven years.
Employee contributions may be invested either in a fixed income fund, consisting
of guaranteed interest contracts and government securities, or five different
equity funds with various growth and income objectives. Loans from
participants' pre-tax accounts are permitted after two years of participation.
Participants may generally receive their vested account balances at the
earlier of retirement or separation from service.
Option Plan
- -----------
The Board of Directors adopted, and on January 2, 1996 the stockholders
approved, the 1995 Stock Option Plan authorizing an aggregate of 40,540,795
shares of Common Stock (the "1995 Option Plan"). After giving effect to the
reverse stock split, there are 2,702,720 shares of Common Stock reserved for
issuance pursuant to the 1995 Option Plan. The Compensation Committee of the
Board of Directors administers the 1995 Option Plan, including determining the
employees to whom awards will be made, the size of such awards and the specific
terms and conditions applicable to awards, such as vesting periods,
circumstances of forfeiture and the form and timing of payment. Grants including
stock options, stock appreciation rights and restricted stock may be made to
selected
12
<PAGE>
employees of the Company and its subsidiaries and non-employee directors of the
Company. There are no options outstanding under the 1995 Option Plan.
Transactions with Management and Others
- ---------------------------------------
During the Restructuring, Chanin & Co. and Mr. Belinsky as a Managing Director
of Chanin & Co. provided financial advisory services to the original 11%
Noteholders. The fees and expenses of Chanin & Co. were paid by the Company and
approximated $664,000 in 1995. The activities of Chanin & Co. were terminated
at the close of the Restructuring on January 2, 1996.
Since February 1996, Cactus Enterprises, Inc., a company wholly owned by
Kenneth Reimer, has performed certain management consulting services for the
Board. Compensation for such services has been paid by the Company at a rate of
$2,000 per day. Total fees and expenses for 1996 are not anticipated to exceed
$100,000.
On June 7, 1996, the Company, the Partnership and Kevin E. Lewis entered into
the Consulting and Indemnity Agreement and General Release (the "Consulting
Agreement") pursuant to which, among other things, Mr. Lewis would resign as
President and Chief Executive Officer effective September 30, 1996 and will
resign his position as Chairman of the Board on December 31, 1996, unless
requested by the Board of Directors to continue until December 31, 1997. On
September 17, 1996 at the request of the Board of Directors, Mr. Lewis agreed to
remain President and Chief Executive Officer beyond September 30, 1996 with no
change to the financial terms of the Consulting Agreement. After his
resignation as President and Chief Executive Officer, Mr. Lewis will serve as a
consultant to the Company until December 31, 1997. Pursuant to the Consulting
Agreement, Mr. Lewis will receive an annual base salary of $350,000, pro-rated
through the end of 1996 and $250,000 through the end of 1997. Mr. Lewis
received $75,000 upon the execution of the Consulting Agreement, $75,000 on
September 30, 1996 and will receive $100,000 on December 31, 1997. In addition,
Mr. Lewis is entitled to receive $100,000 if requested to assist in certain
negotiations on behalf of the Company and additional compensation based upon the
success of such negotiations. Furthermore, the Company agreed to pay, among
other things, certain legal expenses of Mr. Lewis incurred in connection with
the negotiation of the Consulting Agreement and certain travel and moving
related expenses. The Board of Directors is conducting a search for an
individual to serve as President and Chief Executive Officer of the Company.
PROPOSAL - INDEMNIFICATION AGREEMENTS
Each current director of the Company has entered into an Indemnification
Agreement with the Company, dated as of January 2, 1996 (the "Indemnification
Agreement(s)"), pursuant to which the Company will indemnify each director and
hold each director harmless from any and all losses, expenses and fines to the
fullest extent authorized, permitted or not prohibited by the Delaware General
Corporation Law or any other applicable law (including judicial, regulatory or
administrative interpretations or readings thereof), the Company's Certificate
of Incorporation or By-laws as in effect on the date of execution of the
Indemnification Agreements or other statutory provision authorizing such
indemnification that is adopted after January 2, 1996. In the event that, after
the date of the Indemnification Agreements, the Company provides any greater
right of indemnification, in any respect, to any other person serving as an
officer or director of the Company, then such greater right of indemnification
shall inure to the benefit of the respective director and shall be deemed to be
incorporated in the relevant agreement as a basis for indemnity, at each
director's election, together with the indemnity expressly set forth therein.
In addition, the Indemnification Agreements require the Company to advance the
expenses of the director relating to any action, suit or claim brought against
the director in advance of the final disposition thereof, unless there is a
judicial determination that the director is not entitled to indemnification
under the Indemnification Agreement.
A form of Indemnification Agreement executed by each of the Company's
directors accompanies this Proxy Statement as Exhibit A. The Indemnification
Agreements of Kevin E. Lewis and E.W. Williams, Jr. differ slightly from the
Indemnification Agreements of the other directors in that they specifically
state that the agreements are limited to claims against them while acting as
directors of the Company that arise after January 2, 1996. See "Exhibit A -
Form of Indemnification Agreements."
13
<PAGE>
As an inducement for the Company's directors to continue to serve as members
of the board of directors, each of the Indemnification Agreements provide the
Company's directors with additional assurances that they will be indemnified by
the Company, as set forth above. As such, each director has a personal interest
in the terms of his or her Indemnification Agreement. Due to the existence of
such a personal interest, Stockholder ratification of the Company's execution of
the Indemnification Agreements is sought. In the event the Stockholders fail to
ratify the execution of the Indemnification Agreements, the Company may be
required to take other actions to retain the services of its existing board
members.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL - INDEMNIFICATION AGREEMENTS" TO BE IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF SUCH INDEMNIFICATION AGREEMENTS.
INDEPENDENT AUDITORS
Effective September 17, 1996, the Board of Directors, on the recommendation of
the Audit Committee, has appointed KPMG Peat Marwick LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1996.
Representatives of KPMG Peat Marwick LLP are not expected to be present at the
Annual Meeting.
Deloitte & Touche LLP ("Deloitte & Touche") have been the independent public
accountants of the Company and its predecessors since 1986. For the fiscal year
ended January 2, 1996, Deloitte & Touche also examined the financial statements
of certain of the Company's subsidiaries and provided other audit services to
the Company and its subsidiaries in connection with SEC filings, review of
financial statements, audits of pension plans, and actuarial services.
Representatives of Deloitte & Touche are not expected to be present at the
Annual Meeting.
On the recommendation of the Audit Committee, Deloitte & Touche was dismissed
by the Board of Directors effective September 17, 1996. There have been no
disagreements with Deloitte & Touche on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
during the Company's two most recent fiscal years or any subsequent interim
period which, if not resolved to the satisfaction of Deloitte & Touche, would
have caused it to make a reference to the subject matter of the disagreement(s)
in connection with any report issued by Deloitte & Touche. The Deloitte &
Touche report on the Company's financial statements for the fiscal year ended
January 3, 1995, dated March 2, 1995, included an explanatory paragraph which
identified factors which raised substantial doubt about the Company's ability to
continue as a going concern. As a result of the Restructuring, and the
significant reduction in the Company's debt burden and resulting interest
expense, the March 28, 1996 report of Deloitte & Touche, covering the fiscal
year ended January 2, 1996, did not contain any form of qualification or
uncertainty regarding the Company's financial status.
1997 STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's Proxy Statement for the
1997 Annual Meeting of Stockholders, stockholder proposals must be received by
the Secretary of the Company at its executive offices by February 28, 1997.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment.
14
<PAGE>
The prompt return of your completed proxy card will be appreciated and helpful
in obtaining the necessary vote. Therefore, whether or not you expect to attend
the Annual Meeting, please sign the completed proxy card and return it in the
enclosed envelope.
By Order of the Board of Directors
Dated: October 10, 1996 Alton R. Smith
Secretary
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT CHARGE
TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: FURR'S/BISHOP'S,
INCORPORATED, ATTENTION: ALTON R. SMITH, 6901 QUAKER AVENUE, LUBBOCK, TEXAS
79413.
15
<PAGE>
EXHIBIT A
FORM OF INDEMNIFICATION AGREEMENT
This Agreement is made effective as of January 2, 1996, by and between
Furr's/Bishop's Incorporated, a Delaware corporation (the "Company"), and
_______________ ("Director").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, public companies have from time to time experienced difficulty in
obtaining directors' and officers' liability insurance and significant
variability in premiums and in the scope of coverage of such insurance; and
WHEREAS, the Company currently maintains such insurance but there can be no
assurance that such insurance will be available to the Company and Director in
the future; and
WHEREAS, the Company, in order to induce Director to serve or to continue to
serve the Company, has agreed to provide Director with the benefits contemplated
by this Agreement;
NOW, THEREFORE, in consideration of the promises, conditions, representations
and warranties set forth herein, the Company and Director hereby agree as
follows:
l. Definitions. The following terms, as used herein, shall have the following
-----------
respective meanings:
"Change in Control" shall be deemed to have occurred if (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Act")), 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 stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 20% or more of the total
voting power represented by the Company's then outstanding voting securities,
(ii) during any period of two consecutive years commencing on or after January
2, 1996, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease, for any reason, to
constitute a majority of the Board of Directors, (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that 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 80% of the total voting
power represented by the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for sale or disposition by the Company of all or
substantially all of the Company's assets.
"Claim" means any threatened, pending or completed action, suit or proceeding,
or any inquiry or investigation, whether conducted by or on behalf of the
Company or any other party, that Director in good faith believes might lead to
the institution of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other.
"Covered Act" means any breach of duty, neglect, error, misstatement,
misleading statement, omission or other act done or wrongfully attempted by
Director, including Director's own negligence, or any of the foregoing alleged
by any claimant or any event or occurrence related to the fact that Director is
or was a director, officer, employee, agent or fiduciary of the Company or is or
was serving at the request of the Company as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint venture,
trust or other entity.
16
<PAGE>
[Lewis and Williams Agreements - "Covered Act" means any breach of duty,
neglect, error, misstatement, misleading statement, omission or other act done
or wrongfully attempted by Director, including Director's own negligence, or any
of the foregoing alleged by any claimant or any event or occurrence related to
the fact that Director is or was a director of the Company at any time on or
after January 2, 1996.]
"Determination" means a determination, based on the facts known at the time,
by:
(i) A majority vote of all disinterested directors;
(ii) Special, independent legal counsel in a written opinion prepared at the
request of a majority of all disinterested directors or pursuant to
Section 4(a);
(iii) A majority of the disinterested stockholders of the Company; or
(iv) A final adjudication by a court of competent jurisdiction.
"Determined" shall have a correlative meaning.
"Excluded Claim" means any Claim:
(i) Based upon or attributable to Director gaining in fact any personal
profit or advantage to which Director is not entitled;
(ii) For the return by Director of any remuneration paid to Director,
without the previous approval of the stockholders of the Company, which
is illegal;
(iii) For an accounting of profits in fact made from the purchase or sale
by Director of securities of the Company within the meaning of Section
16 of the Act or similar provisions of any state law;
(iv) Resulting from Director's knowingly fraudulent, dishonest or willful
misconduct; or
(v) Any claim for which indemnification is prohibited by applicable law.
"Expenses" means any expense incurred by Director as a result of a Claim or
Claims made against Director for Covered Acts including, without limitation,
attorneys' fees and all other costs, expenses and obligations paid or incurred
in connection with investigating, defending, being a witness in, or
participating in (including on or preparing to defend, to be a witness in, or
shall not include) Fines.
"Fines" means any fine, penalty or, with respect to an employee benefit plan,
any excise tax or penalty assessed with respect thereto.
"Losses" means any amount that Director is legally obligated to pay as a
result of a Claim or Claims made against Director for Covered Acts including,
without limitation, damages and judgments and sums paid in settlement of a Claim
or Claims, but shall not include Fines.
2. Maintenance of Directors' and Officers' Liability Insurance.
-----------------------------------------------------------
(a) The Company hereby covenants and agrees that, so long as Director shall
continue to serve as a director of the Company and thereafter so long as
Director shall be subject to any Claim for any Covered Act, the Company,
subject to Section 2(c), shall use its best efforts to maintain in full
force and effect directors' and officers' liability insurance.
(b) In all policies of directors' and officers' liability insurance maintained
by the Company, Director shall be named as an insured in such a manner as
to provide Director the same rights and benefits, subject to the same
limitations, as are accorded to the Company's directors or officers most
favorably insured by such policy.
17
<PAGE>
(c) The Company shall have no obligation to maintain directors' and officers'
liability insurance if the Board of Directors of the Company determines in
good faith that such insurance is not reasonably available, the premium
cost for such insurance is unreasonably disproportionate to the amount of
coverage provided, or the coverage provided by such insurance is so
limited by exclusions as to provide an unreasonably insufficient benefit.
3. Indemnification. The Company shall indemnify Director and hold Director
---------------
harmless from any and all Losses, Expenses and Fines to the fullest extent
authorized, permitted or not prohibited (i) by the General Corporation Law of
the State of Delaware (the "GCL"), or any other applicable law (including
judicial, regulatory or administrative interpretations or readings thereof), the
Company's Certificate of Incorporation or Bylaws as in effect on the date
hereof, or (ii) by any amendment thereof or other statutory provision
authorizing or permitting such indemnification that is adopted after the date
hereof, subject to the further provisions of this Agreement [Lewis and Williams
Agreements add: ", with respect to actions, or failures to act, as a director
of the Company occurring on or after January 2, 1996"]. In the event that after
the date of this Agreement the Company provides any greater right of
indemnification, in any respect, to any other person serving as an officer or
director of the Company, then such greater right of indemnification shall inure
to the benefit of Director and shall be deemed to be incorporated in this
Agreement as a basis for indemnity, at Director's election, together with the
indemnity expressly set forth herein.
4. Excluded Coverage.
-----------------
(a) The Company shall have no obligation to indemnify Director for and hold
Director harmless from any Loss, Expense or Fine which has been Determined
to constitute an Excluded Claim, provided that in the event of a Change in
Control, then with respect to all matters thereafter arising concerning
the rights of Director to indemnity payments and Expense advances under
this Agreement, or any other agreements or bylaws now or hereafter in
effect relating to Claims for Covered Acts, a Determination with respect
to an Excluded Claim shall be made only by a court of competent
jurisdiction or by special, independent legal counsel selected by Director
and approved by the Company (which approval shall not be unreasonably
withheld), and who has not otherwise performed services for the Company or
Director. In the event that Director and the Company are unable to agree
on the selection of the special, independent legal counsel, such special,
independent legal counsel shall be selected by lot from among at least
five law firms designated by Director, each in the States of Delaware or
Texas having more than thirty-five (35) attorneys and having a rating of
"av" or better in the then current Martindale-Hubbell Law Directory. Such
selection shall be made in the presence of Director (and Director's legal
counsel or either of them, as Director may elect) and a representative of
the Company. Such special, independent legal counsel, among other things,
shall determine whether and to what extent Director would be permitted to
be indemnified under applicable law and shall render its written opinion
to the Company and Director to such effect.
If there has been a Determination that the Company is not obligated to
indemnify Director as a result of an Excluded Claim (whether by special,
independent legal counsel or otherwise), Director shall have the right to
commence litigation in any court in the State of Delaware having subject matter
jurisdiction thereof, and in which venue is proper, challenging any such
Determination. The Company shall be reimbursed by Director (who hereby agrees
to reimburse the Company) for all amounts theretofore paid as indemnity or
advancement of expenses with respect to such Excluded Claim (but only upon a
final judicial Determination that Director is not entitled to indemnification
made with respect thereto as to which all rights of appeal have been exhausted
or lapsed). The Company shall be obligated to indemnify or advance any
additional amounts to Director in accordance with this Agreement until such
judicial Determination has been made.
(b) The Company shall use its best efforts to make the Determination
contemplated herein promptly. Upon request by Director, in connection with
any matter for which indemnification or advances of expenses may be sought
hereunder, the Company agrees to promptly make a Determination whether
such matter constitutes an Excluded Claim. In this connection, the Company
agrees:
(i) if the Determination is to be made by a majority of disinterested
directors of the Company or a
18
<PAGE>
committee thereof, such Determination shall be made not later than
thirty (30) days after a written request for a Determination (a
"Request") is delivered to the Company by Director;
(ii) if the Determination is to be made by special, independent legal
counsel, such Determination shall be made not later than forty (40)
days after selection of independent legal counsel and in any event
not later than sixty (60) days after a Request is delivered to the
Company by Director; and
(iii) if the Determination is to be made by the stockholders of the
Company, such Determination shall be made not later than ninety (90)
days after a Request is delivered to the Company by Director.
The failure to make a Determination within the above-specified time periods
shall constitute a Determination approving full indemnification or reimbursement
of Director. All costs of making the Determination shall be borne solely by the
Company.
(c) The Company shall have no obligation to indemnify Director and hold
Director harmless for any Loss, Expense or Fine to the extent that
Director is actually and finally reimbursed for such Loss, Expense or Fine
by the Company pursuant to the Company's Bylaws or otherwise.
(d) The Company shall have no obligation to indemnify Director and hold
Director harmless for any Fines to the extent that such indemnification is
prohibited by the GCL.
5. Indemnification Procedures.
--------------------------
(a) Promptly after receipt by Director of notice of the commencement of or the
threat of commencement of any Claim, Director shall, if indemnification
with respect thereto is being sought from the Company under this
Agreement, notify the Company of the commencement thereof, provided that
failure to so notify the Company shall not relieve the Company from any
liability that it may have to Director under this Agreement unless such
failure materially and adversely affects the rights of the Company.
(b) If, at the time of the receipt of such notice, the Company has directors'
and officers' liability insurance in effect, the Company shall give prompt
and proper notice of the commencement of such Claim to the insurer. The
Company shall thereafter take all necessary or desirable action to pay or
to cause such insurer to pay, on behalf of Director, all Losses, Expenses
and Fines payable as a result of such Claim in accordance with the terms
of such policies.
(c) To the extent the Company does not, at the time of the commencement of or
the threat of commencement of such Claim, have applicable directors' and
officers' liability insurance, or if the full amount of any Expenses
arising out of such action, suit or Claim will not be payable under such
insurance then in effect, the Company shall be obligated to pay the
Expenses relating to any such Claim in advance of the final disposition
thereof, unless the Claim has been Determined to be an Excluded Claim for
which the Company is not obligated to provide indemnity or advancement of
Expenses under Section 4(a) of this Agreement. The Company may, if
appropriate, assume the defense of such Claim, with counsel satisfactory
to Director, upon the delivery to Director of written notice of its
election so to do. After delivery of such notice, the Company will not be
liable to Director under this Agreement for any legal or other Expenses
subsequently incurred by Director in connection with such defense other
than reasonable costs of investigation, provided that Director shall have
the right to employ counsel to participate in the investigation and
defense of any such Claim, but the fees and expenses of such counsel
incurred after delivery of notice from the Company of its assumption of
such defense shall be at the Director's expense, provided further that if
(i) the employment of counsel by Director has been previously authorized
by the Company, (ii) counsel for Director shall have reasonably concluded
that there may be a conflict of interest between the Company and Director
in the conduct of any such defense and so notified the Company in writing,
or (iii) the Company shall not, in fact, have taken all necessary actions
to effectively assume the defense of such action, the fees and expenses of
Director's counsel shall be at the expense of the Company.
(d) All payments on account of the Company's indemnification and advancement
obligations under this
19
<PAGE>
Agreement shall be made promptly, but in any event within thirty (30) days
of Director's written request therefor, provided that all payments on
account of the Company's obligations under Paragraph 5(c) of this
Agreement prior to the final disposition of any Claim, shall be made
within ten (10) days of Director's written request therefor.
(e) Director agrees to reimburse the Company for all Losses, Expenses and
Fines paid by the Company on behalf of Director in connection with any
Claim against Director in the event and only to the extent that a
Determination shall have been made by a court in a final adjudication from
which there is no further right of appeal that the Director is not
entitled to be indemnified by the Company for such amounts because the
Claim is an Excluded Claim or because Director is otherwise not entitled
to payment under each of this Agreement, applicable law and any other
right of indemnity or contribution by the Company that may be available to
Director.
(f) Company agrees that it will provide reasonable cooperation to Director and
Director's counsel and their advisors in connection with the investigation
and defense of any Claim for which indemnity is sought by Director under
this Agreement or otherwise, including (i) providing reasonable access to,
and right to make copies of, Company's records, (ii) providing reasonable
access to Company's officers, employees and counsel, and (iii) making
Company's officers and employees reasonably available for depositions,
trial testimony, and preparation therefor.
6. Final Determination; Settlement. The Company shall pay all Losses or Fines
-------------------------------
for which Director is indemnified hereunder upon final Determination that the
Director is entitled to indemnity therefor. The Company shall have no
obligation to indemnify Director under this Agreement for any amounts paid in
settlement of any Claim effected without the Company's prior written consent.
The Company shall not settle any claim in any manner which would impose any Fine
or any obligation on Director without Director's written consent. Neither the
Company nor Director shall unreasonably withhold their consent to any proposed
settlement.
7. Rights Not Exclusive. The rights provided hereunder shall not be deemed
--------------------
exclusive of any other rights to which Director may be entitled under any
charter provision, bylaw, agreement, vote of stockholders or of disinterested
directors or otherwise, both as to action in his official capacity and as to
action in any other capacity by holding such office, and shall continue after
Director ceases to serve the Company as a director.
8. Enforcement.
-----------
(a) Director's right to indemnification shall be enforceable by Director only
in the state courts of the State of Delaware and shall be enforceable
notwithstanding any adverse Determination regarding the Director's right
to indemnification. In any such action, if a prior adverse Determination
regarding the Director's right to indemnification has been made, the
burden of proving that indemnification is required under this Agreement
shall be on Director. The Company shall have the burden of proving that
indemnification is not required under this Agreement if no prior adverse
Determination shall have been made.
(b) In the event that any action is instituted by Director under this
Agreement, or to enforce or interpret any of the terms of this Agreement,
Director shall be entitled to be paid all court costs and expenses,
including reasonable counsel fees, incurred by Director with respect to
such action, unless the court determines that each of the material
assertions made by Director as a basis for such action were not made in
good faith or were frivolous.
9. Severability. In the event that any provision of this Agreement is
------------
determined by a court to require the Company to do or to fail to do an act which
is in violation of applicable law, such provision shall be limited or modified
in its application to the minimum extent necessary to avoid a violation of law,
and, as so limited or modified, such provision and the balance of this Agreement
shall be enforceable in accordance with its terms.
10. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
20
<PAGE>
11. Consent to Jurisdiction. The Company and Director each hereby irrevocably
-----------------------
consent to the jurisdiction of the courts of the State of Delaware for all
purposes in connection with any action or proceeding that arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
12. Successors and Assigns. This Agreement shall be (i) binding upon all
----------------------
successors and assigns of the Company (including any transferee of all or
substantially all of its assets and any successor by merger or otherwise by
operation of law) and (ii) shall be binding on and inure to the benefit of the
heirs, personal representatives, and estate of Director.
13. Amendment. No amendment, modification, termination or cancellation of this
---------
Agreement shall be effective unless made in a writing signed by each of the
parties hereto.
14. Subrogation. In the event of payment under this Agreement, the Company
-----------
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Director, who shall execute all instruments required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents as may be necessary to enable the Company
effectively to bring suit to enforce such rights.
IN WITNESS WHEREOF, the Company and Director have executed this Agreement as of
the day and year first above written.
FURR'S/BISHOP'S INCORPORATED
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
-------------------------------------------
Director
21
<PAGE>
SIDE ONE
--------
FURR'S/BISHOP'S, INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 21, 1996
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Furr's/Bishop's Incorporated (the "Company") to be
held on November 21, 1996, and the Proxy Statement for Annual Meeting of
Stockholders (herein so called) in connection therewith, each dated October 10,
1996, (b) appoints Kevin E. Lewis and Alton R. Smith as Proxies, or either of
them, each with the power to appoint a substitute, (c) authorizes the Proxies to
represent and vote, as designated below, all the shares of Common Stock of the
Company held of record by the undersigned on September 25, 1996, at such annual
meeting and at any adjournment(s) thereof and (d) revokes any proxies heretofore
given.
1. Election of Directors: [_] FOR all nominees [_] WITHHOLD AUTHORITY
(Proposed by the listed below (except for all nominees
Company) as marked to the listed below
contrary below)
Suzanne Hopgood Kenneth F. Reimer
Gilbert C. Osnos E.W. Williams, Jr.
Kevin E. Lewis Sanjay Varma
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, WRITE THE
NOMINEE'S NAME ON THE SPACE BELOW.)
- --------------------------------------------------------------------------------
2. Proposal of the Company to authorize the Company's execution and delivery
of Indemnification Agreements between the Company and each of its
directors.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued and to be signed on reverse side)
<PAGE>
SIDE TWO
--------
(Continued from other side)
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s)
thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS INDICATED, THIS
PROXY WILL BE VOTED FOR THE ELECTION TO THE BOARD OF DIRECTORS OF EACH OF THE
NOMINEES LISTED ON THIS PROXY AND FOR RATIFICATION OF THE INDEMNIFICATION
AGREEMENTS, AND IN THE DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS.
Dated:
-----------------------, 1996
-----------------------------------
-----------------------------------
Please sign your name above exactly
as it appears on your stock
certificate, date and return
promptly. When signing on behalf of
a corporation, partnership, estate,
trust, or in any representative
capacity, please sign name and
title. For joint accounts, each
joint owner must sign.
