CHOCK FULL O'NUTS CORPORATION
370 Lexington Avenue
New York, N.Y. 10017
------------
Notice of Annual Meeting of Stockholders
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Friday, December 18, 1998 at 10:00 A.M.
The Chase Manhattan Bank
11th Floor
Room A
270 Park Avenue
New York, New York 10017
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PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY
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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 Manhattan Bank,
11th Floor - Room A, 270 Park Avenue, New York, New York 10017 on Friday,
December 18, 1998 at 10:00 A.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 1998.
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 resolution that is quoted under the heading "Stockholder
Proposal" 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 22, 1998
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 26, 1998
- - - - - ---------------------------------------------------------------------------
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 1998 Annual Meeting of Stockholders
of the Company to be held at The Chase Manhattan Bank, 11th floor, Room A,
270 Park Avenue, New York, New York 10017 on Friday, December 18, 1998 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 26, 1998. 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 Grant Thornton LLP as the Company's independent auditors for
1999 and against the proposal set forth under the heading "Stockholder
Proposal". 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 22, 1998
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 10,831,000
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:
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 84 years old. He is also a director of Richton
International Corporation.
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 81 years old.
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 73 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 has held for more than five years). His responsibilities
include managing the decentralized personal life insurance medical
underwriting activities for Metropolitan. He is 48 years old. (Term to
expire at the 2000 Annual Meeting).
JERRY COLUMBUS-Mr. Columbus was eleted to the Board of Directors in
September 1997. He is a strategic planning consultant in the consumer
products area and President of Columbus Consulting Company (a company which
provides strategic planning and other management consulting services to mid-
sized manufacturers, distributors and retailers), positions he has held for
over two years. Prior to that time, for 16 years he was employed by Grant
Thornton LLP (the sixth largest U.S. Accounting and Management Consulting
Firm). The last 7 of those years he was a management consulting partner
providing services to manufacturing and distribution companies. He is 46
years old. (Term to expire at the 2000 Annual Meeting).
MARTIN J. CULLEN-Mr. Cullen was elected to the Board of Directors in 1981.
He has been a Vice President of the Company for over 20 years and in 1981
was also elected Treasurer of the Company. He is 65 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.
(Term to expire at the 1999 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 of the
Company and in February 1995, he was elected President of the Company. He
was Vice Chairman of the Board and Chief Operating Officer of the Company
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 56 years old. (Term to
expire at the 1999 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 57 years
old. (Term to expire at the 2000 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 63 years old. In
November 1993, BEEW sold its electrical contracting assets, including its
name, to another electrical contractor, and changed its name to BPI. (Term
to expire at the 2000 Annual Meeting).
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 48 years old.
(Term to expire at the 1999 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 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 Jerry Columbus, Henry Salzhauer, R. Scott
Schafler and David S. Weil. The Compensation Committee which met four times
in fiscal year 1998 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, R. Scott
Schafler and David S. Weil. This Committee met three times relative to the
Company's 1998 fiscal year. The Audit Committee approved the selection of
Grant Thornton LLP 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 exercise the power and authority of the Board of Directors when the entire
Board is unable to convene. All directors 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, 1998:
COMPENSATION TABLE
Annual Compensation
-------------------------
Name and Fiscal Other Annual
Principal Position Year Salary Bonus Compensation
- - - - - ------------------------------------- ------ ------ ----- ------------
(a)
Marvin I. Haas 1998 $268 $20
President and 1997 269 $205
Chief Executive Officer 1996 269
Howard M. Leitner 1998 222 20
Senior Vice President and 1997 221 84
Chief Financial Officer 1996 222
Thomas Donnell 1998 170 34 5
President and Chief Executive 1997 163 65
Officer of Cain's Coffee Company 1996 167 52
Martin J. Cullen 1998 184 20
Vice President, Secretary 1997 183 45
and Treasurer 1996 186
Anthony Fazzari 1998 172 8 11
Senior Vice President - Retail Sales 1997 170 50
and Marketing 1996 175 28 ------
(a) Perquisites include use of corporate automobiles (ranging between $1,000
and $10,000) and life insurance (ranging between $2,000 and $10,000).
On August 5, 1998, the Company entered into employment agreements with
Marvin I. Haas, Howard M. Leitner and four other officers. The agreements
are effective in the event of a change in control(as defined)and provide,
among other matters, for a term of three years beginning immediately after
the change in control and for base salary, bonus and other employee benefits
at amounts existing immediately prior to the change in control.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options/SARs
granted during fiscal 1998 to the named executives:
Individual Grants
Number of % of Total
Securities Options/SARs Exercise Grant Date
Underlying Granted to or Base Present
Options/SARs Employees in Price Expiration Value
Name Granted Fiscal Year ($/Share) Date (1)(2)
Howard M. Leitner 8000 15.1% $6.94 12/11/02 $16,080
Thomas Donnell 7500 14.2% 6.94 12/11/02 $15,075
Anthony Fazarri 7500 14.2% 6.94 12/11/02 $15,075
___________
(1) Options are exercisable in three equal annual installments commencing
one year 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-tranferable 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 accuratley 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.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION/SAR VALUES
The following table summarizes options and SARs exercised during fiscal
1998 and presents the value of unexercised options and SARs held by the
named executives at fiscal year end:
Value of
Unexercised
Number of In-the-Money
Unexercised Options/SARs
Shares Options/SARs at at Fiscal
Acquired Fiscal Year-End Year-End
on Valued Exercisable (E) Exercisable (E)
Name Exercise Realized Unexercisable (U) Unexercisable
(U)
Marvin I. Haas 0 0 166,667 E $93,750 E
83,333 U $46,875 U
Howard M. Leitner 0 0 10,667 E
13,333 U
Thomas Donnell 0 0 6,667 E
10,833 U
Martin J. Cullen 0 0 6,667 E
3,333 U
Anthony Fazzari 0 0 6,667 E
10,833 U
Restricted stock share holdings at July 31, 1998 for Mr. Leitner and
Mr. Cullen amounted to 35,778 shares ($225,800) and 3,577 ($22,580),
respectively. These shares are to vest ratably through 2001. The unvested
portion of the shares are subject to forfeiture in the event the Company
terminates employment for Cause (as defined) or the employee terminates
employment for a reason (as defined) 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 employee for Good Reason, death,
disability or retirement, or after a change in Control (as defined).
The Company has established a Benefits Protection Trust with State Street
Bank and Trust Company (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. At the present time, the Company has
no intention of making additional contributions to the Trust Fund.
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 annually 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, 1998 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
$30,000, $48,000, $17,000, $109,000 and $39,000, respectively.
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.
The Senior Vice President and Chief Financial Officer 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 Vice-President, Secretary/Treasurer can receive a bonus of
from 8% to 30% 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 18% to 45% of base pay dependent upon sales volume, a return
on net assets and operating profit at an agreed upon percent and levels. 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
1998, 23,000 non-qualified stock options were granted to the named
executives. The incentive cash bonus program for fiscal 1998 is substantially
the same as fiscal 1997 which 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 a compensation specialist from a major New
York law firm. 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 1998 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
JERRY COLUMBUS
HENRY SALZHAUER
R. SCOTT SCHAFLER
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, the S&P Midcap 400 Index for
Foods and Beverages and a Peer Group. The Peer Group includes the following
companies: American Rice Inc., Bridgford Foods Corp., Golden Enterprises Inc.,
Grist Mill Co., J&J Snack Foods Corp., J.M. Smucker Co., Lance Inc., Michael
Foods Inc. and Tasty Baking Co.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CHOCK FULL O'NUTS CORPORATION, THE S & P 500 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
CHART
*$100 INVESTED ON 7/31/93 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JULY 31.
PENSION PLAN
The Chock Full O'Nuts Corporation Pension Plan ("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
six months 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, 1998 of Messrs. Haas, Leitner, Donnell, Cullen, and Fazzari are
8, 18, 4, 25, and 10, respectively.
Marvin I. Haas and Howard M. Leitner are the Trustees of the Plan.
The Company maintains a non qualified, unfunded Supplemental Employee
Retirement Plan ("SERP"), which covers those participants of the Plan whose
benefits would otherwise be denied by reason of certain Internal Revenue
Code limitations on qualified plan benefits. A participant in the SERP is
entitled to a benefit equaling the difference between the amount of benefits
the participant is entitled to without reduction (limited to $130,000 at
normal retirement)and the amount of benefits the participant is entitled to
after the reduction (those payable under the Plan). The SERP provides for
immediate funding in the event of a change in control (as defined)of the
Company.
The table below shows the estimated annual pension benefits at normal
retirement age to an employee upon retirement under the Plan, taking into
account the Company's SERP.
Final
Average
Earnings 15 Years 20 Years 25 Years 30 Years 35 Years
- - - - - ---------- -------- -------- -------- -------- --------
$300,000
and higher $78,000 $104,000 $130,000 $130,000 $130,000
$250,000 75,000 100,000 125,000 125,000 125,000
$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 January 1991, April 1991,
May 1995, September 1995 and August 1997 the Company loaned the ESOP
$325,000, $675,000, $500,000, $500,000 and $1,000,000, respectively, to be
repaid in equal annual installments over eight years from the date of the
loan with interest primarily at 9% and 10%. 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 or in the
event of a change in control (as defined). Shares are allocated to
participant's accounts annually based upon the annual compensation (up to
$160,000) 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
contributions are made, 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 4,740 shares, 4,608 shares,
1,831 shares, 6,236 shares and 5,667 shares of common stock were allocated to
each of the accounts of Messrs. Haas, Leitner, Donnell, Cullen and Fazzari,
respectively.
UNFUNDED DIRECTORS RETIREMENT PLAN
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)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 spouses of two deceased
directors. 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of September 30, 1998, 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 746,591(1)(7) 6.8%(1)(7)
Howard M. Leitner 447,958(1)(7) 4.1%(1)(7)
Mark A. Alexander 3,020(3) *
Norman E. Alexander 46,179(4) *
Martin J. Cullen 23,446(7) *
Stuart Z. Krinsly 1,280(5) *
Henry Salzhauer 127,175(6) 1.2%
R. Scott Schafler 3,182 *
David S. Weil 6,796 *
All Directors and executive officers as
a group (17 persons), including the
above named persons 1,838,451(1)(2)(7) 16.7%(1)(2)(7)
- - - - - ------
* Less than 1% of class.
(1) Includes 389,100 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) Includes 800,078 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. See "Employee Stock Ownership Plan".
(3) Includes 1,920 shares which would be received upon conversion of
$15,000 of the Company's 8% Convertible Subordinated Debentures.
(4) Includes 44,884 shares owned by Galleon Syndication Corporation of
which Norman E. Alexander 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) Includes 6,075 shares which would be received upon the conversion of
$50,000 of the Company's 7% Convertible Senior Subordinated Debentures.
(7) Includes for Messrs. Haas, Leitner and Cullen, respectively, 166,667,
10,667 and 6,667 shares granted under stock option agreements which are
currently exercisable.
The following tables sets forth, as of October 6, 1998, 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
Name and Address of Beneficially of
Beneficial Owner Owned Class
- - - - - ------------------------------- --------------------- -----------------
Chock Full O'Nuts Corporation
Employee Stock Ownership Plan
Chock Full O'Nuts Corporation
370 Lexington Avenue
New York, New York 10017 800,078(1) 7.4%(1)
Gabelli Funds, Inc.
One Corporate Center
Rye, New York 10580 1,753,315(2) 15.3%(2)
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401 735,576(3) 6.8%(3)
The TCW Group, Inc.
865 South Figueroa Street
Los Angeles, California 90017 823,588(6) 7.6%(4)
- - - - - ------
(1) See "Employee Stock Ownership Plan".
(2) Includes 369,744 shares which would be received upon conversion of
$3,043,000 of the Company's 7% Convertible Senior Subordinated
Debentures and 222,919 shares which would be received on conversion of
$1,741,000 of the Company's 8% Convertible Subordinated Debentures.
This information has been confirmed to the Company by Gabelli Funds,
Inc. on October 2, 1998.
(3) This information as of June 30, 1998 has been confirmed to the Company
by Dimensional Fund Advisors, Inc. on October 6, 1998.
(4) The information has been confirmed to the Company by The TCW Group,
Inc. on October 5, 1998.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Directors propose that the stockholders ratify the appointment of Grant
Thornton as the Company's independent auditors for 1999. Grant Thornton has
been the Company's independent auditors since the last year. The report of
Grant Thornton with respect to the Company's financial statements appears in
the Company's annual report for the fiscal year ended July 31, 1998. A
representative of Grant Thornton 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.
On April 30, 1998 the Company engaged Grant Thornton, LLP as its independent
auditors for the year ending July 31, 1998 as approved by the Executive
Committee of the Board of Directors and simultaneously dismissed Ernst &
Young LLP. The reports of Ernst & Young LLP on the Company's financial
statements for the past two fiscal years did not contain an adverse opinion
or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. In connection with the
audits of the Company's financial statements for each of the two fiscal years
ended July 31, 1996 and 1997, and in the subsequent interim periods there were
no disagreements with Ernst & Young LLP on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope
and procedures which, if not resolved to the satisfaction of Ernst & Young
LLP would have caused Ernst & Young LLP to make reference to the matter in
their report. Further, there were no reportable events as that term is
described in Item 304(a)(1)(v)of Regulation S-K.
STOCKHOLDER PROPOSAL
John Jennings Crapo, who resides at PO Box 151, Cambridge, MA 02140-0002
has advised the Company of his intention to introduce the following resolution
at the meeting:
RESOLVED: Shareholders of the Chock full o'Nuts Corporation (the "holding
company") instruct the board of directors (the "Board") of the holding company
to publish in the proxy statement of the next two successive shareholder
annual meetings an appendix concerning the charitable donations program of the
holding company for the immediate past fiscal year of the holding company with
the following information: (i) an explanation of at least five hundred words
explaining the standards of the holding company governing it's donations to
Internal Revenue Service (IRS) approved private foundations to include
standards of rejection of such help and (ii) an enumeration of IRS qualifying
charities and IRS approved foundations which our Board plans to help in the
ensuing fiscal year included with each charity and foundation an eleucidation
of at least twenty-six years how it complied with the standards and procedures
enumerated in (i).
The Board of Directors recommends a vote AGAINST this resolution.
The Company believes that it has an obligation to be a good corporate
citizen and, therefore, the Company, from time to time, makes charitable
donations to organizations which the Company deems worthy of such donations.
A decision is made on a case by case basis.
The proposal would require the Company to include in its proxy statements
for the next two years (i) an explanation of at least five hundred (500)
words setting forth standards for the Company's donations, (ii) a list of
charities which the Company proposes to "help," and (iii) an analysis of
such charities' operations for their last twenty-six (26) years to ensure
compliance with the Company's standards.
The Company believes that such a task would take an extraordinary amount
of management's time and effort as well as burden the Company with an
extraordinary expense, none of which would be beneficial to the Company or
its shareholders.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1999 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, 1999. 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 12, 1997, 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 The Altman Group to aid in solicitation of proxies at an anticipated
aggregate cost of $10,000, plus reasonable out-of-pocket expenses.
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, 1998
CHOCK FULL O'NUTS CORPORATION
This proxy solicited by the Board of Directors for the Annual Meeting on
December 18, 1998
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 18, 1998 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 - Norman E. Alexander,
Stuart Z. Krinsly and David S. Weil.
~ 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 1999.
~ FOR ~ AGAINST ~ ABSTAIN
The Board of Directors recommends a vote FOR Proposal 2.
3. Stockholder Proposal: Publish an appendix concerning the charitable
donations program.
The Board of Directors recommends a vote AGAINST the shareholder proposal:
AGAINST ~ FOR ~ ABSTAIN
- - - - - ------------
(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 the Stockholder Proposal.
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)
