<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
SBARRO, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
SBARRO, INC.
763 LARKFIELD ROAD
COMMACK, NEW YORK 11725
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 19, 1998
To the Shareholders:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the
"Meeting") of Sbarro, Inc. (the "Company") will be held at the Carriage House at
Milleridge Inn, 585 North Broadway on Routes 106 and 107 (Exit 41 North on the
Long Island Expressway), Jericho, New York, on Wednesday, August 19, 1998, at
9:30 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 Company's
Annual Meeting of Shareholders to be held in the year 2001 and until
their respective successors are elected and qualified;
2. A proposal to implement 1998 New York legislation by authorizing an
amendment to the Company's By-laws with respect to the minimum size of
the Company's Board of Directors;
3. 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 January 3, 1999; and
4. 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 July 17, 1998 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
July 21, 1998
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
AUGUST 19, 1998
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, August 19, 1998, at 9:30 a.m., Eastern
Daylight Savings Time, at the Carriage House at Milleridge Inn, 585 North
Broadway on Routes 106 and 107 (Exit 41 North on the Long Island Expressway),
Jericho, 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 personal interview, telephone, telegram, cablegram or other means of
electronic transmission. The approximate mailing date of this Proxy Statement is
July 21, 1998.
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 each
of the other proposals set forth in the Notice of Annual Meeting accompanying
this Proxy Statement. 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 July 17, 1998 has been fixed by the Board of
Directors (the "Board of Directors" or the "Board") 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 20,528,309 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 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 the current Class 1, 2 and 3 directors is scheduled to expire at
the annual meetings of shareholders to be held in the years 1999, 2000 and 1998,
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. Any director elected
by the Board to
<PAGE> 4
fill the existing vacancy in the Board 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.
At the Meeting, shareholders will elect three Class 3 directors to serve
until the annual meeting of shareholders scheduled to be held in the year 2001
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 Mario Sbarro, Carmela Sbarro and Bernard Zimmerman
(the "nominees") to serve as Class 3 directors upon their nomination at the
Meeting. Each nominee (other than Carmela Sbarro, who was elected by the Board
of Directors) and each other incumbent director was elected by shareholders.
Each of the nominees has advised the Company of his or her 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, 56, 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. Mr. Sbarro re-assumed the position of President of the Company in
May 1996 (a position he held for more than five years prior to December 1993).
Mr. Sbarro is Chairman of the Executive Committee of the Board.
CARMELA SBARRO, 76, has been Vice President of the Company since March
1985. Mrs. Sbarro devotes a substantial portion of her time to recipe and
product development. Mrs. Sbarro was a founder of the Company, together with her
late husband, Gennaro Sbarro. The Board of Directors elected Mrs. Sbarro as a
director of the Company in January 1998. Mrs. Sbarro previously served as a
director of the Company from March 1985 until December 1988, when she was
elected Director Emeritus of the Company.
BERNARD ZIMMERMAN, 65, has been President of Bernard Zimmerman and Co.,
Inc. since October 1972 and was Senior Vice President of The Zimmerman Group,
Inc. from January 1991 to November 1996, financial and management consulting
firms. Mr. Zimmerman also served as President and a director of Beacon Hill
Mutual Fund, Inc. from December 1994 until October 1996. 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-five 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
HAROLD L. KESTENBAUM, 48, 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 Audit and
Compensation Committees of the Board.
ANTHONY SBARRO, 52, has been an officer, a director and a principal
shareholder of the Company since its organization in 1977, serving as Vice
Chairman of the Board of Directors since May 1996 and as President and Chief
Operating Officer from December 1993 until May 1996. For more than five years
prior to December 1993, 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.
PAUL A. VATTER, 73, 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
2
<PAGE> 5
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 Stock Option Committee of the Board.
Class 2 Directors
RICHARD A. MANDELL, 56, a private investor, was Managing Director of
Bluestone Capital Partners, L.P., an investment banking firm, from February
through April 1998 and Vice President -- Private Investments of Clariden Asset
Management (NY) Inc., a subsidiary of Clariden Bank, a private Swiss bank, from
January 1996 until February 1998. 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 and Compensation Committees of the Board. Mr. Mandell is
also a director of Trend-Lines, Inc. and U.S.A. Detergents, Inc.
JOSEPH SBARRO, 58, 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.
TERRY VINCE, 69, has been Chairman of the Board and President of Sovereign
Hotels (a company that 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 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.
BOARD MEETINGS AND COMMITTEES
The Board of Directors is responsible for the management of the Company.
During the Company's 1997 fiscal year, ended December 28, 1997, the Board of
Directors held seven meetings. Each incumbent director who served as a director
during fiscal 1997 attended at least 75% of all meetings of the Board and
committees on which the person served which were held during that fiscal year,
except for Paul A. Vatter.
The Board of Directors has established Executive, Audit, Compensation (with
a Performance Incentive Plan Subcommittee) and Stock Option Committees. There is
no standing nominating committee. In January 1998, the Board of Directors formed
a special committee (the "Special Committee"), consisting of Richard A. Mandell
(Chairman), Harold L. Kestenbaum, Paul A. Vatter and Terry Vince, to evaluate
the terms of a merger proposed by certain members of the Sbarro family pursuant
to which the Company would be merged into a company controlled by them.
Negotiations concerning the proposed merger were terminated in June 1998 and the
Special Committee ceased functioning.
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 1997, 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 meetings during fiscal 1997.
The Compensation Committee (including the Performance Incentive Plan
Subcommittee of the Compensation Committee) and Stock Option Committee, each
described below under "Executive Compensation-Report of the Compensation and
Stock Option Committees", held twelve and eleven formal meetings (all eleven of
which were joint meetings with the Compensation Committee), respectively, during
fiscal 1997
3
<PAGE> 6
(with the Performance Incentive Plan Subcommittee of the Compensation Committee
holding one additional formal meeting). In addition, such Committees met
informally from time to time during the year.
PENDING LAWSUITS
Following the Company's announcement of a proposal by Mario Sbarro, Joseph
Sbarro, Anthony Sbarro and the Trust of Carmela Sbarro (the "Sbarro Family") for
the merger of the Company with a company to be owned by them, seven lawsuits
were instituted against the Company, all directors other than Carmela Sbarro,
and/or the Sbarro Family. Certain of the actions have been consolidated and all
are presently pending in Suffolk County, New York. While each of the complaints
varies, in general, they allege a breach of fiduciary duties by such directors
and members of the Sbarro Family, that the proposed price per share to be paid
to public shareholders was inadequate and that the proposal served no legitimate
business purpose of the Company. Although varying, the complaints seek,
generally, a declaration of class action status, damages in unspecified amounts
alleged to be caused to the plaintiffs, and other relief (including injunctive
relief, rescission if the transaction is consummated, and rescissory damages),
costs and disbursements, including a reasonable allowance for counsel fees and
expenses. To date, the actions have not as yet been withdrawn despite the fact
that negotiations with regard to the proposed transaction were terminated in
June 1998.
COMPENSATION OF DIRECTORS
Non-employee directors currently receive a retainer at the rate of $16,000
per annum and $1,000 for each meeting of the Board of Directors attended and
$500 for each meeting of a Committee of the Board (other than meetings of the
Special Committee) 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.
Each member of the Special Committee was paid a daily fee of $1,250 or
$2,500 for serving thereon, depending upon the time expended during such day in
performing such services. Each committee member was also entitled to be
reimbursed for out-of-pocket expenses incurred in performing such services. In
addition, Richard A. Mandell was entitled to receive a fee of $10,000 for
serving as Chairman of the Special Committee.
The Company's 1993 Non-Employee Director Stock Option Plan, as amended,
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 after each Annual Meeting of Shareholders. Each option has a ten
year term, subject to early termination in certain instances, and is exercisable
commencing one year following the date of grant at an exercise price equal to
100% of the fair market value of the Company's Common Stock on the date of
grant.
A corporation of which Bernard Zimmerman is President and a majority
shareholder renders financial and consulting assistance to the Company. See
"Executive Compensation -- Compensation Committee Interlocks and Insider
Participation," below, for information with respect to such arrangement.
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):
JOHN BERNABEO, 41, joined the Company in August 1992 and served in various
capacities prior to his election as Vice President - Architecture and
Engineering in May 1997.
GEORGE W. HERZ II, 43, 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).
4
<PAGE> 7
ROBERT S. KOEBELE, 54, 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, 33, 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, 39, was elected Corporate Vice President - Operations
in August 1996, prior to which he served as Vice President - Operations (West)
from February 1995, and as a Zone Vice President from June 1992 until February
1995. 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 as an employee, Mr. Missano served as President of Anaton
Corp., a franchisee of the Company.
GENNARO A. SBARRO, 31, was elected Corporate Vice President - Franchising
in August 1996, prior to which he served as Vice President - Franchising since
February 1995. For more than five years prior thereto, Mr. Sbarro served in
various operational positions for the Company.
GENNARO J. SBARRO, 36, was elected Corporate Vice President - Operations in
August 1996, prior to which he served as Vice President - Operations (East)
since February 1995. For more than five years prior thereto, Mr. Sbarro served
in various capacities for the Company.
LEONARD G. SKROSKY, 66, served the Company as Senior Vice President - Real
Estate and Lease Administration from February 1987 until December 1993. From
January 1994 until June 1996, Mr. Skrosky was President of the Skrosky Company,
a real estate firm dealing with site selection and lease negotiations for
several restaurant and other companies. He rejoined the Company in June 1996 and
was elected Senior Vice President - Real Estate in November 1996.
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 June 30, 1998 (except as noted
below) with respect to (i) holders known to the Company to beneficially own more
than five percent of the outstanding Common Stock of the Company, (ii) each
director and nominee, (iii) each executive officer who is named in the Summary
Compensation Table under the caption "Executive Compensation" and (iv) 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(1) CLASS(2)
---------------- ----------------------- ----------
<S> <C> <C>
Mario Sbarro (3)............................................ 1,841,653(4) 8.8%
Anthony Sbarro (3).......................................... 1,398,800(5) 6.8%
Joseph Sbarro (3)........................................... 1,974,580(6) 9.5%
Trust of Carmela Sbarro (3)................................. 2,497,884(7) 12.2%
Carmela Sbarro(3)........................................... 400 *
Harold L. Kestenbaum........................................ 25,500(8) *
Richard A. Mandell.......................................... 18,750(9) *
Paul A. Vatter.............................................. 21,000(9) *
Terry Vince................................................. 22,050(9) *
Bernard Zimmerman........................................... 61,700(10) *
Robert S. Koebele........................................... 21,833(11) *
Anthony J. Missano.......................................... 10,833(12) *
Gennaro A. Sbarro........................................... 24,373(13) *
Gennaro J. Sbarro........................................... 10,833(12) *
Leonard G. Skrosky.......................................... 37,092(14) *
First Chicago NBD Corporation............................... 1,096,490(15) 5.3%
All directors and executive officers as a group (18)
persons................................................... 7,979,818(16) 37.3%
</TABLE>
5
<PAGE> 8
- ---------------
(1) Shares subject to options are considered beneficially owned to the extent
currently exercisable or exercisable within 60 days after June 30, 1998.
(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, the Trust of Carmela Sbarro and Carmela Sbarro is 763 Larkfield
Road, Commack, New York 11725.
(4) Includes (i) 740 shares owned by Mario Sbarro's wife and 5,450 shares owned
by a charitable foundation supported by Mario Sbarro and his wife, of which
Mr. Sbarro, his wife and another director of the Company are the directors
(as to all of which shares Mr. Sbarro disclaims beneficial ownership), and
(ii) 303,333 shares subject to options. Excludes (i) the shares held by the
Trust of Carmela Sbarro, of which trust Mario Sbarro serves as a trustee
(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) 166,666 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, 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) 18,750
shares subject to options.
(9) Includes 18,750 shares subject to options.
(10) Includes (i) 5,450 shares owned by a family foundation supported by Mario
Sbarro and Mario Sbarro's wife, of which Mr. Zimmerman is a director (as
to which shares Mr. Zimmerman disclaims beneficial ownership), and (ii)
18,750 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 10,833 shares subject to options.
(12) Represents shares subject to options.
(13) Includes (i) 2,400 shares owned by Mr. Sbarro's wife, as to which shares
Mr. Sbarro disclaims beneficial ownership, and (ii) 16,584 shares subject
to options.
(14) Includes 33,333 shares subject to options.
(15) Based solely upon information as of December 31, 1997 contained in a
Schedule 13G filed by First Chicago NBD Corporation with the Securities
and Exchange Commission and the Company.
(16) Includes (i) 5,450 owned by a charitable foundation, of which a director
and executive officer of the Company, his wife and another director of the
Company are directors, as to which shares each disclaims beneficial
ownership, (ii) an aggregate of 15,720 shares owned by spouses, and as
custodian for minor children, of directors and executive officers, as to
which shares beneficial ownership is disclaimed and (iii) 856,832 shares
subject to options.
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 six
most highly compensation persons who were serving as executive officers of the
Company at the end of the Company's 1997 fiscal year for services in all
capacities to the Company and its subsidiaries during the Company's 1997, 1996
and 1995 fiscal years:
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)
--------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Mario Sbarro..................................... 1997 $700,000 $160,000 250,000
Chairman of the Board, President 1996 460,000 500,000 100,000
and Chief Executive Officer(1) 1995 400,000 112,500 --
Anthony Sbarro................................... 1997 300,000 150,000 100,000
Vice Chairman of the Board and Treasurer(1) 1996 300,000 -- --
1995 300,000 87,500 --
Joseph Sbarro.................................... 1997 300,000 150,000 100,000
Senior Executive Vice President and Secretary 1996 276,000 150,000 50,000
1995 250,000 75,000 --
Leonard G. Skrosky............................... 1997 260,000 60,000 --
Senior Vice President -- Real Estate(2) 1996 181,000 -- 100,000
1995 -- -- --
Anthony J. Missano............................... 1997 200,000 75,000 80,000
Corporate Vice President -- Operations 1996 157,000 65,000 --
1995 144,000 30,000 --
Gennaro A. Sbarro................................ 1997 200,000 75,000 80,000
Corporate Vice President -- Franchising 1996 129,000 65,000 --
1995 105,000 30,000 --
Gennaro J. Sbarro................................ 1997 200,000 75,000 80,000
Corporate Vice President -- Operations 1996 155,000 65,000 --
1995 161,000 30,000 --
</TABLE>
- ---------------
(1) Prior to May 1996, Mario Sbarro served as Chairman of the Board of Directors
and Chief Executive Officer of the Company and Anthony Sbarro served as
President and Treasurer of the Company.
(2) Mr. Skrosky, who had been employed by the Company from 1987 until 1993,
rejoined the Company in June 1996.
7
<PAGE> 10
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 consultant 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 1997 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 PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE DATE 5% 10%
---- ---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mario Sbarro................... 100,000 13.2% $25.125 2/18/07 $1,580,098 $4,004,278
150,000 19.8% $28.875 5/20/07 $2,723,300 $6,902,896
Anthony Sbarro................. 100,000 13.2% $25.125 2/18/07 $1,580,098 $4,004,278
Joseph Sbarro.................. 100,000 13.2% $25.125 2/18/07 $1,580,098 $4,004,278
Anthony J. Missano............. 80,000 10.6% $25.125 2/18/07 $1,264,078 $3,203,422
Gennaro A. Sbarro.............. 80,000 10.6% $25.125 2/18/07 $1,264,078 $3,203,422
Gennaro J. Sbarro.............. 80,000 10.6% $25.125 2/18/07 $1,264,078 $3,203,422
</TABLE>
- ---------------
(1) These options are exercisable as to one-third of the number of shares
subject to the options annually, on a cumulative basis, commencing two years
following the date of grant.
(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.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
No options to purchase shares of the Company's Common Stock were exercised
during the Company's fiscal year ended December 28, 1997 by the executive
officers named in the Summary Compensation Table. The following table sets forth
certain information concerning the number and value at December 28, 1997 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 OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
(EXERCISABLE/ (EXERCISABLE/
NAME UNEXERCISABLE) UNEXERCISABLE)(1)
---- ------------------- --------------------
<S> <C> <C>
Mario Sbarro............................................ 270,000/350,000 $912,495/362,500
Anthony Sbarro.......................................... 165,000/100,000 $456,248/162,500
Joseph Sbarro........................................... 150,000/150,000 $456,248/262,500
Leonard G. Skrosky...................................... --/100,000 $ --/162,500
Anthony J. Missano...................................... 10,833/ 81,667 $ 17,498/138,752
Gennaro A. Sbarro....................................... 16,584/ 81,667 $ 46,744/138,752
Gennaro J. Sbarro....................................... 10,833/ 81,667 $ 17,498/138,752
</TABLE>
- ---------------
(1) Represents the number of shares subject to the option multiplied by the
difference between the closing price of the Company's Common Stock on the
New York Stock Exchange on December 26, 1997, the last trading day of the
Company's 1997 fiscal year, and the respective exercise prices.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Bernard Zimmerman and Company, Inc., of which Bernard Zimmerman is
President and a majority shareholder, renders financial and consulting
assistance to the Company, for which it received fees of $116,400 during the
Company's fiscal year ended December 28, 1997. Mr. Zimmerman is Chairman of the
8
<PAGE> 11
Compensation Committee of the Board of Directors, but does not serve on the
Performance Incentive Plan Subcommittee of the Compensation Committee nor on the
Stock Option Committee of the Board.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
This report is presented by the Compensation Committee and Stock Option
Committee of the Company's Board of Directors (the "Committees"). Except for Mr.
Zimmerman, who serves on the Compensation Committee, both Committees consist
exclusively of directors who are neither employees of, nor consultants to, the
Company. Except for stock option grants, the Compensation Committee establishes
the compensation (including annual base compensation and bonuses) for the
Company's three principal executive officers (Mario, Anthony and Joseph Sbarro)
and, with the recommendation of the Company's Chief Executive Officer, the
compensation of the other executive officers of the Company. The members of the
Compensation Committee are Harold L. Kestenbaum, Richard A. Mandell, Terry Vince
and Bernard Zimmerman. The Performance Incentive Plan Subcommittee of the
Compensation Committee (consisting of Messrs. Kestenbaum, Mandell and Vince)
administers and determines performance targets and awards under the Company's
Performance Incentive Plan, as well as determining participants in that plan,
targets for determining amounts a participant may earn under that plan and the
periods during which targets are measured. The Stock Option Committee
administers (including making grants under) the Company's 1991 Stock Incentive
Plan. This Committee consists of Messrs. Kestenbaum and Vince and Paul A.
Vatter. This report describes the policies of the Committees as in effect in
fiscal 1997. 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 use 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 Committees
coordinate their efforts to determine the overall compensation of executive
officers.
To supplement subjective factors, in establishing compensation levels for
the Company's executive officers, the Committees review, 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 Committees use
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 on an annual and, at times, interim basis. In
determining the base salaries to be paid to executive officers, the Committee
considers, among other factors, the executive's level of responsibility,
experience and expertise, the compensation of executives occupying comparable
positions in other restaurant and retail organizations derived from its informal
studies, and general economic factors. The Committee, in consultation with the
Company's Chief Executive Officer, also reviews the performance of each of the
Company's executive officers. The Committee's reviews have been qualitative in
nature, without specific weights being assigned to the various factors employed
by it.
Annual Incentive Compensation. The Company continues to place emphasis on
incentive compensation. Historically, the Company's Chief Executive Officer has
set individual performance objectives and goals for executive officers other
than himself. Bonuses have been 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 determined on a subjective basis. Goals, at times, have been adjusted
periodically during the year, and 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, the
Compensation Committee examines the following factors, without assigning
specific weight to any one factor: the Company's revenues and profitability for
the year upon which the bonus is based; the degree to which the Company had
fulfilled objectives developed at the beginning of the year; the executive's
contribution toward the Company's profitability and meeting corporate goals; the
Chief Executive Officer's views concerning the executive's performance,
including the degree to which the executive achieved his or her personal
performance goals for the year; and information concerning bonuses paid by
9
<PAGE> 12
competitors as indicated in informal Committee surveys. Except for the bonus to
the Company's Chief Executive Officer, bonuses for fiscal 1997 were determined
through the use of the factors described above.
Long-Term Incentive Compensation. The Company has used 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 shareholders. The Company's Chief Executive Officer
makes recommendations to the Stock Option Committee from time to time with
respect to the grant of stock options to employees in light of the level of
their responsibility, compensation level and prior contribution to the Company's
performance, as well as future goals, the performance expected of them and the
number of options then held by the executive. 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. Like the Compensation Committee,
the Stock Option Committee reviews the Company's and its executive officers'
performance, as well as the other factors it utilizes in determining option
grants.
Chief Executive Officer Compensation. The compensation of Mario Sbarro,
the Company's Chief Executive Officer, consists of the same three components as
the Company's other executive officers. The Compensation Committee believes 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. However, with
the concurrence of Mr. Sbarro, the Compensation Committee had not increased his
base salary from early 1992 until the middle of fiscal 1996 when it increased
Mr. Sbarro's salary to $500,000 per annum. Based upon its review of Mr. Sbarro's
performance, his re-assuming the duties of President in addition to his existing
duties as Chairman of the Board and Chief Executive Officer and his leadership,
the Committee increased Mr. Sbarro's annual base salary effective at the
beginning of fiscal 1997 to $700,000. Following adoption of the Performance
Incentive Plan by the Company's shareholders in May 1997, the Performance
Incentive Plan Subcommittee of the Compensation Committee established a formula,
based upon a pre-determined earnings target for the second half of fiscal 1997,
under which Mr. Sbarro's incentive bonus award for fiscal 1997 was determined.
The Compensation Committee believes that determining a bonus based strictly on
objective targets may not adequately measure an executive's performance and,
therefore, intends to determine Mr. Sbarro's bonus for fiscal 1998 outside the
purview of the Performance Incentive Plan. In early fiscal 1997, the Stock
Option Committee determined to grant Mr. Sbarro options to purchase 250,000
shares of Common Stock under the Company's 1991 Stock Incentive Plan, of which
options to purchase 150,000 shares were subject to, and granted following,
shareholder approval of certain amendments to that plan.
Certain Tax Legislation. Section 162(m) of the Internal Revenue Code of
1986, as amended, 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 1997, the Board of Directors adopted, and shareholders
approved, the Company's Performance Incentive Plan and amendments to the
Company's 1991 Stock Incentive Plan to enable compensation under each plan to be
considered qualified "performance-based compensation" and fully tax deductible
for Federal income tax purposes. While the Company intends to maximize
deductibility of compensation paid to executive officers, the Compensation
Committee recognizes that it may be appropriate to pay a bonus to executive
officers, including the Company's Chief Executive Officer, outside the
Performance Incentive Plan, which could cause some portion thereof to exceed the
deductibility limit.
Respectfully submitted,
<TABLE>
<S> <C>
Compensation Committee Stock Option Committee
Bernard Zimmerman, Chairman Harold L. Kestenbaum, Chairman
Harold L. Kestenbaum Terry Vince
Paul A. Vatter
Richard A. Mandell
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, 1997 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, 1992 in the
Company's Common Stock and in each of the comparison groups, and assumes
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SBARRO, INC., THE S&P 500 INDEX
AND THE S&P RESTAURANTS INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P RESTAURANT
(FISCAL YEAR COVERED) 'SBARRO, INC.' S&P 500 INDEX INDEX
<S> <C> <C> <C>
DEC-92 100 100 100
DEC-93 128 110 117
DEC-94 116 112 117
DEC-95 99 153 175
DEC-96 122 189 172
DEC-97 131 252 185
</TABLE>
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 $337,000 for the last five years of the sublease
term, which expires in 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 addition to Mario, Anthony, Joseph, Gennaro A. and Gennaro J. Sbarro and
Anthony J. Missano, Carmela Sbarro, the mother of Mario, Anthony and Joseph
Sbarro, who was a co-founder of the Company and serves as Vice President and a
director of the Company, and a daughter of Mario Sbarro, who serves as Vice
President -- Administration of the Company, each received $100,000 for services
rendered during fiscal 1997. In addition, nine other members of the immediate
families of Mario, Anthony, Joseph and Carmela Sbarro received an aggregate of
$467,823 for services rendered as employees of the Company during fiscal 1997.
11
<PAGE> 14
The Company and its subsidiaries have purchased printing services from a
corporation owned by a son-in-law of Mario Sbarro in the amount of approximately
$220,000 during fiscal 1997. The Company believes that these services were
provided on terms comparable to those that would have been available from
unrelated third parties.
During fiscal 1997, 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 $71,660 and $33,053, respectively, under franchise
agreements containing terms similar to those in agreements entered into by the
Company with unrelated franchisees.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, of the Company's equity securities 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 and 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 ended December 28, 1997 were timely filed.
PROPOSAL 2
PROPOSAL TO AMEND THE COMPANY'S BY-LAWS
WITH RESPECT TO THE MINIMUM SIZE OF THE
BOARD OF DIRECTORS
As noted under the caption "Election of Directors," the Company's Board of
Directors is classified into three classes. Prior to February 22, 1998, the New
York Business Corporation Law (the "NYBCL") required that each class consist of
a minimum of three directors and, accordingly, the Company's By-laws require a
minimum of nine directors (three in each class). Therefore, in the event of the
death or resignation of a director at a time (such as at present) when the
entire Board consists of nine directors, the Company must fill the vacancy.
With the adoption by the New York legislature of amendments to the NYBCL
that became effective on February 22, 1998, the Company is no longer required by
the NYBCL to have any particular minimum number of directors in any class.
To provide the Company with flexibility in the event of the resignation or
death of any director, the Board of Directors proposes that shareholders adopt
an amendment to the Company's By-laws to provide that the minimum number of
directors be six, while retaining the maximum limit of twelve directors (subject
to increase if any Preferred Stock that may be issued shall be entitled to elect
directors). If authorized by the shareholders, the first sentence of Section 3.2
of Article III of the Company's By-laws would be amended to read as follows
(with the proposed addition italicized and the proposed deletion bracketed):
"Until changed by an amendment to these By-laws, the number
of directors shall be not less than [nine] six nor more than
twelve, the exact number to be determined from time to time by
resolution of a majority of the entire Board of Directors;
provided, however, that the number of directors shall be
increased beyond the foregoing limit, to the extent required, in
the event that (and for so long as) the holders of any Preferred
Stock of the Corporation, voting as a separate class or series
under any provisions of the Certificate of Incorporation, as it
may be amended from time to time, shall be entitled to elect
directors."
No changes (which would require the approval of two-thirds of the
outstanding shares of Common Stock) are proposed to the existing provisions in
the Certificate of Incorporation and By-laws which classify
12
<PAGE> 15
the Board of Directors into three classes, with each class to be as nearly equal
in number as the then total number of directors constituting the entire Board
permits or to the provisions in the Company's By-laws that provide that
directors may be removed only for cause by the holders of a majority of
outstanding stock of the Company entitled to vote or by the Board of Directors.
The Board believes that adoption of the proposed amendment will afford the
Board sufficient time to find a suitable replacement to fill any vacancy that
may occur, as well as an alternative to reduce the size of the Board, should any
director resign or die.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THIS PROPOSAL.
PROPOSAL 3
PROPOSAL TO RATIFY THE
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has audited the financial statements of the
Company for the past eight 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 January 3, 1999.
Accordingly, management will present to the Meeting a resolution proposing the
ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending January 3, 1999.
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.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS
PROPOSAL.
VOTING REQUIREMENTS
Directors are elected by a plurality of the votes cast at the Meeting
(Proposal 1). The affirmative vote of two-thirds of the total number of the
outstanding shares of Common Stock is required to approve the proposal to amend
the Company's By-laws with respect to the minimum size of the Company's Board of
Directors (Proposal 2). The affirmative vote of a majority of the votes cast at
the Meeting is required to ratify the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the Company's fiscal year ending
January 3, 1999 (Proposal 3). Abstentions and broker nonvotes with respect to
any matter are not considered as votes cast with respect to that matter.
Accordingly, abstentions and broker nonvotes will have no effect on the outcome
of Proposals 1 or 3, but will effectively serve as votes against Proposal 2. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF EACH NOMINEE NAMED
IN THE PROXY AND FOR PROPOSALS 2 AND 3.
MISCELLANEOUS
SHAREHOLDER PROPOSALS
If a shareholder intends to present a proposal at the Company's 1999 Annual
Meeting of Shareholders and wants that proposal to be included in the Company's
Proxy Statement and form of proxy for that meeting, the proposal must be
received at the Company's principal executive offices not later than December
31, 1998. As to any proposal that a shareholder intends to present to
shareholders without including it in the Company's Proxy Statement for the
Company's 1999 Annual Meeting of Shareholders, the proxies named in Management's
proxy for that meeting will be entitled to exercise their discretionary
authority on that proposal unless the Company receives notice of the matter to
be proposed not later than March 16, 1999. Even if proper notice is received on
or prior to March 16, 1999, the proxies named in Management's proxy for that
meeting may nevertheless exercise their discretionary authority with respect to
such matter by advising shareholders of such
13
<PAGE> 16
proposal and how they intend to exercise their discretion to vote on such
matter, unless the shareholder making the proposal solicits proxies with respect
to such proposal to the degree required by Rule 14a-4(c)(2) of the Securities
Exchange Act of 1934.
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 discretion 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
July 21, 1998
<PAGE> 17
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 the Carriage House
at Milleridge Inn, 585 North Broadway on Routes 106 and 107, Jericho, New York
on Wednesday, August 19, 1998 at 9:30 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 each of Proposals 2 and 3.
PLEASE MARK, DATE AND SIGN THIS PROXY ON REVERSE SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 18
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL LISTED NOMINEES AND FOR PROPOSALS 2 AND 3. PLEASE MARK [X]
YOUR CHOICE
LIKE THIS
IN BLACK OR
BLUE INK
</TABLE>
<TABLE>
<S> <C> <C>
FOR WITHHOLD
all nominees listed AUTHORITY
1. Election of three Class 3 Directors (except as marked To vote for all listed
to the contrary) nominees below
[ ] [ ]
</TABLE>
Nominees: Mario Sbarro, Carmela Sbarro and
Bernard Zimmerman
2. Authorize an amendment to the Company's By-laws with FOR AGAINST ABSTAIN
respect to the minimum size of the Company's Board [ ] [ ] [ ]
of Directors
3. Ratify the appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN
the Company's independent public accountants [ ] [ ] [ ]
(Instruction: To withhold authority to vote for any individual nominee, circle
that nominee's name in the list provided above.)
Signature(s)_______________ __________________________ Dated____________, 1998
(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.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
