<PAGE> 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:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
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:
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<PAGE> 2
SBARRO, INC.
763 LARKFIELD ROAD
COMMACK, NEW YORK 11725
-----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 1995
To the Shareholders:
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Shareholders (the
"Meeting") of Sbarro, Inc. (the "Company") will be held at Sbarro, The Italian
Eatery, Walt Whitman Mall, Route 110, Huntington Station, New York, on
Wednesday, May 24, 1995, at 10:30 A.M., Eastern Daylight Savings time, to
consider and act upon the following matters:
1. The election of three Class 3 directors to serve until the 1998 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 31, 1995; 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 14, 1995 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 24, 1995
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.
<PAGE> 3
SBARRO, INC.
763 LARKFIELD ROAD
COMMACK, NEW YORK 11725
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 24, 1995
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 24, 1995, at 10:30 A.M., New York City
time, at Sbarro, The Italian Eatery, Walt Whitman Mall, Route 110, Huntington
Station, 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 24, 1995.
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 31, 1995. 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 14, 1995 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 thereof. As of the Record Date, there were 20,333,481 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 nine
members with three members in each class. Each class is elected for a term of
three years. The term of office of Class 1, 2 and 3 directors is scheduled to
expire at the 1996, 1997 and 1995 annual 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 3 directors to serve
until the 1998 annual meeting of shareholders and until their respective
successors are elected and qualified. Unless otherwise directed, the
<PAGE> 4
persons named in the Proxy intend to cast all Proxies received for the election
of Messrs. Mario Sbarro, Thomas J. Sandleitner and Bernard Zimmerman (the
"nominees") to serve as Class 3 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 3 Directors
MARIO SBARRO, 53, 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.
THOMAS J. SANDLEITNER, 55, has been a private investor since June 1990.
Prior thereto, Mr. Sandleitner served as President of Manufacturers Hanover
Venture Capital Corp. (from 1981), Chairman of the Board of Directors of
Manufacturers Hanover Capital Investors, Inc. (from 1986) and Senior Managing
Director -- Venture Capital of the Investment Banking Group of Manufacturers
Hanover Trust Company (from 1987). He became a director of the Company in
February 1989. Mr. Sandleitner is a member of the Audit Committee of the Board.
Mr. Sandleitner is also a director of Trend-Lines, Inc.
BERNARD ZIMMERMAN, 62, 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, 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.
INFORMATION ABOUT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE MEETING
Class 1 Directors
ANTHONY SBARRO, 49, 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, 45, has been a practicing attorney in New York since
1975. From October 1989 until July 1990, Mr. Kestenbaum also served as Chairman
of FranchiseAmerica Corp., a provider of franchise marketing and consulting
services. 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, 70, has been Lawrence E. Fouraker Professor of Business
Administration at Harvard University's Graduate School of Business
Administration since 1970. 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.
2
<PAGE> 5
Class 2 Directors
JOSEPH SBARRO, 54, 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, 52, has been a Managing Director of Prudential
Securities Incorporated, an investment banking firm, for more than the past five
years. He became a director of the Company in March 1986. Mr. Mandell is a
member of the Audit Committee of the Board.
TERRY VINCE, 66, 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). 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.
COMMITTEES
The Board of Directors is responsible for the management of the Company.
During the Company's 1994 fiscal year, ended January 1, 1995, the Board of
Directors held four 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 Messrs. Sandleitner and Vatter who attended 50% and
43% of such meetings, respectively.
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 1994, 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 1994.
The Compensation and Stock Option Committees, described below under
"Executive Compensation-Report of the Compensation and Stock Option Committees",
each held one meeting during fiscal 1994. 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 was 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
<PAGE> 6
after each Annual Meeting of Shareholders. Options granted under the plan are
exercisable during the five year period commencing one year following the date
of grant, subject to early termination in certain instances, at an exercise
price equal to 100% of the fair market value of the Company's Common Stock on
the date of grant.
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 January 1, 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, 73, 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.
FREDRIC J. GRUDER, 49, joined the Company as Vice President and General
Counsel in March 1992. For more than five years prior to joining the Company,
Mr. Gruder was a partner of Dornbush Mensch Mandelstam & Schaeffer, a New York
City law firm, and its predecessors.
ROBERT S. KOEBELE, 51, joined the Company in October 1990 as Vice
President -- Finance and Chief Financial Officer. From 1986 until he joined the
Company, Mr. Koebele was Vice President -- Finance and Chief Financial Officer
of General Building Products Corp., a publicly-held operator of retail home
centers and distributor of building products. Mr. Koebele has been a certified
public accountant in New York for more than the past twenty-five years.
JACK H. LEE, 47, joined the Company in January 1995 and was elected Vice
President -- Marketing in February 1995. From February 1994 until he joined the
Company, Mr. Lee served as Vice President -- Special Markets of Newfield
Publications (a publisher of children's books), a subsidiary of K-III
Communications Corp. and, from June 1984 until February 1994 served in various
capacities, most recently as Vice President, with Gruner + Jahr USA Publishing
(a publisher of magazines).
CARMELA N. MERENDINO, 30, 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, 28, 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, 32, 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, 49, 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
4
<PAGE> 7
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.
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, 1995 (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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
- - -------------------------------------------------------------- --------------------- -----------
<S> <C> <C>
Mario Sbarro(2)............................................... 1,905,710(3) 9.3%
Anthony Sbarro(2)............................................. 1,758,300(4) 8.6%
Joseph Sbarro(2).............................................. 2,332,914(5) 11.4%
Trust of Carmela Sbarro(2).................................... 2,497,884(6) 12.3%
J.P. Morgan & Co. Incorporated................................ 1,624,050(7) 8.0%
T. Rowe Price Associates, Inc. ............................... 1,532,350(8) 7.5%
The Prudential Insurance Company of America................... 1,201,280(9) 5.9%
Harold L. Kestenbaum.......................................... 14,250(10) *
Richard A. Mandell............................................ 7,500(11) *
Thomas J. Sandleitner......................................... 7,500(11) *
Paul A. Vatter................................................ 9,750(12) *
Terry Vince................................................... 10,800(12) *
Bernard Zimmerman............................................. 32,500(13) *
Robert S. Koebele............................................. 9,000(14) *
Fredric J. Gruder............................................. 600 *
All directors and executive officers as a group (19
persons).................................................... 8,599,889(15) 41.1%
</TABLE>
- - ---------------
(1) Asterisk indicates less than 1%. Shares subject to options are considered
outstanding only for the purpose of computing the percentage of outstanding
Common Stock which would be owned by the optionee if the 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.
(2) 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.
(3) Includes (i) 3,180 shares owned by children of Mr. Sbarro who reside in his
household (as to which shares Mr. Sbarro disclaims beneficial ownership),
(ii) 3,550 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)
230,000 shares subject to the portion of options held by Mr. Sbarro which
are currently exercisable. Excludes the shares held by the Trust of
5
<PAGE> 8
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.
(4) Includes 135,000 shares subject to the portion of options which are
currently exercisable.
(5) Includes (i) 609,000 shares owned by a partnership of which Mr. Sbarro is
the sole general partner and (ii) 125,000 shares subject to the portion of
options which are currently exercisable.
(6) 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, Franklin Montgomery and Mario Sbarro may be deemed to be the
beneficial owners of these shares with shared voting and dispositive power.
(7) Based upon information as of December 31, 1994 contained in a Schedule 13G
filed by J.P. Morgan & Co. Incorporated ("J.P. Morgan"). The address of
J.P. Morgan is 60 Wall Street, New York, New York 10260. J.P. Morgan has
sole voting power with respect to 976,650 of such shares and sole
dispositive power with respect to all 1,624,050 of such shares. J.P. Morgan
has no shared voting or shared dispositive power with respect to any of
these shares.
(8) Based upon information as of December 31, 1994 contained in a Schedule 13G
filed by T. Rowe Price Associates, Inc. ("T. Rowe Price"). The address of
T. Rowe Price is 100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe
Price has sole voting power with respect to 138,450 of such shares and sole
dispositive power with respect to all 1,532,350 of such shares. T. Rowe
Price has no shared voting or shared dispositive power with respect to any
of such shares.
(9) Based upon information as of December 31, 1994 contained in a Schedule 13G
filed by The Prudential Insurance Company of America ("Prudential"). The
address of Prudential is Prudential Plaza, Newark, New Jersey 07102-3777.
Prudential has sole voting and sole dispositive power with respect to
454,850 of these shares and shared voting and shared dispositive power with
respect to the remaining 746,430 of such shares.
(10) Represents (a) 6,750 shares owned by Mr. Kestenbaum's wife, as to which
shares Mr. Kestenbaum disclaims beneficial ownership, and (b) 7,500 shares
subject to the portion of options which were exercisable on, or become
exercisable within 60 days after, March 31, 1995.
(11) Represents shares subject to the portion of options which were exercisable
on, or become exercisable within 60 days after, March 31, 1995.
(12) Includes 7,500 shares subject to the portion of options which were
exercisable on, or become exercisable within 60 days after, March 31, 1995.
(13) Represents 7,500 and 25,000 shares subject to the portion of 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, which were exercisable on, or become exercisable within 60
days after March 31, 1995.
(14) Includes 1,500 shares subject to the portion of an option which is
currently exercisable.
(15) Includes (a) an aggregate of 9,240 shares owned by spouses and children (as
to which shares beneficial ownership is disclaimed), (b) 3,550 shares owned
by a charitable foundation and (c) 569,251 shares subject to the portion of
options held which were exercisable on, or become exercisable within 60
days after, March 31, 1995.
6
<PAGE> 9
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 1994 fiscal year for services in all
capacities to the Company and its subsidiaries during the Company's 1994, 1993
and 1992 fiscal years:
<TABLE>
<CAPTION>
LONG TERM
NAME AND ANNUAL COMPENSATION COMPENSATION
PRINCIPAL --------------------- ------------
POSITION(1) YEAR SALARY BONUS OPTIONS
- - ------------------------------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Mario Sbarro..................................... 1994 $400,000 $225,000 --
Chairman of the Board and Chief Executive 1993 400,000 225,000 120,000
Officer 1992 395,000 200,000 --
Anthony Sbarro................................... 1994 $235,000 $175,000 --
President, Chief Operating Officer and 1993 235,000 175,000 90,000
Treasurer 1992 234,000 125,000 --
Joseph Sbarro.................................... 1994 $235,000 $150,000 --
Senior Executive Vice President and Secretary 1993 235,000 150,000 75,000
1992 234,000 125,000 --
Robert S. Koebele................................ 1994 $163,000 $ 50,000 5,000
Vice President -- Finance and Chief Financial 1993 155,000 46,500 7,500
Officer 1992 140,000 35,000 4,500
Fredric J. Gruder................................ 1994 $156,000 $ 40,000 5,000
Vice President and General Counsel 1993 148,000 35,000 7,500
1992 113,000(2) -- 7,500
</TABLE>
- - ---------------
(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. Gruder joined the Company in March 1992.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company's 1991 Stock Incentive Plan permits the grant of options and
stock appreciation rights to employees of, and consultants and advisors to, the
Company and its subsidiaries, including officers and directors who are serving
in such capacities. The following table contains information concerning options
granted during the Company's 1994 fiscal year to the executive officers named in
the Summary Compensation Table. No stock appreciation rights have been granted
to date.
<TABLE>
<CAPTION> INDIVIDUAL OPTIONS
------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
PERCENT AT ASSUMED ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SHARES OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER EXPIRATION ------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
- - -------------------------------------- ----------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Koebele..................... 5,000 3.8% $ 21.50 12/11/04 $67,606 $171,327
Fredric J. Gruder..................... 5,000 3.8% 21.50 12/11/04 67,606 171,327
</TABLE>
- - ---------------
(1) These options are exercisable in varying installments commencing on December
12, 1996.
(2) These are hypothetical values using assumed compound growth rates prescribed
by the Securities and Exchange Commission and are not intended to forecast
possible future appreciation, if any, in the market price of the Company's
Common Stock.
7
<PAGE> 10
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 January 1, 1995 by, and the number and value at
January 1, 1995 of shares of Common Stock subject to unexercised options held
by, the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
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)
- - ------------------------------------------- --------------- ----------- ----------------- ------------------
<S> <C> <C> <C> <C>
Mario Sbarro............................... -- -- 230,000/40,000 $ 799,995/ 0
Anthony Sbarro............................. -- -- 135,000/30,000 $ 399,998/ 0
Joseph Sbarro.............................. -- -- 125,000/25,000 $ 399,998/ 0
Robert S. Koebele.......................... 6,000 $53,555 3,000/15,500 $ 26,750/56,250
Fredric J. Gruder.......................... 2,500 $23,950 0 /17,500 $ 0 /78,750
</TABLE>
- - ---------------
(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 option
exercise price.
(2) Represents the closing price of the Company's Common Stock on the New York
Stock Exchange on December 30, 1994, the last trading day of the Company's
1994 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 (the "1991 Plan"). Each Committee
consists exclusively of non-employee directors. The report describes the
policies of the Committees as in effect in fiscal 1994. 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 formal and
informal surveys of compensation levels at other restaurant companies to
supplement objective and subjective factors.
In establishing, at the end of fiscal 1993, compensation levels for the
Company's executive officers for fiscal 1994, the Compensation Committee
reviewed, among other things, a formal survey prepared for it by an independent
compensation consulting group of a major public accounting firm and information
contained in proxy statements of other restaurant companies, the results and
performance of which the Company regularly monitors. The Compensation Committee,
in part, uses these surveys as guidelines 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.
The formal survey commissioned by the Company compared 1992 compensation
(the latest full year for which published information was then available) paid
by the Company to that paid by fourteen other restaurant companies selected by
the consultants, including two of the five companies in the S&P Restaurant Index
(see "Performance Graph," below) and several of the companies which were part of
the Compensation
8
<PAGE> 11
Committee's informal survey. The formal survey concluded that the Company's
average return on sales, return on average equity and earnings per share growth
during the years 1990 through 1992 ranked first, second and ninth, respectively,
among the companies surveyed. The Company's performance ranked it above the top
quartile of the companies surveyed with respect to average return on sales and
return on average equity, while being near the top quartile in earnings per
share growth. The survey also concluded that the cash compensation paid by the
Company to executive officers was generally in the high median range, which the
Committee believes to be appropriate for attracting and retaining high caliber
executives and fostering quality performance. The Committee conducted an
informal survey, through a review of proxy statements of other restaurant
companies, which included the five companies which comprise the S&P Restaurant
Index, to update and revalidate the compensation information contained in the
formal survey.
Base Salary. The Compensation Committee reviews the base salary of each
executive officer of the Company annually. In determining the appropriateness of
base salaries, 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 economic factors. The Committee's reviews have been qualitative in
nature, without specific weights being assigned to the various factors employed
by it. The formal survey concluded that, except for the base salary of the
Company's Chief Executive Officer, the base salary of the Company's other
executive officers was below the top quartile of companies surveyed. Although
the Committee concluded that the performance of the Company's three principal
executive officers merited an increase in their base salaries, after
consultation with these executive officers, their salaries were not increased
for fiscal 1994. Salary increases of approximately 5% were granted to other
executive officers named in the Cash Compensation Table.
Annual Incentive Compensation. For fiscal 1994, the Company continued to
place emphasis, particularly with respect to the Company's three principal
executive officers, 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 and formal
Committee surveys. The Company's emphasis on annual incentive compensation to
executive officers who fulfill objectives generally placed the level of such
payments made in 1994 in the higher range of the bonuses paid by others included
in the surveys.
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. In light of the grant of options made in fiscal 1993 to the Company's
top three executive officers, no additional options were granted to them in
fiscal 1994. Although the Committee does review the value of options granted by
other restaurant companies obtained from the formal and informal surveys, it
does not target its grants of options to those granted by others.
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
9
<PAGE> 12
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, it determined, with the
concurrence of Mr. Sbarro, not to increase his base salary for fiscal 1994, but
rather to continue to emphasize incentive compensation. After reviewing Mr.
Sbarro's accomplishments during fiscal 1994, and without placing specific
weights on any factors, the Compensation Committee awarded Mr. Sbarro a bonus of
$225,000 for fiscal 1994. As previously noted, no additional stock options were
granted to Mr. Sbarro in fiscal 1994.
Recent Tax Legislation. Effective January 1, 1994, 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,
<TABLE>
<S> <C>
Compensation Committee Stock Option Committee
Bernard Zimmerman, Chairman Harold L. Kestenbaum, Chairman
Harold L. Kestenbaum Paul A. Vatter
Terry Vince Terry Vince
</TABLE>
10
<PAGE> 13
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, 1994 with
the (i) Standard & Poor's ("S&P") Restaurant Index, (ii) American Stock Exchange
("AMEX") Composite Index and (iii) S&P 500 Index for the same period. The
Company's Common Stock began trading on the New York Stock Exchange ("NYSE") in
lieu of the AMEX on September 23, 1994. Because the NYSE does not report
cumulative return on investment information, the Company has determined in the
future to compare the cumulative return on investment on its Common Stock to
that of the S&P 500 (which does provide such information) in lieu of the AMEX
Composite Index. The AMEX Composite Index is included in this year's Proxy
Statement in order to comply with Securities and Exchange Commission
requirements. The comparison assumes $100 was invested on January 1, 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 per share were declared in
each of the four quarters of fiscal 1993 and dividends of $.16 per share were
declared in each of the four quarters of fiscal 1994. In February 1995, the
Company further increased its quarterly dividend to $.19 per share.
<TABLE>
<CAPTION>
Measurement Period Amex Market S&P Restau-
(Fiscal Year Covered) Sbarro, Inc. S&P 500 Value rants
<S> <C> <C> <C> <C>
12/89 100 100 100 100
12/90 133 97 82 87
12/91 166 126 105 117
12/92 146 136 106 150
12/93 188 150 126 176
12/94 170 152 115 175
</TABLE>
11
<PAGE> 14
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 is $297,800 until April 1996 and will be $337,000
thereafter until April 2001. 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. In March 1994, the Company purchased a 100,000 square foot
office building. The Company intends to make substantial improvements to this
building during 1995 and to occupy a substantial portion of the building as its
corporate headquarters, lease the remainder of that building and sublet the
building serving as its present corporate headquarters.
The Company leases, for a term expiring in 1995, its original Sbarro
kitchen and retail location from Sbarro Realty, Inc., a New York corporation
whose capital stock is owned in equal shares by Mario, Joseph and Anthony Sbarro
and the Trust of Carmela Sbarro. The lease provides for an annual base rental of
$43,000 and for the adjustment of rents in certain circumstances. The Company
believes that such rents are comparable to the rents that would be charged by an
unaffiliated third party. The Company intends to renew this lease at prevailing
rentals when the current lease expires.
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, $92,300,
$126,500, $85,000, $176,250 and $176,250, respectively, for services rendered
during fiscal 1994. In addition, ten other members of the immediate family of
Mario, Anthony and Joseph Sbarro received an aggregate of $331,706 for services
rendered as employees during fiscal 1994.
The Company has purchased printing services from a corporation owned by the
husband of Carmela N. Merendino and son-in-law of Mario Sbarro in the amount of
approximately $169,000 during fiscal 1994. The Company believes that these
services were provided on terms comparable to those that would have been
available from unrelated third parties.
During fiscal 1994, a company owned by the son of Anthony Sbarro and a
company owned by the daughter of Joseph Sbarro paid royalties to the Company
aggregating approximately $56,000 and $47,000, respectively, under franchise
agreements containing terms similar to those in agreements entered into by the
Company with unrelated franchisees.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of the Company's Common Stock, to file initial reports of ownership and reports
of changes of ownership with the Securities and Exchange Commission and furnish
copies of those reports to the Company. Based solely on a review of the copies
of the reports furnished to the Company to date, or written representations that
no reports were required, the Company believes that all reports required to be
filed by such persons with respect to the Company's fiscal year ending January
1, 1995 were timely made, except that Fredric J. Gruder filed one report ten
days late with respect to one transaction.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has audited the financial statements of the
Company for the past five 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 31, 1995.
Accordingly,
12
<PAGE> 15
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 31, 1995.
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 31, 1995 (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.
MISCELLANEOUS
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 1996 Annual
Meeting of Shareholders must be received by the Company not later than December
31, 1995 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 24, 1995
13
<PAGE> 16
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 Sbarro, The
Italian Eatery, Walt Whitman Mall, Route 110, Huntington Station, New York on
Wednesday, May 24, 1995 at 10:30 A.M., Eastern Daylight Savings time, and at
all 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)
<PAGE> 17
/ X / Please mark you votes as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL LISTED NOMINEES AND FOR
PROPOSAL 2.
----------------
COMMON
1. Election of three Class 3 Directors
FOR ALL WITHHOLD
NOMINEES LISTED AUTHORITY
(EXCEPT AS MARKED TO TO VOTE FOR ALL
THE CONTRARY), LISTED NOMINEES.
/ / / /
NOMINEES: Mario Sbarro, Thomas J. Sandleitner and Bernard Zimmerman
(Instructions: To withhold authority to vote for
any individual 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 / /
Dated:______________________________________, 1995
____________________________________________
____________________________________________
(Signature)
(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.)
PLEASE MARK AND SIGN ABOVE AND RETURN PROMPTLY
