SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
Sbarro, Inc.
(Name of Issuer)
Sbarro, Inc.
Sbarro Merger LLC
Mario Sbarro
Joseph Sbarro
Anthony Sbarro
Joseph Sbarro (1994) Family Limited Partnership
Mario Sbarro and Franklin Montgomery, not individually
but as trustees under that certain Trust Agreement
dated April 28, 1984 for the benefit of Carmela Sbarro
and her descendants
(Name of Person(s) Filing Statement)
Common Stock, par value $.01 per share
(Title of Class of Securities)
805844-10-7
(Cusip Numbers of Class of Securities)
----------------
Mario Sbarro, Chairman and President
Sbarro, Inc.
401 Broadhollow Road
Melville, New York
Telephone Number: (516) 715-4100
Copies To:
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<S> <C> <C>
Richard A. Rubin, Esq. Steven J. Gartner, Esq. Arthur A. Katz, Esq.
Parker Chapin Flattau & Klimpl, LLP Willkie Farr & Gallagher Warshaw Burstein Cohen
1211 Avenue of the Americas 787 Seventh Avenue Schlesinger & Kuh, LLP
New York, New York 10036 New York, New York 10019 555 Fifth Avenue
(212) 704-6000 (212) 728-8000 New York, New York 10017
(212) 984-7700
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<PAGE>
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf Of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. [X]
Calculation of Filing Fee
Transaction Amount of Filing Fee*
Valuation* $79,129.93
$395,649,643
[X] Check Box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
The entire filing fee was paid in connection with the original filing of
the Schedule 13E-3 which was filed on February 26, 1999.
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* Determined by multiplying 13,467,649 (the number of outstanding shares of
Common Stock of Sbarro, Inc. not owned by the persons filing this Schedule
13E-3) by $28.85 per share and adding the aggregate amount anticipated to
be paid to persons holding options to purchase shares of Common Stock
issued by the Company in consideration of cancellation of such options.
** Determined pursuant to Rule 0-11(b)(1) by multiplying $395,649,643 by 1/50
of 1%.
<PAGE>
INTRODUCTION
This Amendment No. 1 ("Amendment No. 1") to the Rule 13e-3 Transaction
Statement on Schedule 13E-3 (the "Original Schedule 13E-3" and, as amended
hereby, this "Schedule 13E-3") is being filed by Sbarro, Inc., a New York
corporation (the "Company"), Sbarro Merger LLC, a New York limited liability
company ("Mergeco"), and Mario Sbarro, Joseph Sbarro, Anthony Sbarro, the Joseph
Sbarro (1994) Family Limited Partnership and Mario Sbarro and Franklin
Montgomery, not individually but as trustees under that certain Trust Agreement
dated April 28, 1984 (the "Trust of Carmela Sbarro") for the benefit of Carmela
Sbarro and her descendants (collectively, the "Continuing Shareholders"),
pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended,
and Rule 13e-3 thereunder, in connection with the proposed merger (the "Merger")
of Mergeco with and into the Company, with the Company as the surviving
corporation in the Merger (the "Surviving Corporation"). The Merger is to be
effected pursuant to an Agreement and Plan of Merger dated as of January 19,
1999, among the Company, Mergeco and the Continuing Shareholders (the "Merger
Agreement"). Mergeco was formed by the Continuing Shareholders in connection
with the Merger and is owned solely by the Continuing Shareholders. Pursuant to
the terms and conditions set forth in the Merger Agreement, if the Merger is
consummated, each outstanding share of Common Stock other than (i) shares of
Common Stock then owned of record by the Continuing Shareholders or Mergeco and
(ii) shares of Common Stock in the Company's treasury, if any, will be converted
into the right to receive $28.85 per share in cash, without interest. As a
result of the Merger, the Continuing Shareholders will own 100% of the capital
stock of the Surviving Corporation. Concurrently with the filing of the Original
Schedule 13E-3, the Company filed a preliminary proxy statement (the "Proxy
Statement") relating to a Special Meeting of Shareholders of the Company being
called to consider adoption of the Merger Agreement (the "Meeting"). There is
attached to this Amendment No. 1 a cross reference sheet supplied pursuant to
Instruction F to Schedule 13E-3 to show the location in the Proxy Statement of
the information required to be included in response to the items of Schedule
13E-3. The information in the Proxy Statement is hereby expressly incorporated
herein by reference, and capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Proxy Statement. This Amendment No. 1
is filed solely to amend Item 17 and file Exhibit (b)(1).
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
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Item 1. Issuer and Class of Security
Subject to the Transaction.
(a) .............................. Front Cover Page;
"SUMMARY - Certain Definitions";
"SUMMARY - The Merger Parties; The Company";
"MANAGEMENT - Directors and Executive Officers of
the Company".
(b) .............................. Front Cover Page;
"SUMMARY - Certain Definitions";
"SUMMARY - Information Concerning the Meeting;
Record Date for the Meeting; Quorum Requirements";
"SUMMARY - Market Prices of and Dividends on the
Common Stock".
(c) .............................. "SUMMARY - Market Prices of and Dividends on the
Common Stock".
(d) .............................. "SUMMARY - Market Prices of and Dividends on the
Common Stock";
"SPECIAL FACTORS - Financing of the Merger";
"SPECIAL FACTORS - Plans for the Company after the
Merger".
(e) .............................. Not Applicable.
(f) .............................. "CERTAIN TRANSACTIONS IN THE COMMON
STOCK".
Item 2. Identity and Background.
(a)-(d) .......................... "SUMMARY - Certain Definitions";
"SUMMARY - The Merger Parties";
"MANAGEMENT";
"SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT".
(e) and (f) ...................... Not Applicable.
(g) .............................. "SUMMARY - The Merger Parties";
"MANAGEMENT".
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<PAGE>
SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
Item 3. Past Contacts, Trans
actions or Negotiations.
(a) (1) .......................... Not Applicable.
(a) (2) and (b) .................. "SPECIAL FACTORS - Background of the
Transaction";
"MANAGEMENT - Directors and Executive Officers of
the Company";
"CERTAIN TRANSACTIONS IN THE COMMON
STOCK".
Item 4. Terms of the Transaction.
(a) .............................. "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - Information Concerning the Meeting;
Purpose of the Meeting";
"SUMMARY - Special Factors; Certain Effects of the
Merger";
"SUMMARY - Special Factors; Certain Litigation";
"SUMMARY - Special Factors;
Financing of the Merger";
"SUMMARY - The Merger
Agreement"; "SPECIAL FACTORS -
Interests of Certain Persons
in the Merger and the
Company"; "SPECIAL FACTORS -
Certain Effects of the
Merger"; "SPECIAL FACTORS -
Financing of the Merger";
"SPECIAL FACTORS - Regulatory
Approvals"; "LITIGATION
PERTAINING TO THE MERGER";
"THE MERGER AGREEMENT".
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
(b) .............................. "SUMMARY - Information Concerning the Meeting;
Purpose of the Meeting";
"SUMMARY - Information Concerning the Meeting;
Voting Requirements";
"SUMMARY - Special Factors; Certain Effects of the
Merger";
"SUMMARY - Special Factors; Certain Litigation";
"SUMMARY - The Merger
Agreement; The Merger
Consideration"; "SPECIAL
FACTORS - Interests of Certain
Persons in the Merger and the
Company"; "SPECIAL FACTORS -
Certain Effects of the
Merger"; "LITIGATION
PERTAINING TO THE MERGER
Current Shareholder
Litigation"; "THE MERGER
AGREEMENT - The Merger; Merger
Consideration"; "THE MERGER
AGREEMENT - Treatment of
Options".
Item 5. Plans or Proposals of the
Issuer or Affiliate.
(a) and (b) ...................... "SUMMARY - Special Factors; Plans for the Company
after the Merger";
"SPECIAL FACTORS - Plans for the Company after the
Merger".
(c) .............................. "SPECIAL FACTORS - Interests of Certain Persons in
the Merger and the Company;
Directors and Officers of the
Surviving Corporation"; "THE
MERGER AGREEMENT - Directors
and Officers, Certificate of
Incorporation and By-Laws
Following the Merger".
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
(d)-(e) .......................... "SUMMARY - Special Factors; Plans for the Company
after the Merger";
"SUMMARY - Special Factors;
Financing of the Merger";
"SUMMARY - Market Prices of
and Dividends on the Common
Stock"; "SPECIAL FACTORS -
Plans for the Company after
the Merger"; "SPECIAL FACTORS
- Financing of the Merger".
(f)-(g) .......................... "SUMMARY - Special Factors; Certain Effects of the
Merger";
"SPECIAL FACTORS - Certain Effects of the Merger".
Item 6. Source and Amount of
Funds or Other
Consideration.
(a) .............................. "SUMMARY - Special Factors; Financing of the
Merger";
"SPECIAL FACTORS - Financing of the Merger".
(b) .............................. "SPECIAL FACTORS - Interests of Certain Persons in
the Merger and the Company; Compensation of Special
Committee Members"; "SPECIAL
FACTORS - Fees and Expenses";
"SPECIAL FACTORS - Financing
of the Merger; Terms of Bear
Stearns' Engagement";
"LITIGATION PERTAINING TO THE
MERGER Current Shareholder
Litigation"; "THE MERGER
AGREEMENT - Fees and
Expenses".
(c) .............................. "SUMMARY - Special Factors; Financing of the
Merger";
"SPECIAL FACTORS - Certain Financial Projections";
"SPECIAL FACTORS - Plans for the Company after the
Merger";
"SPECIAL FACTORS - Financing of the Merger".
(d) .............................. "SUMMARY - Special Factors; Financing of the
Merger";
"SPECIAL FACTORS - Financing of the Merger".
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
Item 7. Purpose(s), Alternatives,
Reasons and Effects.
(a) and (c) ...................... "SUMMARY - Special Factors; Continuing Share
holders' Purpose and Reasons for the Merger";
"SPECIAL FACTORS - Background
of the Transaction"; "SPECIAL
FACTORS - The Continuing
Shareholders' Purpose and
Reasons for the Merger".
(b) .............................. "SPECIAL FACTORS - Background of the
Transaction".
(d) .............................. "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - Information Concerning the Meeting;
Purpose of the Meeting";
"SUMMARY - Special Factors; Plans for the Company
after the Merger";
"SUMMARY - Special Factors; Interests of Certain
Persons in the Merger and the Company";
"SUMMARY - Special Factors; Certain Effects of the
Merger";
"SUMMARY - Special Factors; Certain U.S. Federal
Income Tax Consequences";
"SUMMARY - Special Factors; Accounting Treatment";
"SUMMARY - Special Factors; Financing of the
Merger";
"SUMMARY - The Merger Agreement; The Merger
Consideration";
"SPECIAL FACTORS - Certain Financial Projections";
"SPECIAL FACTORS - Plans for the Company after the
Merger";
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
"SPECIAL FACTORS - Interests of Certain Persons in
the Merger and the Company";
"SPECIAL FACTORS - Certain Effects of the Merger";
"SPECIAL FACTORS - Certain U.S. Federal Income
Tax Consequences";
"SPECIAL FACTORS - Fees and Expenses";
"SPECIAL FACTORS - Accounting Treatment";
"SPECIAL FACTORS - Risk of Insolvency";
"THE MERGER AGREEMENT - The Merger; Merger
Consideration";
"THE MERGER AGREEMENT - The Exchange Fund;
Payment for Shares of Common Stock";
"THE MERGER AGREEMENT - Treatment of
Options";
"THE MERGER AGREEMENT - Tax Withholding".
Item 8. Fairness of the
Transaction.
(a) ..............................
Front Cover Page; "CERTAIN
QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - Special Factors;
Recommendation of the Special
Committee and the Board of
Directors"; "SUMMARY - Special
Factors; Presentation and
Fairness Opinion of Prudential
Securities"; "SPECIAL FACTORS
- Background of the
Transaction"; "SPECIAL FACTORS
- Recommendations of the
Special Committee and the
Board of Directors"; "SPECIAL
FACTORS - The Continuing
Shareholders' Purpose and
Reasons for the Merger";
"SPECIAL FACTORS -
Presentation and Fairness
Opinion of Prudential
Securities".
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<PAGE>
SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
(b) .............................. "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - Special Factors;
Recommendation of the Special
Committee and the Board of
Directors"; "SUMMARY - Special
Factors; Factors Considered by
the Special Committee and the
Board of Directors"; "SUMMARY
- Special Factors;
Presentation and Fairness
Opinion of Prudential
Securities"; "SPECIAL FACTORS
- Background of the
Transaction"; "SPECIAL FACTORS
- Recommendation of the
Special Committee and the
Board of Directors"; "SPECIAL
FACTORS - The Continuing
Shareholders' Purpose and
Reasons for the Merger";
"SPECIAL FACTORS -
Presentation and Fairness
Opinion of Prudential
Securities"; "SPECIAL FACTORS
- Certain Financial
Projections"; "LITIGATION
PERTAINING TO THE MERGER
Current Shareholder
Litigation"; "THE MERGER
AGREEMENT - No Solicitation;
Fiduciary Obligation of
Directors"; "THE MERGER
AGREEMENT - Conditions"; "THE
MERGER AGREEMENT -
Termination"; "THE MERGER
AGREEMENT - Amendment and
Waiver".
(c) .............................. "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - Information Concerning the Meeting;
Voting Requirements";
"SUMMARY - The Merger Agreement; Conditions to,
and Termination of, the Merger";
"SPECIAL FACTORS - Recommendations of the
Special Committee and the Board of Directors";
"THE MERGER AGREEMENT - The Merger; Merger
Consideration;
"THE MERGER AGREEMENT - Covenants";
"THE MERGER AGREEMENT - Conditions";
"THE MERGER AGREEMENT - Termination".
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
(d) .............................. "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - Special Factors; Fairness Opinion of
Prudential Securities";
"SPECIAL FACTORS - Background
of the Transaction"; "SPECIAL
FACTORS - Recommendation of
the Special Committee and the
Board of Directors"; "SPECIAL
FACTORS - The Continuing
Shareholders' Purpose and
Reasons for the Merger";
"SPECIAL FACTORS -
Presentation and Fairness
Opinion of Prudential
Securities".
(e) .............................. "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SPECIAL FACTORS - Background of the
Transaction";
"SPECIAL FACTORS - Recommendation of the Special
Committee and the Board of Directors";
"SPECIAL FACTORS - The Continuing Shareholders'
Purpose and Reasons for the Merger".
(f) .............................. "SPECIAL FACTORS - Background of the
Transaction".
Item 9. Reports, Opinions,
Appraisals and Certain
Negotiations.
(a) and (b)....................... "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - Special Factors; Factors Considered by
the Special Committee and the Board of Directors";
"SUMMARY - Special Factors; Fairness Opinion of
Prudential Securities";
"SPECIAL FACTORS - Background
of the Transaction"; "SPECIAL
FACTORS - Recommendation of
the Special Committee and the
Board of Directors";
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<PAGE>
SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
"SPECIAL FACTORS - The
Continuing Shareholders'
Purpose and Reasons for the
Merger"; "SPECIAL FACTORS -
Presentation and Fairness
Opinion of Prudential
Securities".
(c) .............................. "AVAILABLE INFORMATION".
Item 10. Interest in Securities of the
Issuer.
(a) .............................. "SUMMARY - Information Concerning the Meeting;
Voting Requirements";
"SPECIAL FACTORS - Interests
of Certain Persons in the
Merger and the Company";
"SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT"
(b) .............................. "CERTAIN TRANSACTIONS IN THE COMMON
STOCK".
Item 11. Contracts, Arrangements
or Understandings With
Respect to the Issuer's
Securities........................ "SUMMARY - Information Concerning the Meeting;
Voting Requirements";
"SUMMARY - The Merger Agreement";
"SPECIAL FACTORS - Interests of Certain Persons in
the Merger and the Company";
"SPECIAL FACTORS - Fees and Expenses";
"SPECIAL FACTORS - Financing of the Merger";
"THE MERGER AGREEMENT".
Item 12. Present Intention and
Recommendation of
Certain Persons with
Regard to the Transaction.
(a) .............................. "SUMMARY - Information Concerning the Meeting;
Voting Requirements";
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<PAGE>
SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
"SPECIAL FACTORS -
Recommendation of the Special
Committee and the Board of
Directors"; "THE MERGER
AGREEMENT - Covenants";
"CERTAIN TRANSACTIONS IN THE
COMMON
STOCK".
(b) .............................. "SUMMARY - Special Factors; Recommendation of the
Special Committee and the Board of Directors";
"SPECIAL FACTORS - Background
of the Transaction"; "SPECIAL
FACTORS - Recommendation of
the Special Committee and the
Board of Directors".
Item 13. Other Provisions of the
Transaction.
(a) .............................. "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SUMMARY - No Right of
Appraisal"; "LITIGATION
PERTAINING TO THE MERGER
Current Shareholder
Litigation".
(b)-(c)........................... Not Applicable.
Item 14. Financial Information.
(a) .............................. "SUMMARY - Selected Consolidated Financial Data of
the Company";
"WHERE YOU CAN FIND MORE INFORMA-TION";
"CONSOLIDATED FINANCIAL STATEMENTS".
(b) .............................. Not Applicable.
Item 15. Persons and Assets
Employed, Retained or
Utilized.
(a) .............................. Front Cover Page;
"SUMMARY - Special Factors; Plans for the Company
after the Merger";
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
"SUMMARY - Special Factors;
Financing of the Merger";
"SPECIAL FACTORS - Plans for
the Company after the Merger";
"SPECIAL FACTORS - Interests
of Certain Persons in the
Merger and the Company";
"SPECIAL FACTORS - Fees and
Expenses"; "SPECIAL FACTORS -
Financing of the Merger"; "THE
MERGER AGREEMENT -
Indemnification and
Insurance"; "THE MERGER
AGREEMENT - Fees and
Expenses".
(b) .............................. Front Cover Page;
"CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER";
"SPECIAL FACTORS - Interests of Certain Persons in
the Merger and the Company; Compensation of the
Special Committee Members".
Item 16. Additional Information. "SUMMARY - Information Concerning the Meeting";
Proxy Statement, together with the proxy card.
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SCHEDULE 13E-3
ITEM NUMBER AND CAPTION LOCATION IN PROXY STATEMENT
- --------------------------------------------- --------------------------------------------------
Item 17. Material to be Filed as
Exhibits.
(a) (1) ..........................
Debt Financing Letter, dated
January 19, 1999 and related
Term Sheet (set forth as
Exhibit A and Exhibit B,
respectively, to Annex I to
the Proxy Statement).*
(b) (1) ........................ Presentation by Prudential Securities Incorporated to the
Special Committee, dated January 19, 1999.x
(b) (2) ........................ Opinion of Prudential Securities Incorporated, dated
January 19, 1999 (set forth as Annex II to the Proxy
Statement).*
(c) (1) ........................ Agreement and Plan of Merger between Sbarro, Inc.,
Sbarro Merger LLC, Mario Sbarro, Joseph Sbarro,
Anthony Sbarro, Joseph Sbarro (1994) Family Limited
Partnership and Mario Sbarro and Franklin Montgomery,
not individually but as trustees under that certain Trust
Agreement dated April 28, 1984 for the benefit of
Carmela Sbarro, dated as of January 19, 1999 (set forth
as Annex I to the Proxy Statement).*
(d) (1) ........................ Proxy Statement, together with the proxy card.*
(g) (1) ........................ Memorandum of Understanding, dated January 19,
1999.+
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* Filed with the Original Schedule 13E-3.
x Filed herewith. +
Incorporated by reference to Exhibit 99.01 to the Company's Current Report
on Form 8-K dated (date of earliest event reported): January 19, 1999, file
number 1-8881.
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<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth on the Front Cover Page and in "SUMMARY -
Certain Definitions"; "SUMMARY - The Merger Parties; 1The Company"; and
"MANAGEMENT Directors and Executive Officers of the Company" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth on the Front Cover Page and in "SUMMARY -
Certain Definitions"; "SUMMARY - Information Concerning the Meeting; Record Date
for the Meeting; Quorum Requirements"; and "SUMMARY - Market Prices of and
Dividends on the Common Stock" of the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "SUMMARY - Market Prices of and
Dividends on the Common Stock" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in "SUMMARY - Market Prices of and
Dividends on the Common Stock"; "SPECIAL FACTORS - Financing of the Merger"; and
"SPECIAL FACTORS Plans for the Company after the Merger" of the Proxy Statement
is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in "CERTAIN TRANSACTIONS IN THE COMMON
STOCK" of the Proxy Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed jointly by the Company (which is the
issuer of the class of equity securities that is the subject of the Rule 13e-3
transaction), Mergeco and the Continuing Shareholders.
(a) - (d) The information set forth in "SUMMARY - Certain Definitions";
"SUMMARY The Merger Parties"; "MANAGEMENT"; and "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT" of the Proxy Statement is incorporated herein
by reference.
(e) During the last five years, neither the Company, nor, to the best
of its knowledge, any of its directors, executive officers or controlling
persons has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors). During the last five years, neither
Mergeco, nor any of its members has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors). During the last five
years, none of the individual Continuing Shareholders has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
During the last five years, the sole general partner of the Joseph Sbarro (1994)
Family Limited Partnership has not been convicted in a criminal proceeding
(excluding traffic violations or similar
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<PAGE>
misdemeanors). During the last five years, neither of the trustees of the Trust
of Carmela Sbarro has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(f) During the last five years, neither the Company, nor, to the best
of its knowledge, any of its directors, executive officers or controlling
persons, was a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or finding
any violation of such laws. During the last five years, neither Mergeco, nor any
of its members was a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining further violations of, or
prohibiting activities, subject to, federal or state securities laws or finding
any violations of such laws. During the last five years, none of the individual
Continuing Shareholders was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violations of such laws. During the last five
years, the sole general partner of the Joseph Sbarro (1994) Family Limited
Partnership was not a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining further
violations of, or prohibiting activities, subject to, federal or state
securities laws or finding any violations of such laws. During the last five
years, neither of the trustees of the Trust of Carmela Sbarro was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining further violations of, or prohibiting activities, subject
to, federal or state securities laws or finding any violations of such laws.
(g) The information set forth in "SUMMARY - The Merger Parties"; and
"MANAGEMENT" of the Proxy Statement is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) (1) Not applicable.
(a) (2) and (b) The information set forth in "SPECIAL FACTORS -
Background of the Transaction"; "MANAGEMENT - Directors and Executive Officers
of the Company"; and "CERTAIN TRANSACTIONS IN THE COMMON STOCK" of the Proxy
Statement is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER"; "SUMMARY - Information Concerning the Meeting; Purpose
of the Meeting"; "SUMMARY - Special Factors; Certain Effects of the Merger";
"SUMMARY Special Factors; Certain Litigation"; "SUMMARY - Special Factors;
Financing of the Merger";
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<PAGE>
"SUMMARY - The Merger Agreement"; "SPECIAL FACTORS - Interests of Certain
Persons in the Merger and the Company"; "SPECIAL FACTORS - Certain Effects of
the Merger"; "SPECIAL FACTORS - Financing of the Merger"; "SPECIAL FACTORS -
Regulatory Approvals"; "LITIGATION PERTAINING TO THE MERGER"; and "THE MERGER
AGREEMENT" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SUMMARY - Information Concerning the
Meeting; Purpose of the Meeting"; "SUMMARY - Information Concerning the Meeting;
Voting Require ments"; "SUMMARY - Special Factors; Certain Effects of the
Merger"; "SUMMARY - Special Factors; Certain Litigation"; "SUMMARY - The Merger
Agreement; The Merger Consideration"; "SPECIAL FACTORS - Interests of Certain
Persons in the Merger and the Company"; "SPECIAL FACTORS - Certain Effects of
the Merger"; "LITIGATION PERTAINING TO THE MERGER Current Shareholder
Litigation"; "THE MERGER AGREEMENT - The Merger; Merger Consideration"; and "THE
MERGER AGREEMENT - Treatment of Options" of the Proxy Statement is incorporated
herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) and (b) The information set forth in "SUMMARY - Special Factors;
Plans for the Company after the Merger"; and "SPECIAL FACTORS - Plans for the
Company after the Merger" of the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "SPECIAL FACTORS - Interests of
Certain Persons in the Merger and the Company; Directors and Officers of the
Surviving Corporation"; and "THE MERGER AGREEMENT - Directors and Officers,
Certificate of Incorporation and By-Laws Following the Merger" of the Proxy
Statement is incorporated herein by reference.
(d) - (e) The information set forth in "SUMMARY - Special Factors;
Plans for the Company after the Merger"; "SUMMARY - Special Factors; Financing
of the Merger"; "SUMMARY - Market Prices of and Dividends on the Common Stock";
"SPECIAL FACTORS - Plans for the Company after the Merger"; and "SPECIAL FACTORS
- - Financing of the Merger" of the Proxy Statement is incorporated herein by
reference.
(f) - (g) The information set forth in "SUMMARY - Special Factors;
Certain Effects of the Merger"; and "SPECIAL FACTORS - Certain Effects of the
Merger" of the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "SUMMARY - Special Factors; Financing
of the Merger"; and "SPECIAL FACTORS - Financing of the Merger" of the Proxy
Statement is incorporated herein by reference.
-18-
<PAGE>
(b) The information set forth in "SPECIAL FACTORS - Interests of
Certain Persons in the Merger and the Company; Compensation of Special Committee
Members"; "SPECIAL FACTORS Fees and Expenses"; "SPECIAL FACTORS - Financing of
the Merger; Terms of Bear Stearns' Engagement"; "LITIGATION PERTAINING TO THE
MERGER - Current Shareholder Litigation"; and "THE MERGER AGREEMENT - Fees and
Expenses" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "SUMMARY - Special Factors; Financing
of the Merger"; "SPECIAL FACTORS - Certain Financial Projections"; "SPECIAL
FACTORS - Plans for the Company after the Merger"; and "SPECIAL FACTORS -
Financing of the Merger" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in "SUMMARY - Special Factors; Financing
of the Merger"; and "SPECIAL FACTORS - Financing of the Merger" of the Proxy
Statement is incorporated herein by reference.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) and (c) The information set forth in "SUMMARY - Special Factors;
Continuing Share holders' Purpose and Reasons for the Merger"; "SPECIAL FACTORS
- - Background of the Transaction"; and "SPECIAL FACTORS - The Continuing
Shareholders' Purpose and Reasons for the Merger" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS - Background of the
Transaction" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER"; "SUMMARY - Information Concerning the Meeting; Purpose
of the Meeting"; "SUMMARY - Special Factors; Plans for the Company after the
Merger"; "SUMMARY - Special Factors; Interests of Certain Persons in the Merger
and the Company"; "SUMMARY - Special Factors; Certain Effects of the Merger";
"SUMMARY - Special Factors; Certain U.S. Federal Income Tax Consequences";
"SUMMARY - Special Factors; Accounting Treatment"; "SUMMARY - Special Factors;
Financing of the Merger"; "SUMMARY - The Merger Agreement; The Merger
Consideration"; "SPECIAL FACTORS - Certain Financial Projections"; "SPECIAL
FACTORS - Plans for the Company after the Merger"; "SPECIAL FACTORS - Interests
of Certain Persons in the Merger and the Company"; "SPECIAL FACTORS - Certain
Effects of the Merger"; "SPECIAL FACTORS - Certain U.S. Federal Income Tax
Consequences"; "SPECIAL FACTORS - Fees and Expenses"; "SPECIAL FACTORS -
Accounting Treatment"; "SPECIAL FACTORS - Risk of Insolvency"; "THE MERGER
AGREEMENT - The Merger; Merger Consideration"; "THE MERGER AGREEMENT - The
Exchange Fund; Payment for Shares of Common Stock"; "THE MERGER AGREEMENT -
Treatment of Options"; and "THE MERGER AGREEMENT - Tax Withholding" of the Proxy
Statement is incorporated herein by reference.
-19-
<PAGE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) The information set forth on the Front Cover Page and in "CERTAIN
QUESTIONS AND ANSWERS ABOUT VOTING AND THE MERGER"; "SUMMARY - Special Factors;
Recom mendation of the Special Committee and the Board of Directors"; "SUMMARY -
Special Factors; Presentation and Fairness Opinion of Prudential Securities";
"SPECIAL FACTORS - Background of the Transaction"; "SPECIAL FACTORS -
Recommendations of the Special Committee and the Board of Directors"; "SPECIAL
FACTORS - The Continuing Shareholders' Purpose and Reasons for the Merger"; and
"SPECIAL FACTORS - Presentation and Fairness Opinion of Prudential Securities"
of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER"; "SUMMARY - Special Factors; Recommendation of the
Special Committee and the Board of Directors"; "SUMMARY - Special Factors;
Factors Considered by the Special Committee and the Board of Directors";
"SUMMARY - Special Factors; Presentation and Fairness Opinion of Prudential
Securities"; "SPECIAL FACTORS - Background of the Transaction"; "SPECIAL FACTORS
- - Recommendation of the Special Committee and the Board of Directors"; "SPECIAL
FACTORS - The Continuing Shareholders' Purpose and Reasons for the Merger";
"SPECIAL FACTORS - Presentation and Fairness Opinion of Prudential Securities";
"SPECIAL FACTORS - Certain Financial Projections"; "LITIGATION PERTAINING TO THE
MERGER Current Shareholder Litigation"; "THE MERGER AGREEMENT - No Solicitation;
Fiduciary Obligation of Directors"; "THE MERGER AGREEMENT - Conditions"; "THE
MERGER AGREEMENT - Termination" and "THE MERGER AGREEMENT - Amendment and
Waiver" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER"; "SUMMARY - Information Concerning the Meeting; Voting
Requirements"; "SUMMARY - The Merger Agreement; Conditions to, and Termination
of, the Merger"; "SPECIAL FACTORS - Recommendations of the Special Committee and
the Board of Directors"; "THE MERGER AGREEMENT - The Merger; Merger
Consideration; "THE MERGER AGREEMENT - Covenants"; "THE MERGER AGREEMENT -
Conditions"; and "THE MERGER AGREEMENT - Termination" of the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER"; "SUMMARY - Special Factors; Fairness Opinion of ;
"SPECIAL FACTORS - Background of the Transaction"; "SPECIAL FACTORS -
Recommendation of the Special Committee and the Board of Directors"; "SPECIAL
FACTORS - The Continuing Shareholders' Purpose and Reasons for the Merger"; and
"SPECIAL FACTORS - Presentation and Fairness Opinion of of the Proxy Statement
is incorporated herein by reference.
(e) The information set forth in "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER"; "SPECIAL FACTORS - Background of the Transaction";
"SPECIAL FACTORS - Recommendation of the Special Committee and the Board of
Directors";
-20-
<PAGE>
and "SPECIAL FACTORS - The Continuing Shareholders' Purpose and Reasons for the
Merger" of the Proxy Statement is incorporated herein by reference.
(f) The information set forth in "SPECIAL FACTORS - Background of the
Transaction" of the Proxy Statement is incorporated herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) and (b) The information set forth in "CERTAIN QUESTIONS AND ANSWERS
ABOUT VOTING AND THE MERGER"; "SUMMARY - Special Factors; Factors Considered by
the Special Committee and the Board of Directors"; "SUMMARY - Special Factors;
Fairness Opinion of ; "SPECIAL FACTORS - Background of the Transaction";
"SPECIAL FACTORS Recommendation of the Special Committee and the Board of
Directors"; "SPECIAL FACTORS The Continuing Shareholders' Purpose and Reasons
for the Merger"; and "SPECIAL FACTORS Presentation and Fairness Opinion of of
the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "AVAILABLE INFORMATION" of the Proxy
Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in "SUMMARY - Information Concerning the
Meeting; Voting Requirements"; "SPECIAL FACTORS - Interests of Certain Persons
in the Merger and the Company"; and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" of the Proxy Statement is incorporated herein by
reference.
(b) The information set forth in "CERTAIN TRANSACTIONS IN THE COMMON
STOCK" of the Proxy Statement is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in "SUMMARY - Information Concerning the
Meeting; Voting Requirements"; "SUMMARY - The Merger Agreement"; "SPECIAL
FACTORS - Interests of Certain Persons in the Merger and the Company"; "SPECIAL
FACTORS - Fees and Expenses"; "SPECIAL FACTORS - Financing of the Merger"; and
"THE MERGER AGREEMENT" of the Proxy Statement is incorporated herein by
reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS
WITH REGARD TO THE TRANSACTION.
(a) The information set forth in "SUMMARY - Information Concerning the
Meeting; Voting Requirements"; "SPECIAL FACTORS - Recommendation of the Special
Committee and the Board
-21-
<PAGE>
of Directors"; "THE MERGER AGREEMENT - Covenants"; and "CERTAIN TRANSACTIONS IN
THE COMMON STOCK" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SUMMARY - Special Factors;
Recommendation of The Special Committee and the Board of Directors"; "SPECIAL
FACTORS - Background of the Transaction"; "SPECIAL FACTORS - Recommendation of
the Special Committee and the Board of Directors" of the Proxy Statement is
incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "CERTAIN QUESTIONS AND ANSWERS ABOUT
VOTING AND THE MERGER"; "SUMMARY - No Right of Appraisal"; and "LITIGATION
PERTAINING TO THE MERGER - Current Shareholder Litigation" of the Proxy
Statement is incorporated herein by reference.
(b) - (c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in "SUMMARY - Selected Consolidated
Financial Data of the Company"; "WHERE YOU CAN FIND MORE INFORMATION"; and
"CONSOLIDATED FINANCIAL STATEMENTS" of the Proxy Statement is incorporated
herein by reference.
(b) Not Applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAIN OR UTILIZED.
(a) The information set forth on the Front Cover Page and in "SUMMARY -
Special Factors; Plans for the Company after the Merger"; "SUMMARY - Special
Factors; Financing of the Merger"; "SPECIAL FACTORS - Plans for the Company
after the Merger; "SPECIAL FACTORS - Interests of Certain Persons in the Merger
and the Company"; "SPECIAL FACTORS - Fees and Expenses"; "SPECIAL FACTORS -
Financing of the Merger"; "THE MERGER AGREEMENT Indemnification and Insurance";
and "THE MERGER AGREEMENT - Fees and Expenses" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth on the Front Cover Page and in "CERTAIN
QUESTIONS AND ANSWERS ABOUT VOTING AND THE MERGER"; and "SPECIAL FACTORS -
Interests of Certain Persons in the Merger and the Company; Compensation of the
Special Committee Members" of the Proxy Statement is incorporated herein by
reference.
-22-
<PAGE>
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in "SUMMARY - Information Concerning the
Meeting" of the Proxy Statement is incorporated herein by reference.
Proxy Statement, together with the proxy card.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) (1) Debt Financing Letter, dated January 19, 1999 and related Term
Sheet (set forth as Exhibit A and Exhibit B, respectively, to Annex I to the
Proxy Statement).*
(b) (1) Presentation by Prudential Securities Incorporated to the Special
Committee, dated January 19, 1999.x
(b) (2) Opinion of Prudential Securities Incorporated, dated January 19,
1999 (set forth as Annex II to the Proxy Statement).*
(c) (1) Agreement and Plan of Merger between Sbarro, Inc., Sbarro Merger
LLC, Mario Sbarro, Joseph Sbarro, Anthony Sbarro, the Joseph Sbarro (1994)
Family Limited Partnership and Mario Sbarro and Franklin Montgomery, not
individually but as trustees under that certain Trust Agreement dated April 28,
1984 for the benefit of Carmela Sbarro, dated as of January 19, 1999 (set forth
as Annex I to the Proxy Statement).*
(d) (1) Proxy Statement (including Annexes I and II), together with the
proxy card.*
(e) Not applicable.
(f) As of the date of this Schedule 13E-3, no written instruction, form or
other material has been furnished to any person making the actual oral
solicitation or other recommendation for such person's use, directly or
indirectly, in connection with this Rule 13e-3 transaction.
(g) (1) Memorandum of Understanding, dated January 19, 1999.+
- --------
* Filed with the Original Schedule 13E-3.
x Filed herewith.
+ Incorporated by reference to Exhibit 99.01 to the Company's Current Report
on Form 8-K dated (date of earliest event reported): January 19, 1999, file
number 1-8881.
-23-
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
SBARRO, INC.
By: /s/ Mario Sbarro
- ----------------------------------------------------
Name: Mario Sbarro
Title: President and Chief Executive Office
SBARRO MERGER LLC
By: /s/ Mario Sbarro
- ----------------------------------------------------
Name: Mario Sbarro
Title: Member
/s/ Mario Sbarro
- ----------------------------------------------------
Mario Sbarro
/s/ Joseph Sbarro
- ----------------------------------------------------
Joseph Sbarro
/s/ Anthony Sbarro
- ----------------------------------------------------
Anthony Sbarro
JOSEPH SBARRO (1994)
FAMILY LIMITED PARTNERSHIP
/s/ Joseph Sbarro
- ----------------------------------------------------
Name: Joseph Sbarro
Title: General Partner
/s/ Mario Sbarro
- ----------------------------------------------------
Mario Sbarro, as trustee under that certai
Trust Agreement dated April 28, 1984 for the
benefit of Carmela Sbarro
/s/ Franklin Montgomery
- ----------------------------------------------------
Franklin Montgomery, as trustee under that
certain Trust Agreement dated April 28, 1984
for the benefit of Carmela Sbarro
Dated: March 2, 1999
-24-
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION
- ------- -----------
(a)(1) Debt Financing Letter, dated January 19, 1999 and related
Term Sheet (set forth as Exhibit A and Exhibit B,
respectively, to Annex I to the Proxy Statement).*
(b)(1) Presentation by Prudential Securities Incorporated to the
Special Committee, dated January 19, 1999.x
(b)(2) Opinion of Prudential Securities Incorporated, dated January
19, 1999 (set forth as Annex II to the Proxy Statement).*
(c)(1) Agreement and Plan of Merger between Sbarro, Inc., Sbarro
Merger LLC, Mario Sbarro, Joseph Sbarro, Anthony Sbarro, the
Joseph Sbarro (1994) Family Limited Partnership and Mario
Sbarro and Franklin Montgomery, not individually but as
trustees under that certain Trust Agreement dated April 28,
1984 for the benefit of Carmela Sbarro, dated as of January
19, 1999 (set forth as Annex I to the Proxy Statement).*
(d)(1) Proxy Statement (including Annexes I and II), together with
the proxy card.*
(g)(1) Memorandum of Understanding, dated January 19, 1999.+
- --------
* Filed with the Original Schedule 13E-3.
x Filed herewith.
+ Incorporated by reference to Exhibit 99.01 to the
Company's Current Report on Form 8-K dated (date of
earliest event reported): January 19, 1999, file number
1-8881.
-25-
PROJECT OREGANO
Highly Confidential
------------------------------------------------------
Presentation to the Special Committee of the Board of
Directors
January 19, 1999
------------------------------------------------------
<PAGE>
PROJECT OREGANO
Table of Contents
I. Transaction Overview
II. Company Overview and
Historical Financial Information
III. Valuation Summary
A. Methodology
B. Risk and Growth Rankings - Pizza and Value Priced Italian
Restaurant Companies
C. Risk and Growth Rankings - Fast Food Restaurant Companies
D. Composite Implied Valuation
E. Discounted Cash Flow Analysis
F. Comparable Company Analysis
G. Comparable Transactions Analysis
H. Comparable Companies Valuation Update
Appendix
A. Comparable Companies Analysis
B. Rule 13e-3 Premiums Analysis
C. Weighted Average Cost of Capital
2
<PAGE>
PROJECT OREGANO
-----------------------
I. Transaction Overview
------------------------
<PAGE>
PROJECT OREGANO
TRANSACTION OVERVIEW
Transaction Overview
Synopsis: On January 20, 1998, the Sbarro family made an offer to
take Sbarro, Inc., a New York corporation (the "Company"
or "Sbarro"), private for $28.50 per share (the "Prior
Offer").
In June 1998, negotiations regarding the Prior Offer were
terminated and the Company announced it will explore
various strategic alternatives.
On November 25, 1998, the Company received a new proposal
from members of the Sbarro family to take the Company
private at $27.50 per share.
In January 1999, the Sbarro family increased its offer to
purchase, through a new company ("Mergeco"), each
outstanding share not owned by the Sbarro family to
$28.85. In addition, Mergeco will pay all transaction
related expenses including $2 million in legal fees as
part of an agreement to settle seven class action
lawsuits prior to the closing of the transaction.
Purchase Price: $28.85 per share, or in the aggregate $388.2 million for
the 13.5 million shares (approximately 65.6% of the
outstanding shares) of the Company's Common Stock not
currently owned by the members of the Sbarro family.
Accounting Treatment: Purchase Accounting
Consideration: Cash
4
<PAGE>
PROJECT OREGANO
TRANSACTION OVERVIEW
Transaction Overview
Terms: The offer is subject, among other things, to: (i)
entering into a definitive merger agreement; (ii)
approval of the transaction by the special committee of
the Board, the full Board of Directors, and the
Company's shareholders; (iii) receipt of satisfactory
financing for the transaction; (iv) continued suspension
of dividends by the Company; and (v) receipt of a
fairness opinion from the financial advisor to the
special committee of the Board stating that the proposed
transaction is fair from a financial point of view to
the public shareholders.
Financing: Management believes the transaction will be financed with
approximately $138.4 million in cash on the Company's
balance sheet and a total of $270.0 million in high yield
debt. Concurrent with the execution of the merger
agreement, Bear Stearns & Co. will provide the Company
with a "highly confident" letter.
5
<PAGE>
PROJECT OREGANO
TRANSACTION OVERVIEW
($ in thousands, except offer price and EPS)
Offer Price $28.85
LTM
Operating Implied
Sbarro Parameters (1) Multiple (5)
---------------------------- ------------------- ---------------
LTM Revenues (2) $357,928 1.3x
LTM EBITDA (2) 79,804 5.9x
LTM EBIT (2) 56,825 8.3x
LTM Net Income (3) 38,206 15.7x
1998 EPS (3) (4) 1.86 15.5x
1999 EPS (3) (4) 1.87 15.4x
Tangible Book Value (3) 241,838 2.5x
(1) As of 10/4/98.
(2) Enterprise value multiple; assumes utilization $125.8 million of cash on
balance sheet as of 10/4/98.
(3) Equity value multiple.
(4) Source: Company management.
(5) All multiples assume offer price for 100% of Sbarro's outstanding shares.
6
<PAGE>
PROJECT OREGANO
TRANSACTION OVERVIEW
Transaction Assumptions
($ in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------ --------------------------------------------------------------------
Sources Uses
- ------------------------------------------------ --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of Shares Outstanding (000s) 20,528
Number of Shares to be Repurchased (000s) 13,457 65.6%
Excess Cash on Balance Sheet (1) $ 138.4 Purchase Price of Equity $ 388.2
Purchase Price of Options (2) 7.1
High Yield Debt 270.0 Non-Financing Costs (3) 4.6
------------ ------------
Total Purchase Price $ 400.0
Financing Costs (3) $ 8.4
------------
Total Sources of Funds $ 408.4 Total Uses of Funds $ 408.4
============ ============
- ------------------------------------------------ --------------------------------------------------------------------
(1) Projected as of 12/31/98.
(2) Options outstanding as of 12/2/98. Treasury stock method assumed.
(3) Company estimate. Non-financing costs include $2 million of legal fees as
part of litigation settlement.
</TABLE>
7
<PAGE>
PROJECT OREGANO
TRANSACTION OVERVIEW
Pro Forma Capitalization
($ in millions)
- -------------------------------------------------------------------------------
Pro Forma
Estimated % of Total
Pro Forma Capitalization 12/31/98 Capitalization
- -------------------------------------------------------------------------------
Cash & Cash Equivalents $ 6.6 0.0%
High Yield Debt 270.0 79.4%
---------------- ------------------
Total Long Term Debt $ 270.0 79.4%
Common Equity 70.1 20.6%
---------------- ------------------
Total Shareholders' Equity $ 70.1 20.6%
Total Capitalization $ 340.1 100.0%
================ ==================
- -------------------------------------------------------------------------------
8
<PAGE>
PROJECT OREGANO
------------------------------------------
II. Company Overview and Historical
Financial Information
-------------------------------------------
<PAGE>
PROJECT OREGANO
----------------
A. Description
----------------
<PAGE>
PROJECT OREGANO
COMPANY OVERVIEW
Description
o The Company develops, operates, and franchises an international chain of
family-style, cafeteria-type Italian restaurants under the "Sbarro" and
"Sbarro The Italian Eatery" names.
o Sbarro's menu consists of popular Italian food, including pizza, pasta, hot
and cold Italian entrees, salads, sandwiches, and desserts.
o The restaurants are located primarily in malls, and to a lesser extent,
airports, hospitals, universities, toll roads, and office cafeterias.
o As of October 4, 1998, the Company had 881 units in operation which
consisted of: 625 Company-owned units and 256 franchised units of which 797
were domestic units and 84 were international units.
o Since its initial public offering in 1985, the Company has expanded from
123 restaurants to 881 as of October 4, 1998. Over the past three years,
Sbarro's compound annual growth rate in the number of restaurants added has
slowed to approximately 5%, with franchised restaurants growing faster than
company-owned locations.
11
<PAGE>
PROJECT OREGANO
COMPANY OVERVIEW
Ownership and Management Summary
o Sbarro family members and the Trust of Carmela Sbarro own 34.4% of the
Company's outstanding common stock.
o Certificate of Incorporation requires affirmative vote of holders of at
least 66 2/3% of the total number of common shares outstanding to merge,
consolidate, or sell 25% or more of the Company's assets.
o Senior management includes:
Mario Sbarro - Chairman of the Board, CEO, and President
Anthony Sbarro - Vice Chairman of the Board
Joseph Sbarro - Senior Executive VP and Secretary
Gennaro A. Sbarro - Corporate Vice President Franchise Operations
Gennaro J. Sbarro - Corporate Vice President Operations - East
Anthony J. Missano - Corporate Vice President Operations - West
Robert S. Koebele - Chief Financial Officer
Leonard G. Skrosky - Senior Vice President - Real Estate
George W. Herz - General Counsel
12
<PAGE>
PROJECT OREGANO
----------------------
B. Financial Review
----------------------
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
Historical and Projected Balance Sheets
(In 000's)
<TABLE>
<CAPTION>
Historical (1) Projected (1)
---------------------------------- ---------------------------------------------------------------
FY FY FY FY FY FY FY FY
ASSETS 1996 1997 10/4/98 1998 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 114,818 $ 127,310 $ 125,805 $ 144,970 $ 168,923 $ 194,593 $ 222,612 $ 251,356 $ 281,332
Accounts receivables 1,865 2,375 3,887 2,484 2,551 2,653 2,759 2,865 2,973
Inventories 2,841 2,962 2,572 3,173 3,274 3,401 3,532 3,664 3,797
Prepaid expenses 1,409 1,768 6,025 1,888 1,938 2,016 2,096 2,177 2,259
Total current assets 120,933 134,415 138,289 152,515 176,687 202,664 230,999 260,063 290,361
Property and equipment, net 130,993 136,798 138,691 135,622 127,056 117,970 109,117 100,650 92,112
Deferred charges, net 1,633 1,596 NA 1,600 1,600 1,600 1,600 1,600 1,600
Other assets 5,100 5,840 6,129 5,800 5,800 5,800 5,800 5,800 5,800
Total assets $ 258,659 $ 278,649 $ 283,109 $ 295,536 $ 311,143 $ 328,034 $ 347,515 $ 368,112 $ 389,874
LIABILITIES AND EQUITY
Accounts payable $ 7,173 $ 10,086 $ 6,560 $ 10,822 $ 11,166 $ 11,599 $ 12,045 $ 12,496 $ 12,950
Accrued expenses 22,663 26,025 23,998 27,930 28,816 29,935 31,087 32,250 33,422
Dividends payable 4,691 5,521 - 5,521 5,521 5,521 5,521 5,521 5,521
Income taxes 5,287 4,777 32 4,777 4,777 4,777 4,777 4,777 4,777
Total current liabilities 39,814 46,409 30,590 49,050 50,280 51,832 53,431 55,043 56,670
Deferred income taxes 13,645 11,801 10,681 10,301 8,801 7,301 7,301 7,301 7,301
Total liabilities 53,459 58,210 41,271 59,351 59,081 59,133 60,732 62,344 63,971
Common Stock 31,423 32,648 34,721 32,648 32,648 32,648 32,648 32,648 32,648
Retained earnings 173,777 187,791 207,117 203,538 219,414 236,252 254,136 273,120 293,254
Shareholders' equity 205,200 220,439 241,838 236,186 252,062 268,900 286,784 305,768 $ 325,902
Total liabilities and
shareholders' equity $ 258,659 $ 278,649 $ 283,109 $ 295,536 $ 311,143 $ 328,034 $ 347,515 $ 368,112 $ 389,874
</TABLE>
(1) Historical results from Company's 10-K. Projections provided by the
Company.
14
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
HISTORICAL AND PROJECTED INCOME STATEMENTS
($ in 000's, except per share data)
<TABLE>
<CAPTION>
Historical (1) Projected (1)
---------------------------------------- ------------------------------------------------------------
FY FY YTD YTD FY FY FY FY FY FY
1996 1997 10/5/97 10/4/98 1998 (2) 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C> <C> <C> C> <C>
Restaurant sales $ 319,315 $ 337,723 $ 244,903 $ 256,708 $ 353,564 $ 364,790 $ 378,954 $393,536 $ 408,250 $ 423,096
Franchise related income 6,375 7,360 5,152 6,192 9,038 7,600 8,396 9,209 10,045 10,890
Total revenues 325,690 345,083 250,055 262,900 362,602 372,391 387,350 402,745 418,295 433,986
Cost of food and paper
products 68,668 69,469 50,289 54,068 74,248 76,606 79,580 82,643 85,733 88,850
Gross profit 257,022 275,614 199,766 208,832 288,354 295,785 307,770 320,103 332,563 345,136
Payroll and other benefits 78,258 84,910 63,045 68,161 91,043 93,933 97,581 101,336 105,124 108,947
Occupancy and other expenses 85,577 93,528 71,554 76,301 99,705 102,871 106,865 110,977 115,127 119,313
General and administrative 14,940 17,762 13,354 14,738 19,399 19,923 20,723 21,547 22,379 23,238
Unit closings and
litigation charges - 3,300 - 6,055 - - - - - -
Other income (3) (1,171) (1,653) (1,324) (2,242) (2,000) (3,500) (3,500) (3,500) (3,500) (3,500)
Total costs
and expenses 177,604 197,847 146,629 163,013 208,147 213,227 221,669 230,360 239,130 247,998
EBITDA 79,418 81,067 53,137 51,874 80,207 82,557 86,101 89,743 93,433 97,138
Depreciation 22,910 23,922 17,999 17,056 23,426 24,016 24,536 24,903 25,117 25,188
EBIT 56,508 57,145 35,138 34,818 56,780 58,542 61,564 64,840 68,316 71,951
Interest income 3,798 4,352 3,288 3,734 4,956 5,775 6,652 7,610 8,592 9,617
Income before taxes 60,306 58,197 38,426 32,497 61,736 64,316 68,216 72,450 76,909 81,568
Income taxes 22,916 22,115 14,602 12,349 23,460 25,727 27,287 28,980 30,764 32,627
NI - before unit closings
provision & accounting
change $ 37,390 $ 38,128 $ 23,824 $ 23,902 $ 38,276 $ 38,590 $ 40,930 $ 43,470 $ 46,145 $ 48,941
EPS, excludes unit closings
provision & accounting
change $ 1.83 $ 1.86 $ 1.16 $ 1.16 $ 1.86 $ 1.87 $ 1.99 $ 2.11 $ 2.24 $ 2.38
</TABLE>
- ---------------------
(1) Historical results from Company's 10-K. Projections provided by the
Company.
(2) Based on 52 week year -1998 will have 53 weeks and have EBIT of
approximately $3 million for the 53rd week.
(3) Includes income from joint ventures, income from two 20% owned stores,
beverage rebates, insurance recoveries, and rental/leasing income before
depreciation on new building.
(4) Projected EPS assumes 20.6 million diluted shares outstanding, the same
number of diluted shares outstanding as of 10/4/98.
15
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
HISTORICAL AND PROJECTED INCOME STATEMENT RELATIONSHIPS
<TABLE>
<CAPTION>
Historical (1) Projected (1)
------------------------------------- --------------------------------------------------------
FY FY YTD YTD FY FY FY FY FY FY
1996 1997 10/5/97 10/4/98 1998 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Restaurant sales (2) 98.0% 97.9% 97.9% 97.6% 97.5% 98.0% 97.8% 97.7% 97.6% 97.5%
Franchise related income (2) 2.0% 2.1% 2.1% 2.4% 2.5% 2.0% 2.2% 2.3% 2.4% 2.5%
------------------------------------- --------------------------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of food and paper products (3) 21.5% 20.6% 20.5% 21.1% 21.0% 21.0% 21.0% 21.0% 21.0% 21.0%
Gross Margin (3) 80.5% 81.6% 81.6% 81.4% 81.6% 81.1% 81.2% 81.3% 81.5% 81.6%
Payroll and other benefits (3) 24.5% 25.1% 25.7% 26.6% 25.8% 25.8% 25.8% 25.8% 25.8% 25.8%
Occupancy and other expenses (3) 26.8% 27.7% 29.2% 29.7% 28.2% 28.2% 28.2% 28.2% 28.2% 28.2%
General and administrative (2) 4.6% 5.1% 5.3% 5.6% 5.4% 5.4% 5.4% 5.4% 5.4% 5.4%
EBITDA (2) 24.4% 23.5% 21.3% 19.7% 22.1% 22.2% 22.2% 22.3% 22.3% 22.4%
EBIT (2) 17.4% 16.6% 14.1% 13.2% 15.7% 15.7% 15.9% 16.1% 16.3% 16.6%
Net income (2) 11.5% 11.0% 9.5% 9.1% 10.6% 10.4% 10.6% 10.8% 11.0% 11.3%
</TABLE>
(1) Historical results from Company's 10-K. Projections provided by the
Company.
(2) As a percentage of total revenues.
(3) As a percentage of restaurant sales.
16
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
Operating Performance (1)
<TABLE>
<CAPTION>
FY FY YTD YTD FY FY FY FY FY FY
Company-Owned Restaurants 1996 1997 10/5/97 10/4/98 1998 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning number 571 597 597 623 623 633 655 677 699 721
Additions 29 30 19 19 25 25 25 25 25 25
Acquired from (sold to)
franchisees 1 4 2 1 1 - - - -
Divestitures (4) (8) (5) (18) (16) (3) (3) (3) (3) (3)
Ending number 597 623 613 625 633 655 677 699 721 743
Percent of total 73.2% 72.3% 73.1% 70.9% 70.4% 68.5% 66.8% 65.3% 64.0% 62.8%
Franchised Restaurants
Beginning number 200 219 219 239 239 266 301 336 371 406
Additions 36 47 31 26 40 40 40 40 40 40
Purchases from (sold to)
franchisees (1) (4) (2) (1) (1) - - - - -
Divestitures (16) (23) (22) (8) (12) (5) (5) (5) (5) (5)
Ending number 219 239 226 256 266 301 336 371 406 441
Percent of total 26.8% 27.7% 26.9% 29.1% 29.6% 31.5% 33.2% 34.7% 36.0% 37.2%
All Restaurants
Beginning number 771 816 816 862 862 899 956 1,013 1,070 1,127
Additions 65 77 50 45 65 65 65 65 65 65
Closed during period (20) (31) (27) (26) (28) (8) (8) (8) (8) (8)
Ending number 816 862 839 881 899 956 1,013 1,070 1,127 1,184
Comparative Store Sales Growth -0.18% -0.36% -0.20% 0.90% 1.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Average Sales per Restaurant
($ in millions) $0.547 $0.554 NA NA $0.563$ 0.566 $ 0.569 $0.572$ 0.575 $ 0.578
</TABLE>
(1) Information provided by the Company.
17
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
Operating Performance (1)
<TABLE>
<CAPTION>
FY FY YTD YTD FY FY FY FY FY FY
Total Systemwide Sales 1996 1997 10/5/97 10/4/98 1998 1999 2000 2001 2002 2003
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company-Owned $ 319.3 $ 337.7 $ 244.9 $ 256.7 $ 353.6 $ 364.8 $ 379.0 $ 393.5 $ 408.3 $ 423.1
Franchised $ 118.3 $ 132.8 NA NA $ 142.2 $ 160.6 $ 181.2 $ 202.2 $ 223.4 $ 244.8
Total Systemwide Sales $ 437.6 $ 470.5 NA NA $ 495.7 $ 525.4 $ 560.2 $ 595.7 $ 631.6 $ 667.9
Franchise Royalty Fee (new) NA NA NA NA 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Franchise Royalty Fee (old) NA NA NA NA 7.5% 4.8% 4.8% 4.8% 4.8% 4.8%
Avg. Franchise Fee per Store(2) $ 0.019 $ 0.026 NA NA $ 0.020 $ 0.020 $ 0.020 $ 0.020 $ 0.020 $ 0.020
Total Initial Franchise Fees $ 0.7 $ 1.2 NA NA $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8
Total Franchise Royalty Fee $ 5.7 $ 6.2 NA NA $ 8.2 $ 6.8 $ 7.6 $ 8.4 $ 9.2 $ 10.1
Total Revenue from Franchisees $ 6.4 $ 7.4 $ 5.2 $ 6.2 $ 9.0 $ 7.6 $ 8.4 $ 9.2 $ 10.0 $ 10.9
Total Revenue ($ in millions)
Company-Owned $ 319.3 $ 337.7 $ 244.9 $256.7 $ 353.6 $ 364.8 $ 379.0 $ 393.5 $ 408.3 $ 423.1
Franchise Related Income $ 6.4 $ 7.4 $ 5.2 $ 6.2 $ 9.0 $ 7.6 $ 8.4 $ 9.2 $ 10.0 $ 10.9
Total Revenue $ 325.7 $ 345.1 $ 250.1 $262.9 $ 362.6 $ 372.4 $ 387.3 $ 402.7 $ 418.3 $ 434.0
Total Capital Expenditures ($ in millions)
CapEx per New Restaurant NA NA NA NA $ 0.41 $ 0.41 $ 0.41 $ 0.41 $ 0.41 $ 0.41
New Restaurant CapEx $ 14.1 $ 15.9 NA NA $ 10.3 $ 10.3 $ 10.3 $ 10.3 $ 10.3 $ 10.3
Capital Expenditures
(New Headquarters) $ 4.3 $ 5.0 NA NA $ 7.0 $ - $ - $ - $ - $ -
Maintenance Capital
Expenditures $ 7.5 $ 7.6 NA NA $ 5.0 $ 5.2 $ 5.2 $ 5.8 $ 6.4 $ 6.4
</TABLE>
(1) Information provided by the Company.
(2) FY'96 and FY'97 average franchise/development fee per store was calcuated
based on total initial franchise fees and development fees divided by new
franchise stores. Projected fees are provided by the Company.
18
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
WORKING CAPITAL RELATIONSHIPS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Historical Projected
-----------------------------------------------------------------------------------------------
FY FY FY FY FY FY FY FY
1996 1997 1998 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inventory as days of COGS 15.1 15.6 15.6 15.6 15.6 15.6 15.6 15.6
Accounts receivable as days of sales 2.3 2.5 2.5 2.5 2.5 2.5 2.5 2.5
Prepaid expenses as days of sales 1.6 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Accounts payable as days of COGS 38.1 53.0 53.2 53.2 53.2 53.2 53.2 53.2
Accrued expenses as days of COGS 120.5 136.7 137.3 137.3 137.3 137.3 137.3 137.3
Other assets $5,100 $5,840 $5,800 $5,800 $5,800 $5,800 $5,800 $5,800
Deferred charges, net (in 000s) $1,633 $1,596 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600
Dividends payable (in 000's) $4,691 $5,521 $5,521 $5,521 $5,521 $5,521 $5,521 $5,521
Income taxes payable (in 000's) $5,287 $4,777 $4,777 $4,777 $4,777 $4,777 $4,777 $4,777
Deferred income taxes (in 000s) $13,645 $11,801 $10,301 $8,801 $7,301 $7,301 $7,301 $7,301
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
(Graphic omitted)
Graph depicting the daily prices of shares of Sbarro Inc. from January
12, 1998 to January 11, 1999.
(Graphic omitted)
Graph depicting the trading volume of shares of Sbarro Inc. from
January 12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
20
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
(Graphic omitted)
Graph depicting the closing prices from January 13, 1998 to January
11, 1999 of the S&P 500, Sbarro Inc., Pizza & Italian, and Fast Food as a
percentage of what their respective closing prices were on January 13, 1998.
Pizza & Italian is a composite of CEC, DRI, NPCI, PZZI, and UNO.
Fast Food is a composite of FM, YUM, SONC, and WEN.
Source: IDD Information Services/Tradeline
21
<PAGE>
PROJECT OREGANO
FINANCIAL REVIEW
(Graphic omitted)
Graph depicting what percent of the total volume of shares, traded
from January 12, 1998 to January 11, 1999, traded at specified prices.
Graph shows 16,784,400 cumulative shares, 82% of the 20,528,000 shares
outstanding as reported on 1/11/99.
Source: IDD Information Services/ Tradeline
22
<PAGE>
PROJECT OREGANO
-----------------------
III. Valuation Summary
-----------------------
<PAGE>
PROJECT OREGANO
------------------------
A. Methodology
------------------------
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
Methodology
o Reviewed historical and projected operational information provided by
Sbarro's management. Discussed the Company's historical results, future
growth opportunities, and other matters which we considered relevant to our
analysis with management.
o Reviewed the Company's historical and projected financial information, as
provided by the Company and its financial advisors.
o Analyzed qualitative factors associated with the transaction, including
existing management profile and stock ownership.
o Reviewed the Company's Confidential Memorandum dated August 1998 and the
written indications of interest received from prospective buyers. Discussed
this information with the Company's financial advisers.
o Valued the Company based on a discounted cash flow analysis.
o Compared and analyzed the Company's financial and operational performance
with certain publicly traded pizza and value priced Italian and fast food
restaurants. Valued Sbarro based on comparable publicly traded pizza and
value priced Italian and fast food restaurant companies.
o Analyzed recent mergers and acquisitions involving restaurant companies and
valued the Company based on implied multiples from these transactions.
o Analyzed the premiums paid in selected Rule 13e-3 transactions.
o Analyzed the stock trading history of Sbarro.
25
<PAGE>
PROJECT OREGANO
-----------------------------------
B. Risk and Growth Rankings - Pizza
and Value Priced Italian
Restaurant Companies
-----------------------------------
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
(Graphic omitted)
Graph comparing the sales growth of Sbarro to the range and mean of sales
growth for CEC, DRI, NPCI, PZZI, and UNO over a period of eight quarters ending
11/29/98.
27
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
Comparable Pizza and Value Priced Italian Restaurant Companies
--------------------------------------------------
Growth Factors
--------------------------------------------------
===============================================
Projected Consensus EPS Growth Rate
(Five (5) Year Growth)
===============================================
CEC Entertainment, Inc. 22.0%
NPC International, Inc. 21.0%
Uno Restaurant Corporation 15.0%
Darden Restaurants, Inc. 13.0%
Pizza Inn, Inc. 11.0%
Sbarro, Inc. 5.0%
===============================================
Mean 16.4%
Mean does not include Sbarro.
For further information and detailed analysis, see pages 61-65.
28
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
<TABLE>
<CAPTION>
Comparable Pizza and Value Priced Italian Restaurant Companies
------------------------------------------------------------------------------------------------------
Growth Factors
------------------------------------------------------------------------------------------------------
================================================ ================================================
Historical Sales Growth Historical EBITDA Growth
(Two (2) Year CAGR ) (Two (2) Year CAGR )
================================================ ================================================
<S> <C> <C> <C> <C> <C>
NPC International, Inc. 18.4% CEC Entertainment, Inc. 64.2%
CEC Entertainment, Inc. 15.2% NPC International, Inc. 18.8%
Uno Restaurant Corporation 5.4% Pizza Inn, Inc. 8.2%
Sbarro, Inc. 4.5% Sbarro, Inc. 6.7%
Darden Restaurants, Inc. 1.5% Uno Restaurant Corporation 6.4%
Pizza Inn, Inc. -0.6% Darden Restaurants, Inc. -6.2%
================================================ ================================================
Mean 8.0% Mean 18.3%
================================================ ================================================
Historical EBIT Growth Historical Net Income Growth
(Two (2) Year CAGR ) (Two (2) Year CAGR )
================================================ ================================================
CEC Entertainment, Inc. 301.2% Uno Restaurant Corporation 17.0%
Uno Restaurant Corporation 18.9% Pizza Inn, Inc. 13.6%
NPC International, Inc. 17.0% Sbarro, Inc. 10.1%
Sbarro, Inc. 9.5% NPC International, Inc. 9.2%
Pizza Inn, Inc. 6.8% Darden Restaurants, Inc. -9.2%
Darden Restaurants, Inc. -9.1% CEC Entertainment, Inc. NA
================================================ ================================================
Mean 67.0% Mean 7.6%
</TABLE>
Mean does not include Sbarro.
For further information and detailed analysis, see pages 61-65.
29
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
<TABLE>
<CAPTION>
Comparable Pizza and Value Priced Italian Restaurant Companies
------------------------------------------------------------------------------------------------------
Risk Factors ($ in millions)
------------------------------------------------------------------------------------------------------
================================================ ================================================
Total LTM Sales (1) Number of Restaurants (1)
================================================ ================================================
<S> <C> <C> <C> <C>
Darden Restaurants, Inc. $3,409.6 Darden Restaurants, Inc. 1,143
NPC International, Inc. $443.4 Sbarro, Inc. 881
CEC Entertainment, Inc. $380.3 NPC International, Inc. 649
Sbarro, Inc. $357.9 Pizza Inn, Inc. 505
Uno Restaurant Corporation $191.3 CEC Entertainment, Inc. 320
Pizza Inn, Inc. $68.2 Uno Restaurant Corporation 163
================================================ ================================================
Mean $898.6 Mean 556
================================================ ================================================
Equity Market Capitalization (2) Enterprise Value (2)
(Equity Market Capitalization plus Net Debt)
================================================ ================================================
Darden Restaurants, Inc. $2,532.8 Darden Restaurants, Inc. $2,840.6
Sbarro, Inc. $521.2 CEC Entertainment, Inc. $480.4
CEC Entertainment, Inc. $463.7 Sbarro, Inc. $395.4
NPC International, Inc. $305.0 NPC International, Inc. $391.3
Uno Restaurant Corporation $73.0 Uno Restaurant Corporation $114.4
Pizza Inn, Inc. $48.0 Pizza Inn, Inc. $54.8
================================================ ================================================
Mean $657.3 Mean $776.3
</TABLE>
Mean does not include Sbarro.
For further information and detailed analysis, see pages 61-65.
(1) As of latest reported quarter.
(2) As of 1/12/99.
30
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
<TABLE>
<CAPTION>
Comparable Pizza and Value Priced Italian Restaurant Companies
------------------------------------------------------------------------------------------------------
Risk Factors
------------------------------------------------------------------------------------------------------
================================================ ================================================
LTM EBITDA Margins (1) LTM EBIT Margins (1)
(EBITDA to Sales) (EBIT to Sales)
================================================ ================================================
<S> <C> <C> <C> <C> <C>
Sbarro, Inc. 22.3% Sbarro, Inc. 15.9%
CEC Entertainment, Inc. 21.9% CEC Entertainment, Inc. 14.8%
NPC International, Inc. 16.4% NPC International, Inc. 10.2%
Uno Restaurant Corporation 13.0% Pizza Inn, Inc. 9.9%
Pizza Inn, Inc. 11.3% Uno Restaurant Corporation 6.5%
Darden Restaurants, Inc. 9.8% Darden Restaurants, Inc. 6.0%
================================================ ================================================
Mean 14.5% Mean 9.5%
================================================ ================================================
Leverage (1) LTM Net Income Margins (1)
(Total Debt to Total Cap.(book)) (Net Income to Sales)
================================================ ================================================
Sbarro, Inc. 0.0x Sbarro, Inc. 10.7%
CEC Entertainment, Inc. 0.1x CEC Entertainment, Inc. 8.6%
Darden Restaurants, Inc. 0.2x Pizza Inn, Inc. 6.5%
Uno Restaurant Corporation 0.4x NPC International, Inc. 4.6%
NPC International, Inc. 0.4x Darden Restaurants, Inc. 3.5%
Pizza Inn, Inc. 0.5x Uno Restaurant Corporation 3.1%
================================================ ================================================
Mean 0.3x Mean 5.3%
</TABLE>
Mean does not include Sbarro.
For further information and detailed analysis, see pages 61-65.
(1) As of latest reported quarter.
31
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
------------------------------------------
C. Risk and Growth Rankings - Fast
Food Restaurant Companies
------------------------------------------
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
(Graphic omitted)
Graph comparing the sales growth of Sbarro to the range and mean of
sales growth of FM, SONC, YUM, and WEN over a period of eight quarters ending
10/4/98.
33
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
Comparable Fast Food Restaurant Companies
--------------------------------------------------------------------------
Growth Factors
--------------------------------------------------------------------------
===============================================
Projected Consensus EPS Growth Rate
(Five (5) Year Growth)
===============================================
Foodmaker, Inc. 20.0%
Sonic Corp. 17.0%
Tricon Global Restaurants, Inc. 15.0%
Wendy's International, Inc. 14.0%
Sbarro, Inc. 5.0%
===============================================
Mean 16.5%
Mean does not include Sbarro.
For further information and detailed analysis, see pages 72-76.
34
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
Comparable Fast Food Restaurant Companies
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Growth Factors
------------------------------------------------------------------------------------------------------
================================================ ================================================
Historical Sales Growth Historical EBITDA Growth
(Two (2) Year CAGR ) (Two (2) Year CAGR )
================================================ ================================================
<S> <C> <C> <C> <C> <C>
Sonic Corp. 20.4% Sonic Corp. 20.9%
Wendy's International, Inc. 8.1% Wendy's International, Inc. 15.1%
Foodmaker, Inc. 5.3% Foodmaker, Inc. 10.1%
Sbarro, Inc. 4.5% Sbarro, Inc. 6.7%
Tricon Global Restaurants, Inc. -2.8% Tricon Global Restaurants, Inc. -4.9%
================================================ ================================================
Mean 7.8% Mean 10.3%
================================================ ================================================
Historical EBIT Growth Historical Net Income Growth
(Two (2) Year CAGR ) (Two (2) Year CAGR )
================================================ ================================================
Sonic Corp. 18.8% Foodmaker, Inc. 41.1%
Wendy's International, Inc. 15.5% Sonic Corp. 16.0%
Foodmaker, Inc. 13.3% Tricon Global Restaurants, Inc. 13.9%
Sbarro, Inc. 9.5% Wendy's International, Inc. 11.1%
Tricon Global Restaurants, Inc. 0.6% Sbarro, Inc. 10.1%
================================================ ================================================
Mean 12.1% Mean 20.5%
</TABLE>
Mean does not include Sbarro.
For further information and detailed analysis, see pages 72-76.
35
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
Comparable Fast Food Restaurant Companies
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Risk Factors ($ in millions)
------------------------------------------------------------------------------------------------------
================================================ ================================================
Total LTM Sales (1) Number of Restaurants (1)
================================================ ================================================
<S> <C> <C> <C> <C> <C>
Tricon Global Restaurants, Inc. $8,732.0 Tricon Global Restaurants, Inc. 29,600
Wendy's International, Inc. $1,970.5 Wendy's International, Inc. 6,785
Foodmaker, Inc. $1,174.3 Sonic Corp. 1,847
Sbarro, Inc. $357.9 Foodmaker, Inc. 1,414
Sonic Corp. $219.1 Sbarro, Inc. 881
================================================ ================================================
Mean $3,024.0 Mean 9,912
================================================ ================================================
Equity Market Capitalization (2) Enterprise Value (2)
(Equity Market Capitalization plus Net Debt)
================================================ ================================================
Tricon Global Restaurants, Inc. $7,656.0 Tricon Global Restaurants, Inc. $11,251.0
Wendy's International, Inc. $2,769.1 Wendy's International, Inc. $3,118.4
Foodmaker, Inc. $866.1 Foodmaker, Inc. $1,177.9
Sbarro, Inc. $521.2 Sonic Corp. $510.8
Sonic Corp. $443.5 Sbarro, Inc. $395.4
================================================ ================================================
Mean $2,933.7 Mean $4,014.5
</TABLE>
Mean does not include Sbarro.
For further information and detailed analysis, see pages 72-76.
(1) As of latest reported quarter.
(2) As of 1/12/99.
36
<PAGE>
PROJECT OREGANO
RISK AND GROWTH RANKINGS
<TABLE>
<CAPTION>
Comparable Fast Food Restaurant Companies
------------------------------------------------------------------------------------------------------
Risk Factors
------------------------------------------------------------------------------------------------------
================================================ ================================================
LTM EBITDA Margins (1) LTM EBIT Margins (1)
(EBITDA to Sales) (EBIT to Sales)
================================================ ================================================
<S> <C> <C> <C> <C> <C>
Sonic Corp. 23.1% Sonic Corp. 17.5%
Sbarro, Inc. 22.3% Sbarro, Inc. 15.9%
Wendy's International, Inc. 17.9% Wendy's International, Inc. 12.5%
Tricon Global Restaurants, Inc. 13.3% Tricon Global Restaurants, Inc. 8.1%
Foodmaker, Inc. 11.4% Foodmaker, Inc. 7.8%
================================================ ================================================
Mean 16.4% Mean 11.5%
================================================ ================================================
Leverage (1) LTM Net Income Margins (1)
(Total Debt to Total Cap.(book)) (Net Income to Sales)
================================================ ================================================
Sbarro, Inc. 0.0x Sbarro, Inc. 10.7%
Sonic Corp. 0.3x Sonic Corp. 10.2%
Wendy's International, Inc. 0.3x Wendy's International, Inc. 7.3%
Foodmaker, Inc. 0.7x Foodmaker, Inc. 3.4%
Tricon Global Restaurants, Inc. 1.6x Tricon Global Restaurants, Inc. 1.6%
================================================ ================================================
Mean 0.7x Mean 5.6%
</TABLE>
Mean does not include Sbarro.
For further information and detailed analysis, see pages 72-76.
(1) As of latest reported quarter.
37
<PAGE>
PROJECT OREGANO
------------------------------
D. COMPOSITE IMPLIED VALUATION
------------------------------
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
COMPOSITE IMPLIED SHARE PRICE
[GRAPHIC OMITTED]
Graph comparing the offer price to the implied share price for Pizza &
Value Priced Italian restaurants and Fast Food restaurants. The graph also
compares the offer price to the implied share price based on discounted cash
flows and comparable transactions.
(1) The range of the above graph represents the mean values of the high, low,
mean, and median indication of each valuation methodology. Implied values
for each valuation approach are detailed on the following page.
39
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
<TABLE>
<CAPTION>
SUMMARY OF IMPLIED PRICES OF ALL VALUATION METHODOLOGIES
- ---------------------------------
Offer Price $ 28.85
- ---------------------------------
High Low Mean Median
-----------------------------------------------
<S> <C> <C> <C> <C>
Discounted Cash Flows $ 31.92 $ 25.99 $ 28.80 $ 28.73
Comparable Companies
Pizza and Value Priced Italian Restaurants
LTM Revenue $ 27.81 $ 16.36 $ 21.15 $ 20.41
LTM EBITDA 38.56 23.77 30.11 28.18
LTM EBIT 43.95 28.22 32.45 29.70
LTM Net Income 38.53 19.97 26.85 25.96
1998 EPS 40.79 22.87 29.19 26.55
1999 EPS 35.13 21.65 26.50 22.72
Tangible Book Value 30.20 11.54 23.97 27.07
Mean $ 36.42 $ 20.63 $ 27.17 $ 25.80
Fast Food Restaurants
LTM Revenue $ 46.22 $ 23.34 $ 32.78 $ 30.79
LTM EBITDA 44.84 39.86 42.04 41.72
LTM EBIT 49.83 40.59 43.52 41.83
LTM Net Income 39.92 35.47 37.30 36.50
1998 EPS 36.49 33.69 35.59 36.10
1999 EPS 35.13 28.94 31.98 31.93
Tangible Book Value 73.60 29.98 47.56 39.10
Mean $ 46.57 $ 33.13 $ 38.68 $ 36.85
Comparable Transactions
LTM Revenue $ 30.25 $ 15.61 $ 21.22 $ 18.54
LTM EBITDA 38.41 31.99 34.73 34.23
LTM EBIT 50.98 30.63 39.26 40.30
LTM Net Income 51.49 22.93 35.54 33.48
Tangible Book Value 71.48 11.01 38.33 31.61
Mean $ 48.52 $ 22.43 $ 33.82 $ 31.63
</TABLE>
40
<PAGE>
PROJECT OREGANO
------------------------------------
E. DISCOUNTED CASH FLOW ANALYSIS
------------------------------------
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
<TABLE>
<CAPTION>
PROJECTED UNLEVERED FREE CASH FLOWS
(In 000's) Fiscal Years Ended December 31,
--------------------------------------------------------------------
Free Cash Flow: 1999 2000 2001 2002 2003
<S> <C> <C> <C> <C> <C>
Operating Income (EBIT) $ 58,542 $ 61,564 $ 64,840 $ 68,316 $ 71,951
Less: Income Taxes @ 40.0% (23,417) (24,626) (25,936) (27,327) (28,780)
Tax-Adjusted Operating Income $ 35,125 $ 36,939 $ 38,904 $ 40,990 $ 43,170
Plus: Depreciation 24,016 24,536 24,903 25,117 25,188
Less: Capital Expenditures (15,450) (15,450) (16,050) (16,650) (16,650)
Plus: Changes in Non-Cash
Working Capital and Long-
Term Assets and Liabilities
Deferred Taxes (1,500) (1,500) - - -
Receivables (67) (102) (105) (107) (107)
Inventories (101) (127) (131) (132) (133)
Prepaid Expenses (51) (78) (80) (81) (82)
Deferred Charges - - - - -
Other Assets - - - - -
Accounts Payable and Accruals 1,230 1,552 1,598 1,613 1,627
- - - - -
-------------------------------------------------------------------
Free Cash Flow: $ 43,202 $ 45,770 $ 49,039 $ 50,750 $ 53,013
-------------------------------------------------------------------
</TABLE>
42
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
<TABLE>
<CAPTION>
IMPLIED VALUATION
Present Value of Projected Cash Flows and Terminal Values
(In 000's, except per share data)
----------------------------------------------------------------------------------------------------------------------------
Terminal PV of PV of
Value Free PV of Aggregate Less: PV of Equity
Multiple of Discount Cash Flow Terminal Present Total Plus: Equity per
2003 EBITDA Rate (1) 1999-2003 (2) Value Value Debt (3) Cash (3) Value Share (4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10.50% $183,674 $294,814 $478,488 $ - $ 125,805 $604,293 $ 29.09
11.50% 179,350 281,829 461,178 - 125,805 586,983 28.25
- ------------- ---------------------------------------------------------------------------------------------------------------
5.0x 12.50% 175,192 269,524 444,716 - 125,805 570,521 27.46
- ------------- ---------------------------------------------------------------------------------------------------------------
13.50% 171,193 257,858 429,051 - 125,805 554,856 26.71
14.50% 167,345 246,793 414,137 - 125,805 539,942 25.99
------------- -----------
------------- -----------
10.50% $183,674 $353,777 $537,451 $ - $ 125,805 $663,256 $ 31.92
11.50% 179,350 338,195 517,544 - 125,805 643,349 30.97
- -----------------------------------------------------------------------------------------------------------------------------
6.0x 12.50% 175,192 323,428 498,621 - 125,805 624,426 30.06
- -----------------------------------------------------------------------------------------------------------------------------
13.50% 171,193 309,429 480,622 - 125,805 606,427 29.19
14.50% 167,345 296,151 463,496 - 125,805 589,301 28.36
------------- ------------
(1) As of 1/12/99, weight average cost of capital was 2.16% based on Company's
industry peer group. See calculation in appendix.
(2) Assumes three-quarter year discounting.
(3) As of 10/4/98 balance sheet.
(4) Assumes fully diluted shares outstanding as of 12/2/98 of 20.776 million. mean $ 28.80
</TABLE>
43
<PAGE>
PROJECT OREGANO
-------------------------------
F. COMPARABLE COMPANY ANALYSIS
-------------------------------
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
IMPLIED VALUATION - PIZZA AND VALUE PRICED ITALIAN
COMPARABLE COMPANIES
{GRAPHIC OMITTED]
Graph comparing the offer price to the implied share price of Pizza
and Value Priced Italian restaurants based on LTM revenue, LTM EBITDA, LTM
EBIT, LTM new income, 1998 EPS, 1999 EPS and book value.
45
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
COMPARABLE COMPANY SUMMARY VALUATION MATRIX - PIZZA AND VALUE PRICED ITALIAN
RESTAURANTS
(In thousands except per share)
Offer Price $28.85
<TABLE>
<CAPTION>
Enterprise Value/ Equity Value/
LTM(1) LTM(1) LTM(1) LTM(1)
Revenue EBITDA EBIT Net Income 1998 EPS 1999 EPS
<S> <C> <C> <C> <C> <C> <C>
Sbarro Operating Parameters (2) $357,928 $ 79,804 $ 56,825 $ 38,206 $ 1.86 $ 1.87
Comparable Company Valuation Multiples(3)
Pizza and Value High 1.3x 8.5x 13.9x 21.0x 22.0x 18.8x
Priced Italian Low 0.6 4.6 8.1 10.9 12.3 11.6
Comparables (4)Mean 0.9 6.3 9.7 14.6 15.7 14.1
Median 0.8 5.8 8.6 14.1 14.3 12.1
------------------------------------------
Plus: Cash (5) $ 125,805 $ 125,805 $ 125,805
------------------------------------------
Diluted Shares Outstanding (6) 20,776 20,776 20,776 20,776 -
Implied Equity Value Per Share
Pizza and Value High $ 27.81 $ 38.56 $ 43.95 $ 38.53 $ 40.79 $ 35.13
Priced Italian Low 16.36 23.77 28.22 19.97 22.87 21.65
Comparables Mean 21.15 30.11 32.45 26.85 29.19 26.50
Median 20.41 28.18 29.70 25.96 26.55 22.72
10/4/98
Book Value
<C> <C>
Sbarro Operating Parameters (2) $ 241,838
Comparable Company Valuation Multiples(3)
Pizza and Value High 2.6x
Priced Italian Low 1.0
Comparables (4)Mean 2.1
Median 2.3
Plus: Cash (5)
Diluted Shares Outstanding (6) 20,776
Implied Equity Value Per Share Mean
Pizza and Value High $ 30.20 $36.42
Priced Italian Low 11.54 20.63
Comparables Mean 23.97 27.17
Median 27.07 25.80
(1) Financial information for the latest twelve months ended 10/4/98.
(2) Parameters exclude one-time charges.
(3) Revenue, EBITDA, and EBIT are multiples of Enterprise Value. Net Income
and Book Value are multiples of Equity Value.
(4) Includes CEC Entertainment, Darden Restaurants, NPC International,
Pizza Inn, and Uno Restaurant Corp. See Appendix for more detail.
(5) As of 10/4/98 Form 10-Q.
(6) Calculated using the treasury stock method.
</TABLE>
46
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD COMPANIES
<TABLE>
<CAPTION>
(In millions, except per LTM FYE Shares
share data) Ticker Date Date Out.
------ ---- ---- ------
<S> <C> <C> <C> <C> <C>
CEC Entertainment, Inc. (b) CEC 10/04/98 01/02/98 18.0
Darden Restaurants, Inc. (c)(d) DRI 11/29/98 05/31/98 137.8
NPC International, Inc. (e)(f) NPCI 09/29/98 03/31/98 24.4
Pizza Inn, Inc. (g)(h)* PZZI 09/27/98 06/28/98 11.7
Uno Restaurant Corporation (i) UNO 09/27/98 09/27/98 10.3
Sbarro, Inc. (Trading (j)(k) SBA 10/4/98 12/28/97 20.5
Multiples)
Summary Statistics Exclude
Sbarro, Inc.
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
Based on Latest Twelve Months Results
-------------------------------------
Enterprise Value
Market Values Multiples Equity Value Multiples
------------- ---------------- ----------------------
(In millions, except per 1/12/99 Book Net LTM
share data) Per Share Equity Unlevered Sales EBITDA EBIT Value Income E.P.S.
--------- ------ --------- ----- ------ ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEC Entertainment, Inc. (b) $25.19 $463.7 $480.4 1.3x 5.8x 8.5x 2.6x 14.1x 14.3x
Darden Restaurants, Inc. (c)(d) $18.00 $2,532.8 $2,840.6 0.8x 8.5x 13.9x 2.5x 21.0x 22.1x
NPC International, Inc. (e)(f) $12.25 $305.0 $391.3 0.9x 5.4x 8.6x 2.1x 14.9x 15.1x
Pizza Inn, Inc. (g)(h)* $3.94 $48.0 $54.8 0.8x 7.1x 8.1x 7.4x 10.9x 12.0x
Uno Restaurant Corporation (i) $7.06 $73.0 $114.4 0.6x 4.6x 9.1x 1.0x 12.1x 12.8x
Sbarro, Inc. (Trading (j)(k) $25.38 $521.2 $395.4 1.1x 5.0x 7.0x 2.2x 13.6x 13.6x
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
Based on Forward Results
------------------------
Equity Value Multiples
----------------------
1999 P/E/
(In millions, except per 1998 1999 5yr
share data) E.P.S. E.P.S. Growth
----- ------ --------
<S> <C> <C> <C>
CEC Entertainment, Inc. (b) 14.0x 11.6x 0.5x
Darden Restaurants, Inc. (c)(d) 22.0x 18.8x 1.4x
NPC International, Inc. (e)(f) 14.6x 12.1x 0.6x
Pizza Inn, Inc. (g)(h)* 12.3x NA NA
Uno Restaurant Corporation (i) NA NA NA
Sbarro, Inc. (Trading (j)(k) 13.7x 13.5x 2.7x
Multiples)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summary Statistics Exclude High 1.3x 8.5x 13.9x 2.6x 21.0x 22.1x 22.0x 18.8x 1.4x
Sbarro, Inc. Low 0.6x 4.6x 8.1x 1.0x 10.9x 12.0x 12.3x 11.6x 0.5x
Mean 0.9x 6.3x 9.7x 2.1x 14.6x 15.2x 15.7x 14.1x 0.8x
Median 0.8x 5.8x 8.6x 2.3x 14.1x 14.3x 14.3x 12.1x 0.6x
Sbarro, Inc. (Implied 1.3x 5.9x 8.3x 2.5x 15.7x 15.5x 15.5x 15.4x NM
Multiple at Offer Price)
</TABLE>
See footnote descriptions on page 65.
47
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
IMPLIED VALUATION - FAST FOOD RESTAURANT
COMPARABLE COMPANIES
[GRAPHIC OMITTED]
Graph comparing the offer price to the implied share price of Fast Food
restaurants based on LTM revenue, LTM EBITDA, LTM EBIT, LTM new income, 1998
EPS, 1999 EPS and book value.
48
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
<TABLE>
<CAPTION>
Comparable Company Summary Valuation Matrix - Fast Food Restaurants
(In thousands, except per share)
Offer Price $28.85
Enterprise Value / Equity Value /
--------------------------------------- --------------------------------------------
LTM (1) LTM (1) LTM (1) LTM (1) 10/4/98
Revenue EBITDA EBIT Net Income 1998 EPS 1999 EPS Book Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sbarro Operating Parameters (2) $357,928 $ 79,804 $ 56,825 $ 38,206 $ 1.86 $ 1.87 $ 241,838
Comparable Company Valuation
Multiples (3)
Fast Food Restaurant High 2.3x 10.1x 16.0x 21.7x 19.6x 18.8x 6.3x
Comparables (4)Low 1.0 8.8 12.6 19.3 18.1 15.4 2.6
Mean 1.6 9.4 13.7 20.3 19.2 17.1 4.1
Median 1.4 9.3 13.1 19.8 19.4 17.0 3.4
-----------------------------------
Plus: Cash (5) $ 125,805 $125,805 $ 125,805
-----------------------------------
Diluted Shares Outstanding (6) 20,776 20,776 20,776 20,776 - - 20,776
Implied Equity Value Per Share Mean
Fast Food Restaurant High $ 46.22 $ 44.84 $ 49.83 $ 39.92 $ 36.49 $ 35.13 $ 73.60 $46.57
Comparables Low 23.34 39.86 40.59 35.47 33.69 28.94 29.98 33.13
Mean 32.78 42.04 43.52 37.30 35.59 31.98 47.56 38.68
Median 30.79 41.72 41.83 36.50 36.10 31.93 39.10 36.85
(1) Financial information for the latest twelve months ended 10/4/98.
(2) Parameters exclude one-time charges.
(3) Revenue, EBITDA, and EBIT are multiples of Enterprise Value. Net
Income and Book Value are multiples of Equity Value.
(4) Includes Foodmaker, Tricon Global Restaurants, Sonic Corp., and Wendy's.
See Appendix for more detail.
(5) As of 10/4/98 Form 10-Q.
(6) Calculated using the treasury stock method.
</TABLE>
49
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE FAST FOOD COMPANIES
<TABLE>
<CAPTION>
(In millions, except per LTM FYE Shares
share data) Ticker Date Date Out.
------ ---- ---- ----
<S> <C> <C> <C> <C>
Foodmaker, Inc. (b) FM 09/27/98 09/27/98 38.0
Tricon Global Restaurants, (c)(d)* YUM 09/05/98 12/27/97 152.9
Inc.
Sonic Corp. (e) SONC 08/31/98 08/31/98 18.9
Wendy's International, Inc. (f)(g) WEN 10/04/98 12/28/97 124.4
Sbarro, Inc. (Trading (h)(i) SBA 10/4/98 12/28/97 20.5
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
Based on Latest Twelve Months Results
(In millions, except per 1/12/99 Book Net LTM
share data) Per Share Equity Unlevered Sales EBITDA EBIT Value Income E.P.S.
--------- ------ --------- ----- ------ ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Foodmaker, Inc. $21.94 $866.1 $1,177.9 1.0x 8.8x 12.8x 6.3x 21.7x 22.1x
Tricon Global Restaurants, $49.88 $7,656.0 $11,251.0 1.3x 9.7x 16.0x NA 56.2x 57.1x
Inc.
Sonic Corp. $22.88 $443.5 $510.8 2.3x 10.1x 13.3x 3.4x 19.8x 20.2x
Wendy's International, Inc. $22.00 $2,769.1 $3,118.4 1.6x 8.9x 12.6x 2.6x 19.3x 20.2x
Sbarro, Inc. (Trading $25.38 $521.2 $395.4 1.1x 5.0x 7.0x 2.2x 13.6x 13.6x
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
Based on Forward Results
------------------------
Equity Value Multiples
----------------------
1999 P/E/
(In millions, except per 1998 1999 5yr
share data) E.P.S. E.P.S. Growth
<S> <C> <C> <C>
Foodmaker, Inc. 18.1x 15.4x 0.8x
Tricon Global Restaurants, 19.6x 18.8x 1.3x
Inc.
Sonic Corp. 19.4x 16.3x NA
Wendy's International, Inc. 19.5x 17.7x 1.3x
Sbarro, Inc. (Trading 13.7x 13.5x 3.7x
Multiples)
<C> <C> <C> <C> <C> <C> <C> <C> <C>
High 2.3x 10.1x 16.0x 6.3x 21.7x 22.1x 19.6x 18.8x 1.3x
Low 1.0x 8.8x 12.6x 2.6x 19.3x 20.2x 18.1x 15.4x 0.8x
Mean 1.6x 9.4x 13.7x 4.1x 20.3x 20.8x 19.2x 17.1x 1.1x
Median 1.4x 9.3x 13.1x 3.4x 19.8x 20.2x 19.4x 17.0x 1.3x
1.3x 5.9x 8.3x 2.5x 15.7x 15.5x 15.5x 15.4x NM
See footnote descriptions on page 76.
</TABLE>
50
<PAGE>
PROJECT OREGANO
-----------------------------------
G. COMPARABLE TRANSACTIONS ANALYSIS
------------------------------------
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
IMPLIED VALUATION- COMPARABLE TRANSACTIONS
(Graphic omitted)
Graph comparing the offer price to the implied share price of
comparable transactions based on LTM revenue, LTM EBITDA, LTM EBIT, LTM new
income, 1998 EPS, 1999 EPS and book value.
52
<PAGE>
<TABLE>
<CAPTION>
PROJECT OREGANO
VALUATION SUMMARY
Comparable Transaction Summary Valuation Matrix
(In thousands, except per share)
Offer Price $28.85
Enterprise Value / Equity Value /
--------------------------------------------- ---------------------------
LTM (1) LTM (1) LTM (1) LTM (1) 10/4/98
Revenue EBITDA EBIT Net Income Book Value
<S> <C> <C> <C> <C> <C> <C>
Sbarro Operating Parameters (2) $ 357,928 $ 79,804 $ 56,825 $ 38,206 $ 241,838
Comparable Transaction Valuation
Multiples (3)
High 1.4x 8.4x 16.4x 28.0x 6.1x
Low 0.6 6.8 9.0 12.5 0.9
Mean 0.9 7.5 12.1 19.3 3.3
Median 0.7 7.3 12.5 18.2 2.7
Plus: Cash (4) $ 125,805 $ 125,805 $ 125,805
Diluted Shares Outstanding (5) 20,776 20,776 20,776 20,776 20,776
Implied Equity Value Per Share Mean
High $ 30.25 $ 38.41 $ 50.98 $ 51.49 $ 71.48 $ 48.52
Low 15.61 31.99 30.63 22.93 11.01 22.43
Mean 21.22 34.73 39.26 35.54 38.33 33.82
Median 18.54 34.23 40.30 33.48 31.61 31.63
(1) Financial information for the latest twelve months ended 10/4/98.
(2) Parameters exclude one-time charges.
(3) Revenue, EBITDA, and EBIT are multiples of Enterprise Value. Net Income
and Book Value are multiples of Equity Value. Includes Spaghetti
Warehouse, Au Bon Pain, Pollo Tropical, Bertucci's, DavCo Restaurants,
International Dairy Queen, Perkins Family Restaurants, Krystal Company,
and Family Restaurants. See Appendix for more detail.
(4) As of 10/4/98 Form 10-Q.
(5) Calculated using the treasury stock method.
</TABLE>
53
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
<TABLE>
<CAPTION>
Comparable Transactions Valuation Summary
($ in millions)
<S> <C> <C> <C> <C>
Target Target Anounced Offer Terms EV
Acquiror Business Description Effective Attitude EPP
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Spaghetti Warehouse Operates 40 full service restaurants 9/18/98 Cash $ 50.7
casual-dining which compete in Pending Friendly $ 46.2
Consolidated Restaurant Cos the Italian segment.
- --------------------------------------------------------------------------------------------------------------------
Au Bon Pain Co Inc. (2) Own 152 stores and franchises 111 8/13/98 Cash $ 73.0
quick-service restaurants worldwide Pending Friendly $ 73.0
Bruckmann Rosser Sherrill & Co.
- --------------------------------------------------------------------------------------------------------------------
Pollo Tropical Inc Owns and operates 36, and franchise 6/4/98 Cash $ 95.1
19, quick-service restaurants. 7/20/98 Friendly $ 94.9
Carrols Corp
- --------------------------------------------------------------------------------------------------------------------
Bertucci's (3) (4) Operates 84, full-service Italian 4/3/98 Cash $101.7 $ 140.3
restaurants in 11 states. 7/21/98 Friendly $ 93.5 0.7x
NE Restaurant Co.
- --------------------------------------------------------------------------------------------------------------------
DavCo Restaurants (5) (6) Operates 229 Wendy's International 9/5/97 Cash $202.2 $ 299.1
Restaurants and 34 Friendly's 3/24/98 Friendly $151.1 0.7x
DavCo Acquisition Holding Inc. Restaurants.
- --------------------------------------------------------------------------------------------------------------------
International Dairy Queen (7) Develops, licenses and services a 10/21/97 Stock $536.6 $ 421.1
chain of over 6,000 quick-service 1/8/98 Friendly $582.2 1.3x
Berkshire Hathaway, Inc. restaurants
- --------------------------------------------------------------------------------------------------------------------
Perkins Family Restaurants, L.P. Owns and)operates 135 restaurants 8/4/97 Cash $240.8 $ 262.8
(8)(9)(10) and 333 franchised restaurants 12/23/97 Friendly $186.4 0.9x
The Restaurant Company in 32 states.
- --------------------------------------------------------------------------------------------------------------------
Krystal Company (11) Owns and operates over 250 9/2/97 Cash $137.6 $ 248.2
franchised quick-service restaurants 9/29/97 Friendly $108.4 0.6x
Port Royal Holdings, Inc. in 8 states
- --------------------------------------------------------------------------------------------------------------------
Family Restaurants, Inc. (12)(13) Coco's operates 170 bakery 3/4/96 Cash $306.5 $ 501.2
(Coco's and Carrows) restaurants and Carrows 5/23/96 Friendly $135.0 0.6x
Flagstar Companies, Inc. operates 157 family restaurants
primarily in California.
- --------------------------------------------------------------------------------------------------------------------
Table continued
<S> <C> <C> <C> <C> <C>
Target Revenue EBIT EBITDA Net Income TBV
Acquiror EV/REV. EV/EBIT EV/EBITDA EPP/Net Inc. EPP/TBV
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Spaghetti Warehouse $ 66.0 $ 2.3 $ 6.1 $ 1.2 $129.6
0.8x 22.5x 8.3x 38.7x 0.4x
Consolidated Restaurant Cos
- ----------------------------------------------------------------------------------------------
Au Bon Pain Co Inc. (2) $ 190.7 NA NA NA NA
0.4x NA NA NA NA
Bruckmann Rosser Sherrill & Co.
- ------------------------------------------------------------------------------------------------
Pollo Tropical Inc $ 67.7 $ 9.8 $12.2 $ 5.9 $ 31.1
1.4x 9.7x 7.8x 16.0x 3.1x
Carrols Corp
- ------------------------------------------------------------------------------------------------
Bertucci's (3) (4) $ 140.3 $ 6.2 $14.9 $ 3.3 $ 72.3
0.7X 16.4x 6.8x 28.0x 1.3x
NE Restaurant Co.
- ------------------------------------------------------------------------------------------------
DavCo Restaurants (5) (6) $ 299.1 $15.1 $24.0 $ 6.3 $ 24.6
0.7x 13.4x 8.4x 23.8x 6.1x
DavCo Acquisition Holding Inc.
- ------------------------------------------------------------------------------------------------
International Dairy Queen (7) $ 421.1 $59.7 $66.2 $38.1 $ 97.9
1.3x 9.0x 8.1x 15.3x 5.9x
Berkshire Hathaway, Inc.
- ------------------------------------------------------------------------------------------------
Perkins Family Restaurants, L.P. $ 262.8 $19.2 $35.1 $ 9.1 NM
(8)(9)(10) 0.9x 12.5x 6.9x 20.5x NM
The Restaurant Company
- ------------------------------------------------------------------------------------------------
Krystal Company (11) $ 248.2 9.3 $20.4 $ 3.4 $ 45.6
0.6x 14.8x 6.8x NM 2.4x
Port Royal Holdings, Inc.
- ------------------------------------------------------------------------------------------------
Family Restaurants, Inc. (12)(13) $501.2 $33.2 NA $ 10.0 $132.2
(Coco's and Carrows) 0.6x 9.2x NA 12.5x 0.9x
Flagstar Companies, Inc.
- ------------------------------------------------------------------------------------------------
Summary Statistics (excludes pending transactions)
Legend High 1.4x 16.4x 8.4x 28.0x 6.1x
EV = Enterprise Value Low 0.6x 9.0x 6.8x 12.5x 0.9x
EPP = Equity Purchase Price Mean 0.9x 12.1x 7.5x 19.3x 3.3x
LTM = Latest Twelve Months Median 0.7x 12.5x 7.3x 18.2x 2.7x
TBV = Tangible Book Value
Sbarro's Implied Multiple at Offer Price
1.3x 8.3x 5.9x 15.7x 2.5x
54
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
Footnotes:
- ------------------------------------
(1) Financial data excludes the results of discontinued operations,
extraordinary gains, one-time charges and pending transactions. Unless
otherwise noted, options are assumed to be cashed out based on the
treasury stock method.
(2) The management discussions in the relevant 10-K and 10-Qs were the
source of the revenue for the Au Bon Pain business unit.
(3) Outstanding shares as of the Form S-4 dated 11/5/98.
(4) Financial data as of LTM ended 4/18/98.
(5) Rule 13e-3 transaction. Buying group owned 48% of outstanding common stock.
(6) Financial data as of fiscal year ended 9/27/97.
(7) Depreciation and amortization not disclosed in Form 10-Q. Depreciation and
amortization is from latest Form 10-K.
(8) Company is a "pass through" entity. Tangible book value (TBV) has been
excluded from summary statistics.
(9) Net income is calculated based on an assumed 40% tax rate.
(10) Rule 13e-3 transaction.
(11) Company filed for bankruptcy in 1995, filed a plan of reorganization in
Feb. 1997, and was acquired in September. Therefore, the net income
multiple has been excluded from the summary statistics.
(12) Family Restaurants was a private company at the time of the transaction.
(13) Assumption of debt includes issuance of $150MM of senior notes to
refinance target's outstanding balance on revolver and the assumption of
capital lease obligations.
</TABLE>
55
<PAGE>
PROJECT OREGANO
----------------------------
H. COMPARABLE COMPANIES
VALUATION UPDATE
---------------------------
<PAGE>
PROJECT OREGANO
VALUATION SUMMARY
<TABLE>
<CAPTION>
Comparable Companies - Valuation Update
At 4/15/98
------------------------------------------------------------------------
Company Name Symbol Stock Price LTM EPS/ PE FTM EPS/PE (1) 1998 EPS/PE 1999 EPS/PE
- -------------------------------- ---------- ----------- -------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sbarro, Inc. SBA $29.50 $1.86 $2.08 $1.86 $1.87
15.9x 14.2x 15.9x 15.7x
Comparable Pizza and Value
Priced Italian Food
Companies
CEC Entertainment, Inc. CEC $33.56 $1.34 $1.66 $1.66 $1.98
25.0x 20.2x 20.2x 17.0x
Carden Restaurants, Inc. DRI $17.69 $0.53 $0.78 $0.74 $0.94
33.4x 22.7x 23.9x 18.8x
NPC International, Inc. NPCI $13.00 $0.72 $0.94 $0.95 $1.18
18.1x 13.8x 13.7x 11.0x
Pizza Inn, Inc. PZZI $5.50 $0.34 $0.42 $0.42 NA
16.2x 13.1x 13.1x NA
Uno Restaurant Corporation UNO $7.50 $0.42 NA NA NA
17.9x NA NA NA
------------------------------------------------------------------------ -
Excludes Mean 22.1x 17.5x 17.7x 15.6x
Sbarro Median 18.1x 17.0x 17.0x 17.0x
------------------------------------------------------------------------ -
Comparable Fast Food Companies
Foodmaker, Inc. FM $20.25 $0.95 $1.16 $1.17 $1.40
21.3x 17.5x 17.3x 14.5x
Tricon Global Restaurants, Inc. YUM $31.69 ($0.04) $1.86 $1.88 $2.12
NM 17.0x 16.9x 14.9x
Sonic Corp. SONC $22.50 $0.99 $1.19 $1.15 NA
22.8x 18.9x 19.6x NA
Wendy's International, Inc. WEN $22.00 $1.24 $1.14 $1.17 $1.34
17.7x 19.3x 18.8x 16.4x
------------------------------------------------------------------------ -
Excludes Mean 20.6x 18.2x 18.1x 15.3x
Sbarro Median 21.3x 18.2x 18.1x 14.9x
------------------------------------------------------------------------ -
Table continued At 01/12/99
----------------------------------------------------------- -------------
Company Name Stock Price LTM EPS/PE FTM EPS/PE (1) 1998 EPS/PE 1999 EPS/PE
- -------------------------------- ------------ ------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Sbarro, Inc. . $25.38 $1.86 NA $1.86 $ 1.87
-14.0% 13.6x NA 13.7x 13.5x
Comparable Pizza and Value Price
Italian Food Companies
CEC Entertainment, Inc. $25.19 $1.77 $2.08 $1.80 $ 2.18
-25.0% 14.3x 12.1x 14.0x 11.6x
Carden Restaurants, Inc. $18.00 $0.82 $0.90 $0.82 $ 0.96
1.8% 22.1x 20.0x 22.0x 18.8x
NPC International, Inc. $12.25 $0.81 $0.87 $0.84 $ 1.01
-5.8% 15.1x 14.1x 14.6x 12.1x
Pizza Inn, Inc. $3.94 $0.33 NA $0.32 NA
-28.4% 12.0x NA 12.3x NA
Uno Restaurant Corporation $7.06 $0.55 NA NA NA
-5.8% 12.8x NA NA NA
-------------------------------------------------------------------
-12.6% 15.2x 15.4x 15.7x 14.1x
-5.8% 14.3x 14.1x 14.3x 12.1x
-------------------------------------------------------------------
Comparable Fast Food Companies
Foodmaker, Inc. $21.94 $0.99 $1.33 $1.21 $1.42
8.3% 22.1x 16.5x 18.1x 15.4x
Tricon Global Restaurants, Inc. $49.88 $0.87 $2.58 $2.54 $2.66
57.4% 57.1x 19.3x 19.6x 18.8x
Sonic Corp. $22.88 $1.13 $1.32 $1.18 $1.40
1.7% 20.2x 17.3x 19.4x 16.3x
Wendy's International, Inc. $22.00 $1.09 $1.22 $1.13 $1.24
0.0% 20.2x 18.0x 19.5x 17.7x
------------------------------------------------------------------------
16.8% 20.8x (2) 17.8x 19.2x 17.1x
5.0% 20.2x (2) 17.7x 19.4x 17.0x
------------------------------------------------------------------------
- ------------------------------------------
Note: Earnings estimates from First Call except Sbarro estimates which are from Company provided projections.
(1) Forward twelve months.
(2) Excludes Tricon Global Restaurants.
</TABLE>
57
<PAGE>
PROJECT OREGANO
--------------------
APPENDIX
--------------------
<PAGE>
PROJECT OREGANO
---------------------------------
A. COMPARABLE COMPANIES ANALYSIS
---------------------------------
<PAGE>
PROJECT OREGANO
--------------------------------------------------
1. PIZZA AND VALUE PRICED ITALIAN RESTAURANTS
---------------------------------------------------
<PAGE>
PROJECT OREGANO
APPENDIX
Company Descriptions
CEC Entertainment Inc.
The company is engaged in the family restaurant/entertainment center business
through its Chuck E. Cheese's Pizza restaurants which offer a variety of pizza,
salad bar, sandwiches and desserts and feature musical and comic entertainment
by life-size, computer-controlled robotic characters, family oriented games,
rides and arcade-style activities. As of October 19, 1998, the company operated
259 restaurants and franchisees operated 61 restaurants located in 44 states.
Darden Restaurants, Inc.
The company is the world's largest full-service restaurant organization. As of
August 30, 1998, the company operated 1,143 restaurants, including 642 domestic
Red Lobster restaurants, 459 domestic The Olive Garden restaurants and 3
domestic Bahama Breeze restaurants. The company also operated 39 restaurants in
Canada, including 34 Red Lobster and 5 The Olive Garden restaurants. All of its
restaurants are company owned and operated.
NPC International, Inc.
The company is the largest Pizza Hut franchisee in the world. As of September
29, 1998, the company owned and operated 524 Pizza Hut restaurants and 125
Pizza Hut delivery units.
Pizza Inn, Inc.
The company is the franchisor and food/supplies distributor to a system of
restaurants operating under the Pizza Inn name. As of September 9, 1998, the
Pizza Inn system consisted of 505 units, including 3 company operated units and
502 franchised units. Pizza Inn units are located in 22 states and 19 foreign
countries. Domestic units, which are comprised of 294 full-service units, 40
delivery/carry-out units and 98 express units, are located predominantly in the
southern half of the United States, with Texas, North Carolina and Arkansas
accounting for approximately 29%, 16% and 11%, respectively, of the total.
Uno Restaurant Corporation
As of October 12, 1998, the company owned and operated or franchised a total of
163 restaurants in 19 states, the District of Columbia and 3 foreign countries.
These restaurants include 97 owned and 66 franchised casual dining,
full-service restaurants under the Pizzeria Uno Chicago Bar & Grill name. The
company also operates a consumer foods division, which supplies American
Airlines, movie theaters, hotel restaurants and supermarkets in the Northeast
with both frozen and refrigerated Pizzeria Uno brand products, as well as
certain private label products.
61
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD COMPANIES
<TABLE>
<CAPTION>
Latest Twelve Month Results
---------------------------
(In millions, except
per share data)
Rest. Net Book
Sales Pft. EBITDA EBIT Inc. Assets Value Debt ROE
-------- ------ ------ ------ ------ -------- -------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEC Entertainment, Inc. $380.3 $139.6 $83.4 $56.5 $32.9 $244.4 $178.7 $27.0 19.2%
Darden Restaurants, Inc. $3,409.6 $686.6 $335.7 $205.1 $120.9 $1,879.4 $1,000.4 $320.9 11.7%
NPC International, Inc. $443.4 $78.8 $72.6 $45.3 $20.4 $314.4 $143.9 $90.2 16.3%
Pizza Inn, Inc. $68.2 $11.5 $7.7 $6.8 $4.4 $20.5 $6.5 $7.8 50.7%
Uno Restaurant $191.3 $38.5 $24.8 $12.5 $6.0 $143.2 $73.7 $43.4 8.3%
Corporation
Sbarro, Inc. (Trading $357.9 $96.4 $79.8 $56.8 $38.2 $283.1 $241.8 $0.0 16.8%
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
Latest Fiscal Year
Results
------------------
(In millions, except
per share data)
Sales EBIT Net
<S> <C> <C> <C>
CEC Entertainment, Inc. $349.2 $44.4 $25.1
Darden Restaurants, Inc. $3,287.0 $173.8 $101.7
NPC International, Inc. $455.3 $45.6 $19.5
Pizza Inn, Inc. $68.6 $7.8 $5.0
Uno Restaurant $191.3 $12.5 $6.0
Corporation
Sbarro, Inc. (Trading $345.1 $57.1 $38.1
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
(In millions, except Per Share Results (a) EPS Growth
per share data) --------------------- ----------
LTM 1998 1999 98-99 5-Yrs.
<S> <C> <C> <C> <C> <C>
CEC Entertainment, Inc. $1.77 $1.80 $2.18 21.1% 22.00%
Darden Restaurants, Inc. $0.82 $0.82 $0.96 17.1% 13.00%
NPC International, Inc. $0.81 $0.84 $1.01 20.2% 21.00%
Pizza Inn, Inc. $0.33 $0.32 NA NA 11.00%
Uno Restaurant $0.55 NA NA NA 15.00%
Corporation
Sbarro, Inc. (Trading $1.86 $1.86 $1.87 0.8% 5.04%
Multiples)
<C> <C>
High 21.1% 22.0%
Low 17.1% 11.0%
Mean 19.5% 16.4%
Median 20.2% 15.0%
Summary Statistics Exclude Sbarro, Inc.
</TABLE>
62
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD COMPANIES
<TABLE>
<CAPTION>
Latest Twelve Months
--------------------
(In millions, except per Margins Credit
share data) ------- ------
Rest. Crnt. Debt/ EBITDA/
Pft. S,G&A EBITDA EBIT Net Debt/Cap. Ratio EBITDA Int.
----- ----- ------ ---- ----- --------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CEC Entertainment, Inc. 36.7% 21.9% 21.9% 14.8% 8.6% 0.1x 0.7x 0.3x 42.2x
Darden Restaurants, Inc. 20.1% 14.1% 9.8% 6.0% 3.5% 0.2x 0.6x 1.0x 16.1x
NPC International, Inc. 17.8% 7.8% 16.4% 10.2% 4.6% 0.4x 0.3x 1.2x 5.0x
Pizza Inc, Inc. 16.9% 7.0% 11.3% 9.9% 6.5% 0.5x 1.8x 1.0x 16.3x
Uno Restaurant Corporation 20.1% 13.5% 13.0% 6.5% 3.1% 0.4x 0.3x 1.8x 7.0x
Sbarro, Inc. (Trading 26.9% 11.8% 22.3% 15.9% 10.7% 0.0x 4.5x NA NA
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
(In millions, except per Two Year Growth
share data)
Sales EBIT EBITDA Net Income
----- ----- ------ ----------
<S> <C> <C> <C> <C>
CEC Entertainment, Inc. 15.2% 301.2% 64.2% NA
Darden Restaurants, Inc. 1.5% -9.1% -6.2% -9.2%
NPC International, Inc. 18.4% 17.0% 18.8% 9.2%
Pizza Inc, Inc. -0.6% 6.8% 8.2% 13.6%
Uno Restaurant Corporation 5.4% 18.9% 6.4% 17.0%
Sbarro, Inc. (Trading 4.5% 9.5% 6.7% 10.1%
Multiples)
Summary Statistics Exclude Sbarro, Inc.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High 36.7% 21.9% 21.9% 14.8% 8.6% 0.5x 1.8x 1.8x 42.2x
Low 16.9% 7.0% 9.8% 6.0% 3.1% 0.1x 0.3x 0.3x 5.0x
Mean 22.3% 12.8% 14.5% 9.5% 5.3% 0.3x 0.7x 1.1x 17.3x
Median 20.1% 13.5% 13.0% 9.9% 4.6% 0.4x 0.6x 1.0x 16.1x
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
High 18.4% 301.2% 64.2% 17.0%
Low -0.6% -9.1% -6.2% -9.2%
Mean 8.0% 67.0% 18.3% 7.6%
Median 5.4% 17.0% 8.2% 11.4%
</TABLE>
63
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD COMPANIES
Latest Twelve Months
--------------------
<TABLE>
<CAPTION>
(Dollars in millions except per
unit date) Restaurants
-----------
Owned Franchised Total
----- ---------- -----
<S> <C> <C> <C>
CEC Entertainment, Inc. 259 61 320
Darden Restaurants, Inc. 1,143 - 1,143
NPC International, Inc. 649 - 649
Pizza Inn, Inc. 3 502 505
Uno Restaurant Corporation 97 66 163
Sbarro, Inc. (Trading Multiples) 625 256 881
Summary Statistics Exclude
Sbarro, Inc.
High 1,143 502 1,143
Low 3 61 163
Mean 430 210 556
Median 259 66 505
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
(Dollars in millions except per
unit date) Per Unit Data (1)
-------------------------------------------------------------------------
Revenue EBIT EBITDA EBITDA+Rent ROI
------- ---- ------ ----------- ---
<S> <C> <C> <C> <C> <C>
CEC Entertainment, Inc. $1,437,000 NA NA NA NA
Darden Restaurants, Inc. $2,883,000 $548,000 $657,000 $704,000 28.2%
NPC International, Inc. $630,000 NA NA NA NA
Pizza Inn, Inc. NA NA NA NA NA
Uno Restaurant Corporation $1,856,000 $229,000 $348,000 NA NA
Sbarro, Inc. (Trading Multiples) $548,922 $104,131 $138,328 $261,891 30.5%
Summary Statistics Exclude
Sbarro, Inc.
High $2,883,000 $548,000 $657,000 NA NA
Low $630,000 $229,000 $348,000 NA NA
Mean $1,701,500 $388,500 $502,500 NA NA
Median $1,646,500 $388,500 $502,500 NA NA
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
(Dollars in millions except per
unit date) New Store (1)
-----------------------------
Growth Tot.Cost/Unit
------ --------------
<S> <C> <C>
CEC Entertainment, Inc. 2.2% $1,500,000
Darden Restaurants, Inc. -0.7% $2,500,000
NPC International, Inc. -5.7% $725,000
Pizza Inn, Inc. 2.2% NA
Uno Restaurant Corporation -1.8% $2,350,000
Sbarro, Inc. (Trading Multiples) 4.3% $859,036
Summary Statistics Exclude
Sbarro, Inc.
High 2.2% $2,500,000
Low -5.7% $725,000
Mean -0.7% $1,768,750
Median -0.7% $1,925,000
</TABLE>
(1) Unit level data from company financials and Credit Suisse First Boston
industry research report dated 2/11/98.
64
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE PIZZA AND VALUE PRICED ITALIAN FOOD COMPANIES
Footnotes
* Indicates one or more parameters have been excluded from the summary
statistics.
(a) Earnings estimates from First Call except Sbarro estimates which are from
company projections.
(b) Gains and losses on property transactions in fiscal 1997, fiscal 1996 and
fiscal 1995 were added back net of taxes based on the effective tax rate of the
company.
(c) Charges for restructuring and asset impairment in fiscal 1996 and 1997 were
added back net of taxes based on the effective tax rate of the company.
(d) Per unit data and comparative store sales data is for Olive Garden
restaurants only.
(e) Charges for restructuring and asset impairment in fiscal 1998 and 1996 were
added back net of taxes based on the effective tax rate of the company.
(f) Excludes gain on recapitalization of Romacorp which was incurred during
second quarter of fiscal 1999. Romacorp restaurants excluded from unit data.
(g) Provision for bad debt in fiscal 1998 and fiscal 1997 was added back net of
taxes based on the effective tax rate of the company.
(h) Restaurant count as of the latest fiscal year ended 6/28/98.
(i) Special charges in fiscal 1997 and fiscal 1996 were added back net of taxes
based on the effective tax rate of the company.
(j) Provisions for unit closings in fiscal 1997 and fiscal 1996 were added back
net of taxes based on the effective tax rate of the company.
(k) Terminated transaction and litigation settlement charges incurred during the
forty-weeks ended 10/4/98 were added back net of taxes based on the effective
tax rate of the company.
65
<PAGE>
PROJECT OREGANO
APPENDIX
CEC ENTERTAINMENT INC. (1)
Daily Prices: July 13, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of CEC Entertainment Inc. from
July 13, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting the trading volume of shares of CEC Entertainment Inc.
from July 13, 1998 to January 11, 1999.
(1) Data prior to 7/9/98 is unavailable fromIDD Information Services/Tradeline
as a result of the company's name change to CEC Entertainment Inc.
Source: IDD Information Services/Tradeline
66
<PAGE>
PROJECT OREGANO
APPENDIX
DARDEN RESTAURANTS INC
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of Darden Restaurants, Inc.
from January 12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of Darden Restaurants, Inc.
from January 12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
67
<PAGE>
PROJECT OREGANO
APPENDIX
NPC INTERNATIONAL INC
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of NPC International, Inc.
from January 12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of NPC International, Inc.
from January 12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
68
<PAGE>
PROJECT OREGANO
APPENDIX
PIZZA INN INC
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of Pizza Inn Inc. from
January 12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of Pizza Inn Inc. from
January 12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
69
<PAGE>
PROJECT OREGANO
APPENDIX
UNO RESTAURANT CORP
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of UNO Restaurant Corp. from
January 12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of UNO Restaurant Corp. from
January 12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
70
<PAGE>
PROJECT OREGANO
--------------------------
2. FAST FOOD RESTAURANTS
--------------------------
<PAGE>
PROJECT OREGANO
APPENDIX
Company Descriptions
Foodmaker, Inc.
The company owns, operates and franchises Jack in the Box restaurants, a
fast-food chain located principally in the Western and Southwestern United
States. Jack in the Box is a leading regional competitor in the fast-food
segment of the restaurant industry. At September 28, 1997, there were 1,414
Jack in the Box restaurants, of which 1069 were operated by the company and 345
were franchised.
TRICON Global Restaurants, Inc.
The company is the world's largest quick service restaurant company based on
number of units, with 29,600 units in 95 countries and territories. The
company, owns, operates and franchises three of the most recognized restaurant
concepts, Pizza Hut, Taco Bell and KFC. As of September 5, 1998, the company's
system included 10,049 company operated/joint venture restaurants and 19,551
franchised/licensed restaurants.
Sonic Corp.
The company operates and franchises the largest chain of drive-in restaurants
in the United States. As of August 31, 1998, the company had 1,847 restaurants
in operation, consisting of 292 company-owned restaurants and 1,555 franchised
restaurants, principally in the south central and southeastern United States.
At a typical Sonic restaurant, a customer drives into one of 24 to 36 covered
drive-in spaces, orders through an intercom, and has the food delivered by a
carhop within an average of four minutes.
Wendy's International, Inc.
The company is primarily engaged in the business of operating, developing, and
franchising a system of distinctive quick-service restaurants. At December 28,
1997, there were 5,207 Wendy's restaurants in operation in the United States
and in 34 other countries and territories. Of these restaurants, 1,202 were
operated by the company and 4,005 were franchised. During the same period, the
company operated 124 Tim Hortons restaurants and its franchisees operated 1,454
in Canada and the United States.
72
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE FAST FOOD COMPANIES
<TABLE>
<CAPTION>
Latest Twelve Month Results
-------------------------------------------------------------------------------------------
(in millions, except Results
per share data)
-------------------------------------------------------------------------------------------
Sales Rest. EBITDA EBIT Net Assets Book Debt ROE
Pft. Inc. Value
----- ---- ------ ---- --- ----- ------ ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Foodmaker, Inc. $1,174.3 $179.4 $133.8 $91.7 $39.9 $743.6 $137.0 $321.7 35.5%
Tricon Global $8,732.0 $1,612.0 $1,158.0 $703.0 $136.2 $4,616.0 ($1,375.0) $3,834.01 12.4%
Restaurants, Inc.
Sonic Corp. $219.1 $83.3 $50.6 $38.4 $22.3 $233.2 $132.0 $69.9 17.9%
Wendy's International, $1,970.5 $523.7 $352.2 $246.9 $143.5 $1,794.7 $1,075.3 $451.7 12.6%
Inc.
Sbarro, Inc. (Trading $357.9 $96.4 $79.8 $56.8 $38.2 $283.1 $241.8 $0.0 16.8%
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
Latest Fiscal Year
Results
-----------------------
(in millions, except Results Per Share Results EPS Growth
per share data) (a)
------------------------- --------------------- ---------------
Sales EBIT Net LTM 1998 1999 98-99 5-Yrs.
----- ---- --- --- ---- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Foodmaker, Inc. $1,174.3 $91.7 $39.9 $0.99 $1.21 $1.42 17.4% 20.00%
Tricon Global $9,681.0 $662.0 $141.6 $0.87 $2.54 $2.66 4.7% 15.00%
Restaurants, Inc.
Sonic Corp. $219.1 $38.4 $22.3 $1.13 $1.18 $1.40 18.6% 17.00%
Wendy's International, $2,036.9 $295.3 $173.4 $1.09 $1.13 $1.24 9.7% 14.00%
Inc.
Sbarro, Inc. (Trading $345.1 $57.1 $38.1 $1.86 $1.86 $1.87 0.8% 3.66%
Multiples)
Summary Statistics Exclude Sbarro, Inc.
High 18.6% 20.0%
Low 4.7% 14.0%
Mean 12.6% 16.5%
Median 13.5% 16.0%
</TABLE>
73
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE FAST FOOD COMPANIES
<TABLE>
<CAPTION>
Latest Twelve Months
---------------------------------------------------------------------------------------------------
(in millions, except per Margins Credit
share data)
--------------------------------------------- --------------------------------------------------
Rest. S,G&A EBITDA EBIT Net Debt/Cap. Crnt. Debt/EBITDA EBITDA/Int
Pft. Ratio
----- ----- ------ ---- --- -------- ------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Foodmaker, Inc. 15.3% 7.8% 11.4% 7.8% 3.4% 0.7x 0.4x 2.4x 4.0x
Tricon Global Restaurants, 18.5% 10.4% 13.3% 8.1% 1.6% 1.6x 0.4x 3.3x 4.0x
Inc.
Sonic Corp. 38.0% 20.5% 23.1% 17.5% 10.2% 0.3x 0.7x 1.4x 18.4x
Wendy's International, Inc. 26.6% 14.0% 17.9% 12.5% 7.3% 0.3x 1.4x 1.3x 228.9x
Sbarro, Inc. (Trading 26.9% 11.8% 22.3% 15.9% 10.7% 0.0x 4.5x NA NA
Multiples)
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
(in millions, except per Two Year Growth
share data)
----------------------------------------------
Sales EBIT EBITDA Net Income
<S> <C> <C> <C> <C>
Foodmaker, Inc. 5.3% 13.3% 10.1% 41.1%
Tricon Global Restaurants, -2.8% 0.6% -4.9% 13.9%
Inc.
Sonic Corp. 20.4% 18.8% 20.9% 16.0%
Wendy's International, Inc. 8.1% 15.5% 15.1% 11.1%
Sbarro, Inc. (Trading 4.5% 9.5% 6.7% 10.1%
Multiples)
</TABLE>
Summary Statistics Exclude Sbarro, Inc.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High 38.0% 20.5% 23.1% 17.5% 10.2% 1.6x 1.4x 3.3x 228.9x
Low 15.3% 7.8% 11.4% 7.8% 1.6% 0.3x 0.4x 1.3x 4.0x
Mean 24.6 13.2% 16.4% 11.5% 5.6% 0.7x 0.7x 2.1x 63.9x
Median 22.5% 12.2% 15.6% 10.3% 5.3% 0.5x 0.5x 1.9x 11.2x
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
High 20.4% 18.8% 20.9% 16.0%
Low -2.8% 0.6% -4.9% 11.1%
Mean 7.8% 12.1% 10.3% 13.6%
Median 6.7% 14.4% 12.6% 13.9%
</TABLE>
74
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE FAST FOOD COMPANIES
<TABLE>
<CAPTION>
Latest Twelve Months
---------------------------------------------------------------------------------------------------
(Dollars in millions except per Restaurants Per Unit Data (1)
unit data)
---------------------------------- ---------------------------------------------------------------
Owned Franchised Total Revenue EBIT EBITDA EBITDA+Rent ROI
----- ---------- ----- ------- ---- ------ ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Foodmaker, Inc. 1,069 345 1,414 $1,114.228 NA NA NA NA
Tricon Global Restaurants, Inc. 10,049 19,551 29,600 $630,000 NA NA NA NA
Sonic Corp. 292 1,555 1,847 $707,000 NA NA NA NA
Wendy's International, Inc. 1,326 5,459 6,785 $1,132,000 $107,000 $172,000 $201,000 20.6%
Sbarro, Inc. (Trading Multiples) 625 256 881 $548,922 $104,131 $138,328 $261,891 30.5%
</TABLE>
Summary Statistics Exclude Sbarro, Inc.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High 10,049 19,551 29,600 $1,132,000) NA NA NA NA
Low 292 345 1,414 $630,000 NA NA NA NA
Mean 3,184 6,728 9,912 $895,807 NA NA NA NA
Median 1,198 3,507 4,316 $910,614 NA NA NA NA
</TABLE>
TABLE CONTINUED
<TABLE>
<CAPTION>
Latest Twelve Months
--------------------------
(Dollars in millions except per New Store (1)
unit data)
-------------------------
Growth Tot.Cost/Unit
------ -------------
<S> <C> <C>
Foodmaker, Inc. 6.9% $1,300,000
Tricon Global Restaurants, Inc. -0.4% $725,000
Sonic Corp. 9.9% NA
Wendy's International, Inc. 7.4% $975,000
Sbarro, Inc. (Trading Multiples) 4.3% $859,036
</TABLE>
Summary Statistics Exclude Sbarro, Inc.
<TABLE>
<CAPTION>
<S> <C> <C>
High 9.9% $1,300,000
Low -0.4% $0
Mean 6.0% $750,000
Median 7.1% $850,000
</TABLE>
(1) Unit level data from company financials and Credit Suisse First Boston
industry research report dated 2/11/98.
75
<PAGE>
PROJECT OREGANO
SELECTED COMPARABLE FAST FOOD COMPANIES
Footnotes
* Indicates one or more parameters have been excluded from the summary
statistics.
(a) Earnings estimates from First Call except Sbarro estimates which are from
company projections.
(b) Litigation settlement of $45.8 million in fiscal 1998 was removed net
of taxes.
(c) Unusual charges and gains/losses related to facility actions in fiscal 1997,
fiscal 1996, fiscal 1995 and the interim periods ended 9/5/98 and 9/6/97 were
added back net of taxes based on a 40% tax rate.
(d) Joint venture restaurants are classified as company owned restaurants.
Restaurant unit growth between 12/21/97-9/5/98. Per unit data is for Pizza Hut
Restaurants only.
(e) Provision for Impairment of long-lived assets and provision for litigation
settlement in fiscal 1998, fiscal 1997 and fiscal 1996 were added back net of
taxes based on the effective tax rate of the company.
(f) Non-recurring charges in fiscal 1997 and special charges related to Hortons
in fiscal 1995 were added back net of taxes based on the effective tax rate of
the company.
(g) Non recurring gains from sale of properties to franchisees in all periods
was removed net of taxes. Restaurant count as of fiscal 1997. Comparable store
growth is for domestic Wendy's restaurants only.
(h) Provisions for unit closings in fiscal 1997 and fiscal 1995 were added back
net of taxes based on the effective tax rate of the company.
(i) Terminated transaction and litigation settlement charges incurred during the
forty-weeks ended 10/4/98 were added back net of taxes based on the effective
tax rate of the company.
76
<PAGE>
PROJECT OREGANO
APPENDIX
FOODMAKER INC
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of Foodmaker Inc. from
January 12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of Foodmaker Inc. from January
12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
77
<PAGE>
PROJECT OREGANO
APPENDIX
TRICON GLOBAL RESTAURANTS
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of Tricon Global
Restaurants from January 12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of Tricon Global Restaurants
from January 12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
78
<PAGE>
PROJECT OREGANO
APPENDIX
SONIC CORP
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of Sonic Corp. from January
12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of Sonic Corp. from January
12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
79
<PAGE>
PROJECT OREGANO
APPENDIX
WENDY'S INTERNATIONAL
Daily Prices: January 12, 1998 to January 11, 1999
[GRAPHIC OMITTED]
Graph depicting the daily prices of shares of Wendy's International
Inc. from January 12, 1998 to January 11, 1999.
[GRAPHIC OMITTED]
Graph depicting trading volume of shares of Wendy's International Inc.
from January 12, 1998 to January 11, 1999.
Source: IDD Information Services/Tradeline
80
<PAGE>
PROJECT OREGANO
-----------------------------------
B. 13E-3 PREMIUMS ANALYSIS
-----------------------------------
<PAGE>
PROJECT OREGANO
APPENDIX
Selected Closed Rule 13e-3 Transactions
- Transaction Size: $100 - $500 Million
- Date Range: 1/1/92 - 12/2/98
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Transaction Stock Premiums
Value Offer Prior to Announcement
Date ($ in Share --------------------------
Announced Target Name Acquiror Name Millions) Price 1 Day 1 Week 4 Weeks
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
02/11/98 MTL Inc. Sombrero Acquisition Corp. $250.4 $40.00 37.9% 38.5% 56.1%
(1) 08/04/97 Perkins Family Restaurant LP Restaurant Co 76.3 14.00 28.7 26.5 31.8
08/29/97 Rexel Inc Rexel SA(Pinault-Printemps) 302.0 22.50 19.2 30.0 21.6
08/29/96 Amtrol Inc Cypress Group LLC 227.2 28.25 71.2 56.9 56.9
08/14/97 Tuesday Morning Corp Madison Dearborn Partners 298.6 25.00 22.7 25.8 11.1
06/02/97 Acordia Inc(Anthem Inc) Anthem Inc 193.2 40.00 12.7 11.5 26.0
01/28/97 Calgene Inc(Monsanto Co) Monsanto Co 242.6 8.00 62.0 60.0 60.0
(2) 01/21/97 Mafco Consolidated Grp(Mafco) Mafco Holdings Inc 116.8 33.50 23.5 23.5 27.6
01/13/97 Zurich Reinsurance Centre Zurich Versicherungs GmbH 319.0 39.50 17.1 18.5 11.6
07/22/96 Telebit Corp Cisco Systems Inc 196.3 13.35 21.4 22.8 6.0
06/03/96 Univar Corp Pakhoed Holding NV 331.8 19.45 57.2 54.1 58.8
05/24/97 SyStemix Inc(Novartis AG) Novartis AG 107.6 19.50 4.7 69.6 59.2
10/26/95 Maxtor Corp Hyundai Electronics Industries 228.2 6.70 42.9 64.9 44.9
07/14/95 REN Corp-USA(COBE Labs Inc) COBE Laboratories(Gambro AB) 182.1 20.00 27.0 20.3 26.0
04/05/95 Club Med Inc Club Mediterranee SA 153.4 32.00 41.4 39.9 44.6
02/27/95 CCP Insurance Inc Conseco Inc 273.7 23.25 20.0 30.1 23.2
12/28/94 Fleet Mortgage Group Inc Fleet Financial Group Inc,MA 188.1 20.00 19.4 18.5 18.5
11/01/94 Pacific Telecom(PacifiCorp) PacifiCorp 159.0 30.00 23.7 23.7 23.7
09/14/94 Petrolane Inc(QFB Partners) AmeriGas Inc(UGI Corp) 109.6 16.00 48.8 50.6 45.5
09/08/94 Contel Cellular Inc(Contel) GTE Corp 254.3 25.50 43.7 37.8 36.0
09/21/92 MidSouth Corp Kansas City Southern Inds Inc 197.3 20.50 86.4 88.5 86.4
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Statistics
High $331.8 86.4% 88.5% 86.4%
Low 76.3 4.7% 11.5% 6.0%
Mean 207.9 34.8% 38.7% 36.9%
Median 196.8 27.0% 30.1% 31.8%
Source: Securities Data Corporation
All companies are incorporated in states that have supermajority shareholder
provisions, unless noted.
(1) Transaction is below the range, but shares
similar characteristics with the proposed transaction.
(2) Acquiror purchased remaining 15% interest for $33.50 per share and paid a
cash dividend of $10.00 per share.
</TABLE>
82
<PAGE>
PROJECT OREGANO
------------------------------------
C. WEIGHTED AVERAGE COST OF CAPITAL
-------------------------------------
<PAGE>
PROJECT OREGANO
APPENDIX - WEIGHTED AVERAGE COST OF CAPITAL
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Market Value Market Value Market Value Debt/ Equity/ Debt/ Historic Unlevered
of Total Debt of Equity (1) of Total Capital Total Capital Total Capital Equity Beta (3) Beta (4)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CEC Entertainment $ 27.0 $ 463.7 $ 490.6 5.5% 94.5% 5.8% 1.07 1.05
Darden Restuarants, Inc. 320.9 2,532.8 2,853.7 11.2% 88.8% 12.7% 0.77 0.74
NPC International, Inc. 90.2 305.0 395.2 22.8% 77.2% 29.6% 0.82 0.75
Pizza Inn, Inc. 7.8 48.0 55.8 14.0% 86.0% 16.3% 0.45 0.43
Uno Restaurant Corporation 43.4 73.0 116.5 37.3% 62.7% 59.5% 0.61 0.53
Foodmaker, Inc. 321.7 866.1 1,187.8 27.1% 72.9% 37.1% 1.06 0.96
Tricon Global Restaurants, Inc. 3,834.0 7,656.0 11,490.0 33.4% 66.6% 50.1% 0.56 0.49
Sonic Corp. 69.9 443.5 513.4 13.6% 86.4% 15.8% 1.21 1.15
Wendy's International, Inc. 451.7 2,769.1 3,220.9 14.0% 86.0% 16.3% 0.71 0.67
- ---------------------------------------------------------------------------------------------------------------------------------
Mean $ 574.1 $ 1,684.1 $ 2,258.2 19.9% 80.1% 27.0% 0.81 0.75
Median $ 90.2 $ 463.7 $ 513.4 14.0% 86.0% 16.3% 0.77 0.74
- ---------------------------------------------------------------------------------------------------------------------------------
WACC Calculation Inputs:
% Equity (%E) 80.0% Selected Unlevered Beta (Mean Value) 0.75
% Debt (%D) 20.0% Risk-Free Rate (Rf) (5) 5.55%
Debt/Equity 25.0% Risk Premium (Rm-Rf) (6) 7.80%
Tax Rate 40.00%
Small Stock Risk Premium (SSR) (7) 1.70%
Beta (Levered)
-------------
BL=Bu*[1+((1-t)*D/E)] 0.86
-------------
Cost of Equity Cost of Debt
-------------
Ke=Rf+BL*(Rm-Rf)+SSR 13.99% Pre-Tax Cost of Debt (Kd) (8) 8.06%
-------------
- -------------------------------------------------------
WACC=[((Kd)*(%D))*(1-t)]+(Ke*(%E)) 12.16%
- ------------------------------------------------------
</TABLE>
(1) Market value of equity as of 1/12/99.
(2) Market value of equity plus market value of total debt.
(3) Source: Bloomberg adjusted beta calculation from five years of historical
(monthly) price information compared to the S&P 500, excluding Tricon which
is monthly since 9/30/97,
Darden which is monthly since 5/31/95, and Pizza Inn which is monthly since
8/31/93.
(4) Unlevered Beta=Beta/[1+((total debt)*(1-tax rate))/total equity value)]
(5) 20-year Treasury as of 1/12/99 as reported on Bloomberg.
(6) Source: Ibbotson Associates. Stock Bonds and Inflation, 1998 Yearbook.
Large company common stocks total returns minus long term (20 year)
government bond total returns.
(7) Source: Ibbotson Associates. Stock Bonds and Inflation, 1998 Yearbook.
Expected low capitalization equity size premium (capitalization between
$261 million and $945 million).
(8) Based on 300 basis points over the 6-month Libor Rate as of 1/12/99.
84
