<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Chock Full O'Nuts Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Chock Full O'Nuts Corporation
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- - --------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
CHOCK FULL O'NUTS CORPORATION
370 LEXINGTON AVENUE
NEW YORK, N.Y. 10017
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
FRIDAY, DECEMBER 16, 1994 AT 10:00 A.M.
DORAL HOTELS OF MURRAY HILL
RENAISSANCE ROOM
130 EAST 39TH STREET
NEW YORK, NEW YORK 10016
----------------
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY
----------------
To the Stockholders of
CHOCK FULL O'NUTS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Chock Full
O'Nuts Corporation (the "Company") will be held at the Doral Hotels of Murray
Hill, Renaissance Room, 130 East 39th Street, New York, New York 10016 on
Friday, December 16, 1994 at 10:00 A.M., Eastern Standard Time, for the
following purposes:
1. To elect four directors for three year terms.
2. To ratify the appointment of independent auditors for 1995.
3. To consider and approve an amendment to the Company's Incentive
Compensation Plan to increase by 150,000 shares the number of shares
available for grant under the Plan.
4. To transact such other business as may properly be brought before
the meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on October 24, 1994 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
MARTIN J. CULLEN
Secretary
Dated:New York, N.Y.
October 24, 1994
- - --------------------------------------------------------------------------------
IMPORTANT: Whether or not you expect to attend the meeting, please complete,
date and sign the proxy and return it promptly in the enclosed
envelope.
<PAGE>
CHOCK FULL O'NUTS CORPORATION
PROXY STATEMENT
This Statement is furnished to the stockholders of Chock Full O'Nuts
Corporation (the "Company") in connection with the solicitation by the Board of
Directors of proxies to be used at the 1994 Annual Meeting of Stockholders of
the Company to be held at the Doral Hotels of Murray Hill, Renaissance Room,
130 East 39th Street, New York, New York 10016 on Friday, December 16, 1994 at
10:00 A.M., Eastern Standard Time, and at any adjournments thereof.
The approximate date on which this Statement and the accompanying proxy will
be mailed to stockholders is October 24, 1994. The Company's Annual Report,
including financial statements, has been mailed to stockholders along with this
Statement.
All shares represented by each properly executed, unrevoked proxy received in
time for the meeting will be voted as specified. In the absence of any
specification, proxies will be voted for the election of the four persons
listed herein as nominees as directors, for the amendment to the Company's
Incentive Compensation Plan increasing by 150,000 the number of shares
available for grant under the Plan and for the ratification of the appointment
of Ernst & Young as the Company's independent auditors for 1995. Any proxy may
be revoked at any time prior to its exercise, by written notification to the
Secretary of the Company.
The Board of Directors has fixed the close of business on October 24, 1994 as
the record date (the "Record Date") for the determination of the stockholders
entitled to notice of and to vote at this meeting. The principal office of the
Company is located at 370 Lexington Avenue, New York, New York 10017.
At the Record Date, the Company had outstanding approximately 10,422,000
shares of Common Stock, par value $.25 per share. Each share outstanding
entitles the holder thereof to one vote.
The only persons known to the Company to be the beneficial owner of five
percent or more of the Company's Common Stock, as of the Record Date, are
listed under "Security Ownership of Certain Beneficial Owners and Management"
below.
ELECTION OF DIRECTORS
At this meeting four directors are to be elected to serve for three-year
terms, each to hold office until his successor is duly elected and qualified.
It is not contemplated that any nominee will be unable to serve as a director,
but if such contingency should occur prior to the meeting, the persons named as
proxies in the enclosed proxy or their substitutes (the "Proxies") will have
the right to vote for substitute nominees. The Proxies were selected by the
Board of Directors of the Company and are directors and officers of the
Company. Certain information with respect to each nominee, as well as directors
continuing in office, is stated below.
DIRECTORS NOMINATED FOR THREE-YEAR TERMS:
MARK A. ALEXANDER, M.D.--Dr. Alexander was elected to the Board of Directors
in October 1993 and is Vice President of Metropolitan Life Insurance Company (a
position he had held for more than five years). His responsibilities include
managing the decentralized personal life insurance medical underwriting
activities for Metropolitan. He is forty-four years old.
HOWARD M. LEITNER--Mr. Leitner joined the Company in August 1980 and later
that year was elected a director. In August 1986, he was elected President in
addition to his duties as Chief Financial and Accounting Officer. He has been a
Certified Public Accountant for more than 20 years and for two
2
<PAGE>
years prior to joining the Company he was an Audit Manager for Ernst & Whinney
(now known as Ernst & Young), the successor to S. D. Leidesdorf & Co., with
whom Mr. Leitner had been employed as an accountant for the 15 preceding years.
He is fifty-three years old.
HENRY SALZHAUER--Mr. Salzhauer was elected to the Board of Directors in July
1992. He is a Vice President of Benjamin Partners, Inc. ("BPI"), an investment
firm. Prior to December 1993, he was a Vice President of Benjamin Electrical
Engineering Works, Inc. ("BEEW"), an electrical contracting company (a position
he had held for more than five years). He is fifty-nine years old. In November
1993, BEEW sold its electrical contracting assets, including its name, to
Fischbach & Moore, Inc. another electrical contractor, and changed its name to
BPI.
R. SCOTT SCHAFLER--Mr. Schafler was elected to the Board of Directors in
March 1993 and is President of Cortec Group, Inc. (a position he has held for
more than five years), a New York based buyout group specializing in the
acquisition and operation of middle market manufacturing companies with
proprietary technology or leading distribution channels. He is Chairman of the
Board of two Cortec Group affiliates: Conax Corporation, a leading manufacturer
of electro-explosive life support equipment (a position he has held for 9
years) and National Controls Corporation, a leading manufacturer of electronic
controls for food service companies. He is also President of Cordec Capital
Corporation, General Partner of a buyout fund formed in 1990 specializing in
the acquisition and operation of middle market manufacturing companies with
proprietary technology or leading distribution channels. He is forty-three
years old.
DIRECTORS CONTINUING IN OFFICE:
NORMAN E. ALEXANDER--Mr. Alexander was elected to the Board of Directors in
1982. In February 1994, he was elected non-executive Chairman of the Board of
Directors. He is Chairman and Chief Executive Officer of Sequa Corporation, a
company providing a broad range of products and services to customers in
commercial and government markets (a position he has held for more than five
years). He is eighty years old. He is also a director of Richton International
Corporation. (Term to expire at the 1995 Annual Meeting).
MARTIN J. CULLEN--Mr. Cullen was elected to the Board of Directors in 1981.
He has been Vice President of the Company for over eighteen years and in June
1981 was also elected Treasurer of the Company. He is sixty years old and has
been with the Company for over thirty-nine years. His responsibilities are
principally in the area of purchasing and he is currently Secretary of the
Company. (Term to expire at the 1996 Annual Meeting).
VIRGIL GLADIEUX--Mr. Gladieux was elected to the Board of Directors in
November 1983. He is Chairman and Chief Executive Officer of V/Gladieux
Enterprises, a company engaged in the food service and mass feeding industry,
and he has held this position for more than ten years. He is eighty-five years
old. (Term to expire at the 1996 Annual Meeting).
MARVIN I. HAAS--Mr. Haas was elected to the Board of Directors in December
1990. In August 1993, Mr. Haas was elected Chief Executive Officer. He is also
Vice Chairman of the Board and Chief Operating Officer, positions he has held
since October 1991. He was a consultant to the Company from September 1989 to
May 1990. Mr. Haas was President and Chief Operating Officer of Swissrose
International (a dairy products importer) for a period of more than five years
through April 1987 and subsequently was a self-employed consultant until
joining the Company. He is fifty-two years old. (Term to expire at the 1996
Annual Meeting).
STUART Z. KRINSLY--Mr. Krinsly was elected to the Board of Directors in
September 1992. He is Senior Executive Vice President and General Counsel of
Sequa Corporation, a company providing a broad range of products and services
to customers in commercial and government markets (a position he has held for
more than five years). He also is a director of Sequa Corporation. He is
seventy-seven years old. (Term to expire at the 1995 Annual Meeting).
DAVID S. WEIL--Mr. Weil was elected to the Board of Directors in April 1990.
He is President and Chief Executive Officer of Ampacet Corporation, a company
which is a plastics raw material producer,
3
<PAGE>
specializing in the manufacture of color and additive masterbatches used by the
plastic processors, (a position he has held for more than five years). He is
sixty-nine years old. (Term to expire at the 1995 Annual Meeting).
Norman E. Alexander is the father of Mark A. Alexander. There is no other
family relationship between any officer or director of the Company.
There were eight meetings of the Company's Board of Directors held during the
Company's last fiscal year. The Board of Directors has a Compensation Committee
which is presently comprised of Virgil Gladieux, Henry Salzhauer and David S.
Weil. The Compensation Committee which met four times relative to fiscal year
1994 performs the function of evaluating the work performance of the Company's
executive and administrative employees and determining compensation for such
persons. The report of the compensation committee appears on pages 7 and 8 of
this proxy statement. The Board of Directors has a Nominating Committee
currently comprised of Norman E. Alexander, Stuart Z. Krinsly and Henry
Salzhauer which evaluates potential members of the Board of Directors. The
Nominating Committee seeks potential nominees for Board membership in many ways
and will consider suggestions submitted by stockholders if mailed to the
Secretary of the Company. The Board of Directors has an Audit Committee
currently comprised of Norman E. Alexander, Virgil Gladieux, R. Scott Schafler
and David S. Weil. This Committee met twice relative to the Company's 1994
fiscal year. The Audit Committee approved the selection of Ernst & Young as the
Company's independent auditors and met with the auditors to review the planned
scope and the results of the audit. The Board of Directors has an Executive
Committee comprised of Norman E. Alexander, Marvin I. Haas and David S. Weil.
The Executive Committee may exercise the power and authority of the Board of
Directors when the entire Board is unable to convene. All directors, except
Mark A. Alexander, attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and of all committees of the Board on
which that director served.
4
<PAGE>
EXECUTIVE COMPENSATION AND TRANSACTIONS WITH DIRECTORS, OFFICERS AND PRINCIPAL
HOLDERS
The following information is furnished with respect to each of the five
highest compensated executive officers of the Company who were executive
officers of the Company at any time during the fiscal year ended July 31, 1994:
COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------
NAME AND FISCAL OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
------------------ ------ ------ ----- ------------
(A)
<S> <C> <C> <C> <C>
Marvin I. Haas 1994 $273 $20
Chief Executive Officer (August 1993) 1993 272 $100
Vice Chairman of the Board and 1992 262
Chief Operating Officer
Howard M. Leitner 1994 225 20
President and Chief Financial Officer 1993 221 82
1992 236
Thomas Donnell 1994 169 60 5
President and Chief Executive 1993 108 44 2
Officer of Cain's Coffee Company
(Acquired Dec. 1992)
Martin J. Cullen 1994 192 20
Vice President, Secretary 1993 180 60
and Treasurer 1992 188
Anthony Fazzari 1994 179 23 11
Vice President 1993 162 60
1992 171
</TABLE>
- - --------
(a) Perquisites include use of corporate automobiles (ranging between $2,000
and $10,000) and life insurance (ranging between $5,000 and $10,000).
5
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options/SARs
granted during fiscal 1994 to the named executives:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OF GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SHARE) DATE VALUE(1)(2)
---- ------------ ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Marvin I. Haas(3) -0-
Howard M. Leitner 16,000 14.7 8.50 12/16/03 $75,348
Thomas Donnell 10,000 9.2 8.50 12/16/03 47,093
Martin J. Cullen 10,000 9.2 8.50 12/16/03 47,093
Anthony Fazzari 10,000 9.2 8.50 12/16/03 47,093
</TABLE>
- - --------
(1) Options are not exercisable until three years after the date of grant.
(2) Grant date present value is determined using the Black-Scholes Model. The
Black-Scholes Model is a complicated mathematical formula widely used to
value exchange traded options. However, stock options granted by the
Company to its executives differ from exchange traded options in three key
respects; options granted by the Company to its executives are long-term,
non-transferable and subject to vesting restrictions while exchange traded
options are short-term and can be exercised or sold immediately in a liquid
market. In this presentation, the Black-Scholes Model has been adapted to
estimate the present value of the options set forth in the table, taking
into consideration a number of factors, including the volatility of the
Common Stock, its dividend rate, the term of the option and interest rates.
Consequently, because the Black-Scholes Model is adapted to value the
options set forth in the table and is assumption-based, it may not
accurately determine present value. The actual value, if any, an optionee
will realize will depend on the excess of the market value of the Common
Stock over the exercise price on the date the option is exercised.
(3) On August 29, 1994, Mr. Haas was granted an option to purchase 250,000
shares at $5.75 per share.
Restricted stock share holdings at July 31, 1994, pursuant to agreements
described under "Certain Relationships and Transactions" for Mr. Leitner and
Mr. Cullen amounted to 71,120 ($418,000) and 7,112 ($41,800), respectively.
The Company has established a Benefits Protection Trust with Shawmut Bank,
N.A. (the "Trust Fund") and has contributed $700,000 thereto. The Trust Fund is
to be used for litigation expenses incurred by Company employees, including all
executive officers of the Company, in the event that after a Change-in-Control
(as defined) the new management of the Company refuses to pay benefits under
any employment contract or any employee benefit plan maintained by the Company.
As compensation for their services, each independent director (i.e. a
director who is not also an officer or employee of the Company) is paid $16,000
in cash. Each independent director who is a member of the Audit Committee or
the Compensation Committee is paid $1,000 for attendance at a meeting of the
Committee on which he serves. The Company does not pay director fees to
directors who are employees of the Company.
Annual pension payments as of July 31, 1994 under the Company's defined
benefit plan which would be payable for Messrs. Haas, Leitner, Cullen and
Fazzari (assuming normal retirement date) amount to approximately $20,000,
$63,000, $109,000, and $37,000.
6
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee's responsibilities include establishing the
Company's policies governing compensation of officers and other key executives
of the Company. The Committee's principal objective in setting such policies is
to develop a program designed to attract and retain officers and other key
executives critical to the success of the Company and to reward and motivate
those executives for performance which enhances the profitability of the
Company and creates value for its shareholders.
To achieve these objectives, the Compensation Committee has developed a
competitive, market-driven base salary program coupled with an annual incentive
cash bonus plan geared toward performance. Base salaries, prior to bonus
awards, for officers and key executives have been fixed at levels believed to
be generally lower than those for comparable positions in comparable companies.
However, these officers and key executives, other than the Chief Executive
Officer, the President of the Company and the President and Chief Executive
Officer of Cain's Coffee Company, can receive a bonus ranging from 20% to 50%
of base pay depending upon, among other matters, the achievement by the Company
of certain targeted operating income levels as well as a return on net assets
("RONA") at an agreed upon percent. Fifty percent (50%) of the bonus is
dependent upon the achievement of those operating income levels, 25% on the
achievement of the specified RONA level and 25% is at the discretion of the
Compensation Committee. The Chief Executive Officer and the President can
receive a bonus from 20% to 50% of base pay dependent upon, among other
matters, the achievement of certain targeted levels of earnings per share
(excluding unusual and extraordinary items) and a RONA at an agreed upon
percent. Fifty percent (50%) of the bonus is dependent upon achievement of
those earnings per share levels, 25% on the achievement of the specified RONA
level and 25% is at the discretion of the Compensation Committee. The President
and Chief Executive Officer of Cain's Coffee Company can receive a bonus of
from 24% to 50% of base pay dependent upon the operating income of such
company. In addition, certain other officers can receive a bonus based on
specified levels of sales volume and operating profits. Tying a significant
portion of overall executive compensation to the achievement of performance
objectives and thus making such bonus "at risk" is believed to align the
financial interests of the participating executives with those of the Company
and its shareholders. The bonus is only paid if the executive is employed as at
the last day of the fiscal year. In addition, non-qualified stock options are
also granted, from time to time, based upon long-term corporate objectives and
individual circumstances. In determining long-term incentive grants, the
Compensation Committee has set shareholder value creation as a priority. During
fiscal 1994 non-qualified stock options to purchase a total of 109,000 shares
of Company common stock were granted to officers and key executives, not
including the Company's Chief Executive Officer, at a price of $8.50 per share
(the market value on the date of grant). On August 29, 1994, non-qualified
stock options to purchase 250,000 shares of Company common stock were granted
to the Chief Executive Officer at a price of $5.75 per share (the market value
on the date of grant). Options to purchase 26,000 of such shares are contingent
upon an amendment to the Company's incentive Compensation Corporation Plan
which will increase the number of shares available for grant under the Plan.
"See Amendment to Incentive Compensation Plan." The incentive cash bonus
program for fiscal 1994 was reviewed for the Compensation Committee by a senior
external compensation consulting specialist and found to be in line with
competitive practice. The non-qualified stock option grants to management other
than the Chief Executive Officer for fiscal 1994 was also reviewed and found to
be at the lower end of the competitive range. The non-qualified option grant
for the Chief Executive Officer, established to provide a focus on stock
performance, was found to be in line with competitive practice for comparable
strategic situations.
The base salary levels for the Chief Executive Officer and all other officers
and key executives are reviewed and approved by the Compensation Committee
based upon competitive salary data developed by the Committee last year in
consultation with a leading firm of compensation consultants. This data
includes salaries paid to executives at comparable corporations and is affected
by overall salary movement in the workplace, generally, and the food industry
in which the Company operates. Salary
7
<PAGE>
changes are recommended to the Compensation Committee based upon a comparison
between each executive's base pay and those of other companies of similar size
in the food industry, the length of service of each executive and how well each
executive has performed in relation to predetermined goals and other
operational issues which may have arisen during the preceding year.
Compensation for the Chief Executive Officer for 1994 was determined in
accordance with the preceding factors. Mr. Haas' compensation also reflected
his inclusion in the incentive bonus program which can provide a substantial
part of his overall potential compensation dependent upon the performance of
the Company.
COMPENSATION COMMITTEE
VIRGIL GLADIEUX, CHAIRMAN
HENRY SALZHAUER
DAVID S. WEIL
8
<PAGE>
COMPANY PERFORMANCE
The following graph shows a five year comparison of cumulative total returns
for the Company, the S&P 500 composite index and the S&P Foods Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CHOCK FULL O'NUTS CORPORATION, THE S & P 500 INDEX AND
THE S & P FOODS INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
CHOCK FULL S & P S & P
Measurement period O'NUTS 500 FOODS
(Fiscal year covered) CORPORATION INDEX INDEX
- - --------------------- ----------- ----- -----
<S> <C> <C> <C>
Measurement PT -
07/31/89 $100 $100 $100
FYE 07/31/90 $ 95 $106 $103
FYE 07/31/91 $ 98 $120 $131
FYE 07/31/92 $108 $135 $143
FYE 07/31/93 $113 $147 $129
FYE 07/31/94 $ 83 $155 $139
</TABLE>
* $100 invested on 07/31/89 in stock or index including reinvestment of
dividends, fiscal year ending July 31.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1987 and January 1988, the Company issued an aggregate of 500,000
shares of its common stock to certain senior key executives pursuant to the
Company's Incentive Compensation Plan under restricted stock agreements which
provide that the shares are to vest ratably over a period of 14 years. The
unvested portion of the shares are subject to forfeiture in the event the
Company terminates employment for Cause or the employee terminates employment
for a reason other than death, disability, retirement at or after normal
retirement date or Good Reason and to accelerated vesting in the event of
termination of employment by the Company for any reason other than Cause or
termination of employment by the employee for Good Reason, death, disability or
retirement. Messrs. Howard Leitner and Martin Cullen were awarded 100,000 and
10,000 shares, respectively, pursuant to these agreements. The number of shares
distributed to participants is based upon the fair value of the shares at the
date of the award which takes into account the market price of the shares on
such date as well as the length and nature of the restrictions imposed upon the
award. The fair value of the shares awarded to Messrs. Leitner and Cullen,
respectively, pursuant to these agreements was $290,000 and $29,000.
Certain of the Company's employees (including, but not limited to officers)
are furnished with an automobile in connection with their business duties.
The Board of Directors has adopted an Unfunded Directors Retirement Plan (the
"Directors Plan") for directors who are not and never have been employees of
the Company (the "Outside Directors"). Each Outside Director who retires from
the Board with at least five full years of service as a director of the Company
shall, at the latter of age 65 or on the date on which such director retires
from the Board (the "Payment Date") receive for a period of 10 years from the
Payment Date an annual cash benefit payment (the "Retired Director's Fee")
equal to the regular annual director's fee in effect upon such director's
retirement; provided, however, that if such director is terminated as a
director following a change in control (as defined in the Company's Severance
Benefit Payment Plan) the balance of such director's then current term shall be
credited toward his five-year service requirement and in addition, the
surviving spouse of any director who dies (in office or after retirement) after
meeting the foregoing age and service requirements shall receive or continue to
receive such director's benefits for the balance of the 10 year period during
which the deceased director was entitled thereto, and payment of such Retired
Director's Fee shall terminate upon the death of any such director and such
director's surviving spouse. Benefits are currently being paid to the surviving
spouse of a deceased director. As of the date hereof, two Outside Directors
meet the age and service requirements for the receipt of benefits in the event
of their retirement.
In December 1988, March 1989, January 1991 and April 1991 the Chock Full
O'Nuts Corporation Employee Stock Ownership Plan purchased shares of the
Company's common stock from certain directors and officers as more fully
described under the section headed "Employee Stock Ownership Plan".
PENSION PLAN
The Chock Full O'Nuts Corporation Pension Plan is a noncontributory defined
benefit plan covering all non-union employees of the Company. Employees become
eligible for membership in the Plan on the anniversary dates coinciding with or
next following the date of attainment of age 20 1/2 and completion of a year of
service. Participants become fully vested after 5 years of service. Prior
thereto there are no benefits payable under the Plan.
The Plan provides normal retirement benefits, reduced early retirement
benefits and increased post-retirement benefits which are available at the
employee's option. Benefits are payable in the form of a straight life annuity
or a 50% joint and survivor annuity. At Normal Retirement (age 65) or Postponed
10
<PAGE>
Retirement (age 70), a participant receives an annual pension payable in equal
monthly installments equal to 2% of his final 5 year average compensation times
credited service to a maximum of 50% of the final 5 year average compensation.
Credited service includes years of service rendered after reaching age 22. The
years of credited service under the Plan at July 31, 1994 of Messrs. Haas,
Leitner, Donnell, Cullen, and Fazzari are 4, 14, 0, 25, and 6, respectively.
Marvin I. Haas and Howard M. Leitner are the Trustees of the Plan.
The table below shows the estimated annual pension benefits at normal
retirement age to an employee upon retirement under the Plan.
<TABLE>
<CAPTION>
FINAL
AVERAGE
EARNINGS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$300,000
and higher $90,000 $118,000 $118,000 $118,000 $118,000
$250,000 75,000 100,000 118,000 118,000 118,000
$200,000 60,000 80,000 100,000 100,000 100,000
$150,000 45,000 60,000 75,000 75,000 75,000
$100,000 30,000 40,000 50,000 50,000 50,000
</TABLE>
DEFERRED COMPENSATION PLAN
The Chock Full O'Nuts Deferred Compensation Plan for certain key executives
(the "Deferred Compensation Plan") became effective August 1, 1987. The purpose
of the Deferred Compensation Plan is to supplement the pension benefits
available to certain officers and key employees of the Company under the Chock
Full O'Nuts Corporation Pension Plan and to further the growth in the earnings
of the Company by offering long-term incentives to such officers and key
employees who will be largely responsible for such growth. While the
arrangement is considered unfunded for tax purposes, the Company and Wachovia
Bank & Trust Company have entered into a grantor trust agreement establishing a
trust fund to aid the Company in accumulating the amounts necessary to satisfy
its liability for deferred compensation benefits. The assets of the trust will
at all times be subject to the claims of the Company's creditors. The Company
will make contributions annually in an amount which will fully fund each
covered executive's benefit as of his expected retirement, and will make
payments of deferred compensation benefits to the extent the trust does not.
Pursuant to the provisions of the Deferred Compensation Plan, the
Compensation Committee of the Board shall determine those employees who shall
be entitled to participate in the Deferred Compensation Plan and the amount of
the supplemental benefits to be paid to any such participant. Upon such
determination, such employee and the Company shall enter into a deferred
compensation agreement which specifies the amount and rights of such
participant to receive supplemental pension benefits.
As of the date hereof there are no deferred compensation agreements
outstanding under the Deferred Compensation Plan.
EMPLOYEE STOCK OWNERSHIP PLAN
In November 1988, the Company's Board of Directors approved the Chock Full
O'Nuts Corporation Employee Stock Ownership Plan ("ESOP") which is a
noncontributory plan established to acquire shares of the Company's common
stock for the benefit of all eligible employees. In December 1988, March 1989,
February 1990, January 1991 and April 1991, the Company loaned the ESOP
$1,000,000, $750,000, $1,140,000, $325,000 and $675,000, respectively, to be
repaid in equal annual installments over eight years from the date of the loan
with interest primarily at 9% and 10%. With the proceeds of the December 1988
and March 1989 loans, the ESOP purchased approximately 110,000 and 85,000
shares
11
<PAGE>
of the Company's common stock from certain directors and officers at a price
of $8.125 and $8 per share (the then current market prices). With the proceeds
of the January 1991 and April 1991 loans, the ESOP purchased approximately
134,000 shares of the Company's common stock from certain directors, officers
and employees at prices of $5.625 and $7.75 per share (the then current market
prices). Howard Leitner and Martin Cullen sold approximately 57,100 and
12,700, respectively, of such shares, to the ESOP for which they received
approximately $429,000 and $120,000. With the proceeds of the February 1990
loan, the ESOP purchased approximately 212,000 shares of the Company's common
stock in the open market at prices between $5.50 and $6.50 per share. Each
full-time employee of the Company who is not represented by a labor union is
eligible to participate in the ESOP on the date which is one year after the
date of his employment by the Company. All such participating employees are
vested in those shares allocated to their specific accounts after a period of
five years. Shares are allocated to participant's accounts annually based upon
the annual compensation (up to $200,000) earned by each participant. As the
Company makes annual contributions to the ESOP, these contributions are used
to repay the loans to the Company, together with accrued interest. Deferred
compensation equal to the loans has been recorded as a reduction of
stockholders' equity representing the Company's prepayment of future
compensation expense. As the loans are repaid, common stock is allocated to
ESOP participants and deferred compensation is reduced by the amount of the
principal payment on the loans. Marvin I. Haas and Howard M. Leitner are the
administrators of the ESOP.
As of the date of this proxy statement a total of 3,515 shares 3,907 shares,
3,876 shares and 3,360 shares of common stock were allocated to each of the
accounts of Messrs. Haas, Leitner, Cullen and Fazzari, respectively.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 13, 1994, the shares of the
Company's Common Stock owned beneficially by the present directors and
nominees of the Company individually and by all present directors, nominees
and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NAME OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
<S> <C> <C>
Marvin I. Haas 1,081,700(1)(2) 10.4%(1)
Howard M. Leitner 688,530(1) 6.6%(1)
Norman E. Alexander 44,834(3) *
Martin J. Cullen 16,295 *
Virgil Gladieux 53,182(4) *
Stuart Z. Krinsly 1,244(5) *
Henry Salzhauer 2,358(6) *
R. Scott Schafler 3,090 *
David S. Weil 1,737 *
All Directors and executive officers
as a group (12 persons), including
the above named persons 1,293,715(1)(2) 12.4%(1)
</TABLE>
- - --------
* Less than 1% of class.
(1) Includes 613,287 shares owned by the Chock Full O'Nuts Corporation
Employee Stock Ownership Plan of which Marvin I. Haas and Howard M.
Leitner are the Administrators and share voting power.
(2) Includes an aggregate of 266,799 shares owned by Steven Schulman and
92,202 shares owned by Dennis Duke, which shares were issued in connection
with the Company's acquisition in June 1991 of Hillside Coffee of
California, Inc. Such shares are subject to the provisions of an agreement
between the Company, Marvin I. Haas, Steven Schulman and Dennis Duke,
which agreement provides, among other things, that all shares of stock of
the Company owned by Messrs. Schulman and Duke will, for a period of ten
years, be voted (i) in favor of the election to the Board of such nominees
who shall have been selected by the Board and (ii) in accordance with the
recommendation of the Board with respect to all such other matters upon
which
12
<PAGE>
shareholders shall have a right to vote. In order to insure the obligations
of Messrs. Schulman and Duke under the agreement each of Messrs. Schulman
and Duke has granted to Mr. Haas an irrevocable proxy with respect to all
shares owned by him.
(3) Includes 43,577 shares owned by Galleon Syndication Corporation of which
Norman E. Alexander owns 100% of the issued and outstanding capital stock.
(4) Includes 48,593 shares owned by Advanced Restaurant Concepts, Inc. of which
Virgil Gladieux owns 100% of the issued and outstanding capital stock.
(5) Represents shares which would be received upon the conversion of $10,000 of
the Company's 8% Convertible Subordinated Debentures.
(6) Represents shares which would be received upon the conversion of $20,000 of
the Company's 7% Convertible Senior Subordinated Debentures.
The following tables sets forth, as of October 13, 1994, the shares of the
Company's Common Stock owned beneficially by persons known to the Company to
own more than five percent of the outstanding shares of the Common Stock of the
Company:
<TABLE>
<CAPTION>
COMMON STOCK PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OWNED CLASS
- - ---------------- ------------ -------
<S> <C> <C>
Marvin I. Haas
Chock Full O'Nuts Corporation
370 Lexington Avenue
New York, New York 10017 1,081,700(1)(2) 10.4%(1)(2)
Howard M. Leitner
Chock Full O'Nuts Corporation
370 Lexington Avenue
New York, New York 10017 688,530(1) 6.6%(1)
Chock Full O'Nuts Corporation
Employee Stock Ownership Plan
Chock Full O'Nuts Corporation
370 Lexington Avenue
New York, New York 10017 613,287(3) 5.9%(3)
Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580 2,309,282(4) 20.4%(4)
Dimensional Fund Advisors Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401 680,483(5) 6.5%(5)
David L. Babson & Company, Inc.
One Memorial Drive
Cambridge, Massachusetts 02142 654,648(6) 6.2%(6)
HB Korenvaes Investments, L.P.
777 Main Street
Suite 2750
Fort Worth, Texas 76102 1,001,376(7) 8.8%(7)
</TABLE>
- - --------
(1) See Note 1 "Security Ownership of Certain Beneficial Owners and
Management".
(2) See Note 2 "Security Ownership of Certain Beneficial Owners and
Management".
(3) See "Employee Stock Ownership Plan".
(4) Includes 482,664 shares which would be received upon conversion of
$4,093,000 of the Company's 7% Convertible Senior Subordinated Debentures
and 442,681 shares which would be received on conversion of $3,556,000 of
the Company's 8% Convertible Subordinated Debentures. This information has
been confirmed to the Company on August 24, 1994.
(5) This information has been confirmed to the Company by Dimensional Fund
Advisors, Inc. on September 12, 1994.
(6) Includes 76,651 shares which would be received upon conversion of $650,000
of the Company's 7% Convertible Senior Subordinated Debentures. This
information has been confirmed to the Company by David L. Babson & Company
on September 19, 1994.
13
<PAGE>
(7) Represents shares which would be received upon conversion of $8,492,000 of
the Company's 7% Convertible Senior Subordinated Debentures as confirmed to
the Company on September 12, 1994.
AMENDMENT TO INCENTIVE COMPENSATION PLAN
On January 12, 1984, the Board of Directors adopted an Incentive Compensation
Plan, approved by the stockholders on March 1, 1984, which provides among other
matters, for incentive or non-qualified stock options, stock appreciation
rights, performance units, restricted stock and incentive bonus awards (in the
form of cash or stock units).
The purpose of the Plan is to provide incentives to key employees whose
performance will contribute to the long-term success and growth of the Company,
to strengthen the ability of the Company to attract and retain employees of
high competence, to increase the identity of interests of such key employees
with those of the Company's stockholders and to help build loyalty to the
Company through recognition and the opportunity for stock ownership. All
officers and key employees of the Company who are in positions which enable
them to make significant contributions to the long-term performance and growth
of the Company are eligible to receive awards under the Plan. The Plan is
administered by the Board of Directors and the Compensation Committee.
The maximum aggregate number of shares of Common Stock as to which awards or
options may at any time be granted under the Plan is currently 1,190,000 shares
(plus any stock dividend shares). As of October 13, 1994, no shares were
available for grant under the Plan. Pursuant to the proposal, the Plan would be
amended to increase by 150,000 shares the number of shares available for grant
under the Plan.
TERMS OF OPTIONS
The Plan permits the granting of both incentive stock options and non-
qualified stock options. Generally the option price of both incentive stock
options and non-qualified stock options must be at least equal to 100% of the
fair market value of the shares on the date of grant. The maximum term of each
option is ten years. For any participant who owns shares possessing more than
10% of the voting rights of the Company's outstanding Common Stock, the
exercise price of any incentive stock option must be at least equal to 110% of
the fair market value of the shares subject to such option on the date of grant
and the term of the option may not be longer than five years. Options become
exercisable at such time or times as the Board or the Compensation Committee
may determine at the time it grants options.
FEDERAL INCOME TAX CONSEQUENCES
Non-qualified Stock Options. The grant of a non-qualified stock option will
have no immediate tax consequences to the Company or the employee. The exercise
of a non-qualified stock option will require an employee to include in his
gross income the amount by which the fair market value of the acquired shares
on the exercise date (or the date on which any substantial risk of forfeiture
lapses) exceeds the option price.
Upon a subsequent sale or taxable exchange of the shares acquired upon
exercise of a non-qualified stock option, an employee will recognize long or
short-term capital gain or loss equal to the difference between the amount
realized on the sale and the tax basis of such shares.
The Company will be entitled (provided applicable withholding requirements
are met) to a deduction for Federal income tax purposes at the same time and in
the same amount as the employee is in receipt of income in connection with the
exercise of a non-qualified stock option.
14
<PAGE>
Incentive Stock Options. The grant of an incentive stock option will have no
immediate tax consequences to the Company or the employee. If the employee
exercises an incentive stock option and does not dispose of the acquired shares
within two years after the grant of the incentive stock option nor within one
year after the date of the transfer of such shares to him (a "disqualifying
disposition"), he will realize no compensation income and any gain or loss that
he realizes on a subsequent disposition of such shares will be treated as a
long-term capital gain or loss. For purposes of calculating the employee's
alternative minimum taxable income, however, the option will be taxed as if it
were a non-qualified stock option.
ELIGIBILITY
Members of the Company's Board of Directors who are also employees of the
Company are eligible to participate in awards made or options granted under the
Incentive Compensation Plan. Of the shares previously granted to employees
under the Plan in excess of 90% of such shares were awarded to employees who
were officers (both executive and non-executive) and/or directors of the
Company. It is anticipated that in excess of 90% of the shares to be granted
under the Plan in the future will be awarded to employees who are officers
(both executive and non-executive) and/or directors of the Company. The Company
has no present plans or understandings to award any shares or grant any options
under the Plan to any officers or employees of the Company; except for options
to purchase 26,000 shares granted to Marvin I. Haas, the Company's Chief
Executive Officer.
During the fiscal year ended July 31, 1994, the Company granted to Messrs.
Marvin I. Haas, Howard M. Leitner, Thomas Donnell, Martin J. Cullen and Anthony
Fazzari, respectively, non-qualified options to purchase 224,000 shares
(granted August 29, 1994), 16,000 shares, 10,000 shares, 10,000 shares and
10,000 shares and to all employees, including non-executive and non-named
officers as a group 63,000 shares.
The Company believes that the amendment should be approved because of the
need to have the ability to issue shares of Common Stock to the key employees
upon whose performance and contribution the long-term success and growth of the
Company is dependent.
Approval of the foregoing proposal requires the affirmative vote of a
majority of the votes cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Directors propose that the stockholders ratify the appointment of Ernst &
Young as the Company's independent auditors for 1995. Ernst & Young had been
the Company's independent auditors for the last fifteen years. The report of
Ernst & Young with respect to the Company's financial statements appears in the
Company's annual report for the fiscal year ended July 31, 1994. A
representative of Ernst & Young will be at the annual meeting and will have an
opportunity to make a statement if he desires to do so and will be available to
respond to appropriate questions. In the event the stockholders fail to ratify
the appointment, the Directors will consider it a directive to consider other
auditors for a subsequent year.
Approval of the foregoing proposal requires the affirmative vote of a
majority of the votes cast.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
15
<PAGE>
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1995 Annual
Meeting must be received by the Company for inclusion in the Company's proxy
statement relating to that meeting not later than July 28, 1995. Such proposals
should be addressed to Martin J. Cullen, Secretary, Chock Full O'Nuts
Corporation, 370 Lexington Avenue, New York, New York 10017.
OTHER MATTERS
The management knows of no other business which will be presented for
consideration at the Annual Meeting other than that stated in the notice of
meeting, except that the minutes of the Annual Meeting of Stockholders held
December 17, 1993, will be presented for approval as to form but such action is
not to constitute approval or disapproval of any of the matters referred to in
such minutes. If, however, any other matters shall properly come before the
Annual Meeting, it is intended that the persons named in the enclosed proxy, or
their substitutes, will vote the proxies in accordance with their best judgment
in such matters.
The cost of this proxy solicitation and any additional material relating to
the meeting which may be furnished to the stockholders will be borne by the
Company. In addition, solicitation by telephone, telegraph or other means may
be made personally, without additional compensation, by officers, directors and
regular employees of the Company. The Company also will request brokers,
dealers, banks and voting trustees and their nominees holding shares of record
but not beneficially to forward proxy soliciting material to beneficial owners
of such shares, and the Company, upon request, will reimburse them for their
expenses in so doing. The Company has also retained Hill and Knowlton to aid in
solicitation of proxies at an anticipated aggregate cost not in excess of
$30,000.
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K, without exhibits, will be provided without charge to
any stockholder submitting a written request. Such request should be addressed
to Martin J. Cullen, Secretary, Chock Full O'Nuts Corporation, 370 Lexington
Avenue, New York, New York 10017.
By Order of the Board of Directors
MARTIN J. CULLEN
Secretary
Dated:New York, New York
October 24, 1994
16
<PAGE>
CHOCK FULL O'NUTS CORPORATION
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING ON
DECEMBER 16, 1994
The undersigned hereby appoints Marvin I. Haas and Howard M. Leitner, and
each of them, with full power of substitution, the attorneys and proxies of the
undersigned to attend the Annual Meeting of Stockholders of Chock Full O'Nuts
Corporation to be held December 16, 1994 at 10:00 A.M., Eastern Standard Time
and at any adjournment or adjournments thereof, hereby revoking any proxies
heretofore given, to vote all shares of stock of the Company held or owned by
the undersigned as indicated on the proposals as more fully set forth in the
Proxy Statement, and in their discretion upon such other matters as may come
before the meeting.
1. Election of Directors: for a three-year term--Mark A. Alexander, Howard M.
Leitner, Henry Salzhauer and R. Scott Schafler.
[_] FOR all nominees[_] WITHHOLD authority to vote for all nominees.
[_] FOR all nominees, EXCEPT nominee(s) written below.
-----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
2. Proposal to ratify the appointment of independent auditors for 1995.
[_] FOR[_] AGAINST[_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
3. Proposal to amend the Company's Incentive Compensation Plan to increase by
150,000 shares the number of shares available for grant under the Plan.
[_] FOR[_] AGAINST[_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
--------------
(continued and to be signed on reverse side)
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR IF NO
DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES
AND FOR PROPOSAL 2 AND 3.
The undersigned hereby acknowledges receipt of the Notice of and Proxy
Statement for the aforesaid Annual Meeting.
Date and sign exactly as name
appears hereon. Each joint Tenant
must sign. When signing as
Attorney, Executor, Trustee, etc.,
give full title. If signer is
corporation, sign in full
corporate name by authorized
officer.
...................................
(Date of Above)
...................................
(Signature of Stockholder)
...................................
(Signature of Stockholder)
<PAGE>
GRAPHICS APPENDIX LIST
PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS REFERENCE
- - --------------------------------------------------------------------------------
9 Company Performance Graph
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