-----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, Iwuge5ZyjOf2ZG6d9PPn0BLPjzNfOlvuEFEwC0Y9KKdmu7f48N03kti8YmfIPmVV BQJoerBaoRupxQfkCfEsOA== 0000950109-96-001189.txt : 19960229 0000950109-96-001189.hdr.sgml : 19960229 ACCESSION NUMBER: 0000950109-96-001189 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19960228 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAIRY MART CONVENIENCE STORES INC CENTRAL INDEX KEY: 0000721675 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CONVENIENCE STORES [5412] IRS NUMBER: 042497894 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: S-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-01267 FILM NUMBER: 96527502 BUSINESS ADDRESS: STREET 1: ONE VISION DRIVE CITY: ENFIELD STATE: CT ZIP: 06082 BUSINESS PHONE: 2037414444 S-2 1 FORM S-2 CLASS A COMMON STOCK As filed with the Securities and Exchange Commission on February 28, 1996. Registration No. 33- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________________ FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 DAIRY MART CONVENIENCE STORES, INC. (Exact name of registrant as specified in charter) DELAWARE 04-2497894 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) ONE VISION DRIVE, ENFIELD, CONNECTICUT 06082 (860) 741-4444 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) COPY TO: ROBERT B. STEIN, JR. STANFORD N. GOLDMAN, JR., ESQUIRE CHIEF EXECUTIVE OFFICER, PRESIDENT MINTZ, LEVIN, COHN, FERRIS, AND CHAIRMAN OF THE BOARD GLOVSKY AND POPEO, P.C. DAIRY MART CONVENIENCE STORES, INC. ONE FINANCIAL CENTER ONE VISION DRIVE BOSTON, MA 02111 ENFIELD, CONNECTICUT 06082 (617) 348-1708 (860) 741-4501 (Name, Address, including zip code, and telephone number, including area code, of agent for service) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 1(a)(1) of this Form, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] CALCULATION OF REGISTRATION FEE
============================================================================================================== TITLE OF EACH PROPOSED PROPOSED CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE REGISTRATION BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE - -------------------------------------------------------------------------------------------------------------- Class A Common Stock, par value $.01 per share........................... 1,715,000 $ 6.95 $ 11,919,250.00 $ 4,110.00 - ------------------------------------------------------------------------------------------------------------- Class A Common Stock Purchase Warrant.... 1,715,000 (2) (2) (2) ==============================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) of the Securities Act of 1933, based upon the exercise price of the Class A Common Stock Purchase Warrants. (2) Pursuant to Rule 457(g) under the Securities Act of 1933, no separate fee is payable for the Class A Common Stock Purchase Warrants. Also registered hereunder pursuant to Rule 416 are an indeterminate number of shares of Class A Common Stock which may be issued pursuant to anti-dilution provisions applicable to the Class A Common Stock Purchase Warrants. ____________________________ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. DAIRY MART CONVENIENCE STORES, INC. CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-2
Form S-2 Item and Caption Location in Prospectus ------------------------- ---------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of.Prospectus .. Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus................. Inside Front and Outside Back Cover Pages; Available Information; Documents Incorporated by Reference 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges.... Risk Factors; The Company 4. Use of Proceeds........................... Not Applicable 5. Determination of Offering Price........... Not Applicable 6. Dilution.................................. Not Applicable 7. Selling Security Holders.................. Selling Stockholders 8. Plan of Distribution...................... Plan of Distribution 9. Description of Securities to be Registered Description of the Class A Common Stock and Warrants 10. Interests of Named Experts and Counsel.... Certain Legal Matters; Experts 11. Information with Respect to the Registrant Documents Incorporated by Reference 12. Incorporation of Certain Information by Reference................................. Documents Incorporated by Reference 13. Disclosure of Commission Position on Indemnification for Securities Act Liabilities............................... Not Applicable
PROSPECTUS DAIRY MART CONVENIENCE STORES, INC. 1,715,000 CLASS A COMMON STOCK PURCHASE WARRANTS 1,715,000 SHARES OF CLASS A COMMON STOCK (PAR VALUE $.01 PER SHARE) ---------------------------------- The 1,715,000 Class A Common Stock Purchase Warrants (the "Warrants") and the 1,715,000 shares of Class A Common Stock (the "Class A Common Stock") of Dairy Mart Convenience Stores, Inc., a Delaware corporation (the "Company" or "Dairy Mart"), offered hereby are being sold by the selling stockholders identified herein (the "Selling Stockholders"). Each Warrant entitles the registered holder thereof to purchase one share of Class A Common Stock at an initial exercise price of $6.95 per share, subject to adjustment in certain circumstances, for a period of six years commencing on December 1, 1995. Offers and sales of the Warrants and the Class A Common Stock may be made on one or more exchanges, in the over-the-counter market, or otherwise, at prices and on terms then prevailing, or at prices related to the then-current market price, or in negotiated transactions, or by underwriters pursuant to an underwriting agreement in customary form, or in a combination of any such methods of sale. The Selling Stockholders may also sell such securities in accordance with Rule 144 under the Securities Act of 1933, as amended (the "1933 Act"). The Selling Stockholders are identified and certain information with respect to them is provided under the caption "Selling Stockholders" herein, to which reference is made. The expenses of the registration of the securities offered hereby, including fees of counsel for the Company, and one counsel for the Selling Stockholders, will be paid by the Company. The following expenses will be borne by the Selling Stockholders: underwriting discounts and selling commissions, if any, and the fee of additional legal counsel, if any, for the Selling Stockholders. The filing by the Company of this Prospectus in accordance with the requirements of Form S-2 is not an admission that any person whose shares are included herein is an "affiliate" of the Company. The Selling Stockholders have advised the Company that they have not engaged any person as an underwriter or selling agent for any of such securities, but they may in the future elect to do so, and they will be responsible for paying such a person or persons customary compensation for so acting. The Selling Stockholders and any broker executing selling orders on behalf of any Selling Stockholders may be deemed to be "underwriters" within the meaning of the 1933 Act, in which event commissions received by any such broker may be deemed to be underwriting commissions under the 1933 Act. The Company will not receive any of the proceeds from the sale of the securities offered hereby, other than receipt of the exercise price. The Class A Common Stock is listed on the Nasdaq Stock Market ("Nasdaq") under the symbol "DMCVA." The Warrants are not listed, nor does the Company intend to list them, on Nasdaq or any national securities exchange. On February 23, 1996, the closing sale price of the Class A Common Stock, as reported by Nasdaq, was $5.94 per share. ---------------------------------- THE WARRANTS AND THE CLASS A COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS. ---------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION, OR ANY STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------------------- The date of this Prospectus is __________ __, 1996. FOR CALIFORNIA RESIDENTS ONLY WITH RESPECT TO SALES OF THE SECURITIES BEING OFFERED HEREBY TO CALIFORNIA RESIDENTS, SUCH SECURITIES MAY BE SOLD ONLY TO (1) "ACCREDITED INVESTORS" WITHIN THE MEANING OF REGULATION D UNDER THE 1933 ACT, (2) BANKS, SAVINGS AND LOAN ASSOCIATIONS, TRUST COMPANIES, INSURANCE COMPANIES, INVESTMENT COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, PENSION AND PROFIT SHARING TRUSTS, CORPORATIONS OR OTHER ENTITIES WHICH, TOGETHER WITH THE CORPORATION'S OR OTHER ENTITY'S AFFILIATES, HAVE A NET WORTH ON A CONSOLIDATED BASIS ACCORDING TO THEIR MOST RECENT REGULARLY PREPARED FINANCIAL STATEMENTS (WHICH SHALL HAVE BEEN REVIEWED, BUT NOT NECESSARILY AUDITED, BY OUTSIDE ACCOUNTANTS) OF NOT LESS THAN $14,000,000 AND SUBSIDIARIES OF THE FOREGOING, (3) ANY CORPORATION, PARTNERSHIP OR ORGANIZATION (OTHER THAN A CORPORATION, PARTNERSHIP OR ORGANIZATION FORMED FOR THE SOLE PURPOSE OF PURCHASING THE SECURITIES OFFERED HEREBY) WHO PURCHASES AT LEAST $1,000,000 AGGREGATE AMOUNT OF THE SECURITIES OFFERED HEREBY, (4) ANY NATURAL PERSON WHO (A) HAS INCOME OF $65,000 AND A NET WORTH OF $250,000, OR (B) HAS A NET WORTH OF $500,000 (IN EACH CASE, EXCLUDING HOME, HOME FURNISHINGS AND PERSONAL AUTOMOBILES), OR (5) ANY "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED UNDER RULE 144A OF THE 1933 ACT. AVAILABLE INFORMATION The Company is subject to certain informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). These reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024 of the Commission's office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549, and at its regional offices located at 7 World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such reports, proxy statements and other information can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549 at prescribed rates. Additional updating information with respect to the securities covered herein may be provided in the future to purchasers by means of appendices to this Prospectus. The Company has filed with the Commission in Washington, DC a registration statement (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the 1933 Act with respect to the securities offered or to be offered hereby. This Prospectus does not contain all of the information included in the Registration Statement, certain items of which are omitted in accordance with the rules and regulations of the Commission. For further information about the Company and the securities offered hereby, reference is made to the Registration Statement and the exhibits thereto. The Company will provide without charge to each person to whom this Prospectus is delivered, on the written or oral request of such person, a copy of any document incorporated herein by reference, excluding exhibits. Requests should be made to Dairy Mart Convenience Stores, Inc., One Vision Drive, Enfield, Connecticut 06082, telephone (860) 741-4444, Attention: Investor Relations. While the Warrants are outstanding, the Company will furnish holders of the Warrants with annual reports containing audited consolidated financial statements and quarterly reports containing unaudited interim consolidated financial statements. 2 RISK FACTORS An investment in the shares being offered by this Prospectus involves a high degree of risk. In addition to the other information contained in this Prospectus or incorporated herein by reference, prospective investors should carefully consider the following risk factors before purchasing the shares offered hereby. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the Risk Factors discussed below. LEVERAGE; DEBT SERVICE At February 3, 1996, the Company had consolidated long-term indebtedness of approximately $99.7 million. As of October 28, 1995, the Company had consolidated long-term indebtedness of approximately $87.9 million and a ratio of consolidated indebtedness to total stockholders' equity of 3.7 to 1. This substantial degree of leverage may have adverse consequences on the Company including: (i) impairment of the Company's ability to obtain additional financing in the future for working capital, capital expenditures or other purposes; (ii) required use of a substantial portion of the Company's cash flow from operations to make interest and principal payments; (iii) an adverse effect on the Company's ability to compete with other businesses that may be less leveraged; and (iv) the Company's increased vulnerability in the event of a downturn in its businesses. The Credit Agreement will mature on May 31, 1996 and contains numerous financial and operating covenants and requires periodic repayments of amounts borrowed thereunder. As of February 3, 1996, the Company had no outstanding revolving credit loans and outstanding letters of credit in the amount of $13.8 million. There can be no assurance that the Company will be able to obtain new financing on satisfactory terms or maintain compliance with the financial covenants that are contained in the Credit Agreement or any new credit facility. Failure to meet such financial tests or other covenants would result in a default thereunder. The Company expects to obtain a new credit facility and generate sufficient cash flow from operations to meet all of its principal and interest obligations on its and its subsidiaries' indebtedness, including indebtedness under the Notes (as hereinafter defined), the Credit Agreement and any new credit agreement. However, the Company's ability to satisfy principal and interest obligations under its credit facility will depend upon dividends and other intercompany transfers from its subsidiaries, and will be subject to the successful implementation of the Company's business strategy and financial, business and other factors affecting the business and operations of the Company and its subsidiaries, including factors beyond their control, such as prevailing economic conditions. NET LOSSES The Company has incurred substantial net losses in two of its last three fiscal years. For the fiscal years ended January 25, 1995 and January 30, 1993, the Company experienced net losses of $11,150,000 and $6,850,000, respectively, primarily reflecting nonrecurring charges incurred during such fiscal periods. In fiscal 1994, the Company had net income of $866,000. The Company expects to incur a substantial net loss for the fiscal year ended February 3, 1996, also reflecting nonrecurring charges incurred during fiscal 1996. There can be no assurance that the Company will not experience annual net losses in the future. MANAGEMENT CONTROL OF THE COMPANY DM Associates Limited Partnership ("DM Associates") owns 1,858,743 shares of the Company's Class B Common Stock. Five of the Company's seven directors are currently elected by the holders of the Company's Class B Common Stock. The remaining two directors are elected by the holders of the Company's Class A Common Stock. The Company's management, through its control of the general partner of DM Associates, is entitled to vote not less than 40.9% of the Company's Class B Common Stock. Such 40.9% of the Company's Class B Common Stock constitutes 37.1% of the total voting power of both classes of Common Stock. In addition, a Change of Control under the Indenture will result (i) if DM Associates continues to hold all of its shares after 3 September 13, 1997, or (ii) if the limited partners of DM Associates exercise their right to require either a sale or distribution to such limited partners of the Company's Common Stock owned by DM Associates if certain conditions are not satisfied, which right is exercisable after September 12, 1997. Further, the limited partnership agreement also requires that the general partner of DM Associates consult with a certain limited partner of DM Associates before voting any shares at a meeting of the Company's shareholders or exercising any consensual rights of such shares. If such general partner votes or exercises consensual rights of such shares in a manner in which such limited partner does not agree, the limited partner may dissolve DM Associates. If a Change of Control were to occur, the Company may be unable to fulfill its obligations to redeem the Notes and to pay principal and interest due under the Notes. ENVIRONMENTAL COMPLIANCE The Company incurs ongoing costs to comply with federal, state and local environmental laws and regulations, particularly the comprehensive regulatory programs governing underground storage tanks ("USTs") used in the Company's gasoline operations. In addition, in the ordinary course of business, the Company periodically detects releases of gasoline or other regulated substances from USTs it owns or operates. In the past three fiscal years ended January 28, 1995, the Company recorded expenses which averaged approximately $1.2 million annually, net of reimbursements from state trust fund programs, for assessment and remediation activities in connection with releases into the environment of regulated substances from USTs at the Company's current or former gasoline facilities. The Company accrues its estimates of all costs to be incurred for assessment and remediation for releases at the time they become known. These accruals are adjusted if and when new information becomes known. Due to the nature of such releases, the actual costs incurred may vary from these estimates, and the ongoing costs of assessment and remediation activities may vary significantly from year to year. In addition, federal and state regulatory programs mandate that all existing USTs be upgraded or replaced by December 22, 1998 to meet certain environmental protection requirements. The Company presently estimates that in addition to the Company's assessment and remediation costs discussed above, it will make aggregate capital expenditures ranging from approximately $10.0 million to $12.5 million over the next three fiscal years to comply with upgrading and other UST regulatory requirements. The actual costs incurred may vary substantially from these estimates. STORE EXPANSION A major component in the Company's growth strategy is to continue to build new stores and increase its level of gasoline sales. The opening of new stores will be dependent upon a number of factors, including general economic conditions, anticipated competition in the Company's markets, the availability of desirable locations, the ability to negotiate and enter into lease, development or acquisition agreements on acceptable terms and the availability of financing. The Company's experience has been that new stores contribute positively to operating income after their first year of operation. There can be no assurance that the Company will be able to open, operate or acquire new stores on a timely or profitable basis in accordance with the Company's current plans. COMPETITION The convenience store and retail gasoline industries are highly competitive. The number and type of competitors vary by location. The Company presently competes with other convenience stores, large integrated gasoline service station operators, super market chains, neighborhood grocery stores, independent gasoline service stations, fast food operations and other similar retail outlets, some of which are well-recognized national or regional retail chains. Some of the Company's competitors have greater financial resources than the Company. Key competitive factors include, among others, location, ease of access, store management, product selection, pricing, hours of operation, store safety, cleanliness, product promotions and marketing. 4 Gasoline sales are very competitive. The Company competes with both independent and national brand gasoline stations. Gasoline profit margins have a significant impact on the Company's earnings. These profit margins are often influenced by factors beyond the Company's control, such as volatility in the wholesale gasoline market, and are continually influenced by competition in each local market area. EFFECT OF WEATHER ON BUSINESS The Company believes that weather conditions have a significant effect on its sales, as convenience store customers are more likely to go to stores to purchase convenience goods and services, particularly higher profit margin items such as fast food items, fountain drinks and other beverages, when weather conditions are favorable. Accordingly, the Company's stores generally experience significantly higher revenues and profit margins during the warmer weather months, which fall within the Company's second and third fiscal quarters. If weather conditions are not favorable in the second and third fiscal quarters, the Company's performance may be adversely affected. GOVERNMENT REGULATION AND POTENTIAL LEGISLATION The Company is subject to numerous federal, state and local laws, regulations and ordinances. In addition, various federal, state and local legislative and regulatory proposals are made from time to time to, among other things, increase the minimum wage payable to employees, and increase taxes on, and regulation of, the retail sale of certain products, such as tobacco products and alcoholic beverages. Changes to such laws, regulations or ordinances may adversely affect the Company's performance by increasing the Company's costs or affecting its sales of certain products. NO PRIOR MARKET FOR THE WARRANTS The Company does not intend to apply for the listing of the Warrants on any securities exchange or on Nasdaq and it is not anticipated that an active trading market will develop for the Warrants. Accordingly, the purchasers of the Warrants may not be readily able to liquidate their investments. If a public trading market develops for the Warrants, future trading prices of such securities will depend on many factors, including, among other things, the Company's results of operations and the market for similar securities. Depending on these and other factors, including the financial condition of the Company, the market price for the Warrants may be adversely affected. LITIGATION The Company is currently involved in a derivative lawsuit in which the plaintiff alleges, among other things, that in connection with the Company's purchase of certain interests from Charles Nirenberg, a former stockholder, director and officer of the Company (the "Nirenberg Transaction"), the Board of Directors violated their fiduciary duty to the Company and its stockholders, violated provisions of Delaware corporate law and wasted corporate assets. The Plaintiff's seek, among other things, a declaration that the current structure of the general partner of DM Associates is invalid and that certain voting rights with respect to the Class B Common Stock held by DM Associates should be vested in the Company. Although the Company is contesting these claims, if the Company became a general partner of DM Associates, a Change of Control of the Company under the Indenture could result. If a Change of Control were to occur, the Company may be unable to fulfill its obligations to redeem the Notes and to pay principal and interest due under the Notes. In addition, if the plaintiff pursues this claim, management of the Company could be forced to commit time and resources to the defense of this action. There can be no assurance that this claim will not have a material adverse effect on the Company's business, operating results and financial condition. 5 THE COMPANY Dairy Mart was founded in 1957 and operates one of the nation's largest convenience store chains. As of the fiscal year ended January 28, 1995, the Company operated or franchised approximately 960 stores under the "Dairy Mart" name in 11 states located in the Northeast, Midwest and Southeast, of which 406 stores sold gasoline and 317 stores were franchised. Dairy Mart stores offer a wide range of products and services which cater to the convenience needs of its customers, including milk, ice cream, groceries, beverages, snack foods, candy, deli products, publications, health and beauty aids, tobacco products, lottery tickets and money orders. The stores are typically located in densely populated, suburban areas on sites which are easily accessible to customers and provide ample parking. Dairy Mart stores are generally free standing structures which are well-lit and are designed to encourage customers to purchase high profit margin products, such as deli items, coffee, fountain drinks and other fast food items. The Company is incorporated in Delaware and maintains its principal executive offices at One Vision Drive, Enfield, Connecticut 06082. The Company's telephone number is (860) 741-4444. SELLING STOCKHOLDERS The securities offered hereby by the Selling Stockholders consist of Warrants to purchase 1,715,000 shares of Class A Common Stock and 1,715,000 shares of Class A Common Stock issuable upon exercise of the Warrants. The Warrants were acquired by the Selling Stockholders (i) in connection with the issuance and sale by the Company of its 10 1/4% Senior Subordinated Notes (Series B) due 2004 (the "Series B Notes") and Warrants pursuant to several Note and Warrant Purchase Agreements dated as of December 1, 1995 between the Company and the Selling Stockholders (filed as an exhibit to the Registration Statement) and (ii) the issuance of Warrants to the holders of the Company's 10 1/4% Senior Subordinated Notes (Series A) due 2004 issued in March 1994 (the "Series A Notes," and together with the Series B Notes, sometimes collectively the "Notes"). The following table sets forth information with respect to the beneficial ownership of the Company's Class A Common Stock as of February 2, 1996 (including shares of Class A Common Stock issuable upon exercise of the Warrants) and as adjusted to reflect the sale of the Warrants/Class A Common Stock offered hereby by each Selling Stockholder. None of the Selling Stockholders has had a material relationship with the Company within the past three years other than as a result of the ownership of the Warrants and the Notes. 6
NUMBER OF SHARES NUMBER OF OF CLASS A PERCENT OF WARRANTS/SHARES COMMON STOCK CLASS A PERCENT OF OF CLASS A BENEFICIALLY OWNED COMMON STOCK WARRANTS COMMON STOCK SELLING STOCKHOLDER PRIOR TO OFFERING(1) OUTSTANDING(2) OUTSTANDING(3) BEING OFFERED(4) - ------------------- --------------------- --------------- --------------- ---------------- The IDS Mutual Fund Group(5) 374,665 11.8% 21.8% 374,665 Sun America, Inc.(6) 360,001 11.4% 21.0% 360,001 Triumph-Connecticut Limited Partnership(7) 765,000 21.5% 44.6% 765,000 Cede & Co. 213,277 7.1% 12.4% 213,277 Jeanne A. Biz 33 * * 33 Charach, Inc. 67 * * 67 Evelyn R. Cross 60 * * 60 Margaret H. Effinger 67 * * 67 Robert O. Effinger 33 * * 33 Roy W. Gividen 67 * * 67 Joseph E. Golder 167 * * 167 Harold Haller 67 * * 67 Deadie Smith 67 * * 67 Dr. A. Kamtar 100 * * 100 Robert J. Lynch 27 * * 27 Vernell B. Markle 67 * * 67 Doris I. Morrison 67 * * 67 Patricia Morrow 67 * * 67 Margaret M. O'Neil 67 * * 67 Agenor C. Rochet 400 * * 400 R. Burns Ross 67 * * 67 Benjamin Schwartz 167 * * 167 Bernard Shapiro 133 * * 133 Linda Shields 167 * * 167 Ruth Wilson 100 * * 100
___________________________________________________________ *Less than 1% of the outstanding class of the security (1) Includes shares of Class A Common Stock issuable upon exercise of the Warrants. The persons named in this table have sole voting and investment power with respect to all shares of Class A Common Stock shown as beneficially owned by them, subject to the information contained in the footnotes to this table. (2) Rounded to nearest one-tenth of one percent, based on 2,801,434 shares of Class A Common Stock outstanding on February 2, 1996. (3) Rounded to nearest one-tenth of one percent. (4) The Selling Stockholders may offer and sell the Warrants held by them, or may elect to exercise the Warrants and offer and sell the shares of Class A Common Stock acquired thereby, or may offer and sell a combination of Warrants and shares of Class A Common Stock. Therefore, no estimate can be given as to the amount and percentage of the Class A Common Stock to be owned by each Selling Stockholder after the completion of the offering. (5) Includes Warrants held of record: (i) by VAR & Co. as nominee for IDS Bond Fund, Inc. and IDS Extra Income Fund, Inc.; (ii) by Wrap Four & Co. as nominee for IDS Life Special Income Fund, Inc. and (iii) by ABCDS & Co. as nominee for American Express Trust Company, as trustee for Total Portfolio Management Trust. (6) Includes Warrants held of record by OKGBD & Co. as nominee for SunAmerica, Inc. and affiliates and formerly held of record by SunAmerica, Inc., SunAmerica Life Insurance Company, and First SunAmerica Life Insurance Company. (7) Triumph-Connecticut Limited Partnership ("Tri-Conn") has shared voting and investment power with respect to all shares of Class A Common Stock shown as beneficially owned by them. The sole general partner of Tri-Conn is Triumph- Connecticut Capital Advisors Limited Partnership, the managing general partner of which is Frederick W. McCarthy. Thomas W. Janes, an affiliate of Tri-Conn, is a director of the Company. PLAN OF DISTRIBUTION The 1,715,000 Warrants and the 1,715,000 shares of Class A Common Stock of the Company offered hereby may be offered and sold from time to time by the Selling Stockholders, or by pledgees, donees, transferees or other successors in interest. Such offers and sales may be made from time to time on one or more exchanges or in the over-the-counter market, or otherwise, at prices and on terms then prevailing or at prices related to the then-current market price, or in negotiated transactions. The Warrants and the shares of Class A Common Stock may be sold by one or more of the following: (a) a block trade in which the broker or dealer so engaged will attempt to sell such securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account; (c) an exchange distribution in accordance with the rules of such exchange; (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers; (e) privately negotiated transactions; and (f) a combination of any such methods of sale. In effecting sales, brokers or dealers engaged by the Selling Stockholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions or discounts from Selling Stockholders or from the purchasers in amounts to be negotiated immediately prior to the sale. The Selling Stockholders may also sell such securities in accordance with Rule 144 under the 1933 Act. The Company has agreed to use its best efforts to maintain the effectiveness of the registration of the shares being offered hereunder for a period of at least three years or such shorter period which will terminate when all of the Warrants and the shares of Class A Common Stock offered hereby have been sold hereunder. The Selling Stockholders and any brokers participating in such sales may be deemed to be underwriters within the meaning of the 1933 Act. There can be no assurance that the Selling Stockholders will sell any or all of the Warrants and the shares of Class A Common Stock offered hereunder. All proceeds from any such sales will be the property of the Selling Stockholders, who will bear the expense of underwriting discounts and selling commissions, if any. DESCRIPTION OF CLASS A COMMON STOCK AND WARRANTS The authorized capital stock of the Company consists of 20,000,000 shares of Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), 10,000,000 shares of Class B Common Stock, par value $.01 per share (the "Class B Common Stock" and, together with the Class A Common Stock, the "Common Stock") and 1,000,000 shares of Serial Preferred Stock, par value $.01 per share (the "Serial Preferred Stock"). VOTING RIGHTS--COMMON STOCK As of February 2, 1996, there were 2,801,434 shares of Class A Common Stock issued and outstanding held of record by approximately 620 stockholders and 2,783,060 shares of Class B Common Stock issued and outstanding held of record by approximately 415 stockholders. Holders of Class A Common Stock are entitled to elect 25% of the Board of Directors (rounded up to the nearest whole number) elected by the holders of Common Stock so long as the number of outstanding shares of Class A Common Stock is at least 10% of the total number of outstanding shares of both classes of Common Stock. Currently, the holders of Class A Common Stock are entitled, as a class, to elect two directors of the Company, and the holders of the Class B Common Stock are entitled, as a class, to elect the remaining five directors. The holders of a majority of the Class B Common Stock can and will continue to be able to elect a majority of the directors elected by the holders of Common Stock, so long as the number of outstanding shares of Class B Common 8 Stock is at least 12.5% of the number of outstanding shares of both classes of Common Stock. If the number of outstanding shares of Class B Common Stock falls below that percentage, directors not elected by the holders of Class A Common Stock will be elected by the holders of both classes of Common Stock, with holders of Class A Common Stock having one-tenth vote per share and holders of Class B Common Stock having one vote per share. Directors may be removed, with or without cause, by the holders of the class or classes of Common Stock that elected them. Vacancies in a directorship may be filled by the vote of the class of shares that had previously filled that vacancy, or by the remaining directors of that class; however, if there are no such directors, the vacancy may be filled by the remaining directors. After the exercise of the Warrants and the issuance and sale of the Class A Common Stock offered by this Prospectus, the outstanding shares of that class will be 62% (assuming no conversions of Class B Common Stock and no additional issuances of Common Stock prior to the exercise of the Warrants) of the total number of shares of both classes outstanding. If the number of outstanding shares of Class A Common Stock should become less than 10% of the total number of outstanding shares of both classes of Common Stock, the holders of Class A Common Stock would not have the right to elect 25% of the Board of Directors elected by the holders of Common Stock. Directors would then be elected by all stockholders voting as one class, except holders of Class A Common Stock would have one-tenth vote per share and holders of Class B Common Stock would have one vote per share. The holders of Class A Common Stock and Class B Common Stock must vote together as a single class in order to amend the Company's Certificate of Incorporation to increase or decrease the aggregate number of authorized shares of any class or classes of stock. Except for the election or removal of directors as described above and except for class votes as required by law, holders of both classes of Common Stock vote or consent as a single class on all matters, with each share of Class A Common Stock having one-tenth vote per share and each share of Class B Common Stock having one vote per share. The present holders of Class B Common Stock will have approximately 38% (assuming no conversions of Class B Common Stock and no additional issuances of Common Stock prior to the exercise of the Warrants) of the combined voting power of both classes of Common Stock after the conversion of the Warrants and the issuance and sale of the Class A Common Stock offered by this Prospectus. DIVIDENDS--COMMON STOCK Cash or property dividends can be declared and paid on the Class A Common Stock without being declared and paid on the Class B Common Stock. No cash or property dividend may be paid on the Class B Common Stock unless a dividend at least equal in amount per share is paid concurrently on the Class A Common Stock. Dividends paid on shares of Class A Common Stock or Class B Common Stock may be paid only as follows: (i) shares of Class A Common Stock may be paid only to holders of shares of Class A Common Stock unless there is no Class A Common Stock outstanding, and shares of Class B Common Stock may be paid only to holders of Class B Common Stock; and (ii) the same number of shares shall be paid in respect of each outstanding share of Class A and Class B Common Stock. For example, if a stock dividend of two shares of Class A Common Stock were paid for each share of Class A Common Stock held, a stock dividend of two shares of Class B Common Stock would simultaneously be paid for each share of Class B Common Stock held. The Company has not paid any cash dividends during the last two fiscal years and pursuant to loan covenants contained in the Credit Agreement, is currently restricted from paying any dividends on its capital stock. 9 CONVERSION--COMMON STOCK At the option of the holder of record, each share of Class B Common Stock is convertible at any time into one share of Class A Common Stock. Conversion of a significant number of shares of Class B Common Stock into Class A Common Stock could put control of the entire Board of Directors into the hands of the current holders of the Class B Common Stock. OTHER RIGHTS--COMMON STOCK Shareholders of the Company have no preemptive or other rights to subscribe for additional shares. On liquidation, dissolution or winding up of the Company, all shareholders, regardless of class, are entitled to share ratably in any assets available for distribution to holders of shares of Common Stock. No shares of either class are subject to redemption. All outstanding shares are, and all shares of Class A Common Stock offered by this Prospectus will be, when sold, legally issued, fully paid and nonassessable. The Company may not subdivide or combine shares of either class without at the same time proportionally subdividing or combining shares of the other class. TRANSFER AGENT The transfer agent and registrar for shares of the Class A Common Stock and Class B Common Stock is the American Stock Transfer Company. SERIAL PREFERRED STOCK The Board of Directors may, without action of the shareholders of the Company, issue Preferred Stock from time to time in one or more series with distinctive serial designations. The Board of Directors is authorized to determine, among other things, with respect to each series which may be issued: (i) the dividend rate and conditions and the dividend preferences, if any; (ii) whether dividends would be cumulative and, if so, the date from which dividends on such series would accumulate; (iii) whether, and to what extent, the holders of such series would enjoy voting rights, if any, in addition to those prescribed by law; (iv) whether, and upon what terms, such series would be convertible into or exchangeable for shares of any other class of capital stock or other series of Preferred Stock; (v) whether, and upon what terms, such series would be redeemable; (vi) whether or not a sinking fund would be provided for the redemption of such series and, if so, the terms and conditions thereof; and (vii) the preference, if any, to which such series would be entitled in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company. With regard to dividends, redemption and liquidation preference, any particular series of Preferred Stock may rank junior to, on a parity with or senior to any other series of Preferred Stock and any class of the Common Stock. It is not possible to state the actual effect of the authorization of the Preferred Stock upon the rights of holders of the Common Stock, either Class A or Class B, until the Board of Directors determines the specific rights of the holders of a series of the Preferred Stock. However, such effects might include (a) restrictions on dividends on the Common Stock if dividends on Preferred Stock have not been paid; (b) dilution of the voting power of the Common Stock to the extent that the Preferred Stock has voting rights; (c) dilution of the equity interest of the Common Stock to the extent that the Preferred Stock is converted into Common Stock; or (d) the Common Stock not being entitled to share in the Company's assets upon liquidation until satisfaction of any liquidation preference granted the holders of the Preferred Stock. Issuance of Preferred Stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could make it more difficult for a third party to acquire a majority of the 10 outstanding voting stock. Accordingly, the issuance of Preferred Stock may be used as an "anti-takeover" device without further action on the part of the shareholders of the Company. The Company has no present plans to issue any shares of Preferred Stock. WARRANTS As of February 2, 1996, there were Warrants to purchase 1,715,000 shares of Series A Common Stock issued and outstanding, held of record by 25 holders. The Warrants were issued pursuant to several (Series B) Note and Warrant Purchase Agreements between the Company and certain purchasers dated as of December 1, 1995 (the "Series B Purchase Agreements") and the Amended and Restated Indenture, dated as of December 1, 1995, among the Company, certain guarantors and First National Bank, as trustee (the "Indenture"), pursuant to which the Series A Notes were issued. The following statements are subject to the detailed provisions of the Series B Purchase Agreements, the Indenture and the Warrants and are qualified in their entirety by reference to the Series B Purchase Agreements, the Indenture and the Warrants, copies of the form of which have been filed as exhibits to the Registration Statement of which this Prospectus is a part. At any time until December 1, 2001, each Warrant entitles the registered holder to purchase the number of shares of the Company's Class A Common Stock specified in such Warrant at an initial exercise price of $6.95 per share. The exercise price shall be adjusted on the first anniversary date of the Warrants to the lower of (x) the initial exercise price and (y) 110% of the average closing price of Class A Common Stock during the 30 trading days immediately preceding the first anniversary date of the Warrants. The Warrants may be exercised by surrendering to the Company or its designated agent the Warrants and the payment of the exercise price (i) by wire transfer, cash, check or money order, payable in United States funds, (ii) by delivering the Series A Notes and Series B Notes, (iii) to the extent permitted by the Indenture and the Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of February 25, 1994, among the Company and Society National Bank, by authorizing the Company to withhold from such issuance of shares of Common Stock upon exercise of the Warrant a number of Shares of Common Stock determined by dividing the warrant exercise price by the closing Class A Common Stock price on the date immediately preceding the exercise date or (iv) any combination thereof. No fractional shares of Class A Common Stock will be issued in connection with the exercise of Warrants. If the holder would otherwise be entitled to receive a fractional share of Class A Common Stock, the number of shares issuable upon exercise will be rounded up to the next larger whole share. The Company is required to keep available a sufficient number of authorized shares of Class A Common Stock for issuance to permit exercise of the Warrants. The Warrants are not redeemable by the Company. The Warrants will expire at 5:00 pm., New York time on December 1, 2001. In the event a holder of Warrants fails to exercise the Warrants prior to their expiration, the Warrants will expire and the holder thereof will have no further rights with respect to the Warrants. A holder of Warrants does not have any rights, privileges or liabilities as a stockholder of the Company. The exercise price of the Warrants and the number of shares issuable upon exercise of the Warrants are subject to adjustment to protect against dilution in the event of stock dividends, stock splits, combinations, subdivisions, reclassifications, purchases or redemptions of Class B Common Stock at a price greater than the Class A Common Stock, or issuances of Class A Common Stock (or convertible securities, options, grants or other rights to purchase Class A Common Stock, excluding shares issuable upon exercise of currently outstanding options and up to 650,000 shares issuable for future grants under the Company's option plans) at a price less than the greater of the market price or warrant price of Class A Common Stock. The adjustments to the exercise price and number of shares 11 issuable upon exercise of the Warrants occurs at the time of issuance of a convertible security, option or right, and in the event such convertible securities, options or rights later expire or terminate, the exercise price of the Warrants may be increased and the number of shares issuable upon exercise of the Warrants may be decreased. No assurance can be given that the market price of the Company's Class A Common Stock will exceed the exercise price of the Warrants at any time during the exercise period. Holders of the Warrants have the right to exercise the Warrants to purchase shares of Class A Common Stock whether or not a current prospectus relating to such shares is then in effect and whether or not the shares are qualified for sale under the securities laws of the jurisdictions in which the various holders of the Warrants reside. In the event the holders of the Warrants exercise the Warrants in the absence of a current prospectus relating to such shares and qualification for sale under the securities laws of the various jurisdictions, the Warrants and the shares issued upon exercise of the Warrants will be "restricted securities" as that term is defined under the Securities Act. As such, the shares will not be transferable in the absence of an effective registration statement or an opinion from counsel that an exemption therefrom exists, and the value of the warrants and the shares may be materially affected. The Company generally must be notified prior to the transfer of such restricted securities, although certain transfers of such "restricted securities" to institutional accredited investors may be effected without prior notice to the Company. The Company has undertaken to maintain the effectiveness of the Registration Statement of which this Prospectus is a part or to file and maintain the effectiveness of another registration statement so as to permit the purchase of the Class A Common Stock underlying the Warrants, but there can be no assurance that the Company will be able to do so. The Warrants may be deprived of any value if this Prospectus or another prospectus covering the shares issuable upon the exercise thereof is not kept effective or if such Class A Common Stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the Warrants reside. For the life of the Warrants, a holder thereof is given the opportunity to profit from a rise in the market price of the Class A Common Stock that may result in a dilution of the interest of other stockholders. In addition, the Company may find it more difficult to raise equity capital if it should be needed for the business of the Company while the Warrants are outstanding. At any time when the holders of Warrants might be expected to exercise them, the Company would, in all likelihood, be able to obtain additional equity capital on terms more favorable than those provided in the Warrants. CERTAIN LEGAL MATTERS The validity of the issuance of the Warrants and the shares of Class A Common Stock offered hereby is being passed upon for the Company by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts. EXPERTS The Consolidated Financial Statements and schedules of the Company for each of the three years in the period ended January 28, 1995, incorporated by reference into this Prospectus, have been audited by Arthur Andersen LLP, Independent Public Accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. DOCUMENTS INCORPORATED BY REFERENCE The following documents filed by the Company with the Commission are incorporated herein by reference: 12 (a) The Company's Annual Report on Form 10-K for the fiscal year ended January 28, 1995, as amended by Amendment No. 1 on Form 10-K/A. (b) The Company's Current Report on Form 8-K for the January 27, 1995 event. (c) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 1995. (d) The Company's Current Report on Form 8-K for the August 10, 1995 event. (e) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 29, 1995. (f) The Company's Current Report on Form 8-K for the September 28, 1995 event. (g) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995. (h) The Company's Current Report on Form 8-K for the October 30, 1995 event, as amended by Amendment No. 1 on Form 8-K/A. (i) The Company's Current Report on Form 8-K for the January 19, 1996 event. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein modifies or supersedes such statement. Any statement modified or superseded shall not be deemed, except as modified or superseded, to constitute part of this Prospectus. This Prospectus is accompanied by the Company's Form 10-K and Form 10-K/A-1 for the fiscal year ended January 28, 1995 and Form 10-Q for the quarter ended October 28, 1995. The Company will provide to each person to whom this Prospectus is delivered, including any beneficial owner of Warrants, upon written or oral request of such person, a copy of the documents incorporated by reference into this Prospectus (not including exhibits to such documents unless the exhibits are specifically incorporated by reference into the documents which this Prospectus incorporates). Requests for such documents should be directed to the Company at Dairy Mart Convenience Stores, Inc., One Vision Drive, Enfield, Connecticut 06082; Attention: Investor Relations, telephone number (860) 741- 4444. 13 ================================================================================ No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or any Underwriter. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy to any person in any jurisdiction in which such offer or solicitation would be unlawful. Neither the delivery of this Prospectus nor any offer or sale hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company or that the information contained herein is correct as of any date subsequent to the date hereof. ________________ TABLE OF CONTENTS
Page ---- Available Information...................................................... 2 Risk Factors............................................................... 3 The Company................................................................ 6 Selling Stockholders....................................................... 6 Plan of Distribution....................................................... 7 Description of Class A Common Stock and Warrants........................... 8 Certain Legal Matters...................................................... 12 Experts.................................................................... 12 Documents Incorporated by Reference........................................ 12
DIARY MART CONVENIENCE STORES, INC. 1,715,000 CLASS A COMMON STOCK PURCHASE WARRANTS AND 1,715,000 SHARES OF CLASS A COMMON STOCK ___________________ P R O S P E C T U S ___________________ __________________ ________, 1996 ================================================================================ 14 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS -------------------------------------- ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following expenses incurred in connection with the sale of the securities being registered will be borne by the Registrant. Other than the registration fee, the amounts stated are estimates. Registration Fee $ 4,110.00 Legal Fees and Expenses 15,000.00 Accounting Fees and Expenses 10,000.00 ---------- Miscellaneous 2,000.00 ---------- TOTAL $31,110.00 =========
No portion of the above-listed fee will be borne by the Selling Stockholders. In connection with the sale of the securities being registered, the Selling Stockholders will pay underwriting discounts and selling commissions, if any, and the fees of additional legal counsel, if any, for the Selling Stockholders. ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 145 of the General Corporation Law of the State of Delaware ("DGCL") provides that a corporation has the power to indemnify its officers and directors against the expenses, including attorney's fees, judgments, fines or settlement amounts, actually and reasonably incurred by them in connection with the defense of any action by reason of being or have been directors or officers, if such person shall have acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, except that if such action shall be in the right of the corporation, no such indemnification shall be provided as to any claim, issue or matter as to which such person shall have been judged to have been liable to the corporation unless and to the extent that the Court of Chancery of the State of Delaware, or another court in which the suit was brought, shall determine upon application that, in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity. The Registrant's certificate of incorporation provides for indemnification of its directors and officers to the fullest extent permitted by the DGCL. As permitted by Section 102 of the DGCL, the Registrant's certificate of incorporation provides that no director shall be liable to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director other than: (i) for breaches of the director's duty of loyalty to the Registrant or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) for the unlawful payment of dividends or unlawful stock purchases or redemptions under Section 174 of the DGCL; and (iv) for any transaction from which the director derived an improper personal benefit. The Registrant has purchased a liability insurance policy which insures: (i) the Registrant, under certain circumstances, in the event it indemnifies a director or officer of the Registrant or the subsidiary pursuant to the foregoing provisions of the certificate of incorporation or by-laws of the Registrant or otherwise; and (ii) directors and officers, under certain circumstances, against liability and costs (including the cost of defending any action) incurred by directors or officers in their capacity as such. In addition, the Registration Rights Agreement dated as of December 1, 1995, filed as Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995, incorporated herein by reference, provides for indemnification by the Registrant of the Selling Stockholders against certain liabilities under the 1933 Act, the 1934 Act, state securities laws or otherwise, and provides for indemnification by the Selling II-1 Stockholders of the Registrant and its directors, its officers and certain control persons against certain liabilities under the 1933 Act, the 1934 Act, state securities laws, or otherwise. ITEM 16. EXHIBITS.
Exhibit Number Description - ------- ----------- 4.1 The Registrant's Restated Certificate of Incorporation and Amended and Restated Bylaws (incorporated by reference to Exhibits 3.1 and 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 28, 1995, File No. 0- 12497) 4.2 Instruments defining the rights of the holders of the Registrant's Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-639)) dated November 5, 1985 4.3 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of Class A Common Stock of the Registrant (Initially Exercisable for an Aggregate of 1,215,000 Shares of Class A Common Stock (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995) 4.4 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of Class A Common Stock of the Registrant (Initially Exercisable for an Aggregate of 500,000 Shares of Class A Common Stock (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995)) 5* Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with respect to the legality of the securities being registered 13 Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see Exhibit 5) 24 Power of Attorney (filed in Part II of this Registration Statement) 99.1 Note Purchase Agreement, dated as of December 1, 1995, by and between the Registrant and the Purchasers Listed in the Schedule of Purchasers therein, relating to 10 1/4% Senior Subordinated Notes (Series B) due March 15, 2004 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995) 99.2 Registration Rights Agreement, dated as of December 1, 1995, by and among the Registrant and the Holders of (i) 10 1/4% Senior Subordinated Notes (Series B) of the Registrant, due March 15, 2004, and (ii) Warrants to Purchase 1,715,000 shares of Class A Common Stock, par value $.01 per share, of the Registrant (incorporated by reference
II-2 to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995) _____________________ *To be filed by amendment. ITEM 17. UNDERTAKINGS. A. Rule 415 Offering ----------------- The Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the 1933 Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) ((S) 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if this Registration Statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. B. Filings Incorporating Subsequent 1934 Act Documents by Reference ---------------------------------------------------------------- The Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the 1934 Act) that II-3 is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. C. Request for Acceleration of Effective Date or Filing of ------------------------------------------------------- Registration Statement on Form S-8 ---------------------------------- Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-2 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Enfield, Connecticut, on February 28, 1996. DAIRY MART CONVENIENCE STORES, INC. By:/s/ Robert B. Stein, Jr. ------------------------------- Robert B. Stein, Jr. President, Chief Executive Officer and Chairman of the Board POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert B. Stein, Jr. and Gregory G. Landry, or any of them, his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signatures Title Date - ---------- ----- ---- /s/ Robert B. Stein, Jr. President, Chief Executive February 28, 1996 - --------------------------- Robert B. Stein, Jr. Officer and Chairman of the Board (principal executive officer) /s/ Gregory G. Landry Executive Vice President, February 28, 1996 - --------------------------- Gregory G. Landry Chief Financial Officer, Chief Accounting Officer and Director (principal financial and accounting officer)
II-5 /s/ Frank W. Barrett Director February 28, 1996 - ------------------------------- Frank W. Barrett /s/ J. Kermit Birchfield, Jr. Director February 28, 1996 - ------------------------------- J. Kermit Birchfield, Jr. /s/ John W. Everets, Jr. Director February 28, 1996 - ------------------------------- John W. Everets, Jr. /s/ Thomas W. Janes Director February 28, 1996 - ------------------------------- Thomas W. Janes /s/ Truby G. Proctor, Jr. Director February 28, 1996 - ------------------------------- Truby G. Proctor, Jr.
II-6 DAIRY MART CONVENIENCE, INC. ---------------------------- INDEX TO EXHIBITS FILED WITH FORM S-2 REGISTRATION STATEMENT
Exhibit Sequential Number Description Page No. - ------- ----------- ---------- 4.1 The Registrant's Restated Certificate of Incorporation and Amended and Restated Bylaws (incorporated by reference to Exhibits 3.1 and 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 28, 1995, file No. 0-12497) 4.2 Instruments defining the rights of the holders of the Registrant's Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Registration No. 33- 639)) dated November 5, 1985 4.3 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of Class A Common Stock of the Registrant (Initially Exercisable for an Aggregate of 1,215,000 Shares of Class A Common Stock (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995) 4.4 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of Class A Common Stock of the Registrant (Initially Exercisable for an Aggregate of 500,000 Shares of Class A Common Stock (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995)) 5* Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with respect to the legality of the securities being registered 13 Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see Exhibit 5) 24 Power of Attorney (filed in Part II of this Registration Statement) 99.1 Note Purchase Agreement, dated as of December 1, 1995, by and between the Registrant and the Purchasers Listed in the Schedule of Purchasers therein, relating to 10 1/4% Senior Subordinated Notes (Series B) due March 15, 2004 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995) 99.2 Registration Rights Agreement, dated as of December 1, 1995, by and among the Registrant and the Holders of (i) 10 1/4% Senior Subordinated Notes (Series B) of the Registrant, due March 15, 2004, and (ii) Warrants to Purchase 1,715,000 shares of Class A Common Stock, par value $.01 per share, of the Registrant (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 28, 1995)
____________________________ * To be filed by amendment. II-4 EX-13 2 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q - --- X Quarterly Report Pursuant to Section 13 or - --- 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended October 28, 1995 ---------------- - --- Transition Report Pursuant to Section 13 or 15(d) - --- of the Securities Exchange Act of 1934 For the Transition Period From ________ to ______ Commission File Number 0-12497 DAIRY MART CONVENIENCE STORES, INC. -------------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 04-2497894 - ------------------------------- --------------------------------- (State or other Jurisdiction of (IRS Employer Identification No.) incorporation or organization) ONE VISION DRIVE, ENFIELD, CT 06082 ----------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code (203) 741-4444 -------------- N/A ------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ --- Shares of Class A Common Stock outstanding October 28, 1995 - 2,800,934 Shares of Class B Common Stock outstanding October 28, 1995 - 2,783,060 PART I. FINANCIAL INFORMATION DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts)
FOR THE THIRD FISCAL FOR THE THREE FISCAL QUARTER ENDED QUARTERS ENDED ------------------------ ------------------------ OCTOBER 28, OCTOBER 29, OCTOBER 28, OCTOBER 29, 1995 1994 1995 1994 - ---------------------------------------------------------------------------------------------------------- Net Sales of the Company, Its Subsidiaries and Franchises................. $ 181,935 $ 197,543 $ 542,928 $ 581,139 - --------------------------------------------------------------------------------------------------------- Revenues......................................... $ 143,492 $ 157,067 $ 428,194 $ 460,135 ----------- ----------- ---------- ---------- Cost of goods sold and expenses: Cost of goods sold.............................. 102,878 114,620 309,649 340,580 Selling, general and administrative expenses....................................... 36,770 38,415 106,325 113,186 Interest expense................................ 2,359 2,361 6,982 6,995 Loss (gain) on disposition of properties, net................................ (38) 297 54 643 Nonrecurring charges............................ 2,197 750 2,450 3,953 ----------- ----------- ---------- ---------- 144,166 156,443 425,460 465,357 ----------- ----------- ---------- ---------- Income (loss) before income taxes and cumulative effect of accounting change............................ (674) 624 2,734 (5,222) Benefit (provision) from income taxes............ 269 (256) (1,231) 2,110 ----------- ----------- ---------- ---------- Income (loss) before cumulative effect of accounting change.................. (405) 368 1,503 (3,112) Cumulative effect of accounting change (net of income tax benefit of $271)........... - - - (389) ----------- ----------- ---------- ---------- Net income (loss)............................. $ (405) $ 368 $ 1,503 $ (3,501) - --------------------------------------------------------------------------------------------------------- Weighted average shares outstanding 5,582 5,545 5,823 5,538 ----------- ----------- ---------- ---------- Earnings (loss) per share: Before cumulative effect of accounting change.............................. $ (0.07) $ 0.07 $ 0.26 $ (0.56) Cumulative effect of accounting change.......... - - - (0.07) ----------- ----------- ---------- ---------- Earnings (loss) per share........................ $ (0.07) $ 0.07 $ 0.26 $ (0.63) - ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
OCTOBER 28, 1995 JANUARY 28, 1995 - ----------------------------------------------------------------------------------------------- ASSETS (Unaudited) CURRENT ASSETS: Cash................................................. $ 15,666 $ 4,512 Short-term investment................................ 2,131 2,053 Accounts and notes receivable........................ 10,997 12,398 Inventory............................................ 19,820 26,044 Prepaid expenses and other current assets............ 2,516 1,945 Deferred income taxes................................ 2,051 3,537 ------------ ------------ Total current assets.............................. 53,181 50,489 ------------ ------------ NET BOOK VALUE OF PROPERTY AND EQUIPMENT HELD FOR SALE.... 9,874 23,378 ------------ ------------ PROPERTY AND EQUIPMENT: Land and improvements................................ 9,178 9,180 Buildings and leaseholds............................. 31,913 31,370 Equipment............................................ 70,307 59,358 ------------ ------------ 111,398 99,908 Less - Accumulated depreciation...................... 35,733 30,345 ------------ ------------ Net property and equipment........................ 75,665 69,563 ------------ ------------ PROPERTY UNDER CAPITAL LEASES, NET........................ 1,545 1,015 ------------ ------------ OTHER ASSETS: Goodwill, net........................................ 10,393 10,647 Franchise and operating rights, net.................. 7,059 7,314 Notes receivable..................................... 2,466 2,494 Other................................................ 6,496 7,328 ------------ ------------ Total other assets................................ 26,414 27,783 ------------ ------------ TOTAL ASSETS.............................................. $ 166,679 $ 172,228 - ----------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt.................... $ 1,285 $ 1,285 Current portion of capital lease obligations......... 418 285 Accounts payable..................................... 29,939 28,942 Accrued expenses..................................... 11,198 17,214 Accrued interest..................................... 1,062 3,052 ------------ ------------ Total current liabilities......................... 43,902 50,778 ------------ ------------ LONG-TERM DEBT, LESS CURRENT PORTION ABOVE................ 86,125 87,324 ------------ ------------ CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION ABOVE..... 1,749 1,374 ------------ ------------ OTHER LIABILITIES AND DEFERRED CREDITS.................... 5,736 6,837 ------------ ------------ DEFERRED INCOME TAXES..................................... 4,754 3,098 ------------ ------------ STOCKHOLDERS' EQUITY: Class A Common Stock................................. 33 33 Class B Common Stock................................. 30 30 Paid-in capital in excess of par value............... 27,673 27,580 Retained earnings.................................... 1,682 179 Treasury stock, at cost.............................. (5,005) (5,005) ------------ ------------ Total stockholders' equity........................ 24,413 22,817 ------------ ------------ Total liabilities and stockholder's equity................ $ 166,679 $ 172,228 - -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
FOR THE THREE FISCAL QUARTERS ENDED ----------------------------------- OCTOBER 28, 1995 OCTOBER 29, 1994 - ------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)................................................ $ 1,503 $ (3,501) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cash flow effect of nonrecurring items......................... (2,310) 3,258 Cumulative effect of accounting change......................... - 389 Depreciation and amortization.................................. 9,060 9,336 Change in deferred income taxes................................ 3,142 (2,100) Loss on other disposition of properties, net................... 54 643 Decrease (increase) in accounts and notes receivable........... 1,401 (467) Decrease (increase) in inventory............................... 6,224 (756) Increase in accounts payable................................... 997 1,485 (Decrease) increase in accrued interest........................ (1,990) 115 Increase in other current assets and liabilities, net.......... (4,565) (2,986) (Decrease) increase in other noncurrent liabilities and deferred credits......................................... (813) 496 ---------- ---------- Net cash provided by operating activities.......................... 12,703 5,912 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in short-term investment................................ (78) (2,031) Purchase of property and equipment............................... (13,820) (12,766) Proceeds from sale of property and equipment..................... 13,817 638 Proceeds from long-term notes receivable......................... 729 972 Increase in long-term notes receivable........................... (701) (1,400) (Increase) decrease in intangibles and other assets, net......... (69) 185 ---------- ---------- Net cash used by investing activities.............................. (122) (14,402) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of senior subordinated notes, net of offering costs..... - 72,653 Repayment of term debt........................................... - (22,000) Retirement of subordinated debentures............................ - (27,944) Decrease in revolving loan, net.................................. - (12,100) Additional long-term debt........................................ - 1,362 Repayment of other long-term debt and capital lease obligations.. (1,520) (1,300) Increases in common stock and paid-in capital.................... 93 81 ---------- ---------- Net cash (used) provided by financing activities................... (1,427) 10,752 ---------- ---------- Increase in cash................................................... 11,154 2,262 Cash at beginning of fiscal year................................... 4,512 6,632 ---------- ---------- CASH AT END OF THIRD FISCAL QUARTER................................ $ 15,666 $ 8,894 - ------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 28, 1995 (Unaudited) The unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented, and which are of a normal, recurring nature. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K, filed with the Securities and Exchange Commission on May 15, 1995. 1. Accounting Policies ------------------- The financial statements included herein have been prepared in accordance with the accounting policies described in Note 1 to the January 28, 1995 audited consolidated financial statements included in the Company's Form 10-K. Certain prior year amounts have been reclassified to conform to the presentation used for the current year. 2. Changes in Capital Accounts --------------------------- An analysis of the capital stock accounts for the first three fiscal quarters ended October 28, 1995 follows:
COMMON STOCK -------------------------------------------------------------------------- CLASS A SHARES CLASS B SHARES PAID-IN-CAPITAL ISSUED AT ISSUED AT IN EXCESS OF $.01 PAR VALUE $.01 PAR VALUE AMOUNT PAR VALUE -------------- -------------- --------------- --------------- Balance January 28, 1995 3,290,460 2,961,953 $ 62,526 $ 27,579,716 Employee stock purchase plan 13,038 - 129 48,914 Stock options exercised 16,125 - 161 44,182 Exchange of Class B shares for Class A shares 2,936 (2,936) - - Balance October 28, 1995 ----------- ----------- ---------- -------------- 3,322,559 2,959,017 $ 62,816 $ 27,672,812 ----------- ----------- ---------- --------------
As of October 28, 1995, there were 521,625 shares of Class A Common Stock and 175,957 shares of Class B Common Stock held as treasury stock at an aggregate cost of $5,004,847, leaving 2,800,934 Class A shares and 2,783,060 Class B shares outstanding. 3. Earnings (Loss) Per Share ------------------------- Earnings (loss) per share is based on the weighted average number of shares outstanding, including the dilutive effect of stock options, if appropriate, during each period. 4. Seasonality ----------- The results of operations for the third fiscal quarter ended October 28, 1995 are not necessarily indicative of results to be expected for the full fiscal year. The convenience store industry in the Company's marketing areas experiences a higher percentage of revenues and profit margins during the summer months than during the winter months. Historically, the Company has achieved more favorable financial results in its second and third fiscal quarters, as compared to its first and fourth fiscal quarters. 5. Nonrecurring Charges -------------------- A summary of nonrecurring charges for the third fiscal quarter and the three fiscal quarters ended October 28, 1995 and October 29, 1994 is as follows:
FOR THE THIRD FISCAL FOR THE THREE FISCAL QUARTER ENDED QUARTERS ENDED --------------------- --------------------- OCT 28, OCT 29, OCT 28, OCT 29, 1995 1994 1995 1994 - --------------------------------------------------------------- --------------------- (IN THOUSANDS) Expenses associated with purchase of majority shareholder's interest.. $ 945 $ - $ 945 $ - Costs of store closings................ 500 - 740 518 Costs to divest of dairy manufacturing and distribution operations.......................... 752 - 765 - Regulatory and financing fees and expenses........................ - - - 285 Administrative severance, settlement and related costs........ - 750 - 2,550 Writedown of non-operating properties to net realizable value............................... - - - 600 --------------------- --------------------- Total $ 2,197 $ 750 $ 2,450 $ 3,953 ===================== =====================
During the current year third fiscal quarter, the Company incurred $945,000 in legal and professional fees associated with the purchase of a former majority shareholder's interest in the Company (see Note 6). The further effects of such purchase will be reflected in the fourth fiscal quarter financial statements of the Company. In the prior fiscal year, the Company recorded a nonrecurring charge for costs associated with the sale or closing of 143 of its retail convenience stores and the closing of 81 of its retail gasoline facilities. During the current year three fiscal quarters, the Company has incurred $740,000 of costs in excess of the previously recorded estimate to close or sell such stores. Such costs relate, in part, to disposal of equipment, inventory and leases associated with closed stores and the removal of underground storage tanks associated with the closed gasoline facilities. In the prior fiscal year, the Company recorded a nonrecurring charge for costs associated with the discontinuance and sale of its dairy manufacturing and distribution operations. During the current year three fiscal quarters, the Company has incurred $765,000 of costs in excess of the previously recorded estimate to close and sell such operations. In the prior fiscal year, the Company incurred $285,000 in nonrecurring duplicative interest expense, net of interest income, due to the issuance of the Company's 10.25% senior subordinated notes on March 3, 1994 and the subsequent retirement of the Company's 14.25% subordinated debentures on April 4, 1994. In the prior year three fiscal quarters, the Company recorded nonrecurring charges of $2,550,000 for costs, including legal expenses, associated with the removal of the Company's former president and Chief Executive Officer by the Board of Directors, and the settlement of legal disputes arising therefrom and severance and other personnel related costs associated with a reduction in other administrative support positions by the Company. 6. Subsequent Events ----------------- Subsequent to the end of the current year third fiscal quarter, the Company consummated the purchase of the interests of Charles Nirenberg and certain of his affiliates (collectively, "Nirenberg") in DM Associates Limited Partnership (the "Nirenberg Transaction"). Nirenberg's interests in the limited partnership included limited partnership interests and a promissory note secured by 1,220,000 shares of the Company's Class B Common Stock. The aggregate cash consideration paid by the Company to Nirenberg for their interests in the limited partnership, including the note, was $10,000,000. In addition, Dairy Mart agreed to pay Nirenberg $2,300,000 in consideration of certain matters, including Nirenberg waiving certain claims against the Company, Nirenberg executing a non-compete agreement and Nirenberg allowing Dairy Mart to use his name and likeness in advertising and marketing materials. Dairy Mart also agreed to reimburse Nirenberg for up to $850,000 of previously unreimbursed fees and expenses incurred in connection with activities relating to Dairy Mart. In order to finance the transaction, the Company issued $13,500,000 aggregate principal amount of its 10-1/4% Senior Subordinated Notes (Series B) due 2004 (the "Series B Notes"). The Series B Notes have substantially the same terms and conditions as the Company's current $75,000,000 10-1/4% Senior Subordinated Notes (Series A) due 2004 (the "Series A Notes"). The Indenture pursuant to which the Company issued the Series A Notes has been amended and restated so as to also apply to the Series B Notes. The Series B noteholders also acquired warrants (the "Warrants") with a six year maturity to purchase 1,215,000 shares of the Company's Class A Common Stock at $6.95 per share. The exercise price may be adjusted to 110% of the market price of the Company's Class A Common Stock one year after the issuance of the Warrants, if such adjustment results in a decrease of the exercise price. The Company has also agreed to register the Warrants and the underlying Class A Common Stock for sale with the Securities and Exchange Commission at the Company's expense. Failure to so register the Warrants and underlying Class A Common Stock may cause the interest rate on the Series B Notes to increase in increments to a maximum rate of 11-3/4%. The Company also obtained from the holders of a majority of the Company's Series A Notes a consent to the Nirenberg Transaction and a waiver of certain alleged events of default. For such consent and waiver, the Company issued to all of the holders of the Series A Notes, Warrants with a six year maturity to purchase 500,000 shares of the Company's Class A Common Stock at $6.95 per share. Such Warrants to purchase 500,000 shares of Class A Common Stock have substantially the same provisions as the Warrants to purchase 1,215,000 shares of Class A Common Stock. DAIRY MART CONVENIENCE STORES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY RESULTS OF OPERATIONS The Company's net income for the first three fiscal quarters ended October 28, 1995 was $1.5 million as compared to a net loss of $3.1 million in the first three fiscal quarters of the prior year. The three fiscal quarters and third fiscal quarter of both years included nonrecurring charges as follows:
FOR THE THIRD FISCAL FOR THE THREE FISCAL QUARTER ENDED QUARTERS ENDED --------------------- --------------------- OCT 28, OCT 29, OCT 28, OCT 29, (IN MILLIONS) 1995 1994 1995 1994 - ---------------------------------------------------------------- --------------------- Expenses associated with purchase of majority shareholder's interest $ 0.9 $ - $ 0.9 $ - Costs of store closings 0.5 - 0.7 0.5 Costs to divest of dairy manufacturing and distribution operations 0.8 - 0.8 - Regulatory and financing fees and expenses - - - 0.3 Administrative severance, settlement and related costs - 0.8 - 2.6 Writedown of non-operating properties to net realizable value - - - 0.6 -------------------- -------------------- Total $ 2.2 $ 0.8 $ 2.4 $ 4.0 ==================== =====================
RESULTS OF OPERATIONS REVENUES Revenues for the current year first three fiscal quarters decreased by $31.9 million from the prior year first three fiscal quarters and revenues for the current year third fiscal quarter decreased by $13.6 million from the prior year third fiscal quarter. A summary of revenues by operating area for the comparative third fiscal quarter and the three fiscal quarters is as follows:
FOR THE THIRD FISCAL FOR THE THREE FISCAL QUARTER ENDED QUARTERS ENDED --------------------- --------------------- OCT 28, OCT 29, OCT 28, OCT 29, (IN MILLIONS) 1995 1994 1995 1994 - -------------------------------------------------------- --------------------- Convenience store $ 87.3 $ 93.3 $256.8 $277.2 Gasoline 55.5 55.9 169.1 159.5 Manufacturing and distribution - 7.5 - 21.8 Other .7 .4 2.3 1.6 -------------------- --------------------- Total $143.5 $157.1 $428.2 $460.1 ==================== =====================
Convenience store revenues decreased $20.4 million, or 7.4%, in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters, and convenience store revenues for the current year third fiscal quarter decreased by $6.0 million as compared to the prior year third fiscal quarter. These decreases are primarily due to the closing or sale of approximately 120 underperforming stores. Although such closures had a negative impact on revenues, they did have a material favorable effect on the results from operations, since the majority of stores closed or sold had been operating at a loss. Gasoline revenues increased $9.6 million in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters due to an increase in the average selling price of gasoline of 5.8 cents per gallon combined with an increase in total gasoline gallons sold of 630,000. The increase in gasoline gallons sold was due to further development of new stores having a major gasoline presence and the remodeling and expansion of gasoline facilities at certain existing locations offset by the closure of certain low volume gasoline locations. Gasoline revenues decreased $400,000 in the current year third fiscal quarter as compared to the prior year third fiscal quarter due to a decrease in the average selling price of 0.5 cents per gallon combined with a decrease in total gasoline gallons sold of 94,000 resulting from the closure of low volume gasoline locations described above. Manufacturing and distribution revenues are not reflected in the current year first three fiscal quarters and the current year third fiscal quarter as compared to the corresponding periods of the prior fiscal year due to the closing and divestiture of the Company's dairy manufacturing and distribution operations in the current fiscal year. GROSS MARGINS Gross margins for the current year first three fiscal quarters decreased $1.1 million from the prior year first three fiscal quarters and gross margins for the current year third fiscal quarter decreased $1.8 million from the prior year third fiscal quarter. A summary of the gross margins by operating area for the comparative third fiscal quarter and the three fiscal quarters is as follows:
FOR THE THIRD FISCAL FOR THE THREE FISCAL QUARTER ENDED QUARTERS ENDED --------------------- ---------------------- OCT 28, OCT 29, OCT 28, OCT 29, (IN MILLIONS) 1995 1994 1995 1994 - -------------------------------------------------------- ---------------------- $ 33.5 $ 34.5 $ 97.9 $ 99.8 Convenience store Gasoline 6.4 7.3 18.3 17.5 Manufacturing and distribution - .2 - .7 Other .7 .4 2.3 1.6 ---------------------- ---------------------- Total $ 40.6 $ 42.4 $ 118.5 $119.6 ====================== ======================
Convenience store gross margins decreased by $1.9 million in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters, and convenience store gross margins for the current year third fiscal quarter decreased $1.0 million as compared to the prior year third fiscal quarter. These decreases were due to the reduction in the number of stores described above, offset by improved product gross margins and higher lottery commissions. Gasoline gross margins increased by $800,000 in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters and gasoline gross margins decreased by $900,000 in the current year third fiscal quarter as compared to the prior year third fiscal quarter. The increase for the current year first three fiscal quarters is primarily due to an increase of 0.5 cents in gross margin per gallon. The decrease for the current year third fiscal quarter is due to a decrease of 1.6 cents in gross margin per gallon combined with the decrease in gasoline gallons sold as described above. SELLING AND GENERAL AND ADMINISTRATIVE EXPENSES Selling expenses for the current year first three fiscal quarters decreased $4.3 million from the prior year first three fiscal quarters. General and administrative expenses for the current year first three fiscal quarters decreased $2.6 million from the prior year first three fiscal quarters. For the current year third fiscal quarter alone, selling expenses decreased $1.3 million and general and administrative expenses decreased $300,000 as compared to the corresponding period of the prior year. A summary of selling expenses by operating area and general and administrative expenses for the comparative third fiscal quarter and the three fiscal quarters is as follows:
FOR THE THIRD FISCAL FOR THE THREE FISCAL QUARTER ENDED QUARTERS ENDED -------------------- -------------------- OCT 28, OCT 29, OCT 28, OCT 29, (IN MILLIONS) 1995 1994 1995 1994 - --------------------------------------------------- -------------------- Convenience store $ 25.1 $ 26.6 $ 74.1 $ 79.0 Gasoline 3.2 3.0 9.6 9.0 -------------------- -------------------- 28.3 29.6 83.7 88.0 General and administrative expenses 8.5 8.8 22.6 25.2 -------------------- -------------------- Total $ 36.8 $ 38.4 $106.3 $113.2 ==================== ====================
Convenience store selling expenses decreased $4.9 million in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters, and convenience store selling expenses decreased $1.5 million for the current year third fiscal quarter as compared to the prior year third fiscal quarter. These decreases were due to the closure or sale of underperforming stores as described above, partially offset by higher labor and rent costs on a per store basis. Gasoline selling expenses increased $600,000 in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters and gasoline selling expenses increased $200,000 in the current year third fiscal quarter as compared to the prior year third fiscal quarter. These increases were primarily due to the operation of new or remodeled expanded facilities as described above combined with increased environmental expenses associated with the remediation of gasoline locations after considering expected reimbursements from various state environmental trust funds. General and administrative expenses decreased in the current year first three fiscal quarters and the current year third fiscal quarter as compared to the corresponding periods of the prior year primarily due to a reduced level of administrative support staff. INTEREST EXPENSE AND TAXES Interest expense remained relatively constant in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters. The effective tax rate for the Company was a provision of 45% for the current year first three fiscal quarters as compared to a benefit of 40% for prior year first three fiscal quarters, and a benefit of 40% for the current year third fiscal quarter as compared to a provision of 41% for the prior year third fiscal quarter. The Company provides for income taxes at the effective rate expected to be incurred for the entire fiscal year. LIQUIDITY AND CAPITAL RESOURCES The Company generates substantial operating cash flow since most of its revenues are received in cash. The amount of cash generated from operations in the current year first three fiscal quarters significantly exceeded the current debt service requirements of the Company's long-term debt and capital lease obligations. Additional cash flow was generated in the current fiscal year from the sale of certain assets, including the sale and leaseback of 17 existing store properties. In addition, the Company has a revolving line of credit available, although not currently utilized, to address the timing of certain working capital disbursements. Management believes that the cash flow from operations and the sale of certain underperforming and non-operating assets will provide the Company with ample liquidity and the capital necessary to achieve the anticipated expansion in its retail operations (see Capital Expenditures). For information with respect to the issuance of $13,500,000 aggregate principal amount of the Company's 10-1/4% Senior Subordinated Notes (Series B) due 2004, see Part II - OTHER INFORMATION. CASH PROVIDED BY OPERATING ACTIVITIES During the current year first three fiscal quarters, net cash generated by operations was $6.8 million higher than the prior year first three fiscal quarters. This increase was primarily due to the improved results of operations in the current year first three fiscal quarters as compared to the prior year first three fiscal quarters (see RESULTS OF OPERATIONS) and to cash provided from working capital through the collection of certain accounts receivable and the liquidation of certain inventories associated with asset divestitures. During the current year first three fiscal quarters, the Company paid its trade payables in an average of 25 days, which compares to 24 days for the fiscal year ended January 28, 1995 and 25 days for the prior year first three fiscal quarters. The cash flow of the Company is also favorably impacted by the Company's use of funds from the sale of money orders, pending remittance of such funds to the issuer of the money orders. As of October 28, 1995 and January 28, 1995, the amounts due the issuer of the money orders were $6.7 million and $5.3 million, respectively. The Company's remittance obligation to the issuer of the money orders is primarily secured by an outstanding letter of credit in the amount of $7.5 million. CASH PROVIDED BY FINANCING ACTIVITIES During the current year first three fiscal quarters, net cash of $1.4 million was used primarily to repay long-term debt and capital lease obligations. During the prior year first three fiscal quarters, net cash of $10.8 million was provided from the issuance of the Notes and the subsequent repayment of the indebtedness under a bank term loan and bank revolving loan and to redeem in full the Company's 14.25% subordinated debentures. During the current year first fiscal quarter, management finalized an amendment of the Company's senior credit facility temporarily reducing the total availability to $20.0 million with $15.0 million available for the issuance of letters of credit. As of October 28, 1995, the Company had no outstanding revolving credit loans under the amended credit facility, but did have $13.8 million of letters of credit outstanding thereunder. The Company may utilize the amended credit facility as needed for working capital and general corporate purposes. CASH USED BY INVESTING ACTIVITIES During the current year first three fiscal quarters, net cash of $122,000 was used by investing activities. The receipt of $13.8 million in proceeds from the sale of certain assets, as described above, offset the use of $13.8 million to fund the Company's capital expenditures. Consistent with the Company's overall objective to strengthen its investment in retail operations, proceeds from the sale of assets and cash generated from operations will be used to fund future capital expenditures of the Company including the development of new stores and the upgrading and remodeling of existing stores. CAPITAL EXPENDITURES The Company anticipates spending approximately $18 million for capital expenditures in the current fiscal year ending February 3, 1996 by purchasing store and gasoline equipment for new store locations, remodeling a limited number of its existing stores, introducing certain branded fast food concepts in a number of stores, and significantly upgrading certain gasoline locations to include the installation of credit card readers at the pump, to improve outdoor lighting and to meet current environmental standards (see Environmental Responsibility). ENVIRONMENTAL RESPONSIBILITY The Company accrues its estimate of all costs to be incurred for assessment and remediation with respect to releases of regulated substances from existing and previously operated retail gasoline facilities. As of October 28, 1995, the Company had recorded an accrual of $2,086,000 for such costs, the majority of which are anticipated to be spent over the next 3 to 5 years. The Company is entitled to reimbursement of a portion of the above costs from various state environmental trust funds based upon compliance with the terms and conditions of such trust funds. As of October 28, 1995, the Company has recorded a net state trust fund reimbursement receivable of $1,066,000 (representing a gross receivable of $1,244,000 less an allowance of $178,000). Although there are no assurances as to the timing, the Company anticipates receiving reimbursements from the state environmental trust funds within one to four years from the payment of the reimbursable assessment and remediation expenses. In addition, the Company estimates that future capital expenditure requirements to comply with federal and state underground gasoline storage tank regulations will be approximately $12.0 to $16.0 million in the aggregate through December 1998. These costs could be reduced for low volume locations closed in lieu of the capital cost of compliance. The Company's estimate of costs to be incurred for environmental assessment and remediation and for required underground storage tank upgrading and other regulatory compliance are based on factors and assumptions that could change due to modifications of regulatory requirements or detection of unanticipated environmental conditions. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION - --------------------------- a. ISSUANCE OF $13.5 MILLION OF NOTES. On December 1, 1995, the Company ----------------------------------- issued $13.5 million aggregate principal amount of its 10-1/4% Senior Subordinated Notes (Series B) due 2004 (the "Series B Notes"). The Series B Notes have substantially the same terms and conditions as the Company's current $75,000,000 10-1/4% Senior Subordinated Notes (Series A) due 2004 (the "Series A Notes"). The Indenture pursuant to which the Company issued the Series A Notes has been amended and restated so as to also apply to the Series B Notes. In conjunction with the issuance of the Series B Notes, the Company issued to the purchasers of the Series B Notes, warrants to purchase 1,215,000 shares of the Class A Common Stock of the Company (the "Warrants"). The Warrants may be exercised at any time during the next 6 years. The initial exercise price of the Warrants is $6.95 per share, but the exercise price may be adjusted to 110% of the market price of the Company's Class A Common Stock one year after the issuance of the Warrants, if such adjustment results in a decrease of the exercise price. The exercise price will also be adjusted upon the occurrence of various events, including stock dividends and issuances of Common Stock by the Company for a per share price less than the exercise price of the Warrants or less than the then current market value of the Company's Class A Common Stock. The Company has also agreed to register the Warrants and the underlying Class A Common Stock for sale with the Securities and Exchange Commission, at the Company's expense. Failure to so register the Warrants and underlying Class A Common Stock may cause the interest rate to increase in increments to a maximum rate of 11-3/4%. b. PURCHASE BY THE COMPANY OF INTERESTS IN DM ASSOCIATES. The proceeds ------------------------------------------------------ of the Series B Notes were primarily used to fund the obligations of the Company under an Agreement dated October 30, 1995, as amended December 1, 1995 (the "Nirenberg Agreement"), by and among the Company, Charles Nirenberg, and certain of his affiliates (collectively, "Nirenberg"), pursuant to which, among other things, the Company purchased for $10 million (i) all of Nirenberg's limited partnership interests in DM Associates Limited Partnership ("DM Associates"), and (ii) a promissory note of DM Associates payable to Nirenberg in the principal amount of $7.1 million, which note is secured by a pledge of 1,220,000 shares of Class B Common Stock of the Company owned by DM Associates. DM Associates owns 1,858,743 shares, or 60.7%, of the Class B Common Stock of the Company. Pursuant to the Nirenberg Agreement, the Company also paid to Nirenberg $2.3 million in consideration of certain matters, including, Nirenberg's waiver of certain alleged claims against the Company, Nirenberg allowing the Company to use his name and likeness in advertising materials and Nirenberg's agreement that he will not for a period of five years compete with the Company, solicit employment of any employee of the Company, or interfere in a material manner with any material business relationship between the Company and any third party. The Company has also agreed to reimburse Nirenberg for up to $850,000 of previously unreimbursed fees and expenses incurred in connection with the activities relating to the Company. Under the terms of the Nirenberg Agreement, Nirenberg withdrew as a partner of New DM Management Associates I ("DM Management I") and New DM Management Associates II ("DM Management II"), which were the general partners of DM Associates. As a result, the remaining partners of DM Management I are Robert B. Stein, Jr., the President and a director of the Company; Gregory G. Landry, the Executive Vice President and a director of the Company; and Mitchell J. Kupperman, a former officer and director of the Company, each of whom owns one-third of the partnership interest of DM Management I. The remaining partners of DM Management II dissolved DM Management II and therefore DM Management I is the sole remaining general partner of DM Associates. Mr. Kupperman's employment with the Company was terminated on December 1, 1995. In connection with the termination of Mr. Kupperman's employment and Mr. Kupperman's waiver of certain alleged claims against the Company, the Company paid $1,036,412 to Mr. Kupperman. Effective December 1, 1995, Mr. Nirenberg and Mr. Kupperman each resigned as officers and directors of the Company, and M. Harold Jacobsen and Thomas O'Brien, temporary directors appointed by the Company pursuant to the Nirenberg Agreement, also resigned as directors. Thomas W. Janes, a principal of Triumph Capital Group, Inc., a holder of the Series B Notes, was appointed a director to fill the vacancy created by Mr. Kupperman's registration. Pursuant to the Partnership Agreement of DM Associates, DM Management I has the right to vote all of the shares of Class B Common Stock owned by DM Associates. Pursuant to the Partnership Agreement of DM Management I, the holders of a majority of the partnership interest of DM Management I determines how to vote 638,743 of the shares owned by DM Associates, and the remaining 1,220,000 shares will be voted for or against any motion or proposal in the same proportion that the other Class B shares (including the 638,743 of DM Associates) are voted. The Company has agreed to indemnify Nirenberg against any liability or expense incurred by them as a result of or in connection with the transactions consummated pursuant to the Nirenberg Agreement. c. ISSUANCE OF ADDITIONAL WARRANTS TO NOTEHOLDERS. In addition to the ----------------------------------------------- Warrants to purchase 1,215,000 shares of Class A Common Stock issued in connection with the sale of the Series B Notes, as described above, the Company issued Warrants to purchase 500,000 shares of Class A Common Stock to the holders of the Series A Notes, in consideration of their waiving any rights that they may have had as a result of any Change of Control, as defined in the Indenture, that they may have occurred, and in consideration of their agreement to certain amendments of the Indenture. Such Warrants to purchase 500,000 shares of Class A Common Stock have substantially the same provisions as the Warrants to purchase 1,215,000 shares of Class A Common Stock discussed above. d. AMENDED CREDIT AGREEMENT. Contemporaneously with the consummation of ------------------------- the Nirenberg Agreement and the issuance of the Series B Notes, the Credit Agreement among the Company, Society National Bank, and Fleet Bank, N.A. was amended and restated. The Credit Agreement provides that the issuance of the Series B Notes and the transactions provided for in the Nirenberg Agreement will not constitute defaults under the Credit Agreement. The financial covenants in the Credit Agreement have also been amended so as to reflect the anticipated effect of the Company of the transactions provided for the Nirenberg Agreement. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- The following exhibits are filed as part of this report pursuant to Item 601 of Regulation S-K: (a) EXHIBITS: (4.1) Amended and Restated Indenture, dated as of December 1, 1995, by and among the Company, Certain Subsidiaries of the Company, as Guarantors, and First Bank National Association, as Trustee, is filed as Exhibit 4.1 attached hereto. (10.1) Note Purchase Agreement, dated as of December 1, 1995, between the Company and the Purchasers Listed in the Schedule of Purchasers therein, relating to 10-1/4% Senior Subordinated Notes (Series B) due March 15, 2004, is filed as Exhibit 10-1 attached hereto. (10.2) Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of Class A Common Stock of the Company (Initially Exercisable for an Aggregate of 1,215,000 Shares of Class A Common Stock) is filed as Exhibit 10.2 attached hereto. (10.3) Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of Class A Common Stock of the Company (Initially Exercisable for an Aggregate of 500,000 Shares of Class A Common Stock) is filed as Exhibit 10.3 attached hereto. (10.4) Registration Rights Agreement, dated December 1, 1995, by and among the Company and the Holders of (i) 10-1/4% Senior Subordinated Notes (Series B) of the Company, due March 15, 2004, and (ii) Warrants to Purchase 1,715,000 shares of Class A Common Stock, par value $.01 per share, of the Company is filed as Exhibit 10.4 attached hereto. (10.5) Credit Agreement, dated as of February 25, 1994, Amending and Restating the Credit Agreement, dated as of February 25, 1994, as Amended to Date, by and among the Company, Society National Bank, the Banks and Other Financial Institutions Listed on Schedule I therein, and Society National Bank, as Successor Trustee, is filed as Exhibit 10.5 attached hereto. (10.6) Modification Agreement, dated as of December 1, 1995, by and among the Company, Charles Nirenberg, FCN Properties Corporation, The Nirenberg Foundation, Inc., formerly known as The Nirenberg Family Charitable Foundation, Inc., Robert B. Stein, Jr., and Gregory G. Landry is filed as Exhibit 10.6 attached hereto. (10.7) Amended and Restated Letter Agreement, dated December 1, 1995, to Mitchell J. Kupperman from the Company, Robert B. Stein, Jr., and Gregory G. Landry is filed as Exhibit 10.7 attached hereto. (10.8) DM Associates Limited Partnership Agreement, dated March 12, 1992. Incorporated herein by reference to Exhibit E of the Schedule 13D, dated March 12, 1992, filed by DM Associates Limited Partnership, DM Management Associates and Frank Colaccino. (10.9) First Amendment to Partnership Agreement of DM Associates Limited Partnership, dated as of September 8, 1994. Incorporated herein by reference to Exhibit F of the Schedule 13D, Amendment No. 4, dated January 27, 1995, filed by DM Associates Limited Partnership, New DM Management Associates I, New DM Management Associates II, Charles Nirenberg, Robert B. Stein, Jr., Gregory G. Landry, Mitchell J. Kupperman and Frank Colaccino. (10.10) First Amendment to Partnership Agreement of New DM Management Associates I, dated as of December 1, 1995, between Robert B. Stein, Jr., Gregory G. Landry and Mitchell J. Kupperman is filed as Exhibit 10.10 attached hereto. (10.11) Partnership Agreement of New DM Management Associates I, dated as of September 8, 1994. Incorporated herein by reference to Exhibit G of the Schedule 13D, Amendment No. 4, dated January 27, 1995, filed by DM Associates Limited Partnership, New DM Management Associates I, New DM Management Associates II, Charles Nirenberg, Robert B. Stein, Jr., Gregory G. Landry, Mitchell J. Kupperman and Frank Colaccino. (27) Financial Data Schedule is filed as Exhibit 27 attached hereto. (b) REPORTS ON FORM 8-K: On August 28, 1995, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission (the "SEC") in which the Company reported certain matters related to litigation commenced by Charles Nirenberg and Mitchell J. Kupperman against the Company and the Company's other directors in the Delaware Chancery Court. On September 29, 1995, the Company filed a Current Report on Form 8-K with the SEC in which the Company reported that it had received notices from holders of a majority of the outstanding principal amount of its 10 1/4% Senior Subordinated Notes due 2004, stating that such holders believed a change of control of the Company and a consequent event of default had occurred under the indenture governing such Notes. On October 31, 1995, the Company filed a Current Report on Form 8-K with the SEC in which the Company reported that the Company, Charles Nirenberg, the former Chairman of the Board of Directors and a Director of the Company, and certain other parties executed Agreements settling certain disputes and litigation between the parties. No financial statements were filed with any of the Current Reports. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAIRY MART CONVENIENCE STORES, INC. Date: December 12, 1995 /s/ Gregory G. Landry --------------------------------------------- Gregory G. Landry Executive Vice President Chief Financial Officer EX-23.1 3 CONSENT OF ARTHUR ANDERSEN ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our reports dated May 15, 1995 included in Dairy Mart Convenience Stores, Inc.'s Form 10-K for the year ended January 28, 1995 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Hartford, Connecticut February 28, 1995 -----END PRIVACY-ENHANCED MESSAGE-----