-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RcbfljWdI/zf3/LfTqQZb+o6E2PcuAxpWLVPV1gq5lqv4ScZwdGJV6TgtrxHlAqA UKPbdK3qTj+PW8PiSKMl3g== 0000950172-99-000463.txt : 19990423 0000950172-99-000463.hdr.sgml : 19990423 ACCESSION NUMBER: 0000950172-99-000463 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990422 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CHOCK FULL O NUTS CORP CENTRAL INDEX KEY: 0000020041 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 130697025 STATE OF INCORPORATION: NY FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-03132 FILM NUMBER: 99599159 BUSINESS ADDRESS: STREET 1: 370 LEXINGTON AVE STREET 2: 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125320300 MAIL ADDRESS: STREET 1: 370 LEXINGTON AVENUE STREET 2: 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEE SARA CORP CENTRAL INDEX KEY: 0000023666 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 362089049 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: THREE FIRST NATIONAL PLZ STREET 2: STE 4600 CITY: CHICAGO STATE: IL ZIP: 60602 BUSINESS PHONE: 3127262600 MAIL ADDRESS: STREET 1: THREE FIRST NATL PLZ STREET 2: SUITE 4600 CITY: CHICAGO STATE: IL ZIP: 60602 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED FOODS CORP DATE OF NAME CHANGE: 19850402 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED GROCERD CORP DATE OF NAME CHANGE: 19731220 SC 13D 1 ============================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 ---------------- 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). ============================================================================= CUSIP No. 170268 13D Page 2 of 7 Pages - ----------------------------------------------------------------------------- NAMES OF REPORTING PERSONS: SARA LEE CORPORATION 1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS: 36-208-9049 - ----------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP. (a) |_| (b) |_| - ----------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------- 4 SOURCE OF FUNDS: WC - ----------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| - ----------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: STATE OF MARYLAND - ----------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 598,328 SEE ITEM 5 - ---------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES |_| - ---------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 5.29% * - ---------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------- * 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 - ------- ------- 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. EX-99 2 EXHIBIT 1(A) - LETTER 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 EX-99 3 EXHIBIT 1(B) - LETTER 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 EX-99 4 EXHIBIT 1(C) - CONFIDENTIALITY AGREEMENT 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: EX-99 5 EXHIBIT 1(D) - LETTER 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 EX-99 6 EXHIBIT 1(E) - LETTER 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:
LTM 1998 1997 1996 1995 1994 --- ---- ---- ---- ---- ---- 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)
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