<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 Section 240.14a-12
FURR'S RESTAURANT GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
------------------------------------------------------------------------
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FURR'S RESTAURANT GROUP, INC.
3001 EAST PRESIDENT GEORGE BUSH HWY.
SUITE 200
RICHARDSON, TX 75082
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------
ON
MAY 21, 2002
You are hereby notified that the 2002 Annual Meeting of Stockholders
of Furr's Restaurant Group, Inc. ("Furr's") will be held at 10:00 a.m. local
time on May 21, 2002 in the Company Support Center at 3001 East President
George Bush Hwy., Suite 200, Richardson, Texas 75082 for the following
purposes:
1. To elect six (6) directors to serve one-year terms;
2. To approve a proposal to increase the number of shares
issuable under the Company's 1995 Stock Option Plan by
700,000; 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 Furr's Common Stock at the close of
business on April 1, 2002 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment or postponement thereof.
You are cordially invited to attend the Annual Meeting in person. If
you are unable to attend the Annual Meeting in person, please 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. If you attend the
Annual Meeting, you may revoke your proxy and vote your shares in person.
By Order of the Board of Directors
/s/ BRUCE S. DUDLEY
---------------------------------
Bruce S. Dudley
Secretary
<Page>
FURR'S RESTAURANT GROUP, INC.
3001 EAST PRESIDENT GEORGE BUSH HWY.
SUITE 200
RICHARDSON, TX 75082
---------------
PROXY STATEMENT
---------------
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 2002
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Furr's Restaurant Group,
Inc., formerly known as Furr's/Bishop's, Incorporated, a Delaware corporation
(the "Company" or "Furr's"), for use at the 2002 Annual Meeting of
Stockholders to be held at 10:00 a.m. local time on May 21, 2002 in the
Company Support Center at 3001 East President George Bush Hwy., Suite 200,
Richardson, Texas 75082 and at any adjournment or postponement thereof (the
"Annual Meeting"). Only holders of record of Furr's Common Stock, par value
$.01 per share (the "Common Stock"), at the close of business on April 1,
2002 (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. This
Proxy Statement and the accompanying proxy card are being mailed to
stockholders on or about April 15, 2002.
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 the nominees
for director named in this Proxy Statement and FOR the proposal to increase
the number of shares issuable under the Company's 1995 Stock Option Plan by
700,000. As to any other business which may properly come before the Annual
Meeting, the persons named on the proxy card will vote according to their
best judgment.
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.
The cost of preparing, assembling and mailing this Proxy Statement
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
2
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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.
VOTING SECURITIES AND PRINCIPAL HOLDERS
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 9,769,614 shares of Common Stock held of record and
beneficially by approximately 4,200 holders. 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.
Approval of the proposal to increase the number of shares issuable
under the Company's 1995 Stock Option Plan will require a majority of the
votes cast. The Company's directors will be elected by plurality of the votes
cast. Under applicable Delaware law, abstentions and broker non-votes are
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum for the transaction of business.
Abstentions and broker non-votes are tabulated separately, with abstentions
counted in tabulations of the votes cast on a proposal for purposes of
determining whether a proposal has been approved while broker non-votes
relating to a proposal are not counted as a vote cast with respect to that
proposal.
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PRINCIPAL STOCKHOLDERS
To the best knowledge of management of the Company, no person owned
beneficially, as of April 1, 2002, more than 5 percent of the outstanding
shares of the Company's Common Stock, except as follows:
<Table>
<Caption>
AMOUNT & NATURE OF PERCENT OF
NAME & ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP TOTAL COMMON STOCK
---------------------------------- -------------------- ------------------
Grace Brothers/Rock Finance Group(1) 4,609,819 47.2%
1560 Sherman Avenue
Evanston, IL 60201
Teachers Insurance and Annuity Association of America 1,721,527 17.6%
730 Third Avenue
New York, NY 10011
John Hancock Financial Services, Inc.
John Hancock Life Insurance Company.(2) 1,095,598 11.2%
P.O. Box 111
Boston, MA 02117
The Mutual Life Insurance Company of New York 821,067 8.4%
1740 Broadway
New York, NY 10019
</Table>
- ---------------------------
(1) This information is based on a Schedule 13D/A filed jointly by Grace
Brothers, Ltd. ("Grace"), Rock Finance, L.P. ("Rock"), Bradford T.
Whitmore, Spurgeon Corporation and Bun Partners on June 20, 2001. Grace
presently holds a total of 3,519,987 shares of the Common Stock, which
represent approximately 36.0 percent of the Common Stock outstanding.
Rock presently holds a total of 1,089,832 shares of the Common Stock,
which represent approximately 11.2 percent of the Common Stock
outstanding. Bradford T. Whitmore, Spurgeon Corporation and Bun Partners
are general partners of Grace and Rock and therefore may be deemed to be
beneficial owners of the shares held by the partnerships. Grace has the
sole power to vote and dispose of the Common Stock which it beneficially
owns and Rock has the sole power to vote and dispose of the Common Stock
which it beneficially owns.
(2) Based on information contained in the Schedule 13G filed on February 1,
2001, John Hancock Financial Services, Inc. ("JHFS") became the parent
holding company of John Hancock Life Insurance Company ("JHLIC") as a
result of the demutualization of JHLICO. Accordingly JHFS may be deemed
the beneficial owner of the 1,095,598 shares Common Stock beneficially
owned by JHLICO.
4
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ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
PROPOSAL 1 - ELECTION OF DIRECTORS
The By-laws of the Company provide that directors are 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 until their
successors are duly elected and qualified.
The Nominees for Election at the 2002 Annual Meeting are: Robert N.
Dangremond, Margaret B. Hampton, Damien W. Kovary, Craig S. Miller, Max Pine
and Robert W. Sullivan, each of whom currently serves as a member of the
Board of Directors. The By-laws of the Company provide that directors are
elected by a plurality of the votes cast at the Annual Meeting; therefore,
the six director nominees receiving the most votes will be elected. Unless
otherwise specified, the enclosed proxy will be voted in favor of each of the
nominees named above. 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, the Board of Directors may, but is not required to,
designate a substitute nominee or nominees, in which event the proxies will
be voted FOR the election of the substitute nominee or nominees.
The nominees for election as directors are:
ROBERT N. DANGREMOND, 59, has since August 1989, been a principal of Jay Alix
& Associates. Before joining Jay Alix & Associates he was the Chief Financial
Officer for Leach & Garner Company for eight years and a Vice President of
the Chase Bank. He was also a marketing manager with Scott Paper Company. Mr.
Dangremond serves on the Board of Directors of Viskase Corporation. Mr.
Dangremond has served as a director of Furr's since January 2001.
MARGARET B. HAMPTON, 44, joined Grace Brothers, Ltd., an investment
management firm, in March 1997. Prior to joining Grace Brothers, Ltd., Ms.
Hampton was Managing Director of the Distressed Investments Unit of First
Chicago Capital Corporation. Before joining First Chicago in 1991, Ms.
Hampton was a vice president with Bear Stearns & Co., Inc. in the Financial
Restructuring Group, where she advised debtors and creditors of distressed
companies in a variety of industries including retailing, oil and gas, health
care and real estate. Ms. Hampton serves on the Board of Directors of Ladish
Co., Inc. Ms. Hampton has served as a director of Furr's since February 1999.
DAMIEN W. KOVARY, 47, has served as a managing director of Heico
Acquisitions, a subsidiary of Heico Companies, LLC, since 1997. Prior to
joining Heico Acquisitions, Mr. Kovary was the managing director of the
Special Loan Unit at Teachers Insurance and Annuity Association of America
("Teachers") from 1986 to 1997. Before joining Teachers, Mr. Kovary was a
vice president in the Workout Department at Marine Midland Bank from 1982 to
1986. While at Marine Midland Bank, Mr. Kovary also served as President of
MarMid Energy Corp. and TOMAR Energy Corp. Mr. Kovary has been a director of
Furr's since May 1998.
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CRAIG S. MILLER, 52, has served as President and Chief Executive Officer of
Furr's and as a member of the Board of Directors of Furr's since November
2001. Prior to joining Furr's, Mr. Miller was President of Uno Restaurant
Corporation. He joined Uno in 1984 and was President from 1986 to 2001. He
became Chief Executive Officer of the company in 1996. Prior to his
association with Uno, he had an 11-year career with General Mills (Darden)
Restaurants where he worked in executive positions with Red Lobster Inns and
Casa Gallardo Mexican Restaurants. Mr. Miller is a board member of the
National Restaurant Association and past Chairman of its SAFE Fund. He is the
current Chairman of the NRA's Government Affairs and Public Policy and was
named to the Board of Trustees of the Educational Foundation in 2001.
MAX PINE, 67, has since May 2001, had his own consulting firm, Aries
Associates, to concentrate on advising CEO's, serving on corporate boards and
advising financial investors. From March 1994 to May 2001, Mr. Pine had been
retained as a restaurant industry consultant by BNY Capital Markets, Inc.
(formerly Patricof & Co. Capital), the investment banking division of The
Bank of New York. Prior to 1994, Mr. Pine was employed by Restaurant
Associates Corp. for 25 years, serving as President for 17 years. Mr. Pine
serves as a director of Benihana, Inc. He has served as a director of Furr's
since February 1999.
ROBERT W. SULLIVAN, 43, has served as Chairman and CEO of The Plitt Company
since he purchased the company in 1985. Prior to serving as Chairman of The
Plitt Company, Mr. Sullivan started and in 1998 sold one of the country's
largest industrial and medical marketing-consulting firms, The Martec Group,
which serves a number of Fortune 100 companies and has offices in Tokyo, San
Francisco, Detroit, Chicago and Frankfort. Mr. Sullivan serves as an adviser
and a keynote speaker on such topics as distribution, market entry,
communicating strategies and global market trends for a variety of businesses
an industry groups, including the World Trade Institute. Mr. Sullivan serves
on the Board of Directors/Advisors of Ladish Co., Inc., Clarity
Communications and The Cancer Wellness Center of Chicago. He has served as a
director of Furr's since May 2000.
MANAGEMENT INFORMATION
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held seven (7) meetings during the fiscal
year 2001. The Board of Directors has four standing committees: the Audit
Committee, the Compensation Committee, the Finance Committee and the
Nominating Committee.
The Audit Committee, which held four (4) meetings during fiscal year
2001, consisted of Robert N. Dangremond, Damien W. Kovary and Robert W.
Sullivan. The Committee's responsibilities include: recommending to the Board
the firm to be employed by the Company as its external auditor; consulting
with the persons chosen to be the external auditors with regard to the plan
of audit; reviewing the fees of the external auditors for audit and non-audit
services; reviewing, in consultation with the external auditors, their report
of audit or proposed report of audit and the accompanying management letter,
if any; reviewing with management and the external auditor, before
publication or issuance, the annual financial statements, and any annual
6
<Page>
reports to be filed with the Securities and Exchange Commission; and
consulting with management and the external auditors regarding the adequacy
of corporate systems of accounting and control.
The Compensation Committee, which held five (5) meetings during
fiscal year 2001, consisted of Robert N. Dangremond, Margaret B. Hampton,
Damien W. Kovary and Robert W. Sullivan. The Committee's responsibilities
include: reviewing the recommendations of the Company's President and CEO
with respect to compensation of management employees; administering the
Company's 1995 Stock Option Plan; reviewing management recommendations for
grants of stock options and any proposed plans or practices of the Company
relating to compensation and benefits of its employees and directors; and
determining compensation and incentives for the Chief Executive Officer of
the Company. See "Executive Compensation-Report of the Compensation
Committee" and "-Option Plan."
The Finance Committee, which held two (2) meetings during fiscal
year 2001, consisted of Margaret B. Hampton, Damien W. Kovary and Max Pine.
The principal functions and responsibilities of the Finance Committee are: to
review and approve investment and loan policies; review and approve
asset-liability management policies; monitor corporate financial results; and
recommend corporate financial actions, including dividends and capital
financing. The Finance Committee also makes recommendations to the Board of
Directors with respect to the terms of loans and issuances of securities of
the Company, including equity and debt securities.
The Nominating Committee, which did not hold any meetings during
fiscal year 2001, consisted of Margaret B. Hampton, Damien W. Kovary and Max
Pine. The Board of Directors has acted in lieu of the Nominating Committee in
proposing candidates for election as directors. The Nominating Committee's
responsibilities include: meeting periodically to review the qualifications
of potential Board candidates from whatever source received; reporting its
findings to the Board and proposing nominations for Board membership for
approval by the Board and for submission to stockholders for approval; and
reviewing and making recommendations to the Board, where appropriate,
concerning the size of the Board and the frequency of meetings. The
Nominating Committee will consider nominee recommendations from holders of
Common Stock. Recommendations for the election of directors at the Company's
2003 Annual Meeting of Stockholders should be submitted in writing to the
Nominating Committee at the address of the Company's principal executive
offices on or before December 13, 2002.
In addition to the standing committees, the Board from time to time
establishes committees of limited duration for special purposes. During
fiscal year 2001, the Company had two special committees, the CEO Search
Committee and the Executive Support Committee.
The CEO Search Committee, which held three (3) meetings in fiscal
year 2001, consisted of Robert N. Dangremond, Margaret B. Hampton, Damien W.
Kovary and Max Pine. The CEO Search Committee was created to manage the
process of searching for and securing the services of a Chief Executive
Officer for the Company following Mr. Ratner's resignation in July 2001. The
CEO Search Committee also negotiated Mr. Miller's employment and compensation
arrangements.
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The Executive Support Committee consisted of Damien W. Kovary,
Margaret B. Hampton and Max Pine. The Executive Support Committee was created
to provide increased oversight and assistance to management during the period
following Mr. Ratner's resignation in July 2001 until Mr. Miller commenced
his employment in November 2001. Members of the Committee met on a regular
basis with members of the Company's senior management. For service on the
committee, each member received the indicated compensation: Mr. Kovary -
$23,500; Ms. Hampton - $14,500; Mr. Pine - $14, 500.
Each director attended at least 75 percent of all meetings of the
Board of Directors and committees to which they were assigned during fiscal
year 2001.
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. The Chairman of the Board of Directors receives an additional fee
of $1,000 per month. In addition, non-employee directors receive $500 for
each telephonic committee meeting attended and $1,000 for each committee
meeting attended in person.
DIRECTOR OPTIONS
Under the Company's 1995 Stock Option Plan, as amended, each
director automatically receives a grant of an option to purchase 20,000
shares of Company Common Stock upon appointment as a director, vesting and
becoming exercisable in three equal installments on the first, second and
third anniversaries of the date of grant, and having an exercise price equal
to the closing price of the Company's Common Stock on the date of grant. In
January 2001 the Board of Directors approved the grant to Robert N.
Dangremond to purchase 20,000 shares of Common Stock at a price of $2.25 per
share, which will vest and become exercisable in three equal installments on
the first, second and third anniversaries of the grant. In May 2001 the Board
of Directors approved the grant to each director of an option to purchase
15,000 shares of Common Stock at a price of $3.00 per share, which was
immediately vested and exerciseable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 10 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 American Stock Exchange. Officers,
directors and greater than ten-percent stockholders 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 reporting forms
received by it or written representations from certain reporting persons that
no filings were required for those persons, the Company believes that, during
fiscal 2001 all other filing requirements of Section 16(a) were complied with
by its officers, directors and greater than ten-percent beneficial owners.
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EXECUTIVE OFFICERS
<Table>
<Caption>
NAME AGE TITLE
---- --- -----
Craig S. Miller 52 President and Chief Executive Officer
Thomas M. Blasdell 52 President of Dynamic Foods
Donald M. Dodson 64 Vice President - Product and New Business
Development
Bruce S. Dudley 39 Vice President - Administration
Nancy A. Ellefson 44 Vice President - Finance
Danny K. Meisenheimer 42 Vice President - Marketing
Elizabeth A. Smith 37 Vice President - Field Operations
</Table>
CRAIG S. MILLER has been President and Chief Executive Officer since November
5, 2001. Before joining the Company, Mr. Miller served as President of Uno
Restaurant Corporation (from 1986 to 2001) and became Chief Executive Officer
in 1996. Prior to joining Uno in 1984, he had an 11-year career with General
Mills (Darden) Restaurants where he worked in executive positions with Red
Lobster Inns and Casa Gallardo Mexican Restaurants.
THOMAS M. BLASDELL has been President of Dynamic Foods since December 2001.
Prior to this, he held several other positions with the Company, including
Vice President and General Manager of Dynamic Foods, Vice President of
Purchasing and Distribution, Vice President of Purchasing, Director of
Purchasing and Manager of Warehousing and Inventory Control. Mr. Blasdell
joined the Company in 1971.
DONALD M. DODSON has been Vice President of Product and New Business
Development since December 2001, was Vice President of Operations from 1993
until 2001 and was Vice President- Food and Beverage from 1990 until 1993.
Mr. Dodson joined the Company in 1958.
BRUCE S. DUDLEY joined the Company as Vice President of Human Resources in
October 1998 and was promoted to Vice President of Administration in January
2001. Prior to this, since 1997, Mr. Dudley was a senior consultant with the
Dallas based restaurant-consulting firm Batrus-Hollweg Inc. From 1995 to 1997
Mr. Dudley was the Manager of Organizational Learning for Electronic Data
Systems ("EDS") in Plano, Texas. Prior to 1995, Mr. Dudley was an independent
consultant specializing in organizational development.
NANCY A. ELLEFSON has been Vice President of Finance since November 2001. Ms.
Ellefson joined the Company as Controller in December 1999. After four years
at an international accounting firm, Ms. Ellefson was the controller of
various companies in the real estate, healthcare and restaurant industries
prior to joining the Company.
DANNY K. MEISENHEIMER has been Vice President of Marketing since January
1995. Mr. Meisenheimer joined the Company in 1991.
ELIZABETH A. SMITH has been Vice President of Field Operations since January
2002. Prior to this Ms. Smith held several positions with the Company,
including General Manager, Director of Training, Regional Director and
Director of Operations. Ms. Smith joined the Company in 1981.
9
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STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVES
As of April 1, 2002, according to information furnished to the Company, each
director, director nominee, the executive officers named in the summary
compensation table and all named executive officers and directors as a group,
owned beneficially the indicated shares of Common Stock:
<Table>
<Caption>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF COMMON STOCK
------------------------ ---------------- -----------------------
Directors:
Robert N. Dangremond 23,168 (1) *
Margaret B. Hampton 137,400 (2) 1.4%
Damien W. Kovary 43,600 (3) *
Craig S. Miller 81,500 (4) *
Max Pine 41,000 (5) *
Robert W. Sullivan 43,234 (6) *
Named Executive Officers:
Thomas M. Blasdell 13,252 (7)
Donald M. Dodson 12,593 (8) *
Bruce S. Dudley 12,473 (9) *
Paul G. Hargett - *
Phillip Ratner - *
Danny K. Meisenheimer 12,281(10) *
All officers and directors as a group 428,335 4.4%
</Table>
*Owns less than 1.0 percent
- ------------------------
(1) Includes options to purchase 6,668 shares at $2.25 per share and 15,000
shares at $3.00 per share
(2) Includes options to purchase 20,000 shares at $5.00 per share and
15,000 shares at $3.00 per share
(3) Includes options to purchase 21,333 shares at $5.00 per share, 15,000
shares at $3.00 per share and 6,667 shares at $2.38 per share
(4) Includes 1,500 shares owned indirectly by sons
(5) Includes options to purchase 20,000 shares at $5.00 per share and
15,000 shares at $3.00 per share
(6) Includes options to purchase 13,334 shares at $2.75 per share and
15,000 shares at $3.00 per share
(7) Includes options to purchase 9,000 shares at $5.94 per share, 1,500
shares at $3.00 per share and 750 shares at $3.75 per share
(8) Includes options to purchase 9,000 shares at $5.94 per share, 1,500
shares at $3.00 per share and 750 shares at $3.75 per share
(9) Includes options to purchase 9,000 shares at $5.94 per share, 1,500
shares at $3.00 per share and 750 shares at $3.75 per share
(10) Includes options to purchase 9,000 shares at $5.94 per share, 1,500
shares at $3.00 per share and 750 shares at $3.75 per share
10
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth 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 1, 2002, January 2, 2001 and
December 28, 1999, of the Company's Chief Executive Officer and for the
registrant's four most highly compensated executive officers, other than the
Chief Executive Officer, who were serving at the end of 2001.
<Table>
<Caption>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------- SECURITIES
UNDERLYING ALL OTHER
NAME AND TITLE YEAR SALARY BONUS(8) OTHER OPTIONS COMPENSATION
- -------------- ---- ------ -------- ----- ------- ------------
Craig S. Miller 2001 $53,365(1) - $322,500(2) - -
President and Chief 2000 - - - - -
Executive Officer 1999 - - - - -
Phillip Ratner 2001 $191,250(3) $140,606 $15,000(5) - -
Former President and Chief 2000 315,000 150,000(4) 15,000(5) 50,000 -
Executive Officer 1999 300,000 50,000 15,000(5) - -
Thomas M. Blasdell 2001 $118,000 $38,580 - - -
President of Dynamic Foods 2000 114,400 37,516(4) - 2,250 -
1999 108,116 69,580 - 2,250 -
Donald M. Dodson 2001 $148,000 $38,610 - - -
Vice President- 2000 143,800 43,651(4) - 2,250 -
Operations 1999 138,750 83,000 - 2,250 -
Bruce S. Dudley 2001 $147,000 $38,423 - - -
Vice President- 2000 139,700 44,212(4) - 2,250 -
Human Resources 1999 131,154 - - 2,250 -
Danny K. Meisenheimer 2001 $121,000 $31,280 - - -
Vice President- Marketing 2000 116,500 35,708(4) - 2,250 -
1999 110,263 86,640 - 2,250 -
Paul G. Hargett 2001 $185,885 $65,825 90,000(6) - -
Executive Vice President and 2000 175,000 38,903(4) - - -
CFO(7) 1999 71,346 - - 50,000 -
</Table>
- ------------------------
(1) Compensation reflects amounts paid from Mr. Miller's November 2001 date
of employment.
(2) Compensation reflects a signing bonus of $135,000 and a grant of 75,000
shares of the Company's Common Stock under the Company's Stock Bonus
Plan made effective upon his employment, but which shares are issuable
only at the time of any termination of Mr. Miller's employment. The
shares have been valued at their closing price on the date of Mr.
Miller's employment.
(3) Compensation reflects amounts paid through Mr. Ratner's July 27, 2001
date of resignation.
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(4) Compensation includes a grant of shares of Common Stock under the
Company's Stock Bonus Plan having a value equal to 10% of the annual
bonus amount, based on the closing price of the Common Stock at the
date of grant.
(5) Amount paid for term life insurance and disability coverage as provided
in Mr. Ratner's Employment Agreement.
(6) Compensation reflects payment pursuant to retention bonus agreement
described below.
(7) Compensation reflects amounts paid from Mr. Hargett's August 3, 1999
date of employment until his termination of employment on November 5,
2001.
(8) Amounts represent bonuses paid during year listed, earned in the prior
year.
OPTION PLAN
The Company's 1995 Stock Option Plan (the "1995 Option Plan")
provides for the issuance of stock options, stock appreciation rights or
restricted stock covering up to 980,544 shares of Common Stock. 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 may be made to selected employees of the Company
and its subsidiaries and non-employee directors of the Company. As of January
1, 2002, options representing a total of 859,584 shares of Common Stock were
outstanding.
OPTION GRANTS
The table below sets forth information concerning options to
purchase Common Stock of the Company granted in the 2001 fiscal year to the
executive officers named in the Summary Compensation Table pursuant to the
Company's 1995 Stock Option Plan:
<Table>
<Caption>
POTENTIAL REALIZABLE AT
ASSUMED RATES OF ANNUAL
NUMBER OF APPRECIATION
OPTIONS PERCENT EXERCISE EXPIRATION ------------
NAME GRANTED OF TOTAL PRICE DATE 5% 10%
---- ------- -------- ----- ---- -- ---
Craig S. Miller 400,000(1) 74.8% $3.375 10/9/11 $849,008 $2,151,552
</Table>
- ------------------------
(1) Options vest and become exercisable in three equal installments on the
first, second and third anniversaries of the date of grant.
None of the executive officers named above exercised any stock options
during fiscal 2001.
12
<Page>
STOCK BONUS PLAN
Effective as of January 25, 2001, the Company adopted a Stock Bonus
Plan (the "Stock Bonus Plan") in order to enable selected officers, directors
and key employees to acquire shares of Common Stock of the Company. Awards of
Common Stock are made at the discretion of the Compensation Committee.
100,000 shares of Common Stock were reserved for issuance under the Stock
Bonus Plan. As of March 26, 2002, 86,561 shares of Common Stock have been
issued or reserved for issuance under the Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
AGREEMENTS
AGREEMENTS WITH CRAIG S. MILLER. Craig S. Miller commenced work as
the President and Chief Executive Officer of the Company effective November
5, 2001. Mr. Miller's Employment Agreement, among other things, provides for
a base salary of $375,000, an annual cash bonus of up to 100% of his base
compensation for each fiscal year and up to $15,000 per year to be applied to
payments by Mr. Miller for life insurance and disability coverages. The
minimum annual bonus payable for the 2002 fiscal year is $94,000. Mr.
Miller's Employment Agreement also provides that if Mr. Miller's employment
is terminated by the Company without "cause," or by Mr. Miller with "good
reason" within a period of one year following a "change in control," the
Company will pay Mr. Miller a lump sum amount equal to one (1) year of his
base salary then in effect.
Mr. Miller's Option Agreement grants him the right to purchase
400,000 shares of Common Stock, of which options to purchase 200,000 shares
are exercisable at a price of $3.00 per share, and options to purchase
200,000 shares are exercisable at a price of $3.75 per share. The options
included in each 200,000 share tranche vest in three (3) equal installments
on the first, second and third anniversaries of the date of grant. Mr.
Miller's Option Agreement provides that his options vest fully and
immediately if, within 12 months of a "change of control" of the Company, Mr.
Miller leaves the employment of the Company for good cause or as a result of
termination by the Company of his employment other than for "cause."
In March, 2002, the Board of Directors approved the grant to Mr.
Miller of options to purchase an additional 600,000 shares of the Company's
Common Stock, to be effective upon the approval by the stockholders of the
Company at the 2002 Annual Meeting of a proposal to increase the number of
shares of Common Stock issuable under the Company's 1995 Stock Option Plan.
The Options would consist of three 200,000 share tranches, with 200,000
shares having an exercise price of $4.50 per share, 200,000 shares having an
exercise price of $5.25 per share and 200,000 shares having an exercise price
of $6.00 per share. The Options included in each trance will vest in three
(3) equal installments on the first, second and third anniversaries of the
date of grant.
Mr. Miller was paid a signing bonus of $135,000 and granted 75,000
shares of Common Stock under the Company's Stock Bonus Plan effective upon
his employment, which were intended to compensate Mr. Miller for a part of
the cost of his move and for the value of certain benefits with his former
employer which were lost as a consequence of his employment by
13
<Page>
Furr's. The shares of Common Stock are issuable to Mr. Miller upon
termination of his employment with the Company.
For the purpose of the agreements referenced above, a "change of
control" occurs when, during a 12-month period immediately following any of
certain specified triggering events, a majority of the persons constituting
the Company's Board of Directors prior to the event no longer constitute a
majority of the Board of Directors. Any one of several triggering events will
result in a change of control: a merger with, or sale of substantially all
Company assets to, another legal person in which the Company's stockholders
retain less than a 50 percent interest in the surviving or acquiring entity
or its ultimate parent; an acquisition by any person or group which did not
already own 10 percent or more of the Company's voting securities as of
October 1, 2001, of a total of 50 percent or more of the Company's voting
securities. A termination for "cause" means, among other things, termination
because of Mr. Miller's (i) failure to devote substantially all of his
business time, attention and energies to the business of the Company or to
discharge the duties as the President and Chief Executive Officer of the
Company faithfully, diligently, to the best of his abilities, and in a manner
consistent with those duties normally associated with his position; (ii)
breach of certain covenants pertaining to competition with the Company and
confidentiality of proprietary Company information; (iii) failure to follow a
directive of the Board of Directors set forth with reasonable specificity;
(iv) engagement in conduct that is significantly injurious to the Company;
(v) conviction of any crime or offense involving moral turpitude; or (vi) use
of illegal drugs or abuse of controlled substances or his habitual
intoxication. A termination for "good reason" means a termination by Mr.
Miller because of (i) the Company's breach of the Employment Agreement, (ii)
a material change in the duties or conditions of Mr. Miller's employment, or
(iii) proper notice that the Company does not wish to extend the term of the
Agreement.
AGREEMENTS WITH PHILIP RATNER. Mr. Ratner resigned as the President
and Chief Executive Officer of the Company effective July 26, 2001. Mr.
Ratner's Employment Agreement, among other things, provided for a base salary
of $300,000, an annual cash bonus of up to 50% of his base compensation for
each fiscal year and up to $15,000 per year to be applied to payments for
life insurance and disability coverages. Mr. Ratner's Employment Agreement
also provided that if Mr. Ratner's employment was terminated by the Company
without "cause," or by Mr. Ratner with "good reason" within a period of one
year following a "change in control," the Company would pay Mr. Ratner a lump
sum amount equal to one (1) year of his base salary then in effect, on terms
substantially identical to those described above for Mr. Miller.
RETENTION BONUS AGREEMENTS
In August 2001 the Company entered into Retention Bonus Agreements
with Messrs. Blasdell, Dodson, Dudley, Hargett and Meisenheimer as well as
other members of the Company's senior management to ensure that their
services would remain available to the Company and to compensate them for
their increased responsibilities during the period following Mr. Ratner's
resignation until a new Chief Executive Officer was hired. Under the
agreements, the Company paid each of the executives a bonus equal to twenty
percent (20%) of the executive's monthly base compensation accruing during
the period beginning on June 26, 2001 and ending on the date Mr. Miller
commenced work (the "Retention Bonus"). The Retention Bonus Agreements also
provide for a severance payment equal to six months' base compensation plus
an accrued bonus if the executive's employment is terminated by the
14
<Page>
Company for a reason other than "cause" within six (6) months following Mr.
Miller's hire date. The Agreements require the executive to preserve the
Company's confidential information and to refrain from competing with the
Company after a termination of employment.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee conducts an annual review of the
Company's executive compensation program as proposed by the Company's
President and Chief Executive Officer. The Company seeks to attract and
retain qualified personnel to meet 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 Compensation
Committee takes into consideration in its review of the Company's executive
compensation program comparable industry information obtained from
approximately 90 chain restaurant companies (the "Comparable Companies"). The
Compensation Committee concluded that Comparable Companies are appropriate
for comparison primarily because of the similarity of Comparable Companies'
operations to the Company's and because information about the Comparable
Companies' salary and bonus structure is readily available.
The key elements of the Company's executive compensation
arrangements include base salary, annual incentive bonus and stock options.
The financial performance of definable business units or markets of the
Company are taken into account in evaluating compensation of executives with
responsibility for such units or markets. Base salaries of subordinate
management are generally proposed by the Company's President and CEO and
approved by the Compensation Committee based upon evaluation's of each
individual's responsibilities, relative experience, management abilities and
job performance. The base salary of the President and CEO of the Company is
established in his employment agreement and is reviewed annually for
adjustment by the Compensation Committee.
Approximately 40 members of management participate in a cash bonus
plan (the "Bonus Plan") that contemplates target bonuses ranging from 10
percent to 100 percent of base compensation based upon attainment of a
combination of criteria that include meeting or exceeding the Company's
budget, achieving specified management objectives and, to a lesser extent,
subjective evaluations of performance at the end of the year provided by the
Company's President and CEO. The financial goals used in the Bonus Plan for
2001 were approved by the Compensation Committee based on the Company's
budget and discussions with senior management. The Company did not grant
options in 2001, other than grants made to new management hires in set amount
based upon their seniority.
Mr. Miller's employment agreement, starting compensation and grants
of restricted stock and stock options have been approved by the CEO Search
Committee based upon their review of the requirements of the position,
executive compensation at comparable restaurant companies and Mr. Miller's
compensation at his previous employment.
This report is not 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 is not filed under such acts.
15
<Page>
The foregoing report has been furnished by the Compensation
Committee, whose current members are Robert N. Dangremond, Margaret B.
Hampton, Damien W. Kovary and Robert W. Sullivan.
BOARD AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Company's
Board of Directors, the Company's Audit Committee assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of
the accounting, auditing and financial reporting practices of the Company.
During fiscal 2001, the members of the Audit Committee reviewed the interim
financial information contained in the quarterly earnings announcements with
the independent auditors before public release.
In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company
that might bear on the auditor's independence consistent with Independence
Standards Board Standard No. 1, "INDEPENDENCE DISCUSSIONS WITH AUDIT
COMMITTEES," discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditor's
independence. The Audit Committee also discussed with management and the
independent auditors the quality and adequacy of the Company's internal
controls. The Audit Committee reviewed with the independent auditors their
audit plans, audit scope and identification of audit risks.
The Audit Committee discussed and reviewed with the independent
auditors all communications required by generally accepted auditing
standards, including those described in Statement on Auditing Standards No.
61, as amended, "COMMUNICATION WITH AUDIT COMMITTEES" and, with and without
management present, discussed and reviewed the results of the audit
examinations.
The Audit Committee reviewed the audited financial statements of the
Company as of and for the fiscal year ended January 1, 2002, with management
and the independent auditors. Management has the responsibility for the
preparation of the Company's financial statements and the independent
auditors have the responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management
and the independent auditors, the Audit Committee recommended to the Board
that the Company's audited financial statements be included in its Annual
Report on Form 10-K for the fiscal year ended January 1, 2002, for filing
with the Securities and Exchange Commission. The Audit Committee also
recommended the reappointment of the independent auditors and the Board
concurred in such recommendation.
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934 that might incorporate this Proxy Statement
or future filings with the Securities and Exchange Commission, in whole or in
part, the foregoing report shall not be deemed to be incorporated by
reference into any such filing.
16
<Page>
The foregoing report has been furnished by the Audit Committee,
whose current members are Robert N. Dangremond, Damien W. Kovary and Robert
W. Sullivan. Each member of the Audit Committee is "independent" as defined
in the listing standards of the American Stock Exchange.
AUDIT FEES
The aggregate fees billed for professional services rendered by KPMG
LLP for the audit of the Company's January 1, 2002 consolidated financial
statements, and the reviews of the consolidated financial statements included
in the quarterly reports on Forms 10-Q for the year ended January 1, 2002
were $111,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No information technology services were provided to the Company by
KPMG LLP during the year ended January 1, 2002.
ALL OTHER FEES
The aggregate fees billed for all other services, exclusive of the
fees disclosed above relating to financial statement audit services, rendered
by KPMG LLP during the year ended January 1, 2002 were $76,655. These other
services consisted of employee benefit plan audits, tax compliance and
consulting.
CONSIDERATION OF NON-AUDIT SERVICES BY THE INDEPENDENT ACCOUNTANTS
The Audit Committee has considered whether the services provided
under other non-audit services are compatible with maintaining the auditors'
independence.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Robert N. Dangremond,
Margaret B. Hampton, Damien W. Kovary and Robert W. Sullivan during fiscal
year 2001. There are no relationships between the members of the Compensation
Committee and the members of management of the Company that would impair the
independence of the Compensation Committee in evaluating compensation of the
Company's management.
17
<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 both the New York Stock Exchange Market Value Index and the
American Stock Exchange Market Value Index as well as the SIC Code Index for
Eating Places for the five fiscal years ending January 1, 2002. Since the
Company is now listed on the American Stock Exchange ("Amex"), a comparison
to other Amex listed companies is believed to be more representative of its
performance.
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
<Table>
<Caption>
FISCAL YEAR ENDING
---------------------------------------------------------------------------
COMPANY/INDEX/MARKET 12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001
---------- ---------- ---------- ---------- ---------- ----------
Furr's Restaurants Group Inc. 100.00 50.00 116.67 54.44 24.44 41.07
Rating Places 100.00 105.25 142.20 135.26 128.80 131.17
AMEX Market Index 100.00 120.33 118.69 147.98 146.16 139.43
</Table>
18
<Page>
RETIREMENT PLANS
Cafeteria Operators maintains a tax-qualified defined benefit plan
(the "Pension Plan"). Benefit accruals under the Pension Plan were frozen as
of December 31, 1988 for certain highly-compensated employees. Effective June
30, 1989, all benefit accruals and participation were frozen.
Prior to July 1, 1989, a full-time employee of Cafeteria Operators
(other than a leased or union employee) was eligible for Pension Plan
participation after attaining age 21 and completing one year of service.
A Pension Plan participant's benefit is the greater of the lifetime
monthly payment determined under the primary pension formula and the
alternative pension formula. The lifetime monthly payment under the primary
pension formula is the sum of the participant's frozen accrued lifetime
monthly benefit, if any, under the Kmart Corporation Employees' Retirement
Pension Plan as of December 27, 1986 (the liability for which was assumed by
the Pension Plan), plus .75% of the participant's annualized compensation for
each year in which the participant earned benefit service until the Pension
Plan was frozen, plus .75% of the participant's annualized compensation in
excess of 50% of the Social Security taxable wage base for each year in which
the participant earned benefit service until the Pension Plan was frozen. The
monthly payment under the alternative pension formula is determined from a
cash balance amount which is equal to 2% of the participant's 1986
compensation multiplied by the participant's benefit service prior to January
1, 1987, plus 2% of the participant's compensation in each year in which the
participant earned benefit service after December 31, 1986 until the Pension
Plan was frozen, credited with a maximum 6% compound interest in each such
year. The cash balance is accumulated with interest at a minimum annual rate
of 6% for the period beginning when the Pension Plan was frozen until the
date of the participant's sixty-fifth birthday and, then, converted to an
actuarially equivalent lifetime monthly benefit. For the purpose of both the
primary and alternative pension formulas, the participant's "compensation" is
generally defined as regular taxable wages from Cafeteria Operators and
amounts deferred by the participant under the Employees' Savings Plan
described below.
A participant's accrued benefit becomes fully vested or
nonforfeitable after the participant completes five years of vesting service.
The normal form of payment under the Pension Plan is a lifetime
monthly annuity commencing on the first day of the month coinciding with or
next following the date when the participant attains age 65. If a participant
is married, the normal form of payment is a joint and 50% survivor annuity,
commencing on the first day of the month coinciding with or next following
the date when the participant attains age 65. A participant can elect other
benefit payment options, including an immediate lump sum payment. Payments
commencing prior to the time when the participant attains age 65 are
actuarially reduced for this early commencement, unless the participant's age
and vesting service equal 90 when the payments begin.
19
<Page>
PENSION PLAN TABLE
APPROXIMATE ANNUAL PENSION AT AGE 65*
<Table>
<Caption>
TOTAL SERVICE AS OF 12/31/01
----------------------------
CURRENT COMPENSATION 5 YEARS 15 YEARS 25 YEARS 35 YEARS
- -------------------- ------- -------- -------- --------
$75,000 $2,659 $ 6,264 $9,869 $13,475
100,000 3,817 9,121 14,428 19,798
125,000 4,479 11,553 18,722 25,891
150,000 5,519 14,424 23,393 32,362
</Table>
* Estimates of frozen pension plan benefits.
The only executive officers named in the Summary Compensation Table
who are participants in the Pension Plan are Messrs. Blasdell and Dodson.
Total plan years of service at June 30, 1989 (the date benefit accruals were
frozen) of the executive officers of the Company named in the Summary
Compensation Table and its subsidiaries are Thomas M. Blasdell 17 and Donald
M. Dodson 31; no other executive officer participates in the Pension Plan.
The amounts of monthly benefits that are available to Messrs. Blasdell and
Dodson as of their retirement dates under the Pension Plan are $843 and
$3,265 respectively. The Pension Plan does not cover any compensation
reported in the Summary Compensation Table.
Furr's has established an Employees 401(k) Plan (the "401(k) Plan")
that is qualified under Sections 401(a) and 401(k) of the Internal Revenue
Code. Under the 401(k) Plan, participants may elect to make pre-tax
contributions, in an amount equal to from 1 percent to 12 percent 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 $10,500 in 2001. Additionally,
Furr's may make discretionary contributions to the 401(k) Plan. Furr's made
no discretionary contribution to the 401(k) Plan for the plan year ended
December 31, 2001. Employees are eligible to participate in the 401(k) Plan
at age 21 with one year of participation service.
Participants' contributions to the 401(k) Plan are always fully
vested. The Board of Directors of the Company will designate Company
contributions as either (i) fully vested when made or (ii) subject to a
vesting schedule under which 100 percent of the Company contributions are
vested after up to seven years. Employee contributions may be invested either
in a fixed income fund, consisting of guaranteed interest contracts and
government securities, or nine different equity funds with various growth and
income objectives. Loans from participants' pre-tax accounts are permitted if
they have a minimum of $1,000 in their account.
Participants in the 401(k) Plan may generally receive their vested
account balances at the earlier of retirement or separation from service.
20
<Page>
PROPOSAL 2 - APPROVAL OF INCREASE IN NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER 1995 STOCK OPTION PLAN
The stockholders are asked to approve an amendment to the
Furr's/Bishop's, Incorporated 1995 Stock Option Plan (the "1995 Option Plan")
to increase the number of shares of Common Stock authorized for issuance
under the 1995 Option Plan by 700,000 shares. As of January 1, 2002, 980,544
shares of Common Stock were authorized for issuance pursuant to the 1995
Option Plan, of which options covering 859,584 shares had been issued,
leaving 120,960 shares remaining reserved for issuance under the 1995 Option
Plan.
The 1995 Option Plan is administered by the Compensation Committee
and provides for the grant of incentive stock options pursuant to Section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and
non-statutory stock options, to directors, executive officers and other key
employees. In total, approximately 140 persons are eligible for participation
in the 1995 Option Plan as of March 26, 2002.
The exercise price of options granted under the 1995 Option Plan is
determined by the Compensation Committee; provided that the exercise price of
stock options issued under the 1995 Option Plan may not be less than 100
percent of the Fair Market Value of a share of Common Stock covered by the
Option on the date of grant. Options expire no more than 10 years after the
date of grant. Options generally vest and become exercisable 33 1/3 percent
per year over a three-year period from the date of grant. Unvested options
expire upon termination of employment or death. Generally, vested options
expire 30 days after the termination of employment.
On March 26, 2002, the Compensation Committee of the Board of
Directors authorized an amendment to the 1995 Option Plan, increasing the
number of shares of the Company's Common Stock reserved for issuance by
700,000, subject to approval by stockholders. Upon approval of this
amendment, the total number of shares authorized for issuance will be
1,680,544.
The Board believes that it is in the best interest of the Company to
attract and retain the services of experienced and knowledgeable employees
and to provide an incentive for those employees to increase their proprietary
interest in the Company's long-term success and progress. The 1995 Option
Plan is designed to provide officers, directors and key employees of the
Company and its subsidiaries with additional incentives to promote the
success of the Company's business. In order for the 1995 Option Plan to
continue to serve its purpose, the Board has determined that an increase in
the number of shares available for issuance is necessary.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy at the meeting and
entitled to vote is required for approval of the proposal.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL TO INCREASE THE NUMBER OF
SHARES AUTHORIZED FOR ISSUANCE UNDER 1995 STOCK OPTION
21
<Page>
PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL 2.
INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of the Audit
Committee, has reappointed KPMG LLP as the Company's independent public
accountants. Representatives of KPMG LLP are expected to be present at the
Annual Meeting, with an opportunity to make a statement, if they desire to do
so, and to respond to appropriate questions.
2003 STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's Proxy
Statement for the 2003 Annual Meeting of Stockholders, stockholder proposals
must be received by the Secretary of the Company at its executive offices by
December 13, 2002.
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.
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
/s/ BRUCE S. DUDLEY
---------------------------------
Dated: April 15, 2002 Bruce S. Dudley
Secretary
22
<Page>
- --------------------------------------------------------------------------------
Please mark
your votes as |X|
indicated in
this example
1. Election of Directors:
(Recommended for election by the Board of Directors)
FOR all nominees WITHHOLD
listed at right AUTHORITY
(except as marked for all nominees
to the contrary) listed to the right
|_| |_|
01 Robert N. Dangremond 02 Damien W. Kovary 03 Max Pine
04 Margaret B. Hampton 05 Craig S. Miller 06 Robert W. Sullivan
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, WRITE THE
NOMINEE'S NAME ON THE SPACE BELOW.
________________________________________________________________________________
2. Proposal to increase the number of shares issuable under the Company's
1995 Stock Option Plan by 700,000 shares.
FOR AGAINST ABSTAIN
|_| |_| |_|
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.
Dated: ___________________________, 2002
________________________________________
Signature
________________________________________
Signature if held jointly
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.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY
FURR'S RESTAURANT GROUP, INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD MAY 21, 2002
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Furr's Restaurant Group, Incorporated (the "Company")
to be held on May 21, 2002, and the Proxy Statement for Annual Meeting of
Stockholders (herein so called) in connection therewith, each dated April 15,
2002, (b) appoints Craig Miller and Nancy Ellefson as proxies, or either of
them, each with the power to appoint a substitute, (c) authorizes the Proxies to
represent and vote, as designated on April 1, 2002, at such annual meeting and
at any adjournment(s) thereof and (d) revokes any proxies heretofore given.
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, FOR PROPOSAL 2 AND IN THE DISCRETION OF THE
PROXIES ON ANY OTHER BUSINESS.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
- --------------------------------------------------------------------------------