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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
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CHOCK FULL O'NUTS CORPORATION
(Name of Issuer)
----------------
Common Stock, $.25 par value per share
(Title of Class of Securities)
----------------
170268
(CUSIP Number of Class of Securities)
----------------
JANET LANGFORD KELLY, ESQ.
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
SARA LEE CORPORATION
THREE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60602
(312)726-2600
(Name, Address and Telephone Number of Person authorized to
Receive Notices and Communications on Behalf of Bidders)
Copy to:
CHARLES W. MULANEY, JR., ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 407-0700
April 12, 1999
(Date of Event Which Requires Filing of Statement on Schedule 13D)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule 13D,
and is filing this statement because of Rule 13d-1(b)(3) or (4), check the
following box: [ ]
The information required in the remainder of this cover page shall
not be deemed to be "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act, but shall be subject to all other
provisions of the Act (however, see the Notes).
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CUSIP No. 170268 13D Page 2 of 7 Pages
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NAMES OF REPORTING PERSONS: SARA LEE CORPORATION
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS: 36-208-9049
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP.
(a) |_| (b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS:
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION:
STATE OF MARYLAND
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7 SOLE VOTING POWER
598,328 SEE ITEM 5*
NUMBER OF --------------------------------------------
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY NONE
EACH --------------------------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH 598,328 SEE ITEM 5*
--------------------------------------------
10 SHARED DISPOSITIVE POWER
NONE
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
598,328 SEE ITEM 5
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES
|_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
5.29% *
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14 TYPE OF REPORTING PERSON
CO
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* Between November 12, 1998 and April 16, 1999, Sara Lee
Corporation purchased 111,200 shares of common stock, par value $.25 per
share (the "Common Stock"), of Chock Full O'Nuts Corporation, $2,639,226
principal amount of 7% Convertible Senior Subordinated Debentures, due
April 1, 2012 and $1,340,764 principal amount of 8% Convertible
Subordinated Debentures, due September 15, 2006, less $68,000 principal
amount redeemed, for a total of $1,272,764 principal amount (collectively,
the "Convertible Debentures") in the open market. The Convertible
Debentures are non-voting securities; however, the Convertible Debentures
are convertible into 487,128 shares of Common Stock. This Schedule 13D is
being filed on behalf of Sara Lee Corporation as the beneficial owner of
the shares of Common Stock underlying the Convertible Debentures by virtue
of the conversion rights associated with the Convertible Debentures.
Sara Lee Corporation is entitled to convert the Convertible
Debentures into Common Stock at any time. The aggregate number of shares of
Common Stock which Sara Lee Corporation has a right to obtain by conversion
of the Convertible Debentures is 487,128 shares. Together with the 111,200
shares of Common Stock owned by Sara Lee Corporation, Sara Lee Corporation
holds or has the right to acquire an aggregate of 598,328 shares of Common
Stock representing 5.29% of the 11,318,050 shares of Common Stock of Chock
Full O'Nuts Corporation which would (taking into account such conversion)
then be outstanding (based on the Quarterly Report on Form 10-Q of Chock
Full O'Nuts Corporation for the quarter ended January 31, 1999).
Item 1. Security and Issuer.
This statement on Schedule 13D (this "Statement" or the "Schedule
13D") relates to the Common Stock, par value $.25 per share (the "Common
Stock"), including the associated common stock purchase rights (the
"Rights", and together with the Common Stock, the "Shares"), of Chock Full
O'Nuts Corporation, a New York corporation (the "Issuer"). The Issuer's
principal executive offices are located at 370 Lexington Avenue, New York,
New York 10017.
Item 2. Identity and Background.
(a)-(c) This Statement is being filed by Sara Lee Corporation, a
Maryland corporation ("Sara Lee"). Sara Lee is a global food and consumer
products company which markets a variety of products under leading brand
names, including Hanes, Coach, L'eggs, Dim, Bali, Playtex, Champion, Kiwi,
Hillshire Farm, Ball Park, Jimmy Dean, Douwe Egberts and Sara Lee. The
address of Sara Lee's principal business and principal office is Three
First National Plaza, Suite 4600, Chicago, Illinois 60602.
The name, address and present principal occupation of each of the
directors and executive officers of Sara Lee are set forth in Appendix A
which is attached hereto.
(d) During the past five years, neither Sara Lee, nor to the best
of its knowledge, any director or executive officer of Sara Lee, has been
convicted in a criminal proceeding.
(e) During the past five years, neither Sara Lee, nor to the best
of its knowledge, any director or executive officer of Sara Lee, has been a
party to any civil proceeding of a judicial or administrative body of
competent jurisdiction that resulted in Sara Lee or such person (i) being
subject to a judgment, decree or final order enjoining future violations
of, or prohibiting activities subject to, federal or state securities laws
or (ii) being found in violation with respect to such laws.
(f) Except as provided in Appendix A attached hereto, each
director and executive officer of Sara Lee is a citizen of the United
States.
Item 3. Source and Amount of Funds or Other Consideration.
The amount of funds (net of redemptions) used in making the
purchases of the Common Stock and Convertible Debentures described as
beneficially owned in Item 5(c) hereof was approximately $4,743,239,
including commissions. All of such funds were provided from internally
generated funds. The transactions are set forth in Appendix A attached
hereto.
Item 4. Purpose of the Transaction.
Prior to July 8, 1998, representatives of Sara Lee and the Issuer
from time to time discussed the possibility of a business combination
involving the two companies. In a letter dated August 15, 1997, Sara Lee
formally invited the Issuer to negotiate a business combination acceptable
to both companies and their respective shareholders. On August 20, 1997 the
Issuer indicated that it was not interested in pursuing such negotiations.
From time to time thereafter representatives of Sara Lee approached
representatives of the Issuer regarding a possible transaction. On July 8,
1998, Sara Lee submitted a written proposal to the Board of Directors of
the Issuer proposing that Sara Lee acquire the Issuer. The proposed
purchase price of $9.50 per Share in cash or shares of common stock of Sara
Lee ("Sara Lee Common Stock") represented a 46% premium over the closing
Common Stock price on June 25, 1998 (the day Sara Lee's financial advisors
met with management of the Issuer to discuss a possible transaction). A
copy of the proposal is attached to this Schedule 13D as Exhibit 1(a).
Having received no response from the Board of Directors of the Issuer, on
July 29, 1998, Sara Lee submitted another letter reiterating its offer. On
August 12, 1998, the Board of Directors of the Issuer responded that it was
reviewing and evaluating the proposal with the assistance of its financial
advisor.
On September 15, 1998, representatives of both companies and their
financial advisors met. At this meeting, the proposal and related matters
were discussed. Several telephone conversations between representatives of
Sara Lee and the Issuer regarding the proposal occurred during September
and October 1998. On October 2, 1998, the Issuer and Sara Lee entered into
a Confidentiality Agreement, a copy of which is attached to this Schedule
13D as Exhibit 1(b). Based upon its discussions with the Issuer and its
representatives, in a letter to the Board of Directors of the Issuer
delivered on October 16, 1998, Sara Lee increased its proposal to $10.50
per Share in cash or shares of Sara Lee Common Stock, representing a 79%
premium over the then current price of the Common Stock. A copy of this
proposal is attached to this Schedule 13D as Exhibit 1(c). On October 23,
1998, the Issuer's Board of Directors, through its financial advisors,
rejected this second proposal.
On March 8, 1999, Norman Alexander, the Chairman of the Board of
Directors of the Issuer, and a company controlled by him filed a Schedule
13D disclosing purchases of an aggregate of 533,000 shares of Common Stock
of the Issuer at $5.00 per share on February 24, 1999 as a result of which
(based on such Schedule 13D) he beneficially owns 5.348% of the Issuer's
outstanding Common Stock.
In a letter to the Board of Directors of the Issuer dated March 10,
1999, Sara Lee reiterated its interest in acquiring the Issuer. In light of
the Issuer's unfavorable operating performance, stock price decline and
potential increased severance expenses resulting from the adoption of
employment agreements for certain senior management of the Issuer (which
were disclosed in the Issuer's Annual Proxy Statement dated October 26,
1998 and filed with the Securities and Exchange Commission as exhibits to
the Issuer's Annual Report on Form 10-K filed on October 27, 1998), Sara
Lee offered to acquire the Issuer for $9.50 per Share. This represented a
90% premium over the then current market price of the Common Stock and an
85% premium over the average closing price of the Common Stock for the
prior 20 trading days. A copy of this letter is attached to this Schedule
13D as Exhibit 1(d). On March 22, 1999, the Issuer rejected this proposal
as inadequate.
On April 12, 1999, representatives of Sara Lee informed the
Issuer's financial advisors that, as of that day, Sara Lee had acquired
(directly and through the ownership of convertible debentures) beneficial
ownership of more than 5% of the Issuer's Common Stock. Representatives of
the parties had further discussions during the week of April 12 regarding a
possible meeting between the parties and, on April 16, 1999, Sara Lee's
legal advisors delivered to the Issuer's financial advisors a proposed form
of merger agreement with respect to the acquisition of the Issuer by Sara
Lee. On April 19, 1999, representatives of Sara Lee and its financial
advisors met with representatives of the Issuer and its financial advisors
to discuss the recent performance of the Issuer, a possible transaction
between the parties and related matters. Sara Lee invited representatives
of the Issuer to engage in constructive negotiations regarding the price
and terms of a transaction between the parties and indicated that it was
willing to increase its offer above $10.00 per Share in connection with
such negotiations. The Issuer's representatives indicated that they were
not authorized to engage in such negotiations.
On April 20, 1999, Sara Lee increased its offer to $10.50 per Share
in cash. The Issuer's financial advisors made a counter-proposal to Sara
Lee of $12.50 per share in Sara Lee Common Stock. Later that day in a
letter to the Board of Directors of the Issuer, Sara Lee proposed to
acquire the Issuer at a price of $10.50 per share with the consideration to
be paid in the form of Sara Lee Common Stock. A copy of this letter is
attached to this Schedule 13D as Exhibit 1(e).
Sara Lee's objective is to acquire the Issuer, and it is
considering all options available to meet this objective.
Sara Lee may decide to increase or decrease its investment in the
Issuer based upon its continuing review of its existing investment and
various other factors, including the price and availability of the Issuer's
securities, subsequent developments affecting the Issuer, the Issuer's
business and prospects, other investment and business opportunities
available to Sara Lee, general stock market and economic conditions and
other factors.
Item 5. Interest in Securities of the Issuer.
(a) As of April 22, 1999, Sara Lee beneficially owns 598,328
Shares. 111,200 of such Shares are owned directly and 487,128 are deemed to
be beneficially owned by Sara Lee as a result of its ownership of
$3,911,990 principal amount of Convertible Debentures. As of April 16,
1999, the Convertible Debentures were convertible into 487,128 Shares and,
together with the 111,200 Shares directly owned, represent 5.29% of the
total issued and outstanding Shares of the Issuer (assuming the Convertible
Debentures held by Sara Lee were converted into Shares of Common Stock).
(b) Sara Lee currently exercises sole power to vote or direct the
vote and sole power to dispose or to direct the disposition of 111,200
Shares owned directly. The Convertible Debentures are non-voting securities
of the Issuer. As such, Sara Lee exercises no voting power with respect to
the Convertible Debentures or the Shares underlying such Convertible
Debentures. If the Convertible Debentures are converted, Sara Lee would
exercise sole power to vote or to direct the vote and sole power to dispose
of or to direct the disposition of the 487,128 Shares underlying the
Convertible Debentures.
(c) Attached hereto as Appendix B is a description of the
transactions in Shares and Convertible Debentures, described in Item 4 and
this Item 5, which were effected during the past 60 days. Except as set
forth in Item 4 and this Item 5, Sara Lee has not effected any transactions
in the Convertible Debentures or Shares during the past 60 days.
(d) - (e) Inapplicable
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
None.
Item 7. Material to be Filed as Exhibits.
The following documents are being filed as exhibits to this
Statement and are each incorporated by reference herein.
1(a) Proposal Letter, dated July 8, 1998, from Sara Lee
Corporation to Chock Full O'Nuts Corporation.
1(b) Confidentiality Agreement, dated October 2, 1998, between
Sara Lee Corporation and Chock Full O'Nuts Corporation.
1(c) Proposal Letter, dated October 16, 1998, from Sara Lee
Corporation to Chock Full O'Nuts Corporation.
1(d) Proposal Letter, dated March 10, 1999, from Sara Lee
Corporation to Chock Full O'Nuts Corporation.
1(e) Proposal Letter, dated April 21, 1999, from Sara Lee
Corporation to Chock Full O'Nuts Corporation.
1(e) Proposal Letter, dated April 21, 1999, from Sara Lee
Corporation to Chock Full O'Nuts Corporation.
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: April 22, 1999
SARA LEE CORPORATION
By: /s/ Ann E. Ziegler
---------------------------
Name: Ann E. Ziegler
Title: Vice President - Corporate
Development
EXHIBIT INDEX
Exhibit
Number Exhibit
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1(a) Proposal Letter, dated July 8, 1998, from Sara Lee Corporation to
Chock Full O'Nuts Corporation.
1(b) Confidentiality Agreement, dated October 2, 1998, between Sara Lee
Corporation and Chock Full O'Nuts Corporation.
1(c) Proposal Letter, dated October 16, 1998, from Sara Lee Corporation
to Chock Full O'Nuts Corporation.
1(d) Proposal Letter, dated March 10, 1999, from Sara Lee Corporation to
Chock Full O'Nuts Corporation.
1(e) Proposal Letter, dated April 21, 1999, from Sara Lee Corporation to
Chock Full O'Nuts Corporation.
APPENDIX A
Set forth are the names, addresses and present principal occupations of
each director and executive officer of Sara Lee Corporation.
Paul A. Allaire, whose address is 800 Long Ridge Road, Stamford,
CT 06904, is the Chairman of the Board and Chief Executive Officer of Xerox
Corporation. Mr. Allaire is also a Director of Sara Lee Corporation.
Frans H.J.J. Andriessen, whose address is c/o KPMG European
Headquarters, Avenue Louise 54, B-1050 Brussels, Belgium, is a Professor of
European Integration, University of Utrecht, the Netherlands. Mr.
Andriessen is also a Director of Sara Lee Corporation. Mr. Andriessen is a
citizen of the Netherlands.
John H. Bryan, whose address is Three First National Plaza,
Chicago, IL 60602, is Chairman of the Board and Chief Executive Officer of
Sara Lee Corporation. Mr. Bryan is also a Director of Sara Lee
Corporation.
Duane L. Burnham, whose address is 100 Abbott Park Road,
Abbott Park, IL 60064, is Chairman of the Board of Abbott Laboratories.
Mr. Burnham is also a Director of Sara Lee Corporation.
James R. Carlson, whose address is Three First National Plaza,
Chicago, IL 60602, is Senior Vice President of Sara Lee Corporation.
Charles W. Coker, whose address is North 2nd Street, Hartsville,
SC 29550, is Chairman of the Board of Sonoco Products Company. Mr. Coker
is also a Director of Sara Lee Corporation.
James S. Crown, whose address is 222 N. LaSalle Street, Suite
2000, Chicago, IL 60601, is General Partner of Henry Crown and Company (Not
Incorporated). Mr. Crown is also a Director of Sara Lee Corporation.
Willie D. Davis, whose address is 161 North La Brea Avenue,
Inglewood, CA 90301, is President of All-Pro Broadcasting, Inc., a
privately owned company. Mr. Davis is also a Director of Sara Lee
Corporation.
Gary C. Grom, whose address is Three First National Plaza,
Chicago, IL 60602, is Senior Vice President - Human Resources of Sara Lee
Corporation.
Vernon E. Jordan, Jr., whose address is 1333 New Hampshire
Avenue, N.W., Suite 400, Washington, D.C. 20036, is senior partner of the
Washington, D.C. law firm of Akin, Gump, Strauss, Hauer & Feld L.L.P. Mr.
Jordan is also a Director of Sara Lee Corporation.
Janet L. Kelly, whose address is Three First National Plaza,
Chicago, IL 60602, is Senior Vice President, Secretary and General Counsel
of Sara Lee Corporation.
James L. Ketelsen, whose address is c/o Sara Lee Corporation,
Three First National Plaza, Chicago, IL 60602, is retired. Mr. Ketelsen
is also a Director of Sara Lee Corporation.
Hans B. van Liemt, whose address is c/o Sara Lee Corporation,
Three First National Plaza, Chicago, IL 60602, is retired. Mr. van Liemt
is also a Director of Sara Lee Corporation.
Joan D. Manley, whose address is c/o Sara Lee Corporation, Three
First National Plaza, Chicago, IL 60602, is retired. Mrs. Manley is also a
Director of Sara Lee Corporation.
Mark J. McCarville, whose address is Three First National Plaza,
Chicago, IL 60602, is Senior Vice President - Corporate Development of Sara
Lee Corporation.
C. Steven McMillan, whose address is Three First National Plaza,
Chicago, IL 60602, is President and Chief Operating Officer and a Director
of Sara Lee Corporation.
Frank L. Meysman, whose address is Three First National Plaza,
Chicago, IL 60602, is Executive Vice President and a Director of Sara Lee
Corporation.
Rozanne L. Ridgway, whose address is c/o Sara Lee Corporation,
Three First National Plaza, Chicago, IL 60602, is retired. Ms. Ridgway is
also a Director of Sara Lee Corporation.
Judith A. Sprieser, whose address is Sara Lee Corporation, Three
First National Plaza, Chicago, IL 60602, is Executive Vice President and
Chief Financial Officer of Sara Lee Corporation. Ms. Sprieser is also
a Director of Sara Lee Corporation.
Richard L. Thomas, whose address is c/o Sara Lee Corporation,
Three First National Plaza, Chicago, IL 60602, is retired. Mr. Thomas is
also a Director of Sara Lee Corporation.
John D. Zeglis, whose address is 295 North Maple Avenue, Basking
Ridge, NJ 07920, is President and a Director of AT&T Corporation. Mr.
Zeglis is also a Director of Sara Lee Corporation.
APPENDIX B
Transactions Effected by Sara Lee Corporation
During the 60 Days Preceding the Filing of this Schedule 13D
Date Aggregate Number Price Per Share
of Shares of
Common Stock
4/7/99 3,100 $6.25
4/7/99 1,100 $6.13
4/8/99 9,000 $6.50
4/8/99 4,500 $6.63
4/8/99 12,300 $6.75
4/8/99 700 $6.69
4/8/99 1,000 $6.38
4/9/99 23,500 $7.00
4/9/99 10,000 $7.06
4/12/99 5,900 $6.50
4/12/99 12,100 $6.56
4/12/99 2,000 $6.44
4/13/99 2,500 $6.63
4/13/99 1,000 $6.75
4/13/99 500 $6.56
4/15/99 2,100 $6.50
4/15/99 1,000 $6.38
4/15/99 5,300 $6.75
4/16/99 10,000 $6.75
4/16/99 3,500 $6.69
All transactions were effected through open market transactions.
Exhibit 1(a)
[Sara Lee Corporation Letterhead]
PERSONAL AND CONFIDENTIAL
July 8, 1998
Board of Directors
Chock full o' Nuts Corporation
370 Lexington Avenue
New York, New York 10017
Attn.: Mr. Marvin Haas
Gentlemen:
We have carefully followed Chock full o' Nuts over the past two years and
have discussed with management from time to time the merits of a
combination of our two companies. We agree with management's assessment
that the coffee industry will continue to consolidate and believe that our
businesses will likely be more competitive in combination than stand-alone.
Our combined businesses will have significantly greater geographic coverage
and organizational scale in the food service sector and substantially
broader marketing and financial resources.
We believe that a combination of Chock full o' Nuts with the coffee
business of Sara Lee, on the terms set forth below, will serve the best
interests of our respective stockholders. Accordingly, we were
disappointed to hear last week that you have no interest in pursuing such a
transaction. This is the same response we received in writing last August
20th, when we then expressed our interest.
Sara Lee proposes to acquire all of the outstanding shares of common stock
of Chock full o' Nuts for $9.50 per share (in cash and/or shares of common
stock of Sara Lee), representing a 46% premium to the Company's closing
stock price on June 25, 1998 (the day Goldman Sachs, our representative,
met with management to discuss a possible transaction). We hope that you
will view our proposal as an excellent opportunity for the Chock full o'
Nuts stockholders to realize the full value of their shares to an extent
not likely to be available to them in the marketplace in the foreseeable
future. We are confident that, if asked, your stockholders would agree.
You may wish to consider that Sara Lee's stock price has appreciated by
over 40% since last August 20th while, during the same period, the value of
your share has remained essentially unchanged.
Our proposal is based only on available public information. We may be able
to improve our proposal if you were to provide us with further information.
We could conclude our review of any additional information quite rapidly.
In addition, we wish to express our strong desire to preserve the
continuity of Chock full o' Nuts management and would hope and expect that
certain key members of your management team would become part of the
combined business. To ensure such continuity, we anticipate entering into
appropriate employment agreements with key senior officers of Chock full o'
Nuts as part of the transaction.
The proposal outlined in this letter has been approved by the Board of
Directors of Sara Lee and is subject to the receipt of other customary
approvals and execution of a definitive agreement containing mutually
acceptable terms. The contents of this letter and the existence of any
discussions between Sara Lee and Chock full o' Nuts should not be disclosed
to any party other than the Board of Directors and representatives of Chock
full o' Nuts.
We have tried to proceed in an orderly and constructive manner to discuss a
possible transaction with you. We would strongly prefer to work with you
and your management towards the prompt consummation of a negotiated
transaction. We welcome the opportunity to meet with you and your
representatives as soon as practical to discuss our proposal and the Chock
full o' Nuts business in greater detail. We are confident that a
transaction can be promptly and successfully concluded.
We would hope that following further discussions you will come to share our
enthusiasm about the benefits of this transaction. We look forward to your
early response and will plan to be in touch within the next two weeks.
Sincerely,
/s/ C. Steven McMillan
C. Steven McMillan
Exhibit 1(b)
[Sara Lee Corporation Letterhead]
PERSONAL AND CONFIDENTIAL
October 16, 1998
Board of Directors
Chock full o' Nuts
370 Lexington Avenue
New York, NY 10017
Gentlemen:
We have appreciated the opportunity to review with your financial advisors
certain information and our analysis and views regarding the value of Chock
full o' Nuts Corporation. We remain convinced that the combination of
Chock full o' Nuts with the coffee business of Sara Lee would be in the
best interests of our respective shareholders and employees.
As you know, on July 8, 1998, we submitted to you our proposal to acquire
Chock full o' Nuts for $9.50 per share. This proposal was based solely on
publicly available information. As we indicated to you last week, based on
the information that has been provided to us and subsequent discussions
with your financial advisors, we are prepared to increase our proposal to
$10.50 per share (in cash, shares of common stock of Sara Lee or a
combination thereof), representing a 79% premium to the Company's closing
stock price yesterday.
We continue to believe that our proposal represents a tremendous
opportunity for Chock full o' Nuts shareholders to maximize the value of
their shares. We and our advisors remain prepared to promptly meet with
you to negotiate and execute a definitive merger agreement.
This proposal is not subject to any significant conditions other than
receipt of customary approvals and execution of a definitive agreement
containing customary and mutually acceptable terms. This letter is being
submitted to you on a confidential basis and should not be disclosed to any
party other than your Board of Directors and representatives. This
proposal will expire at the close of business on Monday, October 19, 1998.
We hope you will share our enthusiasm for this proposal and look forward to
working with you and your management towards prompt consummation of a
negotiated transaction.
Sincerely,
/s/ C. Steven McMillan
C. Steven McMillan
cc: Mr. Lawrence A. Hamdan
Credit Suisse First Boston Corporation
Exhibit 1(c)
CONFIDENTIALITY AGREEMENT
CONFIDENTIALITY AGREEMENT ("Agreement") dated October 2, 1998
between Chock full O'Nuts Corporation, a New York corporation ("CFON"), and
Sara Lee Corporation, a Maryland corporation ("SL").
1. SL has requested CFON to explore a possible business
transaction (the "Transaction"). This Agreement relates to the treatment
of certain information, whether furnished before or after the date hereof,
whether oral or written, that may be furnished by CFON to SL in connection
with discussions regarding the Transaction by CFON or its Representatives
(as defined) to SL ("Evaluation Material"). SL acknowledges that the
Evaluation Materials may contain information that is non-public,
confidential and/or proprietary. Evaluation Material includes, without
limitation, memoranda, summaries, notes, analyses, compilations, forecasts,
studies or other documents prepared by SL or any of its Representatives
relating to or based on information or documents supplied by CFON or by any
of its Representatives and further includes any portion of any Evaluation
Material. CFON confirms that it will not make available to SL any
Evaluation Material unless so requested by SL.
2. SL agrees that it will use Evaluation Material solely for
the purpose of evaluating the Transaction and not for any other purpose.
SL agrees that, except as provided in paragraph 5, it will keep the
Evaluation Material confidential and will not, subject to paragraph 4,
without the express written permission of CFON, disclose Evaluation
Material to any person other than its Representatives who (a) need to know
the Evaluation Material for the purpose of evaluating the Transaction, (b)
are informed of the confidential nature of the Evaluation Material and (c)
agree to act in accordance with the terms of this Agreement as if they were
parties hereto. "Representatives" means, as to any person, such person's
affiliates and its and their directors, officers, employees, agents and
advisors (including, without limitation, financial advisors , attorneys and
accountants). SL agrees that it will not, and will direct its
Representatives to not, disclose to any person that Evaluation Material has
been, or is being, made available to it, except with CFON's prior written
consent or in accordance with paragraph 5. SL agrees that it will be
responsible for any breach of the terms hereof by any of its
Representatives.
3. SL acknowledges that it is aware, and will advise its
Representatives who are informed of the matters which are the subject of
this Agreement, that the United States securities laws prohibit any person
who has material, non-public information concerning a company from
purchasing or selling securities of that company or from communicating such
information to any other person under circumstances in which it is
reasonably foreseeable that such other person is likely to purchase or sell
such securities.
4. The foregoing paragraph shall not apply to any portion of
Evaluation Material that (a) is or becomes generally available to the
public other than as a result of a disclosure by SL, (b) is or becomes
available to SL on a non-confidential basis from a person other than CFON
who is not otherwise bound by a confidentiality agreement with CFON or any
of its Representatives, or is not otherwise under a legal, contractual or
fiduciary obligation to CFON or any of its Representatives not to transmit
the information to SL or (c) was already known to SL prior to CFON making
available to SL any Evaluation Material.
5. In the event that SL is requested pursuant to, or required
by, applicable law, regulation, rule or by legal process to disclose any
Evaluation Material, SL agrees that it will provide CFON with prompt notice
of such request or requirement in order to enable CFON to seek an
appropriate protective order or other remedy, to consult with CFON with
respect to CFON taking steps to resist or narrow the scope of such request
or requirement, or to waive compliance, in whole or in part, with the terms
of this Agreement. In any such event, SL will disclose only that portion
of any Evaluation Material which SL is advised by counsel is legally
required and will use its reasonable best efforts to ensure that all
Evaluation Material and other information that is so disclosed will be
accorded confidential treatment.
6. If either party determines to cease discussions and/or not
to proceed with the Transaction, it will promptly inform the other party of
that decision. In that case, SL shall (i) promptly deliver to CFON (at
SL's expense) all written or other Evaluation Material provided by or on
behalf of CFON and all copies, extracts or other reproductions, in whole or
in part, of such written Evaluation Material and (ii) promptly destroy or
cause the destruction of all documents, memoranda, notes and all other
writing or other materials whatsoever containing, reflecting or based on
information in the Evaluation Material and deliver to CFON a certificate of
an appropriate officer attesting to such destruction; provided, however,
that SL may, in its discretion, retain one copy of any Evaluation Material
in its possession in its corporate law department solely for evidentiary
purposes.
7. In consideration of the Evaluation Material being furnished
to SL, SL hereby agrees that, for a period of one year from the date
hereof, without the prior written consent to CFON, SL will not, and will
not cause or permit any of its affiliates to, directly or indirectly,
solicit to employ, hire or retain any of the officers or other key
employees to leave the employ of CFON or any of its subsidiaries; provided,
however, that the foregoing shall not apply to (i) any person who, without
solicitation or encouragement by SL or any of its affiliates, ceases to be
an employee of CFON or such subsidiary or (ii) any employee who responds to
a general advertisement of employment in publications of general
circulation.
8. SL acknowledges and agrees that money damages would not be a
sufficient remedy for any actual or threatened breach of any provision of
this Agreement by it, and that in addition to all other remedies which CFON
may have, CFON shall be entitled to specific performance and injunctive or
other equitable relief as a remedy for such actual or threatened breach.
9. SL agrees that it is not entitled to rely on the accuracy or
completeness of the Evaluation Material and that it will be entitled to
rely solely on such representations and warranties as may be included in
any definitive agreement with respect to the Transaction, subject to such
limitations and qualifications as may be contained therein.
10. Each party agrees that unless and until a definitive
agreement regarding the Transaction has been executed and delivered,
neither party will be under any legal obligation of any kind whatsoever
with respect to the Transaction except for the matters specifically agreed
to herein.
11. This Agreement shall be governed by and be construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law. Each party submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District
of New York and of any New York State court sitting in New York city for
purposes of all legal proceedings arising out of or relating to this
Agreement. Each party waives to the fullest extent permitted by law any
objection it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum. This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute this Agreement as of the date first above
written.
CHOCK FULL O' NUTS
CORPORATION
By: /s/Marvin I. Haas
--------------------------
Name: Marvin I. Haas
Title: President and
Chief Executive Officer
SARA LEE CORPORATION
By: /s/ Mark J. McCarville
---------------------------
Name:
Title:
Exhibit 1(d)
[Sara Lee Corporation Letterhead]
PERSONAL AND CONFIDENTIAL
March 10, 1999
Board of Directors
Chock full o' Nuts
370 Lexington Avenue
New York, NY 10017
Attn.: Marvin Haas
We are disappointed that we have been unable to reach an agreement on the
combination of Chock full o' Nuts with Sara Lee's coffee business. We
continue to believe that such a combination would be in the best interests
of our respective shareholders and employees. As you know, on July 8,
1998, we submitted to you our proposal based solely on publicly available
information to acquire Chock full o' Nuts for $9.50 per share. Based on
information you subsequently provided to us and on discussions with your
financial advisors, in October, 1998, we increased our offer to $10.50 per
share. As you can imagine, we have continued to monitor Chock full o' Nuts
financial performance. In light of Chock's recent financial performance
and stock price, we remain very interested in pursuing a transaction to
acquire Chock full o' Nuts at our original proposal of $9.50 per share.
This proposal represents a 90% premium to your closing price on March 10,
1999 and an 85% premium to your average closing price for the last 20
trading days. We believe that our proposal represents opportunity for your
shareholders to maximize the value of their shares.
This proposal is not subject to any significant conditions other than
receipt of customary approvals and the execution of a definitive agreement
containing customary and mutually acceptable terms. As we have indicated
in the past, we and our advisors remain available to meet with you to
discuss our proposal and to negotiate and execute a definitive merger
agreement.
We look forward to hearing from you.
Sincerely,
/s/ C. Steven McMillan
C. Steven McMillan
Exhibit 1(e)
April 21, 1999
Board of Directors
Chock full o' Nuts Corporation
370 Lexington Avenue
New York, NY 10017
Attention: Marvin Haas, Chief Executive Officer
Gentlemen:
After discussions with your advisors over the past several days, Sara Lee
Corporation ("Sara Lee") has increased its offer for your Company from
$9.50 per share to $10.50 per share. Earlier today, in response to your
advisors, we further improved our proposal by offering stock consideration.
Sara Lee's proposal at $10.50 per share is equal to its highest previous
proposal as communicated on October 16, 1998 of $10.50 per share, despite
the following public disclosure since that time:
- Income from operations for the six months ended January 31,
1999 (the most recent period available since our October 16
proposal) which is $1.9 million less than the comparable
period for the prior year (a 19% decline)
- EPS for the period described above which is $0.06 less than the
comparable period for the prior year (a 19% decline)
- New executive severance agreements
Our proposal represents a 75% premium to today's closing price and we
believe constitutes a very full and fair offer for a company which has
underperformed the stock market in each of the last 1, 3 and 5 year
periods. The attached exhibits provide some context for our proposal and
make some points which we would like to bring to your attention.
The draft merger agreement which was delivered to your advisors on April
16th could be quickly amended to reflect the terms of our last proposal or
any other structural elements which you may feel are attractive to your
shareholders.
Sincerely,
/s/ Mark J. McCarville
Mark J. McCarville
Senior Vice President - Corporate Development
Perspective on Sara Lee's Proposal to the Board of Directors of
Chock full o' Nuts Corporation
1. Our proposed purchase price has a premium associated with it which is
very substantial by any measure:
Price Premium at $10.50
----- -----------------
Latest Close (4/21/99) $6.00 75.0%
Close 30 Trading Days Prior $5.06 107.4%
52-Week High $8.19 28.2%
1 Year Average $6.28 67.3%
3 Year Average $6.13 71.4%
5 Year Average $6.03 74.0%
2. Our proposed purchase price has the following implied multiples (a):
Figure Implied Multiple
------ ----------------
LTM EPS $0.22 47.5x
1998 EPS $0.45 23.3x
Highest EPS of Last Three Years $0.55 19.1x
Highest EPS of Last Five Years $0.57 18.4x
LTM EBITDA $23.4 9.9x
LTM EBIT $13.7 16.9x
(a) Assuming $10.50 per share purchase price, net debt of $(0.8)mm
(includes cash from exercise of .401 mm options with an average exercise
price of $6.52), and 21.6mm fully diluted shares outstanding as per latest
10-Q filed. (b) Latest Twelve Months as of January 31, 1999.
3. We believe that this pricing is extremely attractive for a company which
has had a very inconsistent operating record and whose stock price has
substantially underperformed the S&P 500 over a one, three and five year
period:
<TABLE>
<CAPTION>
LTM 1998 1997 1996 1995 1994
--- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Sales $370.2 $396.4 $366.3 $323.3 $328.2 $265.6
Operating Income $ 13.7 $ 15.6 $ 21.2 $ 15.1 $ 18.3 $ 11.0
% Growth (12.4%) (26.4%) 40.7% (17.3%) 66.2% (9.5%)
EPS $ 0.37 $ 0.45 $ 0.55 $ 0.41 $ 0.51 $ 0.57
% Growth (17.8%) (18.2%) 34.1% (19.6%) (10.5%) 470.0%
Stock Performance
-----------------
1 Year 3 Years 5 Years
------ ------- -------
CHF Shareholders (12.6%) 26.8% (3.2%)
S&P 500 16.2% 102.5% 191.1%
Underperformance in Percentage Points (28.8) (75.7) (194.3)
</TABLE>
