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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
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Chock Full O'Nuts Corporation
(Name of Subject Company)
Chock Full O'Nuts Corporation
(Name of Person(s) Filing Statement)
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8% Convertible Subordinated
Debentures due September 15, 2006
7% Convertible Senior Subordinated
Debentures due April 1, 2012
Common Stock, Par Value $0.25 Per Share
(including associated common stock purchase rights)
(Title of Class of Securities)
170268AC0
170268AB2
170268 10 6
(CUSIP Number of Classes of Securities)
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Howard Leitner
Chock Full O'Nuts Corporation
370 Lexington Avenue
New York, New York 10017
(212) 532-0300
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on behalf of
the Person Filing Statement)
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With copies to:
W. Leslie Duffy, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
(212) 701-3000
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Item 1. Security and Subject Company
The name of the subject company is Chock Full O'Nuts Corporation, a New York
corporation (the "Company"). The principal executive offices of the Company
are located at 370 Lexington Avenue, New York, New York 10017. The classes of
securities to which this Statement relates are (i) the Company's Common Stock,
par value $0.25 per share (the "Common Stock"), including the associated
Common Stock purchase rights (the "Rights" and, together with the Common
Stock, the "Shares") issued pursuant to the Amended and Restated Rights
Agreement dated as of December 30, 1997 (the "Rights Agreement") between the
Company and American Stock Transfer & Trust Company, (ii) the Company's 8%
Convertible Subordinated Debentures due September 15, 2006, issued under an
Indenture dated as of September 15, 1986 between the Company and Bank One
Corporation, as successor to Manufacturers Hanover Trust Company (the "8%
Convertible Debentures"), and (iii) the Company's 7% Convertible Senior
Subordinated Debentures due April 1, 2012, issued under an Indenture dated as
of April 1, 1987 between the Company and IBJ Whitehall Bank & Trust Company
(the "7% Convertible Debentures" and, together with the 8% Convertible
Debentures and the Shares, the "Securities").
Item 2. Tender Offer of the Bidder
This Statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated May 7, 1999 (the "Schedule 14D-1") filed by
Sara Lee Corporation, a Delaware corporation ("Sara Lee"), and its wholly-
owned subsidiary CFN Acquisition Corporation, a Delaware corporation (the
"Purchaser" and, together with Sara Lee, the "Bidder"), to purchase (i) all of
the outstanding Shares at a price of $10.50 per Share, (ii) all of the
outstanding 8% Convertible Debentures at a price of $1,275.82 per $1,000
debenture and (iii) all of the outstanding 7% Convertible Debentures at a
price of $1,344.43 per $1,000 debenture, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 7, 1999 (the "Offer to
Purchase") and the related Letters of Transmittal (which, as amended from time
to time, together with any amendments and supplements thereto, collectively
constitute the "Offer"). The Offer to Purchase states that the principal
executive office of each of Sara Lee and the Purchaser is Three First National
Plaza, Chicago, Illinois 60602.
Item 3. Identity and Background
(a) The name and business address of the Company, which is the person filing
this Schedule 14D-9, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
the Company and its executive officers, directors or affiliates are described
in the sections entitled "Executive Compensation and Transactions with
Directors, Officers and Principal Holders", "Option/SAR Grants in Last Fiscal
Year", "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year
End Option/SAR Values", "Report of the Compensation Committee on Executive
Compensation", "Pension Plan", "401(k) Cash or Deferred Com-pensation Plan",
"Deferred Compensation Plan", "Employee Stock Ownership Plan", "Unfunded
Directors Retirement Plan" and "Security Ownership of Certain Beneficial
Owners and Management" in the Company's Proxy Statement for the 1998 Annual
Meeting of Shareholders held on December 18, 1998 (the "Proxy Statement"). A
copy of the pertinent portions of the Proxy Statement is filed as Exhibit 1
hereto, and such portions are incorporated herein by reference.
Effective as of October 27, 1998, the employment agreement between the
Company and Marvin Haas, the President and Chief Executive Officer of the
Company, was amended and restated. The amended and restated employment
agreement is substantially the same as his employment agreement previously in
effect (as described in the Proxy Statement) except that benefits are payable
in the event of his voluntary resignation for any reason following a Change in
Control (as defined) and not just for certain specified reasons constituting
"Good Reason" (as was provided in the prior employment agreement) and his base
salary continued for the balance of the term after a termination of employment
following a Change in Control is increased by $75,000 per year.
2
On April 30, 1999, in view of the need to minimize management distraction
and to retain management's loyalty and dedication to the Company and to assure
their attention to the Company's performance pending resolution of the
Bidder's proposal, the Board of Directors of the Company (the "Board")
approved the amendment of the annual incentive cash bonus plan covering nine
individuals to provide for the payment of (1) a minimum bonus with respect to
the fiscal year ending July 31, 1999 and (2) the maximum bonus with respect to
a fiscal year if a Change in Control (as defined) of the Company occurs in
such fiscal year. The minimum bonus for each individual is 1/3 of such
individual's maximum bonus opportunity. Mr. Marvin Haas, the President and
Chief Executive Officer of the Company, chose not to accept such amendment as
it relates to the minimum bonus. In the event of a Change in Control of the
Company, the maximum bonus would be payable within 30 days following a Change
in Control. As six executive officers of the Company (including the two
individuals named in the Proxy Statement) are covered by employment agreements
which upon certain terminations of employment following a Change in Control
provide for the payment of this maximum bonus for the fiscal year in which the
Change in Control of the Company occurs, this amendment as approved by the
Board of Directors does not require the Company to make material additional
payments. See "Executive Compensation and Transactions with Directors,
Officers and Principal Holders" in the Proxy Statement (the pertinent section
of which is filed as Exhibit 1 hereto).
To the knowledge of the Company, except as described above, as of the date
hereof, there are no material contracts, agreements, arrangements or
undertakings, or any actual or potential conflicts of interest between the
Company or its affiliates and (1) the Company, its executive officers,
directors or affiliates or (2) the Bidder or its executive officers, directors
or affiliates except as described herein or incorporated by reference.
Item 4. The Solicitation or Recommendation
(a) Recommendation of the Board of Directors. In a letter dated August 15,
1997, the Bidder formally invited the Company to negotiate a business
combination acceptable to both companies and their respective shareholders. On
August 20, 1997 the Company indicated in a letter to the Bidder that it was
not interested in pursuing such negotiations.
On July 8, 1998, the Bidder submitted a written proposal to the Board of the
Company proposing that the Bidder acquire the Company at a purchase price of
$9.50 per Share in cash or shares of the Bidder's common stock ("Bidder Common
Stock"). The Bidder, in a letter to the Board, reiterated its offer on July
29, 1998. On August 12, 1998, the Board responded, in a letter to the Bidder,
that it was, with the assistance of Credit Suisse First Boston Corporation
("CSFB"), the Company's financial advisor, reviewing and evaluating the
proposal.
On September 15, 1998, representatives of the Company, the Bidder and their
respective financial advisors met. At this meeting, the proposal and related
matters were discussed. On October 2, 1998, the Company and the Bidder
exchanged certain financial information. On October 16, 1998, the Bidder
increased its proposal to $10.50 per Share in cash or shares of Bidder Common
Stock. The Bidder, through a representative, subsequently indicated the
possibility of a transaction at a price of $11.00 per Share in some
combination of cash and Bidder Common Stock. On October 29, 1998, the Board,
through CSFB, communicated to the Bidder's financial advisor that it was
rejecting the Bidder's proposal, but that it would be willing to discuss a
transaction at a higher price. On October 29, 1998, CSFB relayed to the
Board that the Bidder had indicated it was not interested in increasing its
offer and thereafter, the Bidder broke off all negotiations with the Company.
In a March 10, 1999 letter to the Board, the Bidder indicated its renewed
interest in acquiring the Company at a price of $9.50 per Share (a lower price
than the Bidder had previously offered). On March 22, 1999, the Board rejected
the Bidder's March 10th proposal as inadequate. The Board viewed the Bidder's
proposal as an attempt by the Bidder to acquire a competitor at a bargain
price, by taking advantage of commodity price fluctuations and depressed
values for microcap stocks.
On April 12, 1999, representatives of the Bidder informed CSFB that, as of
that day, the Bidder had acquired (directly and through the ownership of
convertible debentures) beneficial ownership of more than 5% of the Shares and
that the Bidder would like to engage in discussions regarding a possible
acquisition during the ten day period prior to filing its Schedule 13D with
the Securities and Exchange Commission (the "SEC"). On April 19, 1999, the
Bidder indicated it was willing to increase its proposal above $10.00 per
Share in connection with such negotiations.
3
On April 20, 1999, the Bidder increased its proposal to $10.50 per Share in
cash. Thereafter, CSFB, at the direction of the Company, told the Bidder that
the Board would consider a transaction at $12.50 per Share, payable in the
Bidder's Common Stock. Later that day the Bidder proposed to acquire the
Company at a price of $10.50 per Share payable in the Bidder's Common Stock.
In further discussions the Bidder indicated its willingness to enter into a
stock transaction with a collar that would provide some protection against
declines in the price of the Bidder's Common Stock, but give the Company's
stockholders the benefit of increases, if any, in the value of the Bidder's
Common Stock between the date of signing a definitive agreement and the
closing. Additionally, the Bidder indicated that it was not willing to
increase its offer to above $11.00 per Share.
At this time the Executive Committee of the Board directed CSFB to make
preliminary confidential inquiries to several other companies to determine if
they would be interested in a transaction with the Company.
On April 22, 1999, the Bidder filed a Schedule 13D with the SEC which
indicated that between November 12, 1998 and April 16, 1999, the Bidder had
purchased 111,200 shares of the Common Stock, $2,639,225.00 aggregate
principal amount of 7% Convertible Debentures and a total (net of redemptions)
of $1,272,764.00 aggregate principal amount of 8% Convertible Debentures. On
May 4, 1999, the Bidder issued a press release announcing its intent to
commence a tender offer to purchase all of the Company's outstanding
Securities. On May 7, 1999, the Bidder filed its Schedule 14D-1 with the SEC.
At a meeting held on May 14, 1999, the Board recommended that its
Securityholders reject the Offer, based upon the Board's determination that
the Offer is inadequate and not in the best interests of the Company and its
Securityholders. After consideration of all relevant factors, including those
discussed below, the Board determined that the $10.50 per Share amount of the
Offer does not adequately reflect the potential value of the Company
achievable for its Securityholders. ACCORDINGLY, THE BOARD RECOMMENDS THAT THE
COMPANY'S SECURITYHOLDER'S REJECT THE OFFER AND NOT TENDER ANY SECURITIES TO
THE BIDDER.
The letter from the Chairman of the Board and the Chief Executive Officer of
the Company to the Securityholders communicating the Board's recommendation
and a press release announcing such recommendation are filed as Exhibits 2 and
3 hereto, respectively, and are incorporated by reference herein.
(b) Reasons for the Recommendation. In reaching the determination and
recommendation discussed in paragraph (a) above, the principal factors,
considered by the Board were:
(i) the Board's familiarity with the business, assets, financial
condition, results of operations, business plans and current business
strategy and future prospects of the Company, the nature of the industry in
which the Company operates and the Company's competitive position in such
industry;
(ii) a presentation by CSFB, indicating that, based upon discounted cash
flow analyses (using various operating assumptions for the Company and
management's estimates of synergies achievable by an acquiror), the per
Share value of the Company is higher than the Bidder's Offer of $10.50
per Share;
(iii) the Board's belief that the Offer is an attempt by the Bidder to
acquire a competitor at bargain price, which belief is based, in part, upon
the fact that the Bidder has, more than once, indicated the possibility of
a transaction at a price of $11.00 per Share;
(iv) the Board's and management's perception that the long-term prospects
for the coffee industry as a whole are generally positive, despite the
industry's recent weakness;
(v) the Board's belief, based in part on the factors referred to in
paragraphs (i) through (iv), that the per Share price of the Offer does not
adequately reflect the potential value of the Company achievable for its
Securityholders;
(vi) the Board's belief that it is in the best interest of the
Securityholders at this time to evaluate, with the assistance of CSFB,
alternatives to the Offer, including pursuing current discussions with
other potential purchasers; and
4
(vii) the Board's commitment to protecting the best interests of the
Company and enhancing the value of the Company for the benefit of the
Securityholders.
In view of the variety of factors considered in connection with its
evaluation, the Board did not find it practicable and did not quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination and recommendation. In addition, individual members
of the Board may have given different weight to different factors.
Item 5. Persons Retained, Employed or to Be Compensated
The Company has retained CSFB as its financial advisor in connection with
the Offer and the evaluation of strategic alternatives. Pursuant to the terms
of CSFB's engagement, the Company has agreed to pay CSFB the following fees:
(i) a financial advisory fee of $250,000 (the "Initial Financial Advisory
fee"), (ii) a transaction fee (the "Transaction Fee") equal to the sum of (a)
1.5% of the total fair market value (at the time of closing) of the aggregate
consideration paid or payable to the Company or the Company's stockholders in
connection with an acquisition transaction or other extraordinary corporate
transaction involving the Company, up to and including the aggregate
consideration implied in a transaction valued at $11.00 per Share and (b) 5.0%
of the incremental amount of the aggregate consideration implied in a
transaction valued in excess of $11.00 per share and (iii) in the event of an
unsolicited tender offer for the Company's securities, (a) a fee of $500,000
(the "Opinion Fee"), payable upon the rendering of an opinion by CSFB as to
the fairness, from a financial point of view, of the consideration to be
received in such unsolicited tender offer, (b) a fee of $500,000 (the
"Additional Advisory Fee"), payable within 180 days from the date of the
unsolicited tender offer if the Company is independent at such time and (c)
if, during the term of CSFB's engagement or within two years after termination
of CSFB's engagement, another transaction for the Company is consummated, a
customary transaction fee as mutually agreed upon by the Company and CSFB. The
Initial Financial Advisory Fee, to the extent previously paid, will be
credited against the Opinion Fee and the Additional Advisory Fee, and the
Initial Financial Advisory Fee, the Opinion Fee and the Additional Advisory
Fee, to the extent previously paid, will be credited against the Transaction
Fee or such other transaction fee paid to CSFB pursuant to clause (iii)(c)
above.
The Company has also agreed to reimburse CSFB for reasonable out-of-pocket
expenses, including the fees and expenses of legal counsel and any other
advisor retained by CSFB (with the Company's prior approval), and to indemnify
CSFB and certain related parties against certain liabilities, including
liabilities under the federal securities laws, arising out of CSFB's
engagement. In addition, the Company has agreed to engage CSFB in connection
with any external financing in connection with CSFB's engagement and any
public offering or private placement of the Company's securities during the
term of CSFB's engagement. CSFB has in the past provided financial services to
the Company unrelated to the Offer.
In the ordinary course of business, CSFB and its affiliates may actively
trade or hold the securities of the Company and the Bidder for their own
account or for the account of customers and, accordingly, may at any time hold
a long or short position in such securities.
The Company has retained Kekst & Co. ("Kekst") as its public relations
advisor in connection with the Offer and related matters. The Company has also
retained The Altman Group ("Altman") to assist the Company in connection with
its communications with Securityholders and to provide other services in
connection with the Offer and related matters. The Company will pay Kekst and
Altman reasonable and customary compensation for their services plus
reimbursement for reasonable out-of-pocket expenses. The Company has also
agreed to indemnify each of Kekst and Altman against certain liabilities and
expenses, including certain liabilities under the federal securities laws.
Item 6. Recent Transactions and Intent with Respect to Securities
(a) Except as set forth below, there have been no transactions in the
Securities during the past 60 days by the Company or, to the best of the
Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
5
Between April 1, 1999 and April 9, 1999, Howard M. Leitner, the Senior Vice
President and Chief Financial Officer and director of the Company, sold a
total of 8,884 Shares for aggregate gross proceeds of $49,330. Mr. Leitner
consummated the sale of such Shares in compliance with the requirements of a
Qualified Domestic Relations Order to which he is subject.
(b) To the best of the Company's knowledge, none of its executive officers,
directors, affiliates or subsidiaries presently intend to tender to the Bidder
pursuant to the Offer any Securities which are held of record or beneficially
owned by such persons or to otherwise sell any such Securities.
Item 7. Certain Negotiations and Transactions by the Subject Company
(a) For the reasons discussed in Item 4 above, the Board has concluded that
the Bidder's Offer is inadequate and not in the best interests of the Company
and its Securityholders. At the May 14, 1999 meeting of the Board, the Board
further concluded that it was in the best interest of the Company and its
Securityholders that management, with the assistance the Company's legal and
financial advisors, continue to develop and evaluate alternatives to the
Bidder's Offer in order to maximize the value of the Company to its
Shareholders, including pursuing current discussions with other potential
purchasers.
Accordingly, the Company has undertaken preliminary exploratory discussions
and negotiations which relate to or would result in: (i) an extraordinary
transaction such as a merger or reorganization involving the Company or any of
its subsidiaries, (ii) a purchase, sale or transfer of a material amount of
assets by the Company or any of its subsidiaries, or (iii) a material change
in the present capitalization of the Company. In this regard, the Company has
had preliminary discussions with other parties regarding their potential
interest in a possible transaction involving the Company of the types
described above, and the Company has furnished confidential information to
certain parties indicating an interest in such a transaction and has responded
to due diligence inquiries from such parties. Although the Board has made no
decision to sell the Company, the Board will give careful consideration to any
acquisition proposal that appropriately reflects the Company's value. There
can be no assurance that the aforementioned activity will result in any
transaction being recommended by the Board or that any transaction which is
recommended will be authorized or consummated.
The Board has determined that disclosure at this time with respect to the
parties to, and the possible terms of, any transactions or proposals of the
type referred to in this Item 7 might jeopardize the institution or
continuation of any discussions that the Company has conducted or may conduct.
Accordingly, the Board adopted a resolution at its May 14, 1999 meeting
instructing management not to disclose the possible terms of any such
transactions or proposals, or the parties thereto, unless and until an
agreement in principle relating thereto has been reached or, upon the advice
of counsel, as may otherwise be required by law.
(b) Except as described in Item 3(b) and Item 4 above, there are no
transactions, board resolutions, agreements in principle or signed contracts
in response to the Offer which relate to or would result in one or more of the
matters referred to in paragraph (a) of this item.
Item 8. Additional Information to Be Furnished
The Rights Agreement.
As of December 30, 1997, the Company entered into the Rights Agreement which
amended the Rights Agreement, dated as of December 30, 1987, between the
Company and IBJ Schroder Bank and Trust Company, as rights agent, to, among
other things, (i) extend the expiration date thereof to December 30, 2007,
(ii) establish an exercise price of $28 per Right (as hereinafter defined),
subject to adjustment, (iii) reduce the redemption price to $.01 per Right,
(iv) add an exchange provision which permits the Board, at its option, in
certain circumstances after the Rights become exercisable to exchange one
share of the Company's Common Stock for each Right, (v) provide certain
exclusions from the operation of the Rights Agreement for certain inadvertent
acquisitions, (vi) name American Stock Transfer & Trust Company as successor
Rights Agent and (vii) make certain other technical modifications.
6
On December 30, 1987, the Board authorized and declared a dividend
distribution of one Right (as defined below) for each outstanding share of
Common Stock of the Company to shareholders of record at the close of business
on January 22, 1988 (the "Record Date"). Except as set forth below, each
Right, when exercisable, entitles the registered holder to purchase from the
Company one share of Common Stock at a price of $28 per share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in the Rights Agreement.
The Rights are initially attached to all certificates representing shares of
Common Stock outstanding, and no separate Right certificates have been
distributed. Until the earlier to occur of (i) a public announcement that,
without the prior consent of the Company, (A) a person or group of affiliated
or associated persons has acquired, or obtained the right to acquire, after
December 30, 1987, beneficial ownership of securities having 20% or more of
the voting power of all outstanding voting securities of the Company, or (B) a
person or group of affiliated or associated persons that, on December 30,
1987, beneficially owned securities having 20% or more of the Company's voting
power, has acquired, or obtained the right to acquire, after December 30,
1987, beneficial ownership of securities representing an additional 2% or more
of the Company's voting power (any such person or group referred to in clauses
(A) or (B) being an "Acquiring Person" and such date being the "Stock
Acquisition Date") or (ii) the tenth business day following the commencement
of (or a public announcement of an intention to make) a tender offer or
exchange offer which would result in any person or group of related persons
becoming an Acquiring Person without the prior consent of the Company, or such
later date as may be fixed by the Board of Directors of the Company (the
earlier of such dates being called the "Distribution Date"), the Rights will
be evidenced, with respect to any of the Common Stock certificates outstanding
as of the Record Date, by such Common Stock certificate. The Rights Agreement
provides that, until the Distribution Date, the Rights will be transferred
only in conjunction with the corresponding transfer of the Common Stock
certificates. From as soon as practicable after the Record Date and until the
later of the Stock Acquisition Date or the Distribution Date (or earlier
redemption, exchange or expiration of the Rights), new Common Stock
certificates issued after the Record Date (including Common Stock certificates
issued at any time after the Record Date upon conversion of the Company's
outstanding 8% Convertible Debentures and 7% Convertible Debentures (together,
the "Convertible Debentures")) upon transfer or new issuance of the Common
Stock will contain a notation incorporating the Rights Agreement by reference.
Until the later of the Stock Acquisition Date or the Distribution Date (or
earlier redemption, exchange or expiration of the Rights), the surrender for
transfer of any certificates for Common Stock outstanding (with or without the
Summary of Rights to Purchase Common Shares attached) will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date, and the separate Rights Certificates alone will evidence
the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on the earliest of (i) December 30, 2007, (ii) consummation of a merger
transaction with a person or group who acquired Common Stock pursuant to a
Permitted Offer (as defined below) and who is offering the same price per
share and form of consideration paid in the Permitted Offer, or (iii)
redemption or exchange by the Company as described below.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision, combination or reclassification of, the
Common Stock, (ii) upon the grant to holders of the Common Stock of certain
rights or warrants to subscribe for Common Stock, certain convertible
securities or securities having the same or more favorable rights, privileges
and preferences as the Common Stock at less than the current market price of
the Common Stock or (iii) upon the distribution to holders of the Common Stock
of evidences of indebtedness or assets (excluding regular cash dividends out
of earned surplus and dividends payable in Common Stock) or of subscription
rights or warrants (other than those referred to above).
In the event that a person becomes an Acquiring Person (unless pursuant to a
tender or exchange offer for all outstanding shares of Common Stock at a price
and on terms determined by at least a majority of the members
7
of the Board of Directors of the Company, who are not an Acquiring Person or
an affiliate or associate of an Acquiring Person, to be both adequate and
otherwise in the best interests of the Company and its various constituents,
including, without limitation, both the long term and short term interests of
the Company and its shareholders (a "Permitted Offer")), proper provision
shall be made so that each holder of a Right will for a 60-day period
thereafter have the right to receive upon exercise thereof that number of
shares of Common Stock having a market value of two times the then current
exercise price of the Right, subject to the availability of a sufficient
number of authorized but unissued shares (such right being called the
"Subscription Right").
In the event that after a Stock Acquisition Date the Company is acquired in
a merger or other business combination transaction involving the Company or
50% or more of its assets or earning power are sold (in one transaction or a
series of transactions), proper provision shall be made so that each holder of
a Right shall thereafter have the right to receive, upon the exercise thereof
at the then current exercise price of the Right, that number of shares of
common stock of the acquiring company (or, in the event there is more than one
acquiring company, the acquiring company receiving the greatest portion of the
assets or earning power transferred) which at the time of such transaction
would have a market value of two times the exercise price of the Right (such
right being called the "Merger Right").
The holder of a Right will continue to have the Merger Right whether or not
such holder exercises the Subscription Right. Upon the occurrence of any of
the events giving rise to the exercisability of the Subscription Right or the
Merger Right, any Rights that are or were at any time owned by an Acquiring
Person engaging in any of such transactions or receiving the benefits thereof
on or after the time the Acquiring Person becomes such shall become void
insofar as they relate to the Subscription Right or the Merger Right.
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractions of shares will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Stock on the last trading date prior to the date of exercise.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"), which redemption shall be effective upon the action of
the Board. Additionally, the Company may thereafter redeem the then
outstanding Rights in whole, but not in part, at the Redemption Price provided
that such redemption is incidental to a merger or other business combination
transaction or series of transactions involving the Company but not involving
an Acquiring Person or any person who was an Acquiring Person or following an
event giving rise to, and the expiration of the exercise period for, the
Subscription Right if and for as long as no person beneficially owns
securities representing 20% or more of the voting power of the Company's
voting securities. The redemption of Rights described in the preceding
sentence shall be effective only as of such time when the Subscription Right
is not exercisable, and in any event, only after 10 business days prior
notice. Upon the effective date of the redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the Company's
voting power and prior to the acquisition by any such person or group of 50%
or more of the Company's voting power, the Board of Directors, at its option,
may exchange all or part of the then outstanding and existing Rights (other
than Rights owned by such person or group which shall become void), for Common
Stock, at an exchange ratio of one share of Common Stock per Right (subject to
adjustment).
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stock-holder of the Company, including, without limitation, the right to
vote or to receive dividends.
The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement.
8
Section 912 of the New York Business Corporation Law.
The Offer is conditioned upon, among other things, the Bidder being
satisfied that the restrictions on business combinations contained in Section
912 of the New York Business Corporation Law ("Section 912") are inapplicable
to the proposed merger set forth in the Offer to Purchase.
Section 912 regulates certain business combinations, including mergers, of a
New York corporation, such as the Company, with a person that has,
individually or with or through its affiliates or associates, acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding voting stock of such corporation (an "Interested Shareholder").
Section 912 provides that no New York corporation may engage in any business
combination with any Interested Shareholder of such corporation for a period
of five years following the date on which such Interested Shareholder becomes
an Interested Shareholder (a "Stock Acquisition Date") unless such business
combination or the purchase of stock made by such Interested Shareholder on
such Interested Shareholder's Stock Acquisition Date is approved by the board
of directors of such corporation prior to such Interested Shareholder's Stock
Acquisition Date.
Unless the Bidder satisfies the requirements of Section 912, the Bidder
would be unable to effect the proposed merger with the Company as contemplated
by the Offer to Purchase for a period of five years.
The foregoing summary of Section 912 does not purport to be complete and is
qualified in its entirety to references to the provisions of Section 912.
Litigation.
Between April 26, 1999 and April 27, 1999, two putative class action
lawsuits were filed by alleged Shareholders of the Company against certain
officers and directors of the Company and the Company, in the Supreme Court of
the State of New York, styled LAURA BENJAMIN V. CHOCK FULL O'NUTS CORP., ET
AL., C.A. No. 9108759 and SANDRA KAFENBAUM ET AL. V. MARK A. ALEXANDER ET AL.,
C.A. No. 99602054. In addition, on April 26, 1999 a shareholder's derivative
complaint was filed by alleged Shareholders of the Company against certain
officers and directors of the Company and the Company, in the Supreme Court of
the State of New York, styled HARBOR FINANCE PARTNERS AND ALAN FREBURG V.
MARVIN I. HAAS ET AL., No. 99-602013. Each of the class action suits and the
shareholder's derivative suit set forth substantially similar allegations of
purported misconduct and breach of fiduciary duties by certain officers and
directors of the Company and the Board related to their conduct and
consideration of certain business combinations. The shareholder plaintiffs
seek, in each case unspecified damages, attorneys' fees and equitable relief,
including, among other things, orders requiring the individual defendants to
carry out their fiduciary duties, enjoining them from proceeding with alleged
violations complained of in the complaints, and requiring them to disgorge all
profits allegedly earned from purported insider stock transactions during the
relevant time period. The Board has received a letter from another shareholder
threatening a shareholder's derivative suit similar to that set forth above.
In addition, the Company has been informed that several additional lawsuits
have been filed which the Company believes contain allegations substantially
similar to those set forth above, however, the Company has not been served
with complaints in such matters. The descriptions of the litigation contained
in this section are qualified in their entirety by the complaints filed as
Exhibits 4, 5 and 6 hereto.
9
Item 9. Material to Be Filed as Exhibits
Exhibit No.
-----------
Exhibit 1 Excerpts from Proxy Statement Chock Full O'Nuts Corporation, dated
October 26, 1998.+
Exhibit 2 Letter to Shareholders, dated May 20, 1999.+
Exhibit 3 Press Release of Chock Full O'Nuts Corporation, dated May 20,
1999.+
Exhibit 4 Complaint filed in the Supreme Court of the State of New York,
Laura Benjamin v. Chock Full O'Nuts Corp., et al. (C.A. No.
9108759).+
Exhibit 5 Complaint filed in the Supreme Court of the State of New York,
Sandra Kafenbaum et al. v. Mark A. Alexander et al. (C.A. No.
99602054).+
Exhibit 6 Complaint filed in the Supreme Court of the State of New York,
Harbor Finance Partners and Alan Freburg v. Marvin I. Haas et al.
(No. 99-602013).+
- --------
+ Filed herewith.
10
SIGNATURE
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.
Chock Full O'Nuts Corporation
/s/ Howard M. Leitner
By: _________________________________
Name:Howard M. Leitner
Title:Senior Vice President and
Chief Financial Officer
Dated: May 20, 1999
Exhibit Index
Exhibit 1 Excerpts from Proxy Statement Chock Full O'Nuts Corporation, dated
October 26, 1998.+
Exhibit 2 Letter to Shareholders, dated May 20, 1999.+
Exhibit 3 Press Release of Chock Full O'Nuts Corporation, dated May 20,
1999.+
Exhibit 4 Complaint filed in the Supreme Court of the State of New York,
Laura Benjamin v. Chock Full O'Nuts Corp., et al. (C.A. No.
9108759).+
Exhibit 5 Complaint filed in the Supreme Court of the State of New York,
Sandra Kafenbaum et al. v. Mark A. Alexander et al. (C.Al. No.
99602054).+
Exhibit 6 Complaint filed in the Supreme Court of the State of New York,
Harbor Finance Partners and Alan Freburg v. Marvin I. Haas et al.
(No. 99-602013).+
- --------
+ Filed herewith.