-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PWI8Mo021EcNXMq707cIndLPl/GZ85l2UI5fZk+3wNjxJ21cg2VYs6IGRR8+pZUi Y3Yp4wnFYgXUBCbN+dABAQ== 0000950123-96-001876.txt : 19960430 0000950123-96-001876.hdr.sgml : 19960430 ACCESSION NUMBER: 0000950123-96-001876 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960522 FILED AS OF DATE: 19960429 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBARRO INC CENTRAL INDEX KEY: 0000766004 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 112501939 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08881 FILM NUMBER: 96551976 BUSINESS ADDRESS: STREET 1: 763 LARKFIELD RD CITY: COMMACK STATE: NY ZIP: 11725 BUSINESS PHONE: 5168640200 DEF 14A 1 DEFINITIVE PROXY MATERIALS 1 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-11(c) or Section.240.14a-12
SBARRO, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 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: / / 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: 2 SBARRO, INC. 763 LARKFIELD ROAD COMMACK, NEW YORK 11725 --------------------- NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 22, 1996 To the Shareholders: NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders (the "Meeting") of Sbarro, Inc. (the "Company") will be held at Boulder Creek Steaks & Saloon, 6321 Northern Boulevard (Route 25A) at the intersection of Route 106, East Norwich, New York, on Wednesday, May 22, 1996, at 11:00 A.M., Eastern Daylight Savings Time, to consider and act upon the following matters: 1. The election of three Class 1 directors to serve until the 1999 Annual Meeting of Shareholders and until their respective successors are elected and qualified; 2. A proposal to ratify the action of the Board of Directors in appointing Arthur Andersen LLP as the Company's independent public accountants for the fiscal year ending December 29, 1996; and 3. The transaction of such other business as may properly come before the Meeting or any adjournment or postponement thereof. Information regarding the matters to be acted upon at the Meeting is contained in the accompanying Proxy Statement. The close of business on April 19, 1996 has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. By Order of the Board of Directors, JOSEPH SBARRO, Secretary Commack, New York April 26, 1996 IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. EACH SHAREHOLDER IS URGED TO SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. AN ENVELOPE ADDRESSED TO THE COMPANY'S TRANSFER AGENT IS ENCLOSED FOR THAT PURPOSE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. 3 SBARRO, INC. 763 LARKFIELD ROAD COMMACK, NEW YORK 11725 PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS MAY 22, 1996 This Proxy Statement is furnished to the holders of Common Stock, par value $.01 per share ("Common Stock"), of Sbarro, Inc. (the "Company") in connection with the solicitation of proxies by the Board of Directors of the Company ("Proxy" or "Proxies") for use at the Annual Meeting of Shareholders (the "Meeting") to be held on Wednesday, May 22, 1996, at 11:00 A.M., Eastern Daylight Savings Time, at Boulder Creek Steaks & Saloon, 6321 Northern Boulevard (Route 25A) at the intersection of Route 106, East Norwich, New York, and at any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting. The cost of preparing, assembling and mailing the Notice of Annual Meeting, this Proxy Statement and Proxies is to be borne by the Company. The Company will also reimburse brokers who are holders of record of Common Stock for their expenses in forwarding Proxies and Proxy soliciting material to the beneficial owners of such shares. In addition to the use of the mails, Proxies may be solicited without extra compensation by directors, officers and employees of the Company by telephone, telecopy, telegraph or personal interview. The approximate mailing date of this Proxy Statement is April 26, 1996. Unless otherwise specified, all Proxies received will be voted for the election of all nominees named herein to serve as directors and in favor of the proposal to ratify the appointment of independent public accountants for the Company's fiscal year ending December 29, 1996. A Proxy may be revoked at any time before its exercise by filing with the Secretary of the Company an instrument of revocation or a duly executed proxy bearing a later date, or by attendance at the Meeting and electing to vote in person. Attendance at the Meeting will not in and of itself constitute revocation of a Proxy. The close of business on April 19, 1996 has been fixed by the Board of Directors as the record date (the "Record Date") for the determination of shareholders entitled to notice of, and to vote at, the Meeting and any adjournment and postponement thereof. As of the Record Date, there were 20,350,235 shares of Common Stock outstanding. Each share of Common Stock outstanding on the Record Date will be entitled to one vote on all matters to come before the Meeting. A majority of the shares entitled to vote, represented in person or by proxy, is required to constitute a quorum for the transaction of business. Proxies submitted which contain abstentions or broker nonvotes will be deemed present at the Meeting in determining the presence of a quorum. PROPOSAL 1 ELECTION OF DIRECTORS The Company's Certificate of Incorporation provides that the Board of Directors shall be divided into three classes, with such classes to be as nearly equal in number as the then total number of directors constituting the entire Board permits. The Company's Board of Directors presently consists of eight members with three members in each of Classes 1 and 2 and two members in Class 3. A vacancy was created in Class 3 with the death of Thomas J. Sandleitner on March 10, 1996. The Board is currently reviewing potential candidates to fill the vacancy. Any director elected by the Board to fill the vacancy will hold office until the next meeting of shareholders at which the election of directors is in the regular order of business and until his or her successor has been elected and qualified. Each class is elected for a term of three years. The term of office of the current Class 1, 2 and 3 directors is scheduled to expire at the 1996, 1997 and 1998 annual 4 meetings of shareholders, respectively. At each annual meeting, directors are elected to succeed those in the class whose term expires at that annual meeting, such newly elected directors to hold office until the third succeeding annual meeting and the election and qualification of their respective successors. At the Meeting, shareholders will elect three Class 1 directors to serve until the 1999 annual meeting of shareholders and until their respective successors are elected and qualified. Unless otherwise directed, the persons named in the Proxy intend to cast all Proxies received for the election of Messrs. Anthony Sbarro, Harold L. Kestenbaum and Paul A. Vatter (the "nominees") to serve as Class 1 directors upon their nomination at the Meeting. Each nominee and each other incumbent director was elected by shareholders. Each of the nominees has advised the Company of his willingness to serve as a director of the Company. In case any nominee should become unavailable for election to the Board of Directors for any reason, the persons named in the Proxies have discretionary authority to vote the Proxies for one or more alternative nominees who will be designated by the Board of Directors. The following is a description of the nominees and of each other member of the Board of Directors: INFORMATION ABOUT NOMINEES Class 1 Directors ANTHONY SBARRO, 50, has been an officer, a director and a principal shareholder of the Company since its organization in 1977, serving as President and Chief Operating Officer since December 1993. For more than five years prior thereto, Mr. Sbarro was an Executive Vice President of the Company. He has also served as Treasurer of the Company for more than the past five years. Mr. Sbarro is a member of the Executive Committee of the Board. HAROLD L. KESTENBAUM, 46, has been a practicing attorney in New York since 1976. He became a director of the Company in March 1985. Mr. Kestenbaum is Chairman of the Stock Option Committee and a member of the Compensation Committee of the Board. PAUL A. VATTER, 71, has been, since his retirement in 1995, Professor Emeritus and, from 1970 until his retirement, was Lawrence E. Fouraker Professor of Business Administration, at Harvard University's Graduate School of Business Administration, where he served as a Professor since 1958. He became a director of the Company in March 1985. Professor Vatter is a member of the Audit and Stock Option Committees of the Board. INFORMATION ABOUT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE MEETING Class 2 Directors JOSEPH SBARRO, 55, has been an officer, a director and a principal shareholder of the Company since its organization in 1977, serving as Senior Executive Vice President since December 1993. For more than five years prior thereto, Mr. Sbarro was an Executive Vice President of the Company. He has also served as Secretary of the Company for more than the past five years. Mr. Sbarro is a member of the Executive Committee of the Board. RICHARD A. MANDELL, 53, has been Vice President -- Private Investments of Clariden Asset Management (NY) Inc., a subsidiary of Clariden Bank, a private Swiss bank, since January 1996. From 1982 until June 1995, Mr. Mandell served as a Managing Director of Prudential Securities Incorporated, an investment banking firm. He became a director of the Company in March 1986. Mr. Mandell is a member of the Audit Committee of the Board. Mr. Mandell is also a director of U.S.A. Detergents, Inc. and Trend-Lines, Inc. TERRY VINCE, 67, has been Chairman of the Board and President of Sovereign Hotels (a company which operates hotels) since October 1991 and Chairman of the Board of Fame Corp. (a food service management company) since January 1994. Mr. Vince served as Chairman Emeritus (from November 1990 until October 1991) and Chairman of the Board of Directors and President (from November 1988 until November 1990) of daka International, Inc. (a food and restaurant service company), prior to which 2 5 Mr. Vince served as Chairman of the Board of Directors and President of daka, Inc., the predecessor of daka International, Inc., from 1973 until November 1988. He became a director of the Company in December 1988. Mr. Vince is a member of the Compensation and Stock Option Committees of the Board. Class 3 Directors MARIO SBARRO, 54, has been an officer, a director and a principal shareholder of the Company since its organization in 1977, serving as Chairman of the Board of Directors and Chief Executive Officer for more than the past five years. In addition, for more than five years prior to December 1993, Mr. Sbarro also served as President of the Company. Mr. Sbarro is Chairman of the Executive Committee of the Board. BERNARD ZIMMERMAN, 63, has been President of Bernard Zimmerman and Co., Inc. since October 1972 and Senior Vice President of The Zimmerman Group, Inc. since January 1991, financial and management consulting firms. Mr. Zimmerman has also served as President and a director of Beacon Hill Mutual Fund, Inc., a publicly traded mutual fund, since December 1994. From September 1986 until September 1993, Mr. Zimmerman also served as Chairman and President of St. Lawrence Seaway Corp., an owner and manager of agricultural properties. Mr. Zimmerman has been a certified public accountant in New York for more than the past thirty years. He became a director of the Company in March 1985. Mr. Zimmerman is Chairman of the Audit and Compensation Committees, and is a member of the Executive Committee, of the Board. BOARD MEETINGS AND COMMITTEES The Board of Directors is responsible for the management of the Company. During the Company's 1995 fiscal year, ended December 31, 1995, the Board of Directors held ten meetings. Each incumbent director attended at least 75% of all meetings of the Board and committees on which the person served which were held during the year, except Mr. Vatter who attended 64% such meetings. The Board of Directors has established Executive, Audit, Compensation and Stock Option Committees. There is no standing nominating committee. When the Board is not in session, the Executive Committee has, to the extent permitted by law, all of the power and authority of the Board. The Executive Committee held no formal meetings during fiscal 1995, but met informally from time to time during the year. The principal functions of the Audit Committee are to nominate independent auditors for appointment by the Board; meet with independent auditors to review and approve the scope of their audit engagement and the fees related to such work; meet with the Company's financial management and independent auditors to review matters relating to internal accounting controls, the Company's accounting practices and procedures and other matters relating to the financial condition of the Company; and report to the Board periodically with respect to such matters. The Audit Committee held two formal meetings, and had informal discussions from time to time, during fiscal 1995. The Compensation and Stock Option Committees, described below under "Executive Compensation -- Report of the Compensation and Stock Option Committees", each held one formal meeting during fiscal 1995. In addition, the Committees met informally from time to time during the year. COMPENSATION OF DIRECTORS Non-employee directors receive a retainer at the rate of $12,000 per annum and $500 for each meeting of the Board of Directors attended and for each meeting of a Committee of the Board attended if such meeting is not held on the same day as a meeting of the Board of Directors. Directors are also reimbursed for reasonable travel expenses incurred in attending Board and Committee meetings. The Company's 1993 Non-Employee Director Stock Option Plan, which was approved by shareholders at the Company's 1993 Annual Meeting of Shareholders, provides for the automatic grant of an option to purchase 3,750 shares of the Company's Common Stock to each non-employee director in office immediately 3 6 after each Annual Meeting of Shareholders. The term of each option granted under the plan is five years. Each option is exercisable at an exercise price equal to 100% of the fair market value of the Company's Common Stock on the date of grant commencing one year following the date of grant, subject to early termination in certain instances. Bernard Zimmerman and Company, Inc., of which Mr. Zimmerman is President and a majority shareholder, renders financial and consulting assistance to the Company, for which it received fees of $96,000 during the Company's fiscal year ended December 31, 1995. EXECUTIVE OFFICERS The following is information concerning the executive officers of the Company, other than those who also serve as directors (as to whom information is provided above): CARMELA SBARRO, 74, has been Vice President of the Company since March 1985. Mrs. Sbarro was a founder of the Company, together with her late husband, Gennaro Sbarro. Mrs. Sbarro devotes a substantial portion of her time to recipe and product development. Mrs. Sbarro served as a director of the Company from March 1985 until December 1988 when she was elected Director Emeritus of the Company. GEORGE W. HERZ II, 40, joined the Company in November 1995 and was elected Vice President and General Counsel in February 1996. Prior to joining the Company, Mr. Herz served as General Counsel (from 1993) and Corporate Counsel (from 1982 until 1992) of Minuteman Press International, Inc. (a franchisor of printing centers). ROBERT S. KOEBELE, 52, has served as Vice President -- Finance and Chief Financial Officer of the Company for more than the past five years. Mr. Koebele has been a certified public accountant in New York for more than the past twenty-five years. CARMELA N. MERENDINO, 31, was elected Vice President -- Administration in October 1988. Ms. Merendino joined the Company in March 1985 and performed a variety of corporate administrative functions for the Company prior to her election as Vice President -- Administration. ANTHONY J. MISSANO, 37, was elected Vice President -- Operations (West) in February 1995, prior to which he served as a Zone Vice President since joining the Company in June 1992. Mr. Missano served as a consultant to the Company from June 1992 until he became a full time employee at the end of fiscal 1993. From November 1988 until he joined the Company, Mr. Missano served as President of Anaton Corp., a franchisee of the Company. JAMES M. O'SHEA, 43, joined the Company in January 1995 and was elected Vice President -- Human Resources in February 1995. Prior to joining the Company, Mr. O'Shea served as Director of Human Resources and Administration of Euro-Disney SCA (a theme park operator) from October 1991 through August 1994 and Staff Vice President -- Personnel of Cunard Line Ltd. (a cruise line and hotel operator) from September 1986 through May 1991. GENNARO A. SBARRO, 29, was elected Vice President -- Franchising in February 1995. For more than five years prior thereto, Mr. Sbarro served in various operational positions for the Company. GENNARO J. SBARRO, 33, was elected Vice President -- Operations (East) in February 1995. For more than five years prior thereto, Mr. Sbarro served in various capacities for the Company. LANCE H. STURGES, 50, joined the Company in November 1994 and was elected Vice President -- Real Estate in February 1995. Mr. Sturges served as Vice President of First Union Management Inc. (a real estate investment trust) from June 1994 until he joined the Company; Division Head in the Leasing Department of DeBartolo Corp. (a developer of commercial property) from November 1991 until June 1994, and the principal of Lancer & Associates (a commercial real estate company) from July 1990 until November 1991. In March 1993, Mr. Sturges filed a voluntary petition of bankruptcy and received an order of discharge in August 1993. 4 7 FAMILY RELATIONSHIPS Mario, Anthony and Joseph Sbarro are the sons of Carmela Sbarro. Carmela N. Merendino is the daughter and Gennaro A. Sbarro is the son of Mario Sbarro. Gennaro J. Sbarro is the son and Anthony J. Missano is the son-in-law of Joseph Sbarro. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the ownership of shares of the Company's Common Stock, as of March 31, 1996 (except as noted below), with respect to (a) holders known to the Company to beneficially own more than five percent of the outstanding Common Stock of the Company, (b) each director and nominee, (c) each executive officer named in the Summary Compensation Table under the caption "Executive Compensation" below and (d) all directors and executive officers of the Company as a group. The Company understands that, except as noted below, each beneficial owner has sole voting and investment power with respect to all shares attributable to such owner.
AMOUNT AND NATURE OF PERCENT OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2) - ------------------------------------------------------------- ----------------------- ---------- Mario Sbarro(3).............................................. 1,936,920(4) 9.4% Anthony Sbarro(3)............................................ 1,588,300(5) 7.7% Joseph Sbarro(3)............................................. 2,157,914(6) 10.5% Trust of Carmela Sbarro(3)................................... 2,497,884(7) 12.3% Harold L. Kestenbaum......................................... 18,000(8) * Richard A. Mandell........................................... 11,250(9) * Paul A. Vatter............................................... 13,500(9) * Terry Vince.................................................. 14,550(9) * Bernard Zimmerman............................................ 48,750(10) * Lance H. Sturges............................................. -- * Robert S. Koebele............................................ 13,000(11) * All directors and executive officers as a group (14 persons)................................................... 8,327,749(12) 39.6%
- --------------- (1) Shares subject to options are considered beneficially owned to the extent currently exercisable or exercisable within 60 days after March 31, 1996. (2) Asterisk indicates less than 1%. Shares subject to such options are considered outstanding only for the purpose of computing the percentage of outstanding Common Stock which would be owned by the optionee if such options were exercised, but (except for the calculation of beneficial ownership by all executive officers and directors as a group) are not considered outstanding for the purpose of computing the percentage of outstanding Common Stock owned by any other person. (3) The business address of each of Mario Sbarro, Joseph Sbarro, Anthony Sbarro and the Trust of Carmela Sbarro is 763 Larkfield Road, Commack, New York 11725. (4) Includes (i) 2,490 shares owned by a child of Mr. Sbarro who resides in his household (as to which shares Mr. Sbarro disclaims beneficial ownership), (ii) 18,050 shares owned by a charitable foundation of which Mr. Sbarro and his wife are two of the directors (and, as such, may be deemed to have shared voting and dispositive power with respect to such shares) and (iii) 270,000 shares subject to options. Excludes the shares held by the Trust of Carmela Sbarro, of which trust Mario Sbarro serves as a trustee and as to which shares Mr. Sbarro may be deemed a beneficial owner with shared voting and dispositive power. (5) Includes 165,000 shares subject to options. (6) Includes (i) 609,000 shares owned by a partnership of which Mr. Sbarro is the sole general partner and (ii) 150,000 shares subject to options. (7) The trust was created by Carmela Sbarro for her benefit and for the benefit of her descendants, including Mario, Joseph and Anthony Sbarro. The trustees of the trust are Franklin Montgomery, whose business address is 488 Madison Avenue, New York, New York 10022, and Mario Sbarro. As trustees, 5 8 Franklin Montgomery and Mario Sbarro may be deemed to be the beneficial owners of these shares with shared voting and dispositive power. (8) Represents (i) 6,750 shares owned by Mr. Kestenbaum's wife, as to which shares Mr. Kestenbaum disclaims beneficial ownership, and (ii) 11,250 shares subject to options. (9) Includes 11,250 shares subject to options. (10) Represents 11,250 and 37,500 shares subject to options held respectively by Mr. Zimmerman individually and Bernard Zimmerman and Company, Inc., a company of which Mr. Zimmerman is President and a majority shareholder. (11) Includes 2,500 shares subject to options. (12) Includes (i) an aggregate of 13,530 shares owned by spouses and children who reside in their households (as to which shares beneficial ownership is disclaimed), (ii) 18,050 shares owned by a charitable foundation and (iii) 699,501 shares subject to options. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth information concerning the annual and long-term compensation of the Company's chief executive officer and other four most highly compensated persons who were serving as executive officers of the Company at the end of the Company's 1995 fiscal year for services in all capacities to the Company and its subsidiaries during the Company's 1995, 1994 and 1993 fiscal years:
LONG TERM NAME AND ANNUAL COMPENSATION COMPENSATION PRINCIPAL --------------------- ------------ POSITION(1) YEAR SALARY BONUS OPTIONS - ------------------------------------------------- ---- -------- -------- ------------ Mario Sbarro..................................... 1995 $400,000 $112,500 -- Chairman of the Board and Chief Executive Officer 1994 400,000 225,000 -- 1993 400,000 225,000 120,000 Anthony Sbarro................................... 1995 300,000 87,500 -- President, Chief Operating Officer and Treasurer 1994 235,000 175,000 -- 1993 235,000 175,000 90,000 Joseph Sbarro.................................... 1995 250,000 75,000 -- Senior Executive Vice President and Secretary 1994 235,000 150,000 -- 1993 235,000 150,000 75,000 Lance H. Sturges................................. 1995 238,500 -- -- Vice President -- Real Estate 1994 36,716(2) -- 5,000 Robert S. Koebele................................ 1995 175,000 30,000 -- Vice President -- Finance and Chief Financial 1994 163,000 50,000 5,000 Officer 1993 155,000 46,500 7,500
- --------------- (1) Prior to December 21, 1993, Mario Sbarro served as Chairman of the Board of Directors and President of the Company, Anthony Sbarro served as Executive Vice President and Treasurer of the Company and Joseph Sbarro served as Executive Vice President and Secretary of the Company. (2) Mr. Sturges joined the Company in November 1994. OPTION/SAR GRANTS IN LAST FISCAL YEAR No options or stock appreciation rights were granted to any executive officer named in the Summary Compensation Table during the Company's 1995 fiscal year. 6 9 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES The following table sets forth certain information concerning the number of shares of Common Stock acquired upon the exercise of stock options during the Company's fiscal year ended December 31, 1995 by, and the number and value at December 31, 1995 of shares of Common Stock subject to unexercised options held by, the executive officers named in the Summary Compensation Table.
NUMBER OF SHARES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT FISCAL AT FISCAL YEAR-END YEAR-END SHARES ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/ NAME ON EXERCISE REALIZED(1) UNEXERCISABLE) UNEXERCISABLE)(2) - ------------------------------------------- --------------- ----------- ---------------- ----------------- Mario Sbarro............................... -- -- 270,000/ 0 $124,995/ 0 Anthony Sbarro............................. -- -- 165,000/ 0 $ 62,498/ 0 Joseph Sbarro.............................. -- -- 150,000/ 0 $ 62,498/ 0 Lance H. Sturges........................... -- -- 0 / 5,000 $ 0 / 0 Robert S. Koebele.......................... 3,000 $25,937 4,000/11,500 $ 6,625/$10,125
- --------------- (1) Represents the closing price of the Company's Common Stock on the New York Stock Exchange on the dates of exercise of the options, minus the applicable option exercise prices. (2) Represents the closing price of the Company's Common Stock on the New York Stock Exchange on December 29, 1995, the last trading day of the Company's 1995 fiscal year, minus the respective exercise prices. REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES This report is presented by the Compensation Committee of the Board of Directors, except for the portion of the report under the caption "Long-Term Incentive Compensation", which is presented by the Board's Stock Option Committee. The Compensation Committee establishes the compensation for the Company's three principal executive officers (Mario, Anthony and Joseph Sbarro) and, with the recommendation of the Company's Chief Executive and Chief Operating Officers, the compensation of the other executive officers of the Company. The Stock Option Committee administers (including making grants under) the Company's 1991 Stock Incentive Plan. Each Committee consists exclusively of non-employee directors. This report describes the policies of the Committees as in effect in fiscal 1995. As circumstances arise and the Committees deem it appropriate, policies in effect from time to time may change. It is the philosophy of the Committees to utilize a combination of salary as a base for compensation, annual bonuses as a means of short-term incentive and stock options to provide long-term incentive. Consequently, the Compensation and Stock Option Committees coordinate their efforts to determine overall compensation of executive officers, using information contained in surveys of compensation levels at other restaurant companies to supplement objective and subjective factors. In establishing, at the outset of fiscal 1995, compensation levels for the Company's executive officers for fiscal 1995, the Compensation Committee reviewed, among other things, information contained in proxy statements of other restaurant companies, the results and performance of which the Company regularly reviews and monitors, proxy statements of various retailers and compensation surveys published by consulting firms, major public accounting firms and others. The Compensation Committee, in part, uses the information as a guideline in considering how the Company's compensation compares to the compensation being paid by the Company's competitors, as well as by others with whom the Company may be competing for talent. Base Salary. The Compensation Committee reviews the base salary of each executive officer of the Company annually. In determining the base salaries to be paid to executive officers, the Compensation Committee considers, among other factors, the executive's level of responsibility, performance, experience and expertise, compensation paid to executives performing similar duties for other companies and general 7 10 economic factors. The Compensation Committee, in consultation with the Company's Chief Executive Officer, also reviewed the performance of each of the Company's executive officers, as well as compensation of executives occupying comparative positions in other restaurant and retail organizations derived from its informal studies. The Committee's reviews have been qualitative in nature, without specific weights being assigned to the various factors employed by it. In determining base salary to be paid to executive officers for fiscal 1995, the Committee considered the fact that the Company's revenues, earnings and shareholders equity had increased in fiscal 1994. In determining the fiscal 1995 compensation of Messrs. Anthony Sbarro, the Company's President, and Joseph Sbarro, the Company's Senior Executive Vice President, the Compensation Committee also considered the fact that neither had received base salary increases since early 1992. In light of the fact that the Company's performance in fiscal 1995 did not meet management's expectations, the Compensation Committee has determined to defer consideration of increases for all executive officers until later in fiscal 1996 after it has reviewed the Company's and its executive officers' performance as the year progresses. Annual Incentive Compensation. The Company continues to place emphasis on incentive compensation. The Chief Executive Officer of the Company sets individual performance objectives and goals for each executive officer other than himself. These goals may be based on specific performance related targets (including the accomplishment of certain specific programs) established for the particular executive, for his or her area of responsibility or on a corporate basis, or may be subjective. Goals may be adjusted periodically throughout the year. The Chairman of the Compensation Committee meets periodically with the Chief Executive Officer to review the performance of executive officers. In determining the amount of annual bonuses, at the end of the year, the Committee examines, without assigning specific weight to any factor, such factors as the Company's revenues and profitability for the year, the degree to which the Company has fulfilled objectives developed at the beginning of the year, the executive's contribution toward the Company's profitability and meeting corporate goals, the degree to which the executive achieved his or her personal performance goals for the year and information concerning bonuses paid by competitors as indicated in the informal Committee surveys. Because the Company's earnings in fiscal 1995 were below management's expectations, while still seeking to recognize the Company's continued strong profitability and the effort of the Company's executive officers, including its three principal executive officers, in directing the Company's efforts to improve its earnings, the Committee reduced the annual bonus payable to the Company's executive officers for fiscal 1995. Long-Term Incentive Compensation. The Company has utilized stock options as the primary method of providing long-term incentive compensation. The Company believes stock options foster the interest of key employees in seeking long-term growth for the Company, as well as linking the interests of its executives with the overall interests of stockholders. The Compensation Committee, in the case of executive officers, and the Company's Chief Executive Officer and Chief Operating Officer make recommendations to the Stock Option Committee from time to time with respect to the grant of stock options to employees in light of their level of responsibility, compensation level, prior contribution to the Company's performance and the future goals and the performance expected of them. However, the determination of the grant of options rests with the Stock Option Committee. Although the Stock Option Committee does review the value of options granted by other restaurant companies obtained from the informal surveys it reviews, it does not target its grants of options to those granted by others. The Stock Option Committee did not grant options to any executive officers in fiscal 1995. Like the Compensation Committee, the Stock Option Committee intends to review the Company's and its executive officers' performance, as well as the other factors it utilizes in determining option grants, during the course of fiscal 1996 to determine whether, and, if so, the extent to which, to grant options to executive officers during fiscal 1996. Chief Executive Officer Compensation. The compensation of Mario Sbarro, the Company's Chief Executive Officer, is comprised of the same three components as that of the Company's other executive officers. While it remains the belief of the Compensation Committee that Mr. Sbarro's compensation should be in the top quartile of the compensation levels of chief executive officers in the Company's peer group, with the concurrence of Mr. Sbarro, the Compensation Committee has not increased his base salary since early 1992, but rather has emphasized incentive compensation. The incentive compensation paid to Mr. Sbarro for 8 11 1995 was 50% of his incentive compensation paid for fiscal 1993 and 1994, and no stock options were granted to Mr. Sbarro by the Stock Option Committee in fiscal 1995. Certain Tax Legislation. Section 162(m) of the Internal Revenue Code of 1986 (the "Code") precludes a public company from taking a federal income tax deduction for annual compensation in excess of $1,000,000 paid to its chief executive officer or any of its four other most highly compensated executive officers. Certain "performance based compensation" is excluded from the deduction limitation. In light of amendments adopted by shareholders in 1994 to the Company's 1991 Stock Incentive Plan, any compensation resulting from the exercise of stock options granted by the Company should be eligible for the exclusion. Based upon Internal Revenue Service proposed regulations and present compensation levels, the Compensation Committee believes that the limitations on compensation deductibility under Section 162(m) of the Code will have no effect on the Company in the foreseeable future. Respectfully submitted, Compensation Committee Stock Option Committee Bernard Zimmerman, Chairman Harold L. Kestenbaum, Chairman Harold L. Kestenbaum Paul A. Vatter Terry Vince Terry Vince
PERFORMANCE GRAPH The following graph compares the cumulative return on investment to holders of the Company's Common Stock for the five years ended December 31, 1995 with the Standard & Poor's ("S&P") Restaurant Index and S&P 500 Index for the same period. The comparison assumes $100 was invested on December 31, 1990 in the Company's Common Stock and in each of the comparison groups, and assumes reinvestment of dividends. In February 1993, the Company initiated a policy of paying quarterly dividends. Dividends of $.13 1/3, $.16 and $.19 per share were declared in each of the four quarters of fiscal 1993, 1994 and 1995, respectively. In February 1996, the Company further increased its quarterly dividend to $.23 per share. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG SBARRO, INC., THE S&P 500 INDEX AND THE S&P RESTAURANTS INDEX
MEASUREMENT PERIOD S&P RESTAU- (FISCAL YEAR COVERED) SBARRO, INC. S&P 500 RANTS 12/90 100 100 100 12/91 125 130 135 12/92 110 140 173 12/93 141 155 202 12/94 128 157 201 12/95 109 215 302
9 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company is the sublessee of its headquarters office building (the "Headquarters"), which is leased from the Suffolk County Industrial Development Agency (the "Agency") by Sbarro Enterprises, L.P., a Delaware limited partnership, and, in turn, subleased to the Company. The annual rent payable pursuant to the sublease was $298,000 during fiscal 1995 and increased to $337,000 in April 1996 for the remaining five years of the lease term. In addition, the Company is obligated to pay real estate taxes, utilities, insurance and certain other expenses for the facility. Management believes that such rents are comparable to the rents that would be charged by an unaffiliated third party. Payment of principal and interest and any premium on the bonds issued by the Agency to fund construction of the headquarters is severally guaranteed by Mario, Joseph and Anthony Sbarro. The limited partners of Sbarro Enterprises, L.P. are Mario, Joseph, Anthony and Carmela Sbarro. The mother of Mario, Anthony and Joseph Sbarro and Vice President, Director Emeritus and a co-founder of the Company; a son of Mario Sbarro; a daughter of Mario Sbarro; a son of Joseph Sbarro; and the son-in-law of Joseph Sbarro are employed by the Company in various capacities, for which they received $100,000, $130,000, $86,500, $173,000 and $173,000, respectively, for services rendered during fiscal 1995. In addition, ten other members of the immediate family of Mario, Anthony and Joseph Sbarro received an aggregate of $453,362 for services rendered as employees during fiscal 1995. The Company has purchased printing services from a corporation owned by a son-in-law of Mario Sbarro in the amount of approximately $210,000 during fiscal 1995. The Company believes that these services were provided on terms comparable to those that would have been available from unrelated third parties. During fiscal 1995, companies owned by a son of Anthony Sbarro and a company owned by the daughter of Joseph Sbarro paid royalties to the Company aggregating approximately $59,000 and $41,000, respectively, under franchise agreements containing terms similar to those in agreements entered into by the Company with unrelated franchisees. PROPOSAL 2 APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS The firm of Arthur Andersen LLP has audited the financial statements of the Company for the past six years and the Board of Directors has, subject to ratification by shareholders, appointed that firm to act as its independent public accountants for the Company's fiscal year ending December 29, 1996. Accordingly, management will present to the Meeting a resolution ratifying the appointment of Arthur Andersen LLP as the Company's independent public accountants for the fiscal year ending December 29, 1996. A representative of Arthur Andersen LLP is expected to be present at the Meeting with the opportunity to make a statement if the representative desires to do so and is expected to be available to respond to appropriate questions addressed by shareholders. VOTING REQUIREMENTS Directors are elected by a plurality of the votes cast at the Meeting (Proposal 1). The affirmative vote of a majority of the votes cast at the Meeting will be required to ratify the appointment of Arthur Andersen LLP as the Company's independent public accountants for the Company's fiscal year ending December 29, 1996 (Proposal 2). Abstentions and broker nonvotes with respect to any matter are not considered as votes cast with respect to that matter. The Board of Directors has unanimously recommended a vote in favor of each nominee named in the Proxy and FOR Proposal 2. 10 13 MISCELLANEOUS SHAREHOLDER PROPOSALS Any shareholder proposal intended to be presented at the 1997 Annual Meeting of Shareholders must be received by the Company not later than December 31, 1996 for inclusion in the Company's proxy statement and form of proxy for that meeting. OTHER MATTERS Management does not intend to bring before the Meeting for action any matters other than those specifically referred to above and is not aware of any other matters which are proposed to be presented by others. If any other matters or motions should properly come before the Meeting, the persons named in the Proxy intend to vote thereon in accordance with their judgment on such matters or motions, including any matters or motions dealing with the conduct of the Meeting. PROXIES All shareholders are urged to fill in their choices with respect to the matters to be voted upon, sign and promptly return the enclosed form of Proxy. By Order of the Board of Directors, JOSEPH SBARRO, Secretary April 26, 1996 11 14 PROXY PROXY - ----- ----- SBARRO, INC. (Solicited on Behalf of the Board of Directors) The undersigned holder of Common Stock of SBARRO, INC., revoking all proxies heretofore given, hereby constitutes and appoints Mario Sbarro and Anthony Sbarro, and each of them, Proxies, with full power of substitution, for the undersigned and in the name, place and stead of the undersigned, to vote all of the undersigned's shares of said stock, according to the number of votes and with all the powers the undersigned would possess if personally present, at the Annual Meeting of Shareholders of SBARRO, INC., to be held at Boulder Creek Steaks & Saloon, 6321 Northern Boulevard (Route 25A) at the intersection of Route 106, East Norwich, New York on Wednesday, May 22, 1996 at 11:00 A.M., Eastern Daylight Savings time, and at any adjournments or postponements thereof. The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy Statement relating to the meeting and hereby revokes any proxy or proxies heretofore given. Each properly executed Proxy will be voted in accordance with the specifications made on the reverse side of this Proxy and in the discretion of the Proxies on any other matter that may properly come before the meeting. Where no choice is specified, this Proxy will be voted FOR all listed nominees to serve as directors and FOR Proposal 2. PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE - -------------------------------------------------------------------------------- - FOLD AND DETACH HERE - 15
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL LISTED NOMINEES AND FOR PROPOSAL 2. Please mark your votes as /X/ indicated in this example. 1. Election of three Class 1 Directors FOR all nominees listed WITHHOLD Nominees: Anthony Sbarro, Harold L. Kestenbaum and Paul A. Vatter (except as marked to AUTHORITY the contrary) to vote for all (Instruction: To withhold authority to vote for any individual listed nominees nominee, circle that nominee's name in the list provided above.) / / / / 2. Ratify the appointment of Arthur Andersen LLP as the Company's independent public accountants. FOR AGAINST ABSTAIN / / / / / / Will Attend the Meeting: / / Date: , 1996 --------------------------------------------- --------------------------------------------- --------------------------------------------- Signatures(s) (Signatures should conform to names as registered. For jointly owned shares, each owner should sign. When signing as attorney, executor, administrator, trustee, guardian or officer of a corporation, please give full title as such, and, if signing for a corporation, please give title.) PLEASE MARK AND SIGN ABOVE AND RETURN PROMPTLY - ------------------------------------------------------------------------------------------------------------------------------------ - FOLD AND DETACH HERE -
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