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
() 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 Rule 14a-11(c) or Rule 14a-12
Chock full o'Nuts Corporation
-----------------------------------------------
(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.
CHOCK FULL O'NUTS CORPORATION PRIVATE
370 Lexington Avenue
New York, N.Y. 10017
------------
Notice of Annual Meeting of Stockholders
------------
Thursday, December 19, 1996 at 3:00 P.M.
The Chase Building
Room 7
270 Park Avenue
New York, New York 10017
------------
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
Chase Building,Room 7, 270 Park Avenue, New York, New York 10017 on
Thursday, December 19, 1996 at 3:00 P.M., Eastern Standard Time, for
the following purposes:
1. To elect three directors for three year terms.
2. To ratify the appointment of independent auditors for 1997.
3. To transact such other business as may properly be brought before
the meeting or any adjournment or adjournments thereof, including
taking action upon the resolutions that are quoted under the heading
Stockholder Proposals in the attached Proxy Statement, if they shall
be brought before the meeting or such adjournment.
Only stockholders of record at the close of business on October 23,
1996 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 31, 1996
- ----------------------------------------------------------------
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.
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 1996 Annual Meeting of
Stockholders of the Company to be held at The Chase Building, Room 7,
270 Park Avenue, New York, New York 10017 on Thursday, December 19,
1996 at 3:00 P.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 31, 1996. 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 three persons listed herein as nominees as directors, for the
ratification of the appointment of Ernst & Young as the Company's
independent auditors for 1997 and against the proposals set forth
under the heading Stockholder Proposals. 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
23, 1996 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
10,736,000 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 three 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:
MARTIN J. CULLEN-Mr. Cullen was elected to the Board of Directors in
1981. He has been Vice President of the Company for over 20 years and
in 1981 was also elected Treasurer of the Company. He is 62 years old
and has been with the Company for over forty years. His
responsibilities are principally in the area of purchasing and he is
currently Secretary of the Company.
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 and in February 1995, he was elected President. He was Vice
Chairman of the Board and Chief Operating Officer from October 1991
until February 1995. 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 54 years
old.
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 a Cortec Group
affiliate, National Controls Corporation, a leading manufacturer of
electronic controls for food service companies. He is also President
of Cortec Capital Corporation, General Partner of Cortec Group Fund I,
LP and the managing partner of entities which manage Cortec Group Fund
II, LP (the Funds). Both Funds specialize in the acquisition and
operation of middle market manufacturing companies. He is 46 years
old.
Directors Continuing in Office:
MARK A. ALEXANDER, M.D.-Dr. Alexander was elected to the Board of
Directors in October 1993. He 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 46
years old. (Term to expire at the 1997 Annual Meeting).
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 82
years old. He is also a director of Richton International Corporation.
(Term to expire at the 1998 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 79 years old. (Term to expire
at the 1998 Annual Meeting).
HOWARD M. LEITNER-Mr. Leitner joined the Company in August 1980 as
Chief Financial and Accounting Officer and later that year was elected
a director. He was President of the Company from August 1986 until
February 1995 and currently is a Senior Vice President. He has been a
Certified Public Accountant for more than 20 years and for two 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 55 years old. (Term to
expire at the 1997 Annual Meeting).
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 61 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. (Term to
expire at the 1997 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,
specializing in the manufacture of color and additive masterbatches
used by plastic processors, (a position he has held for more than five
years). He is 71 years old. (Term expire at the 1998 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 are five 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 comprised of Virgil Gladieux, Henry
Salzhauer and David S. Weil. The Compensation Committee which met
once in fiscal year 1996 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
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 comprised of Mark A. Alexander,
Virgil Gladieux, R. Scott Schafler and David S. Weil. This Committee
met twice relative to the Company's 1996 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,
Stuart Z. Krinsly and David S. Weil. The Executive Committee may
exercixe the power and authority of the Board of Directors when the
entire Board is unable to convene. All directors, except Virgil
Gladieux, 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.
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, 1996:
COMPENSATION TABLE
Annual Compensation
(In Thousands)
-------------------------
Name and Fiscal Other Annual
Principal Position Year Salary Bonus Compensation
- ------------------------- ------ ------ ----- ------------
(a)
Marvin I. Haas 1996 $269 $20
President and 1995 273 $104
Chief Executive Officer 1994 273 100
Howard M. Leitner 1996 222 20
Senior Vice President and 1995 225 92
Chief Financial Officer 1994 225
Thomas Donnell 1996 167 72 5
President and Chief Executive 1995 164 83
Officer of Cain's Coffee Company 1994 169 60
Martin J. Cullen 1996 186 20
Vice President, Secretary 1995 193 74
and Treasurer 1994 192
Anthony Fazzari 1996 175 30 11
Senior Vice President Retail 1995 186 73
Sales and Marketing 1994 179 23
- ------
(a) Perquisites include use of corporate automobiles (ranging between
$2,000 and $10,000) and life insurance (ranging between $2,000 and
$10,000).
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
There were no options/SARs granted during fiscal 1996 to the named
executives.
As of July 31, 1996, Marvin I. Haas, Howard M. Leitner, Thomas
Donnell, Martin J. Cullen and Anthony Fazzari have options to acquire
250,000, 16,000, 10,000, 10,000 and 10,000 shares, respectively, of
Company Common Stock, none of which are currently exerciseable.
Restricted stock share holdings at July 31, 1996, pursuant to
agreements describes under Certain Relationships and Transactions
for Mr. Leitner and Mr. Cullen amounted to 54,939 shares and 5,493
shares, 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. Eash 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, 1996 under the Company's
defined benefit plan which would be payable for Messr. Haas, Leitner,
Donnell, Cullen and Fazzari (assuming normal retirement date) amount
to approximately $23,000, $42,000, $11,000, $109,000 and $33,000.
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 within a competitive range for
comparable positions in comparable companies. The President and Chief
Executive Officer can receive a bonus of from 25% to 90% of base pay
dependent upon the achievement of certain targeted levels of earnings
per share and a return on net assets at an agreed upon percent. The
President and Chief Executive Officer of Cain's Coffee Company can
receive a bonus of from 25% to 45% of base pay dependent upon a return
on net assets at an agreed upon percentage of such company. Both the
Senior Vice President and Chief Financial Officer and the Vice
President, Secretary/Treasurer can receive a bonus from 12.5% to 45%
of base pay dependent upon the achievement of certain targeted levels
of earnings per share and a return on net assets at an agreed upon
percent. The Senior Vice President of Retail Sales and Marketing can
receive a bonus of from 22.5% to 45% of base pay dependent upon sales
volume and a return on net assets and operating profit at an agreed
upon percent. In addition, certain other officers and key executives
can receive a bonus up to 45% of base pay based on specified levels of
sales volume, margins, purchasing efficiencies, manufacturing plant
expenditures, operating results, a return on net assets at an agreed
upon percent and the achievement of certain targeted levels of
earnings per share. 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 1996, no
non-qualified stock options were granted to the named executives. The
incentive cash bonus program for fiscal 1996 was reviewed for the
Compensation Committee by a senior external compensation consulting
specialist and found to utilize accepted incentive compensation
techniques, including quantifiable operating objectives that must be
met to receive an incentive award and structures that tie awards
directly to performance through sliding scale payout schedules that
include performance thresholds and payout caps.
The base salary levels for the President and Chief Executive Officer
and all other officers and key executives are reviewed and approved by
the Compensation Committee based upon competitive salary data
developed for the Committee in consultation with the senior external
compensation consulting specialist. 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 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 1996 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
COMPANY PERFORMANCE
The following graph shows a five year comparison of cumulative total
returns for the Company, the S&P 500 composite index and a Peer
Group whose members currently constitute the S&P Midcap 400 Index for
Foods and Beverages (Midcap 400 Index). The Midcap 400 Index
includes the following companies: Dean Foods Co., Dole Food Inc.,
Dreyers Grand Ice Cream Inc., Flowers Inds Inc., lbp Inc.,
International Multifoods Corp., Lance Inc., McCormick & Co. Inc.,
Michael Foods Inc., Savannah Foods & Inds Inc., JM Smucker Co., Tyson
Foods Inc. and Universal Foods Corp.
CHART
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 was
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, three Outside Directors meet the age and service
requirements for the receipt of benefits in the event of their
retirement, one of thosedirectors (Virgil Gladieux) is retiring as of
the date of the annual meeting and will thereafter begin receiving
benefits.
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 201/2 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 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, 1996 of Messrs.
Haas, Leitner, Donnell, Cullen, and Fazzari are 6, 16, 2, 25, and 8,
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.
Final
Average
Earnings 15 Years 20 Years 25 Years 30 Years 35 Years
- ---------- -------- -------- -------- -------- --------
$300,000
and higher $90,000 $120,000 $120,000 $120,000 $120,000
$250,000 75,000 100,000 120,000 120,000 120,000
$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
401(k) CASH OR DEFERRED COMPENSATION PLAN
The Company maintains a tax-qualified 401(k) cash or deferred
compensation plan that covers certain employees who have completed one
year of service and attained age 20. Participants are permitted,
within the limitations imposed by the Internal Revenue Code, to make
pre-tax contributions to the plan pursuant to salary reduction
agreements. The contributions of the participants are held in
separate accounts which are always fully vested.
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, April 1991,
May 1995 and September 1995 the Company loaned the ESOP $1,000,000,
$750,000, $1,140,000, $325,000, $675,000, $500,000 and $500,000,
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 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, May
1995 and September 1995 loans, the ESOP purchased approximately
371,000 shares of the Company's common stock in the open market at
prices between $5.50 and $6.50 per share(the then current market
prices). 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 $150,000) 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 3,851 shares,
3,719 shares, 942 shares, 5,347 shares and 4,779 shares of common
stock were allocated to each of the accounts of Messrs. Haas, Leitner,
Donnell, Cullen and Fazzari, respectively.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of October 8, 1996, 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:
Name of Common Stock Percent
Beneficial Owner Beneficially Owned of Class
- ------------------------------ --------------------- ------------
Marvin I. Haas 416,124(1) 3.9%(1)
Howard M. Leitner 318,061(1) 3.0%(1)
Mark A. Alexander 1,920(2)
Norman E. Alexander 46,179(3) *
Martin J. Cullen 16,779 *
Virgil Gladieux 54,776(4) *
Stuart Z. Krinsly 1,280(5) *
Henry Salzhauer 6,075(6) *
R. Scott Schafler 3,182 *
David S. Weil 6,796 *
All Directors and executive officers as
a group (14 persons), including the
above named persons 1,501,821(1)(2) 14.0%(1)
- ------
* Less than 1% of class.
(1) Includes 254,100 shares owned by the Chock Full O'Nuts Corporation
Pension Trust of which Marvin I. Haas and Howard M. Leitner are the
Trustees. See Pension Plan.
(2) Represents shares which would be received upon conversion of
$15,000 of the Company's 8% Convertible Subordinated Debentures.
(3) Includes 44,884 shares owned by Galleon Syndication Corporation of
which Norman E. Alexander owns 100% of the issued and outstanding
capital stock.
(4) Includes 50,050 shares owned by Advanced Restaurant Concepts, Inc.
of which Virgil Gladieux owns 100% of the issued and outstanding
capital stock. Mr Gladieux will not be continuing as a directors
after December 19, 1996.
(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
$50,000 of the Company's 7% Convertible Senior Subordinated
Debentures.
The following tables sets forth, as of October 8, 1996, 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:
Common
Stock Percent
Beneficially of
Name and Address Owned Class
- ------------------------ --------------------- -----------------
Chock Full O'Nuts Corporation
Employee Stock Ownership Plan
Chock Full O'Nuts Corporation
370 Lexington Avenue 705,092(1) 6.6%(1)
New York, New York 10017
Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580 1,585,390(2) 13.6%(2)
Dimensional Fund Advisors Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401 771,390(3) 7.2%(3)
David L. Babson & Company, Inc.
One Memorial Drive
Cambridge, Massachusetts 02142 687,823(4) 6.4%(4)
HBK Investments Holdings, L.P.
777 Main Street
Suite 2750
Fort Worth, Texas 76102 835,482(5) 7.2%(5)
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, California 90017 920,788(6) 8.6%(6)
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(1) See "Employee Stock Ownership Plan".
(2) Includes 500,121 shares which would be received upon conversion of
$4,116,000 of the Company's 7% Convertible Senior Subordinated
Debentures and 389,372 shares which would be received on conversion of
$3,041,000 of the Company's 8% Convertible Subordinated Debentures.
This information has been confirmed to the Company by Gabelli Funds
Inc. on October 16, 1996.
(3) This information has been confirmed to the Company by Dimensional
Fund Advisors, Inc. on October 8, 1996.
(4) This information has been confirmed to the Company by David L.
Babson & Company on October 8, 1996.
(5) Represents shares which would be received upon conversion of
$6,876,000 of the Company's 7% Convertible Senior Subordinated
Debentures as reported on Amendment No.4 to Schedule 13G on
September 19,1996.
(6) The information has been conformed to the Company by The TCW
Group, Inc. on October 8, 1996.
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 1997. Ernst
& Young has been the Company's independent auditors for the last
seventeen 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, 1996. 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.
STOCKHOLDERS PROPOSALS
Proposal 1
John J. Gilbert, who resides at 29 East 64th Street, New York, NY
10021, is the owner of 140 shares, and Margaret R. and/or John J.
Gilbert trustees U/W of Minnie D. Gilbert for 212 shares, and also
trustees U/W of Samuel Rosenthal for 424 shres, and both representing
an additional family interest of 703 shares, has advised the Company
of his intention to introduce the following resolution at the meeting:
RESOLVED: That the stockholders of Chock full o'Nuts Corporation,
assembled in annual meeting in person and by proxy, hereby request
that the Board of Directors take the needed steps to provide that at
future elections of directors new directors be elected annually and
not by classes as is now provided and that on expiration of present
terms of directors their subsequent election shall also be on an
annual basis.
REASONS: Support along the lines we suggest were shown at the 1990
annual meeting when 22%, owners of 1,597,301 shares, were cast in
favor of this proposal. The vote against included 1,846,404 unmarked
proxies. ARCO to its credit, voluntarily ended theirs stating that
when a very high percentage (34.6%) desired it to be changed to an
annual election it was reason enough for them to change it. Several
other companies have followed suit such as: Pacific Enterprises, Katy
Industries, Hanover Direct and others. A few years ago my resolution
on the subject was withdrawn when the Westinghouse directors agreed to
end their stagger system. At the recent Lockheed-Martin merger the
stagger system was ended and also at a special merger meeting of First
Commerce Corporation in 1995. Further, Allegheny Power System tried
to put in a stagger system, as well as take away cumulative voting,
and the stockholders defeated it, showing stockholders are interested
in their rights.
Because of the normal need to find new directors and because of
environmental problems and the avalanche of derivative losses and many
groups desiring to have directors who are qualified on the subjects,
we think that ending the stagger system of electing directors is the
answer. Some recommendations have been made to carry out the CERES 10
points. The 11th, in our opinion, should be to end staggered boards
and to have cumulative voting.
Equitable Life Insurance Company, which is now called Equitable
Companies, converted from a policy owned company to a public
stockholder meeting. Thanks to AXA, the comptrolling French insurance
company not wanting it they now do not have a staggered board.
Orange and Rockland Utility Company had a terrible time with the
stagger system and its 80% clause to recall a director. The chairman
was involved in a scandal effecting the company. Not having enough
votes, the meeting to get rid of the chairman had to be adjourned.
Finally, at the adjourned meeting enough votes were counted to recall
him.
If you agree, please mark your proxy FOR; if you disagree mark
AGAINST. NOTE: Proxies not marked will be voted against this
resolution.
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MANAGEMENT COMMENTS
The Board of Directors recommends a vote AGAINST this resolution.
The resolution providing for the Company's Board of Directors to be
divided into three classes of directors serving staggered three-year
terms was adopted by the stockholders of the Company at its 1986
annual meeting wherein approximately 73.5% of the shares voted were
voted in favor of the resolution.
A Proposal by the same shareholder who has advised the Company of his
intention to introduce the above resolution was submitted at the
Company's 1987, 1988 and 1990 Annual Meetings and were defeated when
approximately 61%, 68% and 78%, respectively, of the shares voted were
voted against such shareholder's resolution.
As stated at the time of the adoption of the resolution, the Board of
Directors of the Company believes that a classified Board of Directors
is advantageous to the Company and its stockholders. By providing
that directors will serve three-year rather than one-year terms, the
continuity and stability of the composition of the Company's Board of
Directors and of the policies formulated by the Board will be
enhanced. The Board believes that the assurance of continuity and
stability are important to the continued success of the Company. The
Board also believes that this, in turn, will permit it more
effectively to represent the interests of all stockholders, including
responding to circumstances created by demands or actions of a
particular stockholder or group of stockholders.
Proposal 2
Mark Kreiger, who resides at 2098 Lower Lake Drive, Santa Ana, CA,
92705 is the owner of 10,000 shares, has advised the Company of his
intention to introduce the following resolution at the meeting:
RESOLVED, that each Director shall be required to own at least
10,000 shares of Company Stock. This minimum, yet modest investment
will provide additional incentive for Director excellence and more
importantly; a keen interest in the direction of stock price.
If you agree, please your proxy FOR; if you disagree mark AGAINST.
NOTE: Proxies not marked will be voted against this resolution
MANAGEMENT COMMENTS
The Board of Directors recommend a vote AGAINST this resolution.
The Company encourages each of its directors to own securities of the
Company. As a matter of fact, each current director beneficially owns
shares of Company stock.
However, the Company does not believe that a director be required to
own any minimum number of shares, because any such minimum number
might, because of financial contraints and other reasons, make it
impossible for a qualified person to serve as a director of the
Company and thereby deny the Company the benefits of the advice and
counsel of such person.
While, as stated above, the Company encourages each and every
director to continue to invest in the Company, the Company does not
believe that a means test is an appropriate factor in determining
whether or not a person should serve as a director of the Company. The
Company would only nominate directors who would take such obligations
seriously and therefore, the Company does not believe ownership of a
minimum number of shares of Company stock is a necessary test for
serving as a director, nor will such ownership change in any manner
the performance by a director of his duties and responsibilities to
the Company's shareholders.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1997
Annual Meeting must be received by the Company for inclusion in the
Company's proxy statement relating to that meeting not later than July
27, 1997. 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 19, 1995, 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 30, 1996
CHOCK FULL O'NUTS CORPORATION
This proxy solicited by the Board of Directors for the Annual Meeting
on December 19, 1996
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
19, 1996 at 3:00 P.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 Martin J Cullen,
Marvin I Haas and R Scott Schafler
FOR all nominees WITHHOLD authority to vote for all nominees.
FOR all nominees, EXCEPT nominee(s) written below.
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The Board of Directors recommends a vote FOR all nominees.
2. Proposal to ratify the appointment of independent auditors for
1997.
FOR AGAINST ABSTAIN
The Board of Directors recommends a vote FOR Proposal 2.
3. Stockholder Proposals: The Board of Directors recommends a vote
AGAINST the following:
Stockholder Proposal I - Staggered Board ()Against ()For ()Abstain
Stockholder Proposal II - Minimum Ownership
of stock ()Against ()For ()Abstain
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(continued and to be signed on reverse side)
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 against Stockholder Proposals I
and II.
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)
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