<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SIZZLER INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[SIZZLER LOGO]
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders of
Sizzler International, Inc. (the "Company") to be held at the Radisson Hotel at
6161 West Centinela Avenue, Culver City, California, on Tuesday, August 18, 1998
at 3:30 p.m. The matters expected to be acted upon at the Annual Meeting are
described in detail in the attached Notice of Annual Meeting of Stockholders and
Proxy Statement. The Company's 1998 Annual Report, consisting this year of the
Company's fiscal 1998 Annual Report on Form 10-K, is enclosed with the Notice
and Proxy Statement.
Your vote is very important. Whether or not you expect to attend the Annual
Meeting, please complete, sign and date the enclosed Proxy card and return it as
promptly as possible.
Sincerely,
/s/ JAMES A. COLLINS
James A. Collins
Chairman of the Board and
Chief Executive Officer
Sizzler International, Inc.
6101 West Centinela Avenue, Culver City, CA 90230
<PAGE> 3
[SIZZLER LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 18, 1998
To the Stockholders of
Sizzler International, Inc.:
The Annual Meeting of Stockholders of Sizzler International, Inc., a
Delaware corporation (the "Company"), will be held at the Radisson Hotel at 6161
West Centinela Avenue, Culver City, California 90230, on Tuesday, August 18,
1998 at 3:30 p.m. for the following purposes:
1. To elect three directors to serve until the 2001 Annual Meeting of
Stockholders and until their successors are elected and qualified.
2. To approve an amendment to the Company's 1997 Employee Stock
Incentive Plan, under which the number of the Company's Common Stock
available for issuance will be increased from 1,000,000 to 2,800,000.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on June 30, 1998 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournment or postponement thereof.
In order to constitute a quorum for the conduct of business at the Annual
Meeting, holders of a majority of all outstanding shares of Common Stock must be
present in person or be represented by proxy. We hope that you will take this
opportunity to take an active part in the affairs of the Company by voting on
the business to come before the meeting, either by executing and returning the
enclosed proxy in the postage paid, return envelope provided or by casting your
vote in person at the meeting.
By Order of the Board of Directors,
/s/ RYAN S. TONDRO
Ryan S. Tondro
Secretary
Culver City, California
July 17, 1998
<PAGE> 4
SIZZLER INTERNATIONAL, INC.
6101 WEST CENTINELA AVENUE
CULVER CITY, CALIFORNIA 90230
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 18, 1998
GENERAL INFORMATION ON THE MEETING
This Proxy Statement is being mailed on July 17, 1998, in connection with
the solicitation of proxies by and on behalf of the Board of Directors of
Sizzler International, Inc., a Delaware corporation (the "Company"). The proxies
are intended to be used at the Annual Meeting of Stockholders of the Company
which is to be held on Tuesday, August 18, 1998, at 3:30 p.m. at the Radisson
Hotel at 6161 West Centinela Avenue, Culver City, California, and at any
adjournment or postponement thereof.
The entire cost of soliciting proxies will be borne by the Company,
including expenses in connection with preparing and mailing proxy solicitation
materials. The Company has engaged Georgeson & Company, Inc. to solicit proxies
from brokers, banks, other institutional holders, non-objecting beneficial
owners ("NOBO's") and individual holders of record. The Company has agreed to
pay the firm a fee of $10,000. The Company also has agreed to reimburse the firm
for mailing and certain other costs. The Company anticipates the total cost to
be paid under the agreement will be approximately $12,500.
In addition, proxies may be solicited by certain officers, directors and
regular employees of the Company, without extra compensation, by telephone,
telecopy or personal interview. Although there is no formal agreement to do so,
the Company will reimburse brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in sending proxies and proxy material
to the beneficial owners of the Company's Common Stock.
RECORD DATE AND VOTING
Only stockholders of record at the close of business on June 30, 1998 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment
thereof. As of June 30, 1998, 28,823,249 shares of Common Stock were
outstanding, all of which are entitled to be voted at the meeting. The presence,
either in person or by proxy, of persons entitled to vote a majority in voting
interest of the Company's outstanding Common Stock is necessary to constitute a
quorum for the transaction of business at the Annual Meeting. Each share is
entitled to one vote on any matter that may be presented for consideration,
except that as to the election of directors, shares may be voted cumulatively.
(See "Election of Directors.")
A stockholder giving a proxy may revoke it at any time before it is voted
by filing with the Secretary of the Company, at 6101 West Centinela Avenue,
Culver City, California 90230, written notice of revocation or by appearing at
the meeting and voting in person. A prior proxy is automatically revoked by a
stockholder giving a valid proxy bearing a later date. Shares represented by all
valid proxies will be voted in accordance with the instructions contained in the
proxies.
In the absence of instructions, shares represented by valid proxies will be
voted in accordance with the recommendations of the Board of Directors as shown
on the proxy. Proxies will be voted for management's nominees for election as
directors and for approval of Proposal 2, unless the stockholder otherwise
directs in his proxy.
1
<PAGE> 5
INFORMATION ABOUT THE COMPANY
The Company was incorporated on January 18, 1991 in connection with a
reorganization of its parent company Collins Foods International, Inc. ("CFI")
undertaken in contemplation of CFI's merger with PepsiCo, Inc. As part of the
reorganization, the Company's Common Stock was distributed to stockholders of
CFI. In addition, as part of the transaction, the Company acquired the remaining
outstanding shares of common stock of its 66%-owned subsidiary Sizzler
Restaurants International, Inc. ("SRI"), which became the Company's wholly-owned
subsidiary.
The Company (together with its subsidiaries) owns and operates, and
franchises to others, restaurants that do business under the Sizzler(R) service
mark in the United States and abroad. Sizzler(R) restaurants operate in the
mid-scale dining market and feature a selection of grilled steak, chicken and
seafood entrees, sandwiches and specialty platters as well as a fresh fruit and
salad bar in a family environment. The Company also operates Kentucky Fried
Chicken(R) ("KFC") restaurants in Queensland, Australia.
On June 2, 1996, the Company and four subsidiaries filed for protection
from creditors under Chapter 11 of the federal Bankruptcy Code. The cases
involving the Company and its debtor subsidiaries were jointly administered
under Case No. 96-16075AG before the U.S. Bankruptcy Court for the Central
District of California (the "Bankruptcy Proceedings"). The debtor subsidiaries
consisted of SRI, which owned and operated the Company's Sizzler restaurants in
the U.S., Buffalo Ranch Steakhouses, Inc., which owned and operated the
Company's Buffalo Ranch Steakhouse restaurants, and Tenly Enterprises, Inc. and
Collins Properties, Inc., each of which held certain U.S. operating and
non-operating real properties. The Company's international division businesses
and assets, which were owned and operated by non-debtor subsidiaries, were not
subject to the U.S. Chapter 11 cases.
By September 23, 1997, the Company and its debtor subsidiaries had
confirmed and commenced the effective date of their respective plans of
reorganization. The interests of the stockholders of the Company were not
impaired under these plans of reorganization. In accordance with its plan of
reorganization, SRI was reorganized into the Sizzler USA group of companies,
consisting of Sizzler USA, Inc. and its subsidiaries.
PRINCIPAL STOCKHOLDERS
As of June 30, 1998, according to filings with the Securities and Exchange
Commission and to the best knowledge of the Company, the following persons are
the beneficial owners of more than 5% of the outstanding voting shares of the
Common Stock of the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP(1) CLASS
---------------- -------------------- -------
<S> <C> <C>
James A. Collins 3,800,840(2) 13.2%
6101 West Centinela Avenue
Culver City, California 90230
The Capital Group Companies, Inc. 3,674,800(3) 12.7%
Capital Guardian Trust Co. ("CGCI")
333 South Hope Street Los Angeles, California 90071
Dimensional Fund Advisors Inc.("DFAI") 1,514,834(4) 5.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
- ---------------
(1) Possesses sole voting and investment power for all shares of Common Stock
beneficially owned unless otherwise indicated.
(2) Does not include 334,483 shares of Common Stock held by an independent
trustee for the benefit of Mr. Collins' adult children as to which Mr.
Collins disclaims beneficial ownership.
(3) CGCI and its affiliates possess sole investment power, but sole voting power
only for 1,919,100 shares of Common Stock. The Company has been advised that
neither CGCI nor any of its affiliates own any
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<PAGE> 6
shares of Common Stock for its own account. Rather, the Company has been
advised that the shares are held by investment management companies and
investment advisers, which manage accounts on behalf of others.
(4) DFAI possesses sole investment power, but sole voting power only for
1,069,834 shares of Common Stock. Persons who are officers of DFAI also
serve as officers of DFA Investment Group Inc., a registered open-end
investment company (the "DFAI Fund"), and the DFA Investment Trust Company,
a Delaware business trust (the "DFAI Trust"). In their capacities as
officers of the DFAI Fund and the DFAI Trust, these persons vote 220,800
additional shares owned by the Fund and 224,200 additional shares owned by
the Trust. The Company has been advised that the shares are held in
portfolios of DFAI Fund or in series of DFAI Trust investment vehicles for
qualified employee benefit plans, for all of which DFAI, a registered
investment advisor, serves as investment manager.
ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation, each share is entitled to
one vote on any matter that may be presented for consideration, except that as
to the election of directors, shares may be voted cumulatively. Cumulative
voting means that each share is entitled to a number of votes equal to the
number of directors to be elected. Such votes may be cast for one nominee or
distributed among two or more nominees. The proxy holders do not presently
intend to cumulate votes, but they may elect to do so in the event of a
contested election or any other presently unexpected circumstances. If any
stockholder gives notice at the meeting of his intention to cumulate votes, then
all stockholders will have the right to cumulate votes in the election of
directors. The persons receiving the greatest number of votes, up to the number
of directors then to be elected, shall be the persons elected as directors of
the Company.
Under the Company's Certificate of Incorporation, the Board of Directors is
divided into three classes, each containing three Directors with the term of
office of one of the classes expiring each year. Nominees for Class I Directors
are being offered for election at the 1998 Annual Meeting.
Unless authority is withheld by an indication thereon, it is intended that
the proxies will be voted for election to the Board of Directors of the nominees
named below, to serve until the Annual Meeting of Stockholders in the year
specified below and until their successors are elected and duly qualified. While
the Company has no reason to believe that any of the persons named will not be
available as a candidate, should such a situation arise, the proxies may be
voted for the election of other nominees as Directors in the
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<PAGE> 7
discretion of the persons acting pursuant to the proxies. Certain information
concerning the nominees and the incumbent directors whose terms continue after
the Annual Meeting is set forth below:
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AND AGE PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS EXPERIENCE
------------ --------------------------------------------------------------
<S> <C>
CLASS I: Term expires in 2001
James A. Collins (71)................ Chief Executive Officer of the Company since May 29, 1997.
Chairman of the Board of the Company and its predecessor CFI
since 1968. Chief Executive Officer of CFI (1968-1987). Chairman
of the Board, SRI (1982-1991).
Peter H. Dailey (68)................. Director of the Company since 1991. Chairman, Enniskerry
Financial, Ltd., a private investment company, and Chairman,
Supervisory Board of Directors of Memorex-Telex, Inc. Director,
Chicago Title and Trust Company and Jacobs Engineering Group,
Inc. Former Ambassador to Ireland and Special Envoy to NATO.
Charles F. Smith (65)................ Director of the Company since 1995. President of Charles F. Smith
& Co., Inc., an investment banking firm (1984 to present).
Director, FirstFed Financial Corp. and Fremont Funding Corp.
</TABLE>
INCUMBENT DIRECTORS WHOSE TERMS CONTINUE AFTER THE ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AND AGE PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS EXPERIENCE
------------ --------------------------------------------------------------
<S> <C>
CLASS II: Term expires in 1999
Phillip D. Matthews (60)............. Director of the Company since May 1997. Lead Director and
Chairman of the Executive Committee of Wolverine World Wide, Inc.
since 1996. Chairman of the Board of Wolverine World Wide, Inc.
(1993-1996). Chairman, Reliable Company (1993-1997). Director,
Bell Sports, Inc., H.F. Ahmanson & Co., and Wolverine World Wide,
Inc.
Robert A. Muh (60)................... Director of the Company since May 1997. Chairman of the Board of
Sutter Securities, Inc. (1992-1997). President, Financial
Services International (1987-1992; 1997 to present). Trustee,
Massachusetts Institute of Technology and San Francisco Ballet.
Director, MicroModule Systems, Inc.
Carol A. Scott, Ph.D. (48)........... Director of the Company since 1993. Professor of Marketing, UCLA
since 1989. Chairman of the Faculty, UCLA Anderson Graduate
School of Management (1990-1994). Director, AFEM Corporation.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME AND AGE PRESENT PRINCIPAL OCCUPATION AND FIVE YEAR BUSINESS EXPERIENCE
------------ --------------------------------------------------------------
<S> <C>
CLASS III: Term expires in 2000
Barry E. Krantz (54)................. Director of the Company since January 1997. Restaurant industry
consultant since 1995. President and Chief Operating Officer,
Family Restaurants Inc. (1994-1995). Chief Operating Officer,
Restaurant Enterprises Group (1993-1994). President, Family
Restaurant Division (1989-1994). Director, Fresh Choice, Inc. and
Tam Restaurants, Inc.
H. Wallace Merryman (70)............. Director of the Company and its predecessor CFI since 1971.
Chairman of the Board and Chief Executive Officer, Avco Financial
Services, Inc. (1975-1987).
Kevin W. Perkins (46)................ Executive Vice President of the Company and President and Chief
Executive Officer of International Operations of the Company
since May 29, 1997. Director of the Company (1994 to present).
President and Chief Executive Officer of the Company (1994-1997).
President of the Company's Sizzler Asia/Pacific Division
(1988-1994).
</TABLE>
Except as otherwise indicated, during the past five years none of the
directors has been employed by or has carried on his or her occupation in, any
corporation or organization which is a parent, subsidiary or other affiliate of
the Company. All of the foregoing directors, other than Messrs. Krantz, Matthews
and Muh, were directors or executive officers of the Company at the time of the
commencement of the Bankruptcy Proceedings.
THE BOARD OF DIRECTORS AND CERTAIN OF ITS COMMITTEES
The Board of Directors has an Audit Committee, a Compensation and Stock
Option Committee, a Nominating Committee and a Chairman's Committee.
The Board of Directors of the Company met ten times during fiscal 1998.
Each director attended 75% or more of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings held by
committees of the board on which he or she served.
Messrs. Merryman (Chairman) and Smith and Ms. Scott comprised the Audit
Committee, which met three times during fiscal 1998. The Audit Committee
recommends to the Board of Directors the appointment of the Company's
independent auditors, reviews the fee arrangements and scope of the annual
audit, reviews the activities and recommendations of the Company's internal
auditors and considers the comments of the independent auditors with respect to
internal accounting controls.
Messrs. Dailey (Chairman), Merryman and Matthews comprised the Compensation
and Stock Option Committee, which met three times during fiscal 1998. The
Compensation and Stock Option Committee approves officers' salaries, administers
executive compensation plans, reviews and approves the grant of options and
restricted stock and approves bonus schedules for Company employees.
Messrs. Smith (Chairman) and Muh and Ms. Scott comprised the Nominating
Committee which met once during fiscal 1998. The Nominating Committee has the
responsibility of nominating the officers of the Company, recommending
candidates for election to the Board of Directors at the Annual Meeting of
Stockholders and filling vacancies or newly created directorships. The
Nominating Committee will consider nominees recommended by holders of the
Company's Common Stock. Stockholders desiring to make recommendations should
submit them in writing to the Company at its principal executive offices, marked
to the attention of "Chairman, Nominating Committee."
Messrs. Collins, Matthews, Muh and Smith comprise the Chairman's Committee.
Formed in June 1997, the Chairman's Committee met eight times in fiscal 1998.
The Chairman's Committee operates as an
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<PAGE> 9
executive committee of the Board, and is responsible for strategic planning and
oversight, review of major transactions, and other matters.
In his capacity as the Chairman of the Board of Directors and CEO, during
fiscal 1998 Mr. Collins received a salary of $50,000. Each other Director who is
not an employee of the Company is paid a retainer fee of $20,000 per year and is
also paid a fee of $1,000 for attending each meeting of the Board of Directors
and $1,000 for attending committee meetings not held in conjunction with a Board
meeting. Barry E. Krantz, a Director, received compensation in fiscal 1998 for
consulting services provided to the Company. See "Transactions with Directors
and Management" below.
The Company has a 1997 Non-Employee Directors Stock Incentive Plan (the
"Directors' Plan"). Under the Directors' Plan, each director who is not an
employee or officer of the Company or any of its parent or subsidiary
corporations (a "Non-Employee Director") is entitled to receive options to
purchase shares of the Company's Common Stock ("Options"). Options consist of
Initial Options, Designated Committee Options, and Deferred Fees Options.
Initial Options. On the date that any person becomes a Non-Employee
Director of the Company, such person is automatically granted an Option to
purchase 1,000 shares of Common Stock (an "Initial Option"). The exercise price
per share of an Initial Option is the fair market value per share of the Common
Stock on the date of grant. Initial Options generally may not be exercised
before the first anniversary of the date of grant. In addition, until the second
anniversary of the date of grant, the holder of an Initial Option generally may
not exercise more than 50% of the aggregate number of shares subject to such
option.
Designated Committee Options. Each Non-Employee Director that is a member
of the Chairman's Committee is entitled to receive Designated Committee Options.
In lieu of attendance or other cash fees from the Company for participation on
such committee, each Chairman's Committee member is automatically granted, on
the date of each meeting of the Chairman's Committee attended by such Director,
a Designated Committee Option to purchase 1,000 shares of Common Stock. The
exercise price per share of a Designated Committee Option is the fair market
value per share of the Common Stock on the date of grant, less $2.00. Designated
Committee Options are exercisable immediately upon the date of grant. As of June
30, 1998, the members of the Chairman's Committee entitled to Designated
Committee Options were Phillip D. Matthews, Robert A. Muh and Charles F. Smith.
Deferred Fees Options. Each Non-Employee Director is entitled to elect to
receive, in lieu of all or a specified portion of annual retainer fees for each
of the remaining calendar years of his or her term (a "Plan Year"), an annual
Deferred Fees Option. The number of shares of Common Stock subject to the
Deferred Fees Option for each Plan Year is equal to the nearest number of whole
shares determined in accordance with the following formula:
Annual Retainer or percentage thereof
------------------------------------- = Number of Shares
50% of Fair Market Value
"Annual Retainer," as defined in the Directors' Plan, means the amount of
fixed fees to which the Non-Employee Director is entitled for serving as a
director of the Company in the relevant Plan Year. As defined, the Annual
Retainer assumes no change in the director's compensation from that in effect as
of the date in January on which the Option is granted. Annual Retainer does not
include fees for attendance at meetings of the Board of Directors or any
committee of the Board of Directors or for any other services to be provided to
the Company. The fair market value of the Common Stock is determined as of the
date of grant.
The exercise price per share of a Deferred Fees Option is 50% of the fair
market value per share of the Common Stock on the date of grant. In this manner,
upon grant of a Deferred Fees Option the aggregate spread between the Option's
exercise price and the value of the underlying Common Stock is equal to the
amount of Annual Retainer fees the Non-Employee Director has elected to forego.
Deferred Fees Options generally may not be exercised before the expiration of
six months after the date of grant. In addition, until the end of the first
anniversary of the date of grant, the holder of a Deferred Fees Option generally
may not exercise more than 50% of the aggregate number of shares subject to such
option.
6
<PAGE> 10
The Directors' Plan provides for the issuance of up to 400,000 shares of
the Company's Common Stock pursuant to exercise of options granted under the
plan. As of June 30, 1998, options granted under the plan to purchase 170,050
shares were outstanding and no options granted under the plan had been
exercised.
TRANSACTIONS WITH DIRECTORS AND MANAGEMENT
The Company has entered into employment agreements with certain executive
officers. (See "Executive Compensation -- Employment Contracts.")
A subsidiary of the Company is party to a consulting agreement with Barry
E. Krantz, a director of the Company. Under the agreement, Mr. Krantz provides
marketing consulting services at an hourly rate. The agreement is terminable by
the Company's subsidiary at any time and for any reason upon two weeks' notice.
During the 1998 fiscal year, the Company paid Mr. Krantz an aggregate of
$244,277 of fees and expenses under the consulting agreement.
Following the sale of its headquarters building in fiscal 1998, the Company
relocated its principal executive offices from Jefferson Boulevard in Los
Angeles to Centinela Avenue in Culver City, California. The Company's new
principal executive offices are located in an office building owned by Pacifica
Plaza Office Building, a limited partnership ("Pacifica"). James A. Collins, his
spouse and his brother-in-law are among the partners of Pacifica, which was
formed in 1979. Mr. Collins is the Company's Chairman of the Board and interim
Chief Executive Officer. Mr. Collins, his spouse and his brother-in-law,
directly or indirectly, own a majority in interest of Pacifica.
The Company occupies its approximately 35,975 square feet of headquarters
office premises from Pacifica pursuant to a four-year lease. Under the lease,
the Company is responsible for rent payments of $34,176 a month during the
period from November 1997 through December 1999 (except for an initial four
months of abated rent), and $42,450 a month thereafter through October 31, 2001.
Base rent under the lease was predicated upon the terms of a sublease negotiated
between the Company and Digital Equipment Corporation ("DEC"), a tenant of
Pacific. In lieu of a sublease between the Company and DEC, the Company elected
to enter into a direct lease with Pacifica for the headquarters office premises
upon the condition that DEC be responsible for the difference between rent under
its former lease with Pacifica (plus utilities) and the Company's base rent
under the lease. The Company believes these terms were competitive at the time
it entered into the lease.
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<PAGE> 11
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the equity
securities of the Company beneficially owned by each director of the Company,
and by all directors and officers of the Company as a group, on June 30, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP PERCENT OF
NAME OF COMMON STOCK(1)(3) CLASS
---- ----------------------- ----------
<S> <C> <C>
DIRECTORS
James A. Collins............................................ 3,800,840(2) 13.2%
Peter H. Dailey............................................. 10,000 *
Barry E. Krantz............................................. 1,000 *
Phillip D. Matthews......................................... 45,000 *
H. Wallace Merryman......................................... 36,809 *
Robert A. Muh............................................... 20,000 *
Kevin W. Perkins............................................ 187,740 *
Carol A. Scott.............................................. 9,000 *
Charles F. Smith............................................ 33,000 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Christopher R. Thomas (age 49).............................. 160,032 *
Ryan S. Tondro (age 50)..................................... 115,000 *
Michael J. Raedeke (age 40)................................. 28,000 *
All Directors and Executive Officers as a group (13
persons).................................................. 4,452,221 15.4%
</TABLE>
- ---------------
* Less than one percent (1%) of class.
(1) Possesses sole voting and investment power.
(2) Does not include 334,483 shares of common stock held by an independent
trustee for the benefit of Mr. Collins' adult children as to which Mr.
Collins disclaims beneficial ownership.
(3) Includes shares issuable pursuant to options exercisable within 60 days of
June 30, 1998 in the following amounts: Mr. Krantz -- 1,000 shares, Ms.
Scott -- 8,000, Messrs. Dailey, Matthews, Merryman, and Muh -- 10,000 shares
each, Mr. Smith -- 13,000 shares, and all directors and executive officers
as a group -- 62,000 shares.
The following Report of the Compensation and Stock Option Committee and the
Performance Graph included in this proxy statement shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this Report or the Performance Graph by reference therein, and
shall not be deemed soliciting material or otherwise deemed filed under either
of such Acts.
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<PAGE> 12
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
It is the duty of the Compensation and Stock Option Committee to administer
the Company's various compensation and incentive plans, including its 1997
Employee Stock Incentive Plan, the annual Management Incentive Plan and the
Executive Supplemental Benefit Plan. In addition, we review compensation levels
in light of the performance of members of senior management, including the five
most highly compensated executive officers. The Committee reviews all aspects of
compensation for senior management with the Board of Directors.
The Committee is composed entirely of independent outside directors. No
member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries. During fiscal 1998, the Compensation
Committee consisted of Peter H. Dailey (Chairman), Phillip D. Matthews and H.
Wallace Merryman.
The Company routinely has retained the services of outside compensation
consulting firms to assist the Committee in connection with the performance of
its various duties. These firms provide advice to the Committee with respect to
the reasonableness of compensation paid to senior management of the Company.
Typically, this advice takes into account how the Company's compensation
programs compare to those of competing companies as well as the Company's
performance. Members of the Committee also review compensation surveys and
analysis provided by such firms, including material prepared by the Company's
human resources personnel.
The compensation policy of the Company, which is endorsed by the Committee,
is that a substantial portion of the annual compensation of each officer relate
to and must be contingent upon the performance of the Company or a business
unit, the enhancement of shareholder value, and/or the individual contributions
of each officer. As a result, much of an executive officer's potential
compensation is "at risk" under an annual bonus compensation program. In
addition, the Committee seeks to offer compensation opportunities comparable to
those provided by other similar companies in the restaurant industry. The
Committee strives to create a direct link between the long-term interests of
executives and shareholders. Through the use of stock-based incentives, the
Committee focuses the attention of its executives on managing the Company from
the perspective of an owner with an equity stake.
As of May 29, 1997, Chairman of the Board James A. Collins assumed the
additional role of Chief Executive Officer of the Company. Kevin W. Perkins,
previously the Company's Chief Executive Officer, relocated to Brisbane,
Australia to act as Chief Executive Officer of the Company's International
division. Christopher R. Thomas, in addition to acting as the Executive Vice
President of the Company, assumed the responsibilities of Chief Executive
Officer of the Company's Sizzler USA group.
At Mr. Collins' request, Mr. Collins received no compensation increase in
fiscal 1998 after becoming Chief Executive Officer. Mr. Collins' fiscal 1998
compensation included salary and retirement benefits under the Company's
Executive Supplemental Retirement Plan.
Mr. Perkins' salary in fiscal 1998 remained $300,000, representing no
increase over the previous year. However, Mr. Perkins' fiscal 1998 incentive
program was designed to incentivize him to attain maximum profitability for the
International division. Under Mr. Perkins' incentive program, Mr. Perkins was
entitled to a one-time cash bonus, depending on attainment of specified levels
of earnings before interest, taxes, depreciation and amortization ("EBITDA") in
both the International division and the Sizzler Australia division. In the
Committee's view, the incentive program was consistent with the Company's key
1998 objective of maintaining and increasing earnings from its international
operations. Mr. Perkins did not earn a cash bonus under his fiscal 1998
incentive program. As a further inducement to Mr. Perkins to undertake
responsibility for the International division, the Company agreed to adjust Mr.
Perkins' severance benefits. As adjusted, Mr. Perkins became entitled to
$200,000 if his employment terminated on or before April 30, 1998, and to
$100,000 if on or before April 30, 1999, and to $300,000 if the termination is
the result of a sale of the
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<PAGE> 13
International division. Mr. Perkins also was entitled to receive perquisites and
other benefits on the same basis as other executive officers of the Company.
In fiscal 1998, the Company adopted a 1997 Employee Stock Incentive Plan,
authorizing the issuance of up to 1,000,000 shares of its Common Stock to
employees of the Company. As of the end of fiscal 1998, no grants or awards
under this plan had been made. Following the end of fiscal 1998, the Committee
approved the award of options to purchase an aggregate of 999,000 shares of the
Company's Common Stock to employees and officers of the Company for the fiscal
years 1999 and 2000.
The foregoing actions by the Committee were taken by unanimous vote, and
subsequently were approved by the full Board of Directors.
Compensation and Stock Option
Committee
Peter H. Dailey, Chairman
Phillip D. Matthews
H. Wallace Merryman
July 17, 1998
10
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- --------------------
OTHER RESTRICTED
NAME AND ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL POSITION COMPENSATION AWARDS OPTIONS COMPENSATION
AT APRIL 30, 1998 YEAR SALARY($) BONUS($)(1) ($)(2) ($)(4) (#) ($)
------------------ ---- --------- ----------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James A. Collins............... 1998 50,000 -- 24,236 -- -- 264,087(6)
Chairman and Chief 1997.. 150,000 -- 22,400 -- -- 264,087(6)
Executive Officer(7) 1996.. 60,000 -- 21,400 -- -- 264,087(6)
Kevin W. Perkins............... 1998 300,000 375,000 (3) -- -- --
Chief Executive Officer/ 1997 300,000 -- (3) 785,400 -- 58,395(5)
International Division 1996 300,000 -- (3) -- 34,888 12,697
and Director(8)
Christopher R. Thomas.......... 1998 300,000 561,700 (3) -- -- --
Executive Vice President 1997 235,000 -- (3) 561,000 -- --
Finance and Chief Executive 1996 225,000 -- (3) -- 24,444 2,546
Officer/Sizzler USA
Ryan S. Tondro................. 1998 160,000 175,390 (3) -- -- --
Vice President, Chief 1997 140,000 -- (3) 280,500 -- --
Financial Officer 1996 119,000 -- (3) -- 4,444 --
and Secretary
Michael J. Raedeke............. 1998 122,500 99,825 (3) -- -- --
Vice President, 1997 115,000 -- (3) 157,080 -- --
Taxation & Internal Audit 1996 105,000 -- (3) -- 4,444 --
</TABLE>
- ---------------
(1) Includes both (a) a one-time cash bonus established in fiscal 1997 but not
earned or paid until confirmation of the Company's bankruptcy plan of
reorganization in fiscal 1998 and (b) a standard cash performance bonus for
fiscal 1998.
(2) Other Annual Compensation represents: a) automobile allowance and cost
reimbursement, b) reimbursements for legal and tax assistance, c) premiums
on group life insurance, and d) executive medical plan costs.
(3) Does not exceed the lesser of $50,000 or 10% of total salary and bonus.
(4) Restricted stock may be sold to eligible employees at the discretion of the
Board of Directors for an amount that is not less than the par value of such
shares. Dividends, when paid, are paid on all restricted stock. All
restricted shares are subject to limitations on sale or other disposition
thereof, which terminate upon the satisfaction of certain criteria
established by the Board of Directors at the time of the sale. As of the end
of fiscal 1998, the aggregate restricted stock holdings remaining, valued as
of the date of the grant, are as follows: Mr. Perkins, 88,000 shares valued
at $543,125; Mr. Thomas, 120,000 shares valued at $669,500; Mr. Tondro,
50,000 shares valued at $187,500; and Mr. Raedeke, 28,000 shares valued at
$105,000.
(5) Mr. Perkins' 1997 All Other Compensation represents loan forgiveness.
(6) Represents amounts paid as retirement benefits under the Company's Executive
Supplemental Benefit Plan.
(7) Mr. Collins became Chief Executive Officer of the Company on May 29, 1997.
(8) Mr. Perkins was the Chief Executive Officer of the Company during fiscal
year 1998 only up to May 29, 1997.
EXECUTIVE SUPPLEMENTAL BENEFIT PLAN
During fiscal 1998, the Company maintained an Executive Supplemental
Benefit Plan. Under the Supplemental Benefit Plan, the normal retirement date is
the later of the participant's sixty-fifth birthday or the date the participant
achieves 10 years of service under the Supplemental Benefit Plan. Participants
who retire at the normal retirement date are entitled to receive 65% of the
average for their three highest years of
11
<PAGE> 15
earnings, comprised of base salary and standard bonus, but excluding any other
cash bonus or form of remuneration, during the last five years of employment,
reduced by 50% of the participant's primary social security benefit and by the
annuitized value of the participant's account balance under the profit sharing
portion of the Company's Employee Savings Plan. Such benefits are payable as a
life and survivor annuity. Participants who retire between the ages of 55 and 65
and who have completed 15 years of service under the Supplemental Benefit Plan
are entitled to receive reduced benefits based on age and the number of years of
service completed.
EMPLOYMENT CONTRACTS
The Company has three-year employment agreements with four executive
officers (Messrs. Perkins, Thomas, Raedeke, and Tondro). Each of these
agreements sets forth the officer's position and responsibilities with the
Company and provides for the officer's annual base salary, participation in the
Management Incentive Plan or other bonus program, and other benefits generally
available to executive officers of the Company. The agreements expire in May
1999.
Under these employment agreements, the Company may terminate the officer's
employment for cause. "Cause" generally is defined to include the willful and
continued failure by the officer to substantially perform his duties after
demand by the Company, or the willful engaging by the officer in misconduct
which is materially injurious to the Company. Under these agreements, the
officer may terminate his employment for "good reason." "Good reason" generally
is defined as a failure by the Board of Directors to re-elect the officer to the
position set forth in the agreement following removal from such position, or to
vest the officer with the powers and authority of the position set forth in the
agreement, or other breach by the Company.
In the event an employment agreement is terminated by the Company other
than for cause or by reason of the officer's disability, or by the officer for
good reason, the officer is entitled under his employment agreement to receive
the sum of (a) his salary through the date of termination and (b) as severance
an amount equal to one year of the officer's salary at the annual rate in effect
as of the date of termination. The severance provisions of Mr. Perkins'
employment agreement were amended in fiscal 1998. See "Report of the
Compensation and Stock Option Committee."
12
<PAGE> 16
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return for Sizzler stock
with the comparable cumulative returns of (i) a broad market index: The Dow
Jones Equity Market Index and (ii) a published industry or line of business
index: The Dow Jones Entertainment and Leisure (Restaurants) index. The graph
covers the time period from the end of fiscal 1993 until the end of fiscal 1998.
It assumes $100 invested on April 30, 1993 in Sizzler stock and $100 invested at
that time in each of the indexes. The comparison assumes that all dividends are
reinvested.
STOCK PERFORMANCE GRAPH
<TABLE>
<CAPTION>
DOW JONES
ENTERTAINMENT &
MEASUREMENT PERIOD DOW JONES EQUITY LEISURE
(FISCAL YEAR COVERED) SIZZLER MARKET (RESTAURANT)
<S> <C> <C> <C>
4/30/93 100 100 100
4/30/94 92 105 120
4/30/95 77 123 132
4/30/96 53 160 172
4/30/97 35 199 185
4/30/98 40 283 213
</TABLE>
PROPOSAL TWO
AMENDMENT TO THE 1997 EMPLOYEE STOCK INCENTIVE PLAN
TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER
GENERAL
The 1997 Employee Stock Incentive Plan (the "Plan") was adopted by the
Board of Directors on October 16, 1997 and approved by the stockholders on
November 18, 1997. The Plan has not previously been amended.
Initially, a total of 1,000,000 shares of Common Stock were reserved for
issuance under the Plan. As of June 30, 1998, options to purchase 999,000 shares
had been granted, leaving only 1,000 of the 1,000,000 shares reserved for
issuance under the Plan (without giving effect to this amendment) available for
future grants.
13
<PAGE> 17
On June 17, 1998, the Board unanimously authorized an amendment (the
"Amendment") to the Employee Plan. Subject to stockholder approval, the
Amendment provides for an increase in the number of shares of Common Stock
reserved for issuance under the Plan from 1,000,000 to 2,800,000. It is the view
of the Board that an increase is advisable in order to enable the Company to
continue to attract and retain highly qualified employees, and that the amount
of the increase is appropriate under the circumstances.
PROPOSED AMENDMENT TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER
THE PLAN
Stockholder approval is hereby being sought for the Amendment. Currently,
the total number of shares of Common Stock reserved for issuance under the Plan
is 1,000,000. If the proposed amendment is approved, the total number of shares
of Common Stock reserved for issuance under the Plan will be 2,800,000,
reflecting an increase of 1,800,000.
A description of the Plan and the Amendment follows Proposal 2.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented and voting, in person or by proxy, and
entitled to vote at the Annual Meeting will be required to approve Proposal 2.
Votes against are counted for purposes of determining the presence or absence of
a quorum for the transaction of business. Votes against are also counted for
purposes of determining the total number of votes required to pass the proposal
and whether such votes have been obtained. For purposes of the vote on the
proposed Amendment, abstentions will have the same effect as votes against the
proposed Amendment. If a broker, bank, custodian, nominee or other record holder
of Common Stock indicates on a proxy that it does not have discretionary
authority to vote certain shares on Proposal 2, the shares held by such record
holder will be considered "broker nonvotes." Broker nonvotes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted as shares entitled to vote on the matter
and will have no effect on the result of the vote.
The Company's executive officers have an interest in approval of this
proposal, in that they, along with all other individuals eligible to participate
in the Plan, will be eligible for grants of options and other awards under the
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED
FOR ISSUANCE THEREUNDER.
DESCRIPTION OF THE COMPANY'S
1997 EMPLOYEE STOCK INCENTIVE PLAN
Stockholders are being asked to approve an amendment of the Sizzler
International, Inc. 1997 Employee Stock Incentive Plan (the "Employee Plan"),
under which an aggregate of 2,800,000 shares of the Company's Common Stock will
be authorized for issuance under the Plan. The Employee Plan is an important
part of the Company's compensation program and is essential to its ability to
attract and retain highly qualified employees. The proposed Amendment is
necessary to enable the Company to continue providing options to new and current
employees.
The Employee Plan and the Amendment are described in detail below. The
summary of the provisions of the Amendment and of the Plan which follows is not
intended to be complete, and reference should be made to the Amendment and the
Plan for complete statement of the terms and conditions. The Amendment is
attached hereto as Appendix "A," however, due to its length, the Plan is not
included with this Proxy Statement. To obtain a copy of the Plan, requests
should be directed to: Secretary, Sizzler International, Inc., 6101 West
Centinela Avenue, Culver City, California 90230, telephone number (310)
568-0135.
14
<PAGE> 18
ADOPTION
The Employee Plan was adopted by the Company's Board of Directors on
October 16, 1997 and approved by the Company's stockholders on November 18,
1997.
SHARES SUBJECT TO THE PLAN
Assuming approval of the proposed amendment to the Employee Plan, an
aggregate of 2,800,000 shares of the Company's Common Stock will be reserved for
issuance under the Employee Plan. As of June 30, 1998, options to purchase
999,000 shares of the Company's Common Stock had been granted under the Employee
Plan and no shares had been issued under such plan. If any option granted
pursuant to the plan expires or terminates for any reason without being
exercised in whole or in part, or any other award terminates without being
issued, then the shares released from such option or terminated award will again
become available for grant and purchase under the plan.
ELIGIBILITY
Any person employed by the Company or any of its subsidiaries on a salaried
basis, including any director so employed (a "Participant"), is eligible to
receive awards under the Employee Plan. Approximately 535 individuals are
currently eligible to participate in the Employee Plan. There is no limit on the
aggregate maximum of shares of Common Stock that a Participant is eligible to
receive at any time during the term of the Employee Plan. The Company receives
no consideration from Participants in connection with the granting of awards
under the Employee Plan (other than the purchase price at which restricted
shares may be sold.)
ADMINISTRATION
The Employee Plan is to be administered by the Compensation and Stock
Option Committee appointed by the Board and consisting of Board members who are
"outside directors." Subject to the terms of the Employee Plan, the Committee
determines the persons who are to receive awards, the number of shares or amount
of cash subject to each such award and the terms and conditions of such awards.
The Committee also has the authority to construe and interpret any of the
provision of the Employee Plan or any awards granted thereunder.
STOCK OPTIONS
The Employee Plan permits the granting of stock options that are intended
to qualify either as Incentive Options ("IOs"), Nonqualified Options ("NQOs") or
Discount Options.
The option exercise price for each IO share will be no less than 100% of
the "fair market value" (as defined in the Employee Plan) of a share of Common
Stock at the time such option is granted, except in the case of a 10%
stockholder, for whom the exercise price must be at least 110% of the fair
market value. The option exercise price for each NQO will be no less than the
fair market value of a share of Common Stock at the time such option is granted.
The option exercise price for each Discount Option will be less than the fair
market value of a share of Common Stock at the time such option is granted, but
not less than the greater of (a) 50% of the fair market value of a share of
Common Stock at the time of the option grant or (b) the par value of a share of
Common Stock.
The exercise price of options granted under the Employee Plan generally
must be paid in full in cash concurrently with the exercise. However, the
Committee may provide in an option agreement that payment of the exercise price
may be made, in whole or in part, (1) by delivery and surrender of shares of the
Company's Common Stock having a fair market value on the date of surrender equal
to the aggregate exercise price of the option; (2) by reducing the number of
shares of Common Stock to be delivered to the optionee upon exercise of such
option, such reduction to be valued on the basis of the aggregate fair market
value on the date of exercise of the additional shares of Common Stock that
would otherwise have been delivered to such optionee upon exercise of such
option and; (3) in the event that the exercise of the option occurs after the
"Acceleration Date" (as defined below), by tender of a full recourse promissory
note, provided that the
15
<PAGE> 19
principal amount of the note does not exceed the excess of the exercise price of
such option over the aggregate par value of the optioned shares.
Options granted under the Employee Plan will expire on (a) the earlier of
the tenth anniversary (or the fifth anniversary in the case of a 10%
stockholder) of the date of grant or (b) within a certain time after the
Participant's termination of employment with the Company (as set forth in the
Option Agreement).
The Employee Plan does not permit any option under the plan to be granted
at an exercise price of less than the greater of (a) 50% of the fair market
value of a share of Common Stock at the time of the option grant or (b) the par
value of the Company's Common Stock. The Company's acceptance of payment of the
exercise price in shares of its Common Stock is subject to any applicable
prohibition on acquisition by the Company of its own shares.
RESTRICTED SHARE AWARDS
The Committee may sell restricted shares to Participants either in addition
to, or in tandem with, other awards under the Employee Plan. Restricted shares
are subject to such restrictions as the Committee may impose. These restrictions
may be based upon completion of a specified number of years of service with the
Company or upon completion of performance goals as set out in advance. Prior to
the grant of any award, the Committee must: (a) determine the nature, length and
starting date of any performance period for restricted stock awards; (b) select
from among the performance factors to be used to measure performance goals, if
any; and (c) determine the number of shares that may be awarded to the
Participant. Prior to the payment of any award, the Committee must determine the
extent to which such award has been earned. Performance goals selected by the
Committee generally involve the following types of criteria: (a) net revenue
and/or net; (b) earnings before income taxes and amortization growth; (c)
operating income and/or operating income growth; (d) net income and/or net
income growth; (e) earnings per share and/or earnings per share growth; (f)
total stockholder return and/or total return growth; (g) return on equity; (h)
economic value added; and (i) individual confidential business objectives. The
purchase price for such awards must be no less than the par value of the
Company's Common Stock on the date of the award. Payment of the purchase price
for restricted shares must be in cash in full on the date of sale.
STOCK APPRECIATION RIGHTS
The Committee may grant stock appreciation rights to Participants in tandem
with stock options under the Employee Plan. Stock appreciation rights ("SARs")
entitle the recipient of an option to elect to surrender all or part of his or
her option in lieu of exercise of such option. Holders of SARs may make such an
election, at their option, subject to the approval of the Committee. Holders of
SARs electing to surrender all or part of an option may receive cash, shares of
the Company's Common Stock or a combination of both having an aggregate fair
market value on the date of surrender equal to the excess of (i) the aggregate
fair market value on the date of such surrender of the Common Stock otherwise
issuable upon exercise of such option or part thereof so surrendered, over and
above (ii) the exercise price of such option or part thereof so surrendered.
If the grant of an option under the Employee Plan includes the grant of an
SAR, the SAR will be subject to certain conditions and restrictions, unless
waived by the Committee. The conditions and restrictions include restrictions on
receipt of cash upon exercise of the SAR unless the Company shall have filed all
reports and statements required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") during the year prior to exercise and continues to
publicly release quarterly and annual summary statements of sales and earnings
on a regular basis. Elections by SAR holders to receive cash in full or partial
settlement of an SAR must be made between the third and twelfth business day
following such a quarterly or annual release. Exercise of an SAR also is subject
to other requirements of the Exchange Act.
MERGERS, CONSOLIDATIONS AND CHANGES OF CONTROL
In the event of certain changes in control of the Company, all outstanding
options and SARs granted under the Employee Plan become fully exercisable, and
all restrictions imposed upon restricted shares sold
16
<PAGE> 20
under the Employee Plan terminate, on such date of the change of control
(defined as the "Acceleration Date").
The Employee Plan and all outstanding options and SARs granted thereunder
terminate on the first of the following to occur: (i) a dissolution or
liquidation of the Company, (ii) a reorganization, merger, or consolidation of
the Company as a result of which the outstanding securities of the class then
subject to the Employee Plan are exchanged for or converted into cash, property,
and/or securities not issued by the Company, which reorganization, merger, or
consolidation shall have been affirmatively recommended by the Board to the
stockholders of the Company, or (iii) a sale of substantially all of the
property and assets of the Company.
AMENDMENT OF THE EMPLOYEE PLAN
The Board may terminate or amend the Employee Plan, including amending any
form of award agreement or instrument to be executed pursuant to the Plan. The
Board may not, without the approval of stockholders, amend the Employee Plan in
any manner that requires stockholder approval pursuant to the Employee Plan. In
addition, the Board may not amend any outstanding award without the consent of
the Participant.
TERM OF THE EMPLOYEE PLAN
The Employee Plan became effective upon adoption of the plan by the Board
and will terminate upon the first to occur of the following: (a) the expiration
of the twelve-month period following the Effective Date unless theretofore
approved by the stockholders; (b) the effective date of any termination of the
Employee Plan by action of the Board; or (c) any of the events or transactions
specified above under "Mergers, Consolidations and Changes of Control."
Restricted shares may not be sold, and options may not be granted, after January
1, 2007.
FEDERAL INCOME TAX INFORMATION
THE FOLLOWING INFORMATION IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY
STATEMENT OF THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND PARTICIPANTS
OF PARTICIPATION IN THE EMPLOYEE PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR EACH PARTICIPANT WILL DEPEND UPON
HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT IS ENCOURAGED TO SEEK THE
ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE EMPLOYEE PLAN.
Incentive Stock Options. The Participant will recognize no income upon
grant of an IO and incur no tax on its exercise unless Participant is subject to
the Alternative Minimum Tax ("AMT"). If the Participant holds the stock acquired
upon exercise of an IO (the "IO Shares") for more than one year after the date
the option was exercised and for more than two years after the option was
granted, the Participant generally will realize long-term capital gain or loss
(rather than ordinary income or loss) upon disposition of the IO Shares. This
gain or loss will be equal to the difference between the amount realized upon
such disposition and the amount paid for the IO Shares. If the Participant
disposes of IO Shares prior to the expiration of either required holding period
(a "disqualifying disposition"), then the gain realized upon such disqualifying
disposition, up to the difference between the fair market value of the IO Shares
on the date of exercise (or, if less, the amount realized on a sale of such
shares) and the option exercise price, will be treated as ordinary income. Any
additional gain will be treated as capital gain.
Alternative Minimum Tax. The difference between the exercise price and fair
market value of the IO Shares on the date of exercise of an IO is an adjustment
to income for purposes of the AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is generally 26% of an individual taxpayer's alternative
minimum taxable income (28% in the case of alternative minimum taxable income in
excess of $175,000). Alternative minimum taxable income is determined by
adjusting regular taxable income for certain
17
<PAGE> 21
items, increasing that income by tax preference items and reducing this amount
by the applicable exemption amount ($45,000 in case of a joint return, subject
to reduction under certain circumstances). If a disqualifying disposition of the
IO Shares occurs in the same calendar year as exercise of the IO, there is no
adjustment with respect to those IO Shares. Also, upon a sale of IO Shares that
is not a disqualifying disposition, alternative minimum taxable income is
reduced in the year of sale by the excess of the fair market value of the IO
shares at exercise over the amount paid for the IO Shares.
Nonqualified Stock Options. A Participant will not recognize any taxable
income at the time an NQO is granted. However, upon exercise of an NQO, the
Participant generally must include in income as compensation an amount equal to
the difference between the fair market value of the NSO shares on the date of
exercise and the Participant's exercise price. The included amount will be
treated as ordinary income by the Participant and will be subject to withholding
by the Company (either by payment in cash or withholding out of the
Participant's salary). Upon re-sale of the NSO shares by the Participant, any
subsequent appreciation or depreciation in the value of the shares will be
treated as capital gain or loss.
Capital Gain Tax Rate. Short-term capital gains (i.e., on assets held 12
months or less) are taxed at the same rate as ordinary income. Mid-term capital
gains (i.e., on assets held more than one year but no more than 18 months) are
taxed at a maximum rate of 28%, and long-term capital gains (i.e., on assets
held for more than 18 months) are taxed at a maximum rate of 20%, (to the extent
that the gains do not place the taxpayer in a tax bracket of over 15%, the gains
will be taxed at 10%). These capital gain tax rates are more favorable than the
39.6% maximum tax rate applicable to ordinary income. Capital gains may be
offset by capital losses and up to $3,000 of capital losses may be offset
annually against ordinary income.
Restricted Stock. Restricted stock will generally be subject to tax at the
time of receipt of shares of Common Stock or cash, unless there are restrictions
that enable the Participant to defer tax. At the time that tax is incurred, the
tax treatment will be similar to that discussed above for NQOs.
Tax Treatment of the Company. Subject to the limitations imposed by Section
162 (m) of the Code, the Company will generally be entitled to a deduction in
connection with the exercise of an NQO by a Participant or upon the receipt of
restricted stock by a Participant, to the extent that Participant recognizes
ordinary income, and provided that the Company complies with IRS reporting
requirements relating to the income. The Company will be entitled to a deduction
in connection with the disposition of IO shares only to the extent that the
Participant recognizes ordinary income on a disqualifying disposition for the IO
Shares, and provided that the Company complies with IRS reporting requirements
relating to the income. The Company will treat any transfer of record ownership
of shares as a disposition, unless it is notified to the contrary. In order to
enable the Company to learn of disqualifying dispositions and ascertain the
amount of the deduction to which it is entitled, Participants will be required
to notify the Company in writing of the date and terms of any disqualifying
dispositions of IO Shares.
ERISA
The Company believes that the Employee Plan is not subject to any provision
of the Employee Retirement Income Security Act of 1974 ("ERISA") .
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT OF THE EMPLOYEE PLAN.
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<PAGE> 22
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP was the Company's certified public accountant for the
year ended April 30, 1998. During the past fiscal year, the Company also engaged
Arthur Andersen LLP to render certain non-audit professional services, involving
assistance on tax planning matters and general consultations. The appointment of
auditors is approved annually by the Board of Directors based in part on the
recommendation of the Audit Committee. In making its recommendations, the Audit
Committee reviews both the audit scope and estimated audit fees for the coming
year. Arthur Andersen LLP has been selected by the Audit Committee for the
current year and the Board of Directors has approved this recommendation.
Stockholder approval is not sought in connection with this selection. Each
professional service performed by Arthur Andersen LLP during fiscal 1998 was
approved, and the possible effect of such service on the independence of such
firm was considered, by the Audit Committee. Representatives of Arthur Andersen
LLP will be present at the Annual Meeting of Stockholders and will be given an
opportunity to make a statement if they desire to do so and will respond to
appropriate questions from stockholders.
STOCKHOLDERS PROPOSAL FOR 1999 ANNUAL MEETING
Any stockholder proposal to be considered for presentation at the 1999
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices located at 6101 West Centinela Avenue, Culver City, California
90230, on or before April 1, 1999 for inclusion in the Company's Proxy Statement
and form of Proxy.
MISCELLANEOUS
The Company knows of no matters other than the foregoing to be brought
before the Annual Meeting, but if any other such matter properly comes before
the meeting or any adjournment or postponement thereof, it is the intention of
the persons named in the accompanying form of Proxy to vote the proxies in
accordance with their best judgment.
The Annual Report of the Company for the fiscal year ended April 30, 1998
(the "1998 Annual Report"), consisting of the Company's fiscal 1998 Annual
Report on Form 10-K, is being mailed concurrently herewith to each person who
was a stockholder of record on June 30, 1998. The 1998 Annual Report is
incorporated by reference into this Proxy Statement.
EACH STOCKHOLDER WHO DOES NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON
IS URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ RYAN S. TONDRO
Ryan S. Tondro
Secretary
Culver City, California
July 17, 1998
19
<PAGE> 23
APPENDIX A
AMENDMENT
TO THE
SIZZLER INTERNATIONAL, INC.
1997 EMPLOYEE STOCK INCENTIVE PLAN
This Amendment to the Sizzler International, Inc. 1997 Employee Stock
Incentive Plan (the "Amendment") is adopted by Sizzler International, Inc. (the
"Company") effective as of August 18, 1998.
RECITALS
A. The Sizzler International, Inc. 1997 Employee Stock Incentive Plan (the
"Plan") was adopted by the Board of Directors on October 16, 1997 and approved
by the Company's stockholders on November 18, 1997.
B. Section 14 of the Plan provides that the Board may amend the Plan,
subject to certain instances to receipt of approval of the stockholders of the
Company.
C. On June 17, 1998, the Board of Directors of the Company unanimously
adopted an Amendment to the Plan increasing the number of shares of Common Stock
reserved for issuance from 1,000,000 to 2,800,000 shares.
D. The Amendment to the Plan was presented to the stockholders for approval
at the Company's Annual Meeting held on August 18, 1998.
AMENDMENT
1. Section 3 of the Plan is hereby amended in its entirety to read as
follows:
3. Common Shares Subject to Plan. The maximum number of Common Shares
that may be sold as Restricted Shares or that may be acquired upon the
exercise in full of options granted under this Plan, or of Stock
Appreciation Rights granted in connection therewith, in the aggregate is
2,800,000, subject to adjustment as provided in Section 11 hereof. Such
maximum number does not include the number of Restricted Shares sold under
this Plan that are repurchased by the Company nor does it include the
number of Common Shares subject to the unexercised portion of any option
granted under this Plan that expires or is terminated. However, the maximum
number of Common Shares does include the number of Common Shares subject to
the portion of any option granted under this Plan that is surrendered in
connection with the exercise of any Stock Appreciation Rights granted in
connection with such option.
2. Except as amended in Section 1 hereof the Plan remains in full force and
effect. Terms used herein not otherwise defined shall have the meaning ascribed
to them in the Plan.
The undersigned, Ryan S. Tondro, Secretary of the Company, hereby certifies
that the Board and the stockholders of the Company adopted this Amendment on
June 17, 1998 and August 18, 1998, respectively.
EXECUTED at Culver City, California this day of August, 1998.
--------------------------------------
Ryan S. Tondro, Secretary
A-1
<PAGE> 24
PROXY PROXY
SIZZLER INTERNATIONAL, INC.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated July 17, 1998 and, revoking all
prior proxies, appoints James A. Collins, Kevin W. Perkins and Christopher R.
Thomas, and each of them (with full power to act without the other), with full
power of substitution in each, the proxies of the undersigned, to represent the
undersigned and vote all shares of stock of Sizzler International, Inc. which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of Sizzler International, Inc., to be held on August 18,
1998, and at all adjournments and postponements thereof, upon the following
matters and in the manner designated on the other side.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH INSTRUCTIONS INDICATED;
HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXIES WILL VOTE THE SHARES FOR
ITEMS 1 AND 2.
(Continued, and to be signed and dated on the reverse side.)
SIZZLER INTERNATIONAL, INC.
P.O. BOX 11158
NEW YORK, N.Y. 10203-0158
<PAGE> 25
1. Election of Directors
FOR the nominees
listed below
(except as indicated)
[ ]
WITHHOLD AUTHORITY
to vote for ALL
nominees listed below
[ ]
EXCEPTIONS
[ ]
Class I: James A. Collins, Peter H. Dailey and Charles F. Smith
If you desire to withhold authority to vote for any individual nominee, please
write that nominee's name(s) on the space provided.
- ----------------------------------------------
- ----------------------------------------------
2. Approve an amendment to the 1997 Employee Stock Incentive Plan
increasing the number of shares of Common Stock reserved for issuance
thereunder from 1,000,000 to 2,800,000.
For Against Abstain
[ ] [ ] [ ]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy may be
revoked at any time prior to the voting thereof. All other proxies
given by the undersigned are hereby expressly revoked. THIS PROXY IS
BEING SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF SIZZLER
INTERNATIONAL, INC.
Note: Please sign exactly as shown at left. If stock is jointly held, each owner
should sign. Executors, administrators, trustees, guardians, attorneys and
corporate officers should indicate their fiduciary capacity and full title when
signing.
Dated: _____________________________________________________________ , 1998
Signed ___________________________________
__________________________________________
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK. [ ]
