<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (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, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 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:
---------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
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 14, 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.
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
<PAGE>
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".
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
2
<PAGE>
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.
<TABLE>
<CAPTION>
AMOUNTS AND PERCENT
NATURE OF OF TOTAL
BENEFICIAL OUTSTANDING
NAME AND ADDRESS OF 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.
3
<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.
4
<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 and 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 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
5
<PAGE>
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.
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.
6
<PAGE>
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
---- --- -----
<C> <C> <S>
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 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
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"):
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION 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> <C>
Kevin E. Lewis.......... 1995 406,539 50,000 -- -- -- --
Chairman, President and
Chief 1994 463,400 42,000 -- -- -- --
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.
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
8
<PAGE>
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.
The foregoing report has been furnished by Gilbert Osnos, Sanjay Varma and
E.W. Williams, Jr.
9
<PAGE>
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.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, PEER GROUP AND BROAD MARKET
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period INDUSTRY BROAD
(Fiscal Year Covered) FURR/BISHOP'S INDEX MARKET
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-1991 $100.00 $100.00 $100.00
FYE 1991 $ 12.00 $142.36 $129.41
FYE 1992 $ 32.00 $181.91 $135.50
FYE 1993 $ 28.00 $208.89 $153.85
FYE 1994 $ 6.00 $182.94 $150.86
FYE 1995 $ 7.57 $250.51 $195.61
</TABLE>
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
10
<PAGE>
(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.
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 $117, 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
11
<PAGE>
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 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
12
<PAGE>
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."
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, 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.
13
<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 14, 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.
14
<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
<PAGE>
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.
[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.
2
<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:
3
<PAGE>
(i) if the Determination is to be made by a majority of disinterested
directors of the Company or a 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,
4
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(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 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.
5
<PAGE>
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.
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
6
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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 14,
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
listed below for all nominees
(except as marked listed below
to the contrary
below)
(Proposed by the Company)
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)
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, part-
nership, estate, trust,
or in any representative
capacity, please sign
name and title. For
joint accounts, each
joint owner must sign.
