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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20569
__________________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
DAIRY MART CONVENIENCE STORES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2497894
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(State of Incorporation) (IRS Employer
Identification No.)
One Vision Drive, Enfield, Connecticut 06082
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(Address of Principal Executive Offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None None
Securities to be registered pursuant to Section 12(g) of
the Act:
Preferred Stock Purchase Rights
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(Title of Class)
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Item 1. Other Events
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Adoption of Stockholder Rights Plan
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On January 19, 1996, the Board of Directors of the Company
declared a dividend of one Preferred Stock Purchase Right (the "Right(s)")
for each outstanding share of Class A Common Stock, par value $.01 per
share, and Class B Common Stock, par value $0.01 per share (the "Common
Stock"), of the Company. The dividend is payable as of January 29, 1996 to
stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one -hundredth (1/100) of a share of
a new series of preferred shares of the Company, designated as Series A
Junior Preferred Stock ("Preferred Stock"), at a price of $30 per one -
hundredth (1/100) of a share (the "Exercise Price"), subject to certain
adjustments. The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between the Company and
The First National Bank of Boston, as Rights Agent ("Rights Agent"), dated
as of January 19, 1996.
Initially the Rights will not be exercisable, certificates will
not be sent to stockholders, and the Rights will automatically trade with
the Common Stock.
The Rights, unless earlier redeemed by the Board of Directors,
become exercisable upon the close of business on the day (the "Distribution
Date") which is the earlier of (i) the tenth day following a public
announcement that a
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person or group of affiliated or associated persons, with certain
exceptions set forth below, has acquired beneficial ownership of either (x)
25% or more of the outstanding shares of either class of voting stock of
the Company or (y) 15% or more of the total outstanding shares of voting
stock of the Company (an "Acquiring Person") and (ii) the tenth business
day (or such later date as may be determined by the Board of Directors
prior to such time as any person or group of affiliated or associated
persons becomes an Acquiring Person) after the date of the commencement or
announcement of a person's or group's intention to commence a tender or
exchange offer the consummation of which would result in the ownership of
30% or more of the outstanding shares of either class of voting stock (even
if no shares are actually purchased pursuant to such offer); prior thereto,
the Rights would not be exercisable, would not be represented by a separate
certificate, and would not be transferable apart from the Company's Common
Stock, but will instead be evidenced, with respect to any of the Common
Stock certificates outstanding as of January 29, 1996, by such Common Stock
certificate with a copy of this Summary of Rights attached thereto. An
Acquiring Person does not include (A) the Company, (B) any subsidiary of
the Company, (C) DM Associates Limited Partnership (and its general
partner(s) and the holders of the outstanding equity interests in such
general partner(s), in their capacities as
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such) so long as DM Associates does not increase its beneficial ownership
of the voting stock of the Company, (D) any employee benefit plan or
employee stock plan of the Company or of any subsidiary of the Company, or
any trust or other entity organized, appointed, established or holding
Common Stock for or pursuant to the terms of any such plan or (E) any
person or group whose ownership of 25% or more of the outstanding shares of
any class of voting stock or 15% or more of the total outstanding shares of
voting stock of the Company then outstanding results solely from (i) any
action or transaction or transactions approved by the Board of Directors
before such person or group became an Acquiring Person or (ii) a reduction
in the number of issued and outstanding shares of voting stock of the
Company pursuant to a transaction or transactions approved by the Board of
Directors (provided that any person or group that does not become an
Acquiring Person by reason of clause (i) or (ii) above shall become an
Acquiring Person upon the acquisition of an additional 1% of any class of
the Company's voting stock unless such acquisition of additional voting
stock will not result in such person or group becoming an Acquiring Person
by reason of such clause (i) or (ii)).
Until the Distribution Date (or earlier redemption or expiration
of the Rights), new Common Stock certificates issued after January 29, 1996
will contain a legend incorporating the Rights Agreement by reference.
Until the
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Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Company's Common Stock certificates
outstanding as of January 29, 1996 with or without a copy of the Summary of
Rights attached, will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of
record of the Company's Common Stock as of the close of business on the
Distribution Date and such separate certificates alone will evidence the
Rights from and after the Distribution Date.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on January 19, 2006, unless
earlier redeemed by the Company as described below.
The Preferred Stock is non-redeemable and, unless otherwise
provided in connection with the creation of a subsequent series of
preferred stock, subordinate to any other series of the Company's preferred
stock. The Preferred Stock may not be issued except upon exercise of
Rights. Each share of Preferred Stock will be entitled to receive when, as
and if declared, a quarterly dividend in an amount equal to the greater of
$.10 per share and 100 times the cash dividends declared on the Company's
Class B Common
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Stock. In addition, Preferred Stock is entitled to 100 times any non-cash
dividends (other than dividends payable in equity securities) declared on
the Class B Common Stock, in like kind. In the event of liquidation, the
holders of Preferred Stock will be entitled to receive a liquidation
payment in an amount equal to the greater of $100 per one one-hundredth
(1/100) of a share or 100 times the payment made per share of Class B
Common Stock. Each share of Preferred Stock will have 1 vote, voting
together with the Class B Common Stock. In the event of any merger,
consolidation or other transaction in which Class B Common Stock is
exchanged, each share of Preferred Stock will be entitled to receive 100
times the amount received per share of Class B Common Stock. The rights of
Preferred Stock as to dividends, liquidation and voting are protected by
anti-dilution provisions.
The number of shares of Preferred Stock issuable upon exercise of
the Rights is subject to certain adjustments from time to time in the event
of a stock dividend on, or a subdivision or combination of, the Common
Stock. The Exercise Price for the Rights is subject to adjustment in the
event of extraordinary distributions of cash or other property to holders
of Common Stock.
Unless the Rights are earlier redeemed, in the event that, after
the time that the Rights become exercisable, the Company were to be
acquired in a merger or
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other business combination (in which any shares of the Company's Common
Stock are changed into or exchanged for other securities or assets) or more
than 50% of the assets or earning power of the Company and its subsidiaries
(taken as a whole) were to be sold or transferred in one or a series of
related transactions, the Rights Agreement provides that proper provision
will be made so that each holder of record of a Right will from and after
such date have the right to receive, upon payment of the Exercise Price,
that number of shares of common stock of the acquiring company having a
market value at the time of such transaction equal to two times the
Exercise Price. In addition, unless the Rights are earlier redeemed, if a
person or group (with certain exceptions) becomes the beneficial owner of
either (i) 25% or more of any class of the Company's voting stock or (ii)
15% or more of the total number of outstanding shares of the Company's
voting stock (other than pursuant to a tender or exchange offer (a
"Qualifying Tender Offer") for all outstanding shares of Common Stock that
is approved by the Board of Directors, after taking into account the long-
term value of the Company and all other factors they consider relevant in
the circumstances), the Rights Agreement provides that proper provision
will be made so that each holder of record of a Right, other than the
Acquiring Person (whose Rights will thereupon become null and void), will
thereafter have the
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right to receive, upon payment of the Exercise Price, that number of shares
of the Company's Preferred Stock having a market value at the time of the
transaction equal to two times the Exercise Price (such market value to be
determined with reference to the market value of the Company's Common Stock
as provided in the Rights Agreement).
Fractions of shares of Preferred Stock (other than fractions that
are integral multiples of one one-hundredth (1/100) of a share) may, at the
election of the Company, be evidenced by depositary receipts. The Company
may also issue cash in lieu of fractional shares which are not integral
multiples of one one-hundredth (1/100) of a share.
At any time on or prior to the close of business on the tenth day
after the time that a person has become an Acquiring Person (or such later
date as a majority of the Board of Directors may determine), the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per
Right ("Redemption Price"). The Rights may be redeemed after the time that
any Person has become an Acquiring Person only if approved by a majority of
the Continuing Directors. Immediately upon the effective time of the
action of the Board of Directors of the Company authorizing redemption of
the Rights, the right to exercise the Rights will terminate and the only
right of the holders of the Rights will be to receive the Redemption Price.
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For as long as the Rights are then redeemable, the Company may,
except with respect to the redemption price or date of expiration of the
Rights, amend the Rights in any manner, including an amendment to extend
the time period in which the Rights may be redeemed. At any time when the
Rights are not then redeemable, the Company may amend the Rights in any
manner that does not materially adversely affect the interests of holders
of the Rights as such. Amendments to the Rights Agreement from and after
the time that any Person becomes an Acquiring Person requires the approval
of a majority of the Continuing Directors (as provided in the Rights
Agreement).
Until a Right is exercised, the holder, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
As of January 29, 1996 there were 2,801,434 shares of Class A
Common Stock and 2,793,060 shares of Class B Common Stock issued and
outstanding (and 1,638,938 shares reserved for issuance under the Company's
existing stock option plans and 1,715,000 shares of Class B Common Stock
reserved for issuance pursuant to the Company's Stock Purchase Warrants,
dated December 1, 1995). 89,400 shares of Preferred Stock have been
reserved for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group who attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The
Rights
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should not interfere with any merger or other business combination approved
by the Board since they may be redeemed by the Company at $.01 per Right at
any time until the close of business on the tenth day (or such later date
as described above) after a person or group has obtained beneficial
ownership of 15% or more of either class of the voting stock.
The form of Rights Agreement between the Company and The First
National Bank of Boston, as rights agent, specifying the terms of the
Rights, which includes as Exhibit A the form of Summary of Rights to
Purchase Series A Junior Preferred Stock, as Exhibit B the form of Right
Certificate and as Exhibit C the form of Certificate of Designations of the
Company setting forth the terms of the Preferred Stock are attached hereto
as exhibits and incorporated herein by reference. The foregoing description
of the Rights is qualified by reference to such exhibits.
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Item 2. Financial Statements, Pro Forma Financial
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Information and Exhibits.
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(c) Exhibits.
1. Rights Agreement dated as of January 19, 1996 between Dairy
Mart Convenience Stores, Inc. and The First National Bank of
Boston as Rights Agent. The Rights Agreement includes as
Exhibit B the form of Right Certificate and as
Exhibit C the form of Certificate of Designations.
2. Press Release, dated January 19, 1996.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
DAIRY MART CONVENIENCE STORES, INC.
By /s/Gregory G. Landry
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Name: Gregory G. Landry
Title: Executive Vice President
and Chief Financial
Officer
January 29, 1996
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EXHIBIT INDEX
Exhibit No. Description
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99.1. Rights Agreement dated as of January
19, 1996 between Dairy Mart Convenience
Stores, Inc. and The First National Bank
of Boston as Rights Agent. The Rights Agreement
includes as Exhibit B the form of Right
Certificate and as Exhibit C the form of
Certificate of Designations.
99.2. Press Release, dated January 19, 1996.
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DAIRY MART CONVENIENCE STORES, INC.
and
THE FIRST NATIONAL BANK OF BOSTON
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as Rights Agent
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Rights Agreement
Dated as of January 19, 1996
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TABLE OF CONTENTS
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Section Page
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1. Certain Definitions................................................. 2
2. Appointment of Rights Agent......................................... 14
3. Issuance of Right Certificates...................................... 14
4. Form of Right Certificates.......................................... 17
5. Countersignature and Registration................................... 18
6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates............. 19
7. Exercise of Rights; Exercise Price; Expiration Date of Rights....... 21
8. Cancellation and Destruction of Right Certificates.................. 26
9. Reservation and Availability of Shares of Preferred Stock........... 26
10. Preferred Stock Record Date......................................... 29
11. Adjustment of Exercise Price or Number of Shares.................... 30
12. Certification of Adjusted Exercise Price or Number of Shares........ 39
13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power....................................................... 40
14. Fractional Rights and Fractional Shares............................. 47
15. Rights of Action.................................................... 49
16. Agreement of Right Holders.......................................... 49
17. Right Certificate Holder Not Deemed a Stockholder................... 50
18. Concerning the Rights Agent......................................... 51
19. Merger or Consolidation of, or Change in Name of, the Rights Agent.. 52
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Section Page
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20. Duties of Rights Agent.............................................. 53
21. Change of Rights Agent.............................................. 57
22. Issuance of New Right Certificates.................................. 59
23. Redemption.......................................................... 59
24. Notice of Proposed Actions.......................................... 61
25. Notices............................................................. 63
26. Supplements and Amendments.......................................... 64
27. Successors.......................................................... 65
28. Benefits of this Rights Agreement................................... 66
29. Delaware Contract................................................... 66
30. Counterparts........................................................ 66
31. Descriptive Headings................................................ 67
32. Severability........................................................ 67
Exhibit A -- Summary of Rights
Exhibit B -- Form of Right Certificate
Exhibit C -- Form of Certificate of Designations of
Series A Junior Preferred Stock
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RIGHTS AGREEMENT
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Agreement, dated as of January 19, 1996, by and between DAIRY MART
CONVENIENCE STORES, INC., a Delaware corporation (the "Company"), and
The First National Bank of Boston, a Delaware corporation (the "Rights Agent").
W I T N E S S E T H:
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WHEREAS, on January 19, 1996, the Board of Directors of the Company
authorized the issuance of, and declared a dividend payable in, one right (a
"Right") for each share of Common Stock (as such term is hereinafter defined)
outstanding as of the close of business on January 29, 1996 (the "Record Date"),
each such Right representing the right to purchase one one-hundredth of a share
of Series A Junior Preferred Stock of the Company ("Preferred Stock") having the
rights and preferences set forth in the form of Certificate of Designations
attached hereto as Exhibit C authorized by the Board of Directors on January 19,
1996, upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, the Board of Directors of the Company further authorized the
issuance of one Right (subject to adjustment) with respect to each share of
Common Stock which may be issued between the Record Date and the earlier to
occur of the Expiration Date or the Final Expiration Date (as such terms are
hereinafter defined);
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NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
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the following terms shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as
such term is hereinafter defined) and Associates (as such term is
hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of either (i) 25% or more of any
class of the Voting Stock (as such term is hereinafter defined) of the
Company then outstanding or (ii) 15% or more of the total number of
shares of the Voting Stock of the Company then outstanding; provided
that, an Acquiring Person shall not include an (i) Exempt Person (as
such term is hereinafter defined), or (ii) any Person, together with
all Affiliates and Associates of such Person, who or which would be an
Acquiring Person solely by reason of (A) being the Beneficial Owner of
shares of Voting Stock of the Company, the Beneficial Ownership of
which was acquired by such Person pursuant to any action or
transaction or series of related actions or transactions approved by
the Board of
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Directors before such Person otherwise became an Acquiring Person or
(B) a reduction in the number of issued and outstanding shares of
Voting Stock of the Company pursuant to a transaction or a series of
related transactions approved by the Board of Directors of the
Company; provided further, that in the event such Person described in
this clause (ii) does not become an Acquiring Person by reason of
subclause (A) or (B) of this clause (ii), such Person nonetheless
shall become an Acquiring Person in the event such Person thereafter
acquires Beneficial Ownership of an additional 1% of any class of the
Voting Stock of the Company, unless the acquisition of such additional
Voting Stock would not result in such Person becoming an Acquiring
Person by reason of subclause (A) or (B) of this clause (ii).
Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith (but only if at the time of such
determination by the Board of Directors there are then in office not
less than two Continuing Directors and such action is approved by a
majority of the Continuing Directors then in office) that a Person who
would otherwise be an "Acquiring Person" as defined pursuant to the
foregoing provisions of this paragraph (a) has become such
inadvertently, and such Person divests as promptly as practicable a
sufficient number of shares
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of Voting Stock so that such Person would no longer be an "Acquiring
Person" as defined pursuant to the foregoing provisions of this
paragraph (a), then such Person shall not be deemed an "Acquiring
Person" for any purposes of this Rights Agreement.
(b) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), as in effect on the
date of this Rights Agreement.
(c) "Associate" of a Person (as such term is hereinafter defined)
shall mean (i) with respect to a corporation, any officer or director
thereof or of any Subsidiary (as such term is hereinafter defined)
thereof, or any Beneficial Owner (as such term is hereinafter defined)
of 10% or more of any class of equity security thereof, (ii) with
respect to an association, any officer or director thereof or of a
Subsidiary thereof, (iii) with respect to a partnership, any general
partner thereof or any limited partner thereof who is, directly or
indirectly, the Beneficial Owner of a 10% ownership interest therein,
(iv) with respect to a business trust, any officer or trustee thereof
or of any Subsidiary thereof, (v) with respect to any other trust or
an estate, any trustee, executor or similar fiduciary or any Person
who has a
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15% or greater interest as a beneficiary in the income from or
principal of such trust or estate, (vi) with respect to a natural
person, any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person, and (vii) any Affiliate
of such Person.
(d) A person shall be deemed the "Beneficial Owner" of, or to
"Beneficially Own", any securities (and correlative terms shall have
correlative meanings):
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for
purposes of Section 13(d) of the Exchange Act and Regulations 13D
and 13G thereunder (or any comparable or successor law or
regulation), in each case as in effect on the date hereof; or
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or the
fulfillment of a condition or both) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, other rights (other than these Rights),
warrants or options, or otherwise;
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provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "Beneficially Own", securities
tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange or
(B) the right to vote, alone or in concert with others, pursuant
to any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "Beneficially Own", any
securities if the agreement, arrangement or understanding to vote
such security (1) arises solely from a revocable proxy or consent
given in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations under the Exchange Act and (2) is not at the time
reportable by such Person on a Schedule 13D report under the
Exchange Act (or any comparable or successor report), other than
by reference to a proxy or consent solicitation being conducted
by such Person; or
(iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of such
Person's
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Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except as described in clause (B) of
subparagraph (ii) of this paragraph (d)) or disposing of any
securities of the Company; provided, however, that for purposes
of determining Beneficial Ownership of securities under this
Rights Agreement, officers and directors of the Company solely by
reason of their status as such shall not constitute a group
(notwithstanding that they may be Associates of one another or
may be deemed to constitute a group for purposes of Section 13(d)
the Exchange Act) and shall not be deemed to own shares owned by
another officer or director of the Company.
Notwithstanding anything in this paragraph (d) to the contrary, a
Person shall not be deemed the "Beneficial Owner" of, or to "Beneficially Own",
any security underlying any unexercised option, warrant or right issued by the
Company to acquire Voting Stock. Further, a Person shall not be deemed the
"Beneficial Owner" of, or to "Beneficially Own", any security beneficially owned
by another Person solely by reason of an agreement, arrangement or understanding
with such other Person for the purposes of: (x) soliciting the Company's
stockholders for the election of director nominees or any other stockholder
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resolution, the formation of and membership on any committee for the purpose of
promoting or opposing any stockholder resolution or for electing a slate of
nominees to the Company's Board of Directors, service on such a slate of
nominees, or agreement to a slate of director nominees, provided that such other
Person retains the right at any time to withdraw as a nominee or member of any
such committee, and to withhold or revoke any vote or proxy for or against any
such stockholder resolution or for such slate of nominees; (y) entering into
revocable voting agreements or the granting or solicitation of revocable proxies
with respect to any of the matters described in the foregoing clause (x); or (z)
the sharing of expenses and the indemnification against expenses and liabilities
by any such other Person with respect to expenses incurred or conduct occurring
during the time such other Person is a nominee or a member of any such committee
described in the foregoing clause (x). Further, notwithstanding anything in
this paragraph (d) to the contrary, a Person engaged in the business of
underwriting securities shall not be deemed the "Beneficial Owner" of, or to
"Beneficially Own," any securities acquired in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of
Connecticut are authorized or obligated by law or executive order to
close.
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(f) "Close of Business" on any given date shall mean 5:00 P.M.,
Connecticut time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Connecticut time, on
the next succeeding Business Day.
(g) "Common Stock" when used with reference to the Company shall
collectively mean the Class A Common Stock and the Class B Common
Stock (each presently $0.01 par value) of the Company. "Common Stock"
when used with reference to any Person other than the Company which
shall be organized in corporate form shall mean the capital stock or
other equity security with the greatest per share voting power of such
Person. "Common Stock" when used with reference to any Person other
than the Company which shall not be organized in corporate form shall
mean units of beneficial interest which shall represent the right to
participate in profits, losses, deductions and credits of such Person
and which shall be entitled to exercise the greatest voting power per
unit of such Person.
(h) "Continuing Director" shall mean any member of the Board of
Directors, while such person is a member of the Board of Directors,
who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative or nominee of an Acquiring
Person or of any such Affiliate or Associate,
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and who either (i) was a member of the Board of Directors prior to the
time that any Person became an Acquiring Person (other than pursuant
to a Qualifying Tender Offer) or (ii) subsequently became a member of
the Board of Directors, and whose nomination for election or election
to the Board of Directors was recommended or approved by a majority of
the Continuing Directors then on the Board of Directors.
(i) "Distribution Date" shall have the meaning set forth in
Section 3(b) hereof.
(j) "Exchange Act" shall have the meaning set forth in Section
1(b) hereof.
(k) "Exempt Person" shall mean (i) DM Associates Limited
Partnership, a Connecticut limited partnership ("DM Associates"),
provided that DM Associates shall not be deemed to be an Exempt Person
if after the date of this Agreement it acquires Beneficial Ownership
of an additional one or more shares of the Voting Stock, from and
after which time it shall be deemed to be an Acquiring Person
(provided that it then falls within the definition of Acquiring
Person), unless such acquisition of Beneficial Ownership of one or
more additional shares of Voting Stock is effected pursuant to a
transaction approved in advance by the Board of Directors; (ii) for so
long as DM Associates is an Exempt Person, the general partner(s) of
DM Associates
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and the holders of equity interests in such general partner(s) as of
the date of this Agreement, provided, that notwithstanding the
foregoing, the Persons described in this clause (ii) shall only be
Exempt Persons insofar as they would otherwise be Acquiring Persons by
reason of their Beneficial Ownership of Voting Stock held of record by
DM Associates, and this clause (ii) shall not so exempt their
Beneficial Ownership of Voting Stock other than that held of record by
DM Associates for determining whether such Person would be deemed to
be an Acquiring Person hereunder, (iii) the Company, (iv) any
Subsidiary of the Company or (v) any employee benefit plan or employee
stock plan of the Company or any Subsidiary of the Company, or any
trust or other entity organized, appointed, established or holding
Common Stock for or pursuant to the terms of any such plan.
(l) "Exercise Price" shall have the meaning set forth in
Sections 4 and 7(b) hereof.
(m) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(n) "Fair Market Value" of any property shall mean the fair
market value of such property as determined in accordance with Section
11(b) hereof.
(o) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
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(p) "Person" shall mean any individual, firm, corporation or
other entity.
(q) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(r) "Qualifying Tender Offer" shall mean a tender or exchange
offer for all outstanding shares of Common Stock of the Company
approved by a majority of the Board of Directors (provided that at the
time of such approval of the Board of Directors there are then in
office not less than two Continuing Directors and such offer is
approved by a majority of the Continuing Directors then in office),
after taking into account the potential long-term value of the Company
and all other factors that they consider relevant.
(s) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(t) "Right Certificate" shall have the meaning set forth in
Section 3(d) hereof.
(u) "Stock Acquisition Date" shall mean the first date on which
there shall be a public announcement by the Company or an Acquiring
Person that an Acquiring Person has become such (which, for purposes
of this definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) or such earlier date as
a majority of the Continuing
- 12 -
<PAGE>
Directors shall become aware of the existence of an Acquiring Person.
(v) "Subsidiary" of a Person shall mean any corporation or other
entity of which securities or other ownership interests having voting
power sufficient to elect a majority of the board of directors or
other persons performing similar functions are beneficially owned,
directly or indirectly, by such Person or by any corporation or other
entity that is otherwise controlled by such Person.
(w) "Summary of Rights" shall have the meaning set forth in
Section 3(a) hereof.
(x) "Trading Day" shall have the meaning set forth in Section
11(b) hereof.
(y) "Transfer Tax" shall mean any tax or charge, including any
documentary stamp tax, imposed or collected by any governmental or
regulatory authority in respect of any transfer of any security,
instrument or right, including Rights, shares of Common Stock and
shares of Preferred Stock.
(z) "Voting Stock" shall mean (i) the Common Stock of the Company
and (ii) any other shares of capital stock of the Company entitled to
vote generally in the election of directors or entitled to vote
together with the Common Stock in respect of any merger,
consolidation, sale of all or substantially all
- 13 -
<PAGE>
of the Company's assets, liquidation, dissolution or winding up.
Any determination required to be made by the Board of Directors of the Company
for purposes of applying the definitions contained in this Section 1 shall be
made by the Board of Directors in its good faith judgment, which determination
shall be binding on the Rights Agent and the holders of the Rights.
Section 2. Appointment of Rights Agent. The Company hereby
---------------------------
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable.
Section 3. Issuance of Right Certificates.
------------------------------
(a) On the Record Date (or as soon as practicable thereafter), the
Company or the Rights Agent shall send a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit A (the "Summary of Rights"),
by first class mail, postage prepaid, to each record holder of the Common Stock
as of the close of business on the Record Date, at the address of such holder
shown on the records of the Company.
(b) Until the close of business on the day which is the earlier of (i)
the tenth day after the Stock Acquisition Date or (ii) the tenth business day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the
- 14 -
<PAGE>
commencement by any Person (other than an Exempt Person) of, or the first public
announcement of the intent of any Person (other than an Exempt Person) to
commence, a tender or exchange offer upon the successful consummation of which
such Person, together with its Affiliates and Associates, would be the
Beneficial Owner of 30% or more of any class of the then outstanding shares of
Voting Stock of the Company (irrespective of whether any shares are actually
purchased pursuant to any such offer) (the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights shall be evidenced by
the certificates for Common Stock registered in the name of the holders of
Common Stock (together with, in the case of certificates for Common Stock
outstanding as of the Record Date, the Summary of Rights) and not by separate
Right certificates and the record holders of such certificates for Common Stock
shall be the record holders of the Rights represented thereby and (y) each Right
shall be transferable only simultaneously and together with the transfer of a
share of Common Stock (subject to adjustment as hereinafter provided). Until
the Distribution Date (or, if earlier, the Expiration Date or Final Expiration
Date), the surrender for transfer of any certificate for Common Stock shall
constitute the surrender for transfer of the Right or Rights associated with the
Common Stock evidenced thereby, whether or not accompanied by a copy of the
Summary of Rights.
(c) Rights shall be issued in respect of all shares of Common Stock
that become outstanding after the Record Date but
- 15 -
<PAGE>
prior to the earlier of the Distribution Date, the Expiration Date or the Final
Expiration Date and, in certain circumstances provided in Section 22 hereof, may
be issued in respect of shares of Common Stock that become outstanding after the
Distribution Date. Certificates for Common Stock (including, without
limitation, certificates issued upon original issuance, disposition from the
Company's treasury or transfer or exchange of Common Stock) after the Record
Date but prior to the earliest of the Distribution Date, the Expiration Date, or
the Final Expiration Date (or, in certain circumstances as provided in Section
22 hereof, after the Distribution Date) shall have impressed, printed, written
or stamped thereon or otherwise affixed thereto the following legend:
This certificate also evidences and entitles the holder
hereof to the same number of Rights (subject to adjustment) as the
number of shares of Common Stock represented by this certificate, such
Rights being on the terms provided under the Rights Agreement between
Dairy Mart Convenience Stores, Inc. and The First National Bank of
Boston (the "Rights Agent"), dated as of January 19, 1996, as it may
be amended from time to time (the "Rights Agreement"), the terms of
which are incorporated herein by reference and a copy of which is on
file at the principal executive offices of Dairy Mart Convenience
Stores, Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights shall be evidenced by separate certificates and
shall no longer be evidenced by this certificate. Dairy Mart
Convenience Stores, Inc. shall mail to the registered holder of this
certificate a copy of the Rights Agreement without charge within five
days after receipt of a written request therefore. Under certain
-------------
circumstances as provided in Section 7(e) of the Rights
-------------------------------------------------------
- 16 -
<PAGE>
Agreement, Rights issued to or Beneficially Owned by Acquiring Persons
----------------------------------------------------------------------
or their Affiliates or Associates (as such terms are defined in the
-------------------------------------------------------------------
Rights Agreement) or any subsequent holder of such Rights shall be
------------------------------------------------------------------
null and void and may not be transferred to any Person.
------------------------------------------------------
(d) As soon as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if requested, send),
by first class mail, postage prepaid, to each record holder of the Common Stock
as of the close of business on the Distribution Date, as shown by the records of
the Company, at the address of such holder shown on such records, a certificate
in the form provided by Section 4 hereof (a "Right Certificate"), evidencing one
Right (subject to adjustment as provided herein) for each share of Common Stock
so held. As of and after the Distribution Date, the Rights shall be evidenced
solely by Right Certificates and may be transferred by the transfer of the Right
Certificate as permitted hereby, separately and apart from any transfer of one
or more shares of Common Stock.
Section 4. Form of Right Certificates. The Right Certificates
--------------------------
(and the forms of election to purchase shares, certificate and assignment to be
printed on the reverse thereof), when, as and if issued, shall be substantially
in the form set forth in Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as may be required to comply with
- 17 -
<PAGE>
any law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Common Stock or the Rights may
from time to time be listed or as the Company may deem appropriate to conform to
usage or otherwise and as are not inconsistent with the provisions of this
Rights Agreement. Subject to the provisions of Section 22 hereof, Right
Certificates evidencing Rights whenever issued, (i) shall be dated as of the
date of issuance of the Rights they represent and (ii) subject to adjustment
from time to time as provided herein, on their face shall entitle the holders
thereof to purchase such number of shares (including fractional shares which are
integral multiples of one-hundredth of a share) of Preferred Stock as shall be
set forth therein at the price payable upon exercise of a Right provided by
Section 7(b) hereof as the same may from time to time be adjusted as provided
herein (the "Exercise Price").
Section 5. Countersignature and Registration.
---------------------------------
(a) Each Right Certificate shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President, either manually
or by facsimile signature, and have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. Each Right
Certificate shall be countersigned by the Rights Agent either manually or by
facsimile signature and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
Right
- 18 -
<PAGE>
Certificate shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery of the
certificate by the Company, such Right Certificate, nevertheless, may be
countersigned by the Rights Agent and issued and delivered with the same force
and effect as though the person who signed such Right Certificates had not
ceased to be such officer of the Company. Any Right Certificate may be signed
on behalf of the Company by any person who, on the date of the execution of such
Right Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or one or more offices designated as
the appropriate place for surrender of Right Certificates upon exercise or
transfer, and in such other locations as may be required by law, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
- 19 -
<PAGE>
(a) Subject to the provisions of Section 7(e), 7(f) and 14 hereof, at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the earlier of the Expiration Date or the Final
Expiration Date, any Right Certificate, may be (i) transferred or (ii) split up,
combined or exchanged for one or more other Right Certificates, entitling the
registered holder to purchase a like number of shares of Preferred Stock as the
Right Certificate or Rights Certificates surrendered then entitled such holder
to purchase. Any registered holder desiring to transfer any Right Certificate
shall surrender the Right Certificate at the office of the Rights Agent
designated for the surrender of Right Certificates with the form of certificate
and assignment on the reverse side thereof duly endorsed (or enclosed with such
Right Certificate a written instrument of transfer in form satisfactory to the
Company and the Rights Agent), duly executed by the registered holder thereof or
his attorney duly authorized in writing, and with such signature duly
guaranteed. Any registered holder desiring to split up, combine or exchange any
Right Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate to be split up, combined or
exchanged at the office of the Rights Agent designated therefor. Thereupon, the
Rights Agent shall countersign and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any Transfer Tax
- 20 -
<PAGE>
that may be imposed in connection with any transfer, split up, combination or
exchange of any Right Certificates.
(b) Subject to the provisions of Section 7(e), 7(f) and 14 hereof,
upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them and, if requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, or upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company shall issue and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
(a) The Rights shall not be exercisable until, and shall become
exercisable on, the Distribution Date (unless otherwise provided herein,
including, without limitation, the restrictions on exercisability set forth in
Section 7(e) and 23(a) hereof). Except as otherwise provided herein, the Rights
may be exercised, in whole or in part, at any time commencing with the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certificate on the reverse side thereof duly executed
(with
- 21 -
<PAGE>
signatures duly guaranteed), to the Rights Agent at the principal office of the
Rights Agent in 100 Federal Street, Boston, MA 02110 together with payment of
the Exercise Price for each Right exercised, subject to adjustment as
hereinafter provided, at or prior to the Close of Business on the earlier of (i)
January 19, 2006 (the "Final Expiration Date") or (ii) the date on which the
Rights are redeemed as provided in Section 23 hereof (such earlier date being
herein referred to as the "Expiration Date").
(b) The Exercise Price shall initially be $30 for each one one-
hundredth (1/100) of a share of Preferred Stock issued pursuant to the exercise
of a Right. The Exercise Price and the number of shares of Preferred Stock or
other securities to be acquired upon exercise of a Right shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof. The
Exercise Price shall be payable in lawful money of the United States of America,
in accordance with paragraph (c) below.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights with the form of election to
purchase duly executed, accompanied by payment by certified check, cashier's
check, bank draft or money order payable to the Company or the Rights Agent of
the Exercise Price for the shares to be purchased and an amount equal to any
applicable Transfer Tax required to be paid by the holder of the Right
Certificate in accordance with Section 9(e) hereof, the Rights Agent shall
thereupon promptly (i) requisition from any transfer agent of the Preferred
Stock of the Company one or more
- 22 -
<PAGE>
certificates representing the number of shares of Preferred Stock to be so
purchased, and the Company hereby authorizes and directs such transfer agent to
comply with all such requests, (ii) as provided in Section 14(b), at the
election of the Company, cause depositary receipts to be issued in lieu of
fractional shares of Preferred Stock, (iii) if the election provided for in the
immediately preceding clause (ii) has not been made, requisition from the
Company the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with Section 14(b) hereof, (iv) after receipt of such
Preferred Stock certificates and, if applicable, depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (v) when appropriate, after receipt, promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate; provided,
however, that in the case of a purchase of securities, other than Preferred
Stock, pursuant to Section 13 hereof, the Rights Agent shall promptly take the
appropriate actions corresponding in such case to that referred to in the
foregoing clauses (i) through (v) of this Section 7(c). Notwithstanding the
foregoing provisions of this Section 7(c), the Company may suspend the issuance
of shares of Preferred Stock upon exercise of a Right for a reasonable period,
not in excess of 90 days, during which the Company seeks to register under the
Securities Act of 1933, as amended (the "Act"), and any applicable securities
law of any
- 23 -
<PAGE>
other jurisdiction, the shares of Preferred Stock to be issued pursuant to the
Rights; provided, however, that nothing contained in this Section 7(c) shall
relieve the Company of its obligations under Section 9(c) hereof.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or his
assign, subject to the provisions of Section 14(b) hereof.
(e) Notwithstanding any provision of this Rights Agreement to the
contrary, from and after the time (the "invalidation time") when any Person
first becomes an Acquiring Person, other than pursuant to a Qualifying Tender
Offer, any Rights that are beneficially owned by (x) such Acquiring Person (or
any Associate or Affiliate of such Acquiring Person), (y) a transferee of such
Acquiring Person (or any such Associate or Affiliate) who becomes a transferee
after the invalidation time or (z) a transferee of such Acquiring Person (or any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the invalidation time pursuant to either (I) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom it has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (II) a transfer which the Board of Directors has determined is part of
a plan, arrangement or understanding which
- 24 -
<PAGE>
has the purpose or effect of avoiding the provisions of this Section 7(e), and
subsequent transferees of such Persons referred to in clause (y) and (z) above,
shall be void without any further action and any holder of such Rights shall
thereafter have no rights whatsoever with respect to such Rights under any
provision of this Rights Agreement. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) are complied with,
but shall have no liability to any holder of Right Certificates or any other
Person as a result of its failure to make any determination with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder. No
Right Certificate shall be issued pursuant to Section 3 hereof that represents
Rights beneficially owned by an Acquiring Person whose Rights would be void
pursuant to the provisions of this Section 7(e) or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
provisions of this Section 7(e) or any Associate or Affiliate thereof or to any
nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the provisions of this Section 7(e) shall
be cancelled.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered
- 25 -
<PAGE>
holder upon the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate following the form of election to purchase set forth on the reverse
side of the Right Certificate surrendered for such exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall
cancel and retire, any Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Shares of Preferred
---------------------------------------------------
Stock.
- -----
- 26 -
<PAGE>
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or out of authorized and issued shares of Preferred Stock held
in its treasury, such number of shares of Preferred Stock as will from time to
time be sufficient to permit the exercise in full of all outstanding Rights.
(b) The Company shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all shares of Preferred Stock issued
or reserved for issuance in accordance with this Rights Agreement to be listed,
upon official notice of issuance, upon the principal national securities
exchange, if any, upon which the Common Stock is listed or, if the principal
market for the Common Stock is not on any national securities exchange, to be
eligible for quotation in the National Association of Securities Dealers'
Automated Quotation System or any successor thereto or other comparable
quotation system.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to insure that all shares of Preferred Stock
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Exercise Price in
respect thereof), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) The Company shall use its best efforts to (i) file, as soon as
practicable following the occurrence of the
- 27 -
<PAGE>
event described in Section 11(a)(ii), or as soon as is required by law following
the Distribution Date, as the case may be, a registration statement under the
Act, with respect to the shares of Preferred Stock purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for Preferred Stock, and (b) the date
of the expiration of the Rights. The Company may temporarily suspend, for a
period of time not to exceed ninety days, the issuance of shares of Preferred
Stock upon exercise of a Right in order to prepare and file a registration
statement under the Act and permit it to become effective. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. Notwithstanding any provision of this Agreement
to the contrary, the Rights shall not be exercisable in any jurisdiction unless
the requisite qualification in such jurisdiction shall have been obtained and
until a registration statement under the Act (if required) shall have been
declared effective.
(e) The Company covenants and agrees that it will pay when due and
payable any and all federal and state Transfer Taxes which may be payable in
respect of the issuance or delivery of
- 28 -
<PAGE>
the Right Certificates or of any shares of Preferred Stock issued or delivered
upon the exercise of Rights. The Company shall not, however, be required to pay
any Transfer Tax which may be payable in respect of any transfer or delivery of
a Right Certificate to a Person other than, or the issuance or delivery of
certificates for Preferred Stock upon exercise of Rights in a name other than
that of, the registered holder of the Right Certificate, and the Company shall
not be required to issue or deliver a Right Certificate or certificate for
Preferred Stock to a Person other than such registered holder until any such
Transfer Tax shall have been paid (any such Transfer Tax being payable by the
holder of such Right Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such Transfer Tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name
---------------------------
any certificate for shares of Preferred Stock is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Preferred Stock represented thereby on, and such certificate shall be dated
as of, the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Exercise Price (and any applicable Transfer
Taxes) was made; provided, however, that, if the date of such surrender and
payment is a date upon which the Preferred Stock transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate
- 29 -
<PAGE>
shall be dated as of, the next succeeding Business Day on which the Preferred
Stock transfer books of the Company are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate, as such, shall not
be entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price or Number of Shares. The
------------------------------------------------
Exercise Price and the number of shares of Preferred Stock which may be
purchased upon exercise of a Right are subject to adjustment from time to time
as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Rights Agreement (A) declare or pay any dividend on Common
Stock payable in shares of Common Stock, (B) subdivide or split the
outstanding shares of Common Stock into a greater number of shares or
(C) combine or consolidate the outstanding shares of Common Stock into
a smaller number of shares or effect a reverse split of the
outstanding shares of Common Stock, then and in each such event the
number of shares of Preferred Stock issuable upon the exercise of a
Right after the record date for such event (if one shall have been
established or, if not, after the date
- 30 -
<PAGE>
of such event) shall be the number of shares of Preferred Stock
issuable immediately prior to such event multiplied by a fraction the
numerator of which is the number of Rights outstanding immediately
prior to such event and the denominator of which is the number of
Rights outstanding immediately after such event and the Exercise Price
after such event shall be the Exercise Price in effect immediately
prior to such event multiplied by such fraction. If an event occurs
which would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) In the event that any Person (other than an Exempt Person),
alone or together with its Affiliates and Associates, shall become an
Acquiring Person, except pursuant to a Qualifying Tender Offer, then,
subject to the last sentence of Section 23(a) and except as otherwise
provided in this Section 11, each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to
receive upon exercise of such Right in accordance with the terms of
this Rights Agreement and payment of the Exercise Price, the greater
of (1) the number of one one-hundredths of a share of Preferred Stock
for which such
- 31 -
<PAGE>
Right was exercisable immediately prior to the first occurrence of the
event described in this Section 11(a)(ii) or (2) such number of one
one-hundredths of a share of Preferred Stock, based on the per share
Fair Market Value of the Preferred Stock (determined pursuant to
Section 11(b) hereof) on the date of such first occurrence, having a
value equal to twice the Exercise Price; provided, however, that if
the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13 hereof,
then only the provisions of Section 13 hereof shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii).
(iii) In the event that the Company does not have available
sufficient authorized but unissued Preferred Stock to permit the
adjustments required pursuant to the foregoing subparagraph (i) or the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall take all such action as may be
necessary to authorize and reserve for issuance such number of
additional shares of Preferred Stock as may from time to time be
required to be issued upon the exercise in full of all Rights from
time to time outstanding and, if necessary, shall use its best efforts
to obtain stockholder approval thereof. In lieu of issuing shares of
Preferred Stock in accordance
- 32 -
<PAGE>
with the foregoing subparagraphs (i) and (ii), the Company may, if the
Board of Directors determines (but only if at the time of such
determination by the Board of Directors there are then in office not
less than two Continuing Directors and such action is approved by a
majority of the Continuing Directors then in office) that such action
is necessary or appropriate and not contrary to the interests of
holders of Rights, elect to issue or pay, upon the exercise of the
Rights, cash, property, shares of Preferred or Common Stock, or any
combination thereof, having an aggregate Fair Market Value equal to
the Fair Market Value of the shares of Preferred Stock which otherwise
would have been issuable pursuant to Section 11(a)(ii), which Fair
Market Value shall be determined by an investment banking firm
selected by the Board of Directors (but only if at the time of such
selection there are then in office not less than two Continuing
Directors and such selection is approved by a majority of the
Continuing Directors then in office). For purposes of the preceding
sentence, the Fair Market Value of the Preferred Stock shall be as
determined pursuant to Section 11(b). Subject to Section 23 hereof,
any such election by the Board of Directors of the Company must be
made and publicly announced within thirty (30) days
- 33 -
<PAGE>
after the date on which the event described in Section 11(a)(ii)
occurs.
(b) For the purpose of this Rights Agreement, the "Fair Market Value"
of any share of Preferred Stock, Common Stock or any other stock or any Right or
other security or any other property on any date shall be determined as provided
in this Section 11(b). In the case of a publicly-traded stock or other
security, the Fair Market Value on any date shall be deemed to be the average of
the daily closing prices per share of such stock or per unit of such other
security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the event
that the Fair Market Value per share of any share of Common Stock is determined
during a period which includes any date that is within 30 Trading Days after (i)
the ex-dividend date for a dividend or distribution on such stock payable in
shares of Common Stock or securities convertible into shares of Common Stock, or
(ii) the effective date of any subdivision, split, combination, consolidation,
reverse stock split or reclassification of such stock, then, and in each such
case, the Fair Market Value shall be appropriately adjusted by the Board of
Directors of the Company to take into account ex-dividend or post-effective date
trading. The closing price for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way (in either case, as reported in the
applicable transaction
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<PAGE>
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange), or, if the securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the applicable
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such security is listed or admitted to
trading; or, if not listed or admitted to trading on any national securities
exchange, the last quoted price (or, if not so quoted, the average of the high
bid and low asked prices) in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use; or, if no bids for such security
are quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
security selected by the Board of Directors of the Company. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which such security is listed or admitted to trading is open for the transaction
of business or, if such security is not listed or admitted to trading on any
national securities exchange, a Business Day. If a security is not publicly
held or not so listed or traded, "Fair Market Value" shall mean the fair value
per share of stock or per other unit of such other security, as determined by an
independent investment banking firm experienced in the valuation of securities
selected in good faith by the Board of Directors of the Company, or, if no
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<PAGE>
such investment banking firm is, in the good faith judgment of the Board of
Directors, available to make such determination, in good faith by the Board of
Directors of the Company; provided, however, that for purposes of making the
adjustment provided for by Section 11(a)(ii) hereof, the Fair Market Value of a
share of Preferred Stock shall not be less than 100% of the product of the Fair
Market Value of a share of the Class A Common Stock or the Class B Common Stock
(whichever produces the higher result) multiplied by the higher of the then
Dividend Multiple or Vote Multiple applicable to the Preferred Stock (as defined
in the Certificate of Designations relating to the Preferred Stock) and shall
not exceed 105% of the product of the then Fair Market Value of a share of the
Class A Common Stock or the Class B Common Stock (whichever produces the higher
result) multiplied by the higher of the then Dividend Multiple or Vote Multiple
applicable to the Preferred Stock. In the case of property other than
securities, the "Fair Market Value" thereof shall be determined in good faith by
the Board of Directors of the Company based upon such appraisals or valuation
reports of such independent experts as the Board of Directors of the Company
shall in good faith determine to be appropriate in accordance with good business
practices and the interests of the holders of Rights. Any such determination of
Fair Market Value shall be described in a statement filed with the Rights Agent
and shall be binding upon the Rights Agent.
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<PAGE>
(c) All calculations under this Section 11 shall be made to the
nearest cent or to the nearest one one-hundredth of a share, as the case may be.
(d) Irrespective of any adjustment or change in the Exercise Price or
the number of shares of Preferred Stock issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Exercise Price and the number of shares to be issued upon exercise
of the Rights as in the initial Right Certificates issued hereunder but,
nevertheless, shall represent the Rights as so adjusted.
(e) Before taking any action that would cause an adjustment reducing
the purchase price per whole share of Preferred Stock upon exercise of the
Rights below the then par value, if any, of the shares of Preferred Stock, the
Company shall use its best efforts to take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Preferred Stock
at such adjusted purchase price per share.
(f) Anything in this Section 11 to the contrary notwithstanding, in
the event of any reclassification of stock of the Company or any
recapitalization, reorganization or partial liquidation of the Company or
similar transaction, the Company shall be entitled to make such further
adjustments in the number of shares of Preferred Stock which may be acquired
upon exercise
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<PAGE>
of the Rights, and such adjustments in the Exercise Price therefor, in addition
to those adjustments expressly required by the other paragraphs of this Section
11, as the Board of Directors of the Company shall determine to be necessary or
appropriate in order for the holders of the Rights in such event to be treated
equitably and in accordance with the purpose and intent of this Rights Agreement
or in order that any such event shall not, but for such adjustment, in the
opinion of counsel to the Company, result in the stockholders of the Company
being subject to any United States federal income tax liability by reason
thereof.
(g) In the event the Company shall at any time after the Record Date
make any distribution on the shares of Common Stock of the Company, whether by
way of a dividend or a reclassification of stock, a recapitalization,
reorganization or partial liquidation of the Company or otherwise, in cash or
any debt security, debt instrument, real or personal property or any other
property (other than any shares of Common Stock or other capital stock of the
Company and other than any right or warrant to acquire any such shares,
including any debt security convertible into or exchangeable for any such share,
at less than the Fair Market Value of such shares) and the amount of such cash
dividend or the Fair Market Value of such debt security, debt instrument or
property exceeds 150% of the aggregate amount of the cash dividends declared or
paid on the Common Stock of the Company in the 15-month period immediately
preceding such
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<PAGE>
distribution, then and in each such event, unless such distribution is part of
or is made in connection with a transaction to which Section 11(a)(ii) or
Section 13 hereof applies, the Exercise Price shall be reduced by an amount
equal to the cash or the Fair Market Value of such distribution, as the case may
be, per share of Common Stock of the Company. For purposes hereof, the Fair
Market Value of any property distributed to the holders of shares of Common
Stock of the Company shall be the Fair Market Value of such property as
determined by an independent investment banking firm experienced in the
valuation of securities or the other property so distributed, as the case may
be, selected in good faith by the Board of Directors of the Company, or, if no
such investment banking firm is in the good faith judgment of the Board of
Directors available to make such determination, in good faith by the Board of
Directors of the Company, whose determination shall be final and binding on the
Company, the Rights Agent and the holders of Rights.
Section 12. Certification of Adjusted Exercise Price or Number of
-----------------------------------------------------
Shares. Whenever an adjustment is made as provided in Section 11, 13 or 23(c),
- ------
the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts giving rise to such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in
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<PAGE>
accordance with Section 25. Notwithstanding the foregoing sentence, the failure
of the Company to make such certification or give such notice shall not affect
the validity of or the force or effect of the requirement for such adjustment.
Any adjustment to be made pursuant to Section 11, 13 or 23(c) of this Rights
Agreement shall be effective as of the date of the event giving rise to such
adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any adjustment unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
(a) Except for any transaction approved by the Board of Directors
(but only if at the time of such approval by the Board of Directors there are
then in office not less than two Continuing Directors and such action is
approved by a majority of the Continuing Directors then in office), in the event
that, at any time on or after the Distribution Date, (x) the Company shall,
directly or indirectly, consolidate with, or merge with and into, any other
Person or Persons (other than an Exempt Person) and the Company shall not be the
surviving or continuing corporation of such consolidation or merger, or (y) any
Person or Persons (other than an Exempt Person) shall, directly or indirectly,
consolidate with, or merge with and into, the Company, and the Company shall be
the continuing or surviving
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<PAGE>
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person (other than an Exempt Person) or of the Company or cash or any other
property, or (z) the Company or one or more of its Subsidiaries shall, directly
or indirectly, sell or otherwise transfer to any other Person or any Affiliate
or Associate of such Person, in one or more transactions, or the Company or one
or more of its Subsidiaries shall sell or otherwise transfer to any Persons in
one or a series of related transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole), then, on the first occurrence of any such event, proper
provision shall be made so that (i) each holder of record of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to receive,
upon the exercise thereof and payment of the Exercise Price in accordance with
the terms of this Rights Agreement, such number of shares of validly issued,
fully paid, non-assessable and freely tradeable Common Stock of the Principal
Party (as defined herein), not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall, based on the Fair Market Value
of the Common Stock of the Principal Party on the date of the Consummation of
such consolidation, merger, sale or transfer, equal twice the Exercise Price;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue
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<PAGE>
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Rights Agreement; (iii) the term "Company" for
all purposes of this Rights Agreement shall thereafter be deemed to refer to
such Principal Party; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of shares
of its Common Stock in accordance with the provisions of Section 9 hereof
applicable to the reservation of Preferred Stock) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
provided, however, that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all of the assets, recapitalization,
reclassification of shares, reorganization or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall thereupon be
entitled to receive, upon exercise of a Right and payment of the Exercise Price,
such cash, shares, rights, warrants and other property which such holder would
have been entitled to receive had it, at the time of such transaction, owned the
shares of Common Stock of the Principal Party purchasable upon the exercise of a
Right, and such Principal Party shall take such steps (including, but not
limited to, reservation of shares of stock) as may be necessary to permit the
subsequent exercise of the Rights in accordance with the terms
- 42 -
<PAGE>
hereof for such cash, shares, rights, warrants and other property and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the
occurrence of any event described in clause (x), (y) or (z) above of this
Section 13(a).
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (x) or (y) of
the first sentence of Section 13(a) hereof: (A) the Person that is the issuer of
the securities into which shares of Common Stock of the Company are changed or
otherwise exchanged or converted in such merger or consolidation, or, if there
is more than one such issuer, the issuer of the Common Stock of which has the
greatest market value or (B) if no securities are so issued, (x) the Person that
is the other party to the merger or consolidation and that survives such merger
or consolidation, or, if there is more than one such Person, the Person the
Common Stock of which has the greatest market value or (y) if the Person that is
the other party to the merger or consolidation does not survive the merger or
consolidation, the Person that does survive the merger or consolidation
(including the Company if it survives); and
(ii) in the case of any transaction described in (z) of the first
sentence in Section 13(a), the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning
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<PAGE>
power so transferred or if the Person receiving the greatest portion of the
assets or earning power cannot be determined, whichever of such Persons as is
the issuer of Common Stock having the greatest market value of shares
outstanding; provided, however, that in any such case, if the Common Stock of
such Person is not at such time and has not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, and such Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, the term "Principal Party" shall refer to such
other Person, or if such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of all of which are and have been so
registered, the term "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Stock having the greatest market value of shares
outstanding.
(c) The Company shall not consummate any consolidation, merger or
sale or transfer of assets or earning power referred to in Section 13(a) unless
the Principal Party shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance to permit
exercise in full of all Rights in accordance with this Section 13 and unless
prior thereto the Company and the Principal Party involved therein shall have
executed and delivered to the Rights Agent an agreement confirming that the
Principal Party shall, upon consummation of such consolidation, merger or sale
or
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<PAGE>
transfer of assets or earning power, assume this Rights Agreement in accordance
with Section 13(a) hereof and that all rights of first refusal or preemptive
rights in respect of the issuance of shares of Common Stock of the Principal
Party upon exercise of outstanding Rights have been waived and that such
transaction shall not result in a default by the Principal Party under this
Rights Agreement, and further providing that, as soon as practicable after the
date of any consolidation, merger or sale or transfer of assets or earning power
referred to in Section 13(a) hereof, the Principal Party will:
(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, use its best efforts to cause such
registration statement to become effective as soon as practicable
after such filing and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Act) until the date of expiration of the
Rights, and similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights
on a national securities exchange or to meet the eligibility
requirements for quotation on NASDAQ; and
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<PAGE>
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with
the requirements for registration on Form 10 (or any successor form)
under the Exchange Act. In the event that any of the transactions
described in Section 13(a) hereof shall occur at any time after the
occurrence of a transaction described in Section 11(a)(ii) hereof, the
Rights which have not theretofore been exercised shall, subject to the
provisions of Section 7(e) hereof, thereafter be exercisable in the
manner described in Section 13(a) shall, subject to the provisions of
Section 7(e) hereof, thereafter be exercisable in the manner described
in Section 13(a).
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, shares of Common Stock of such Principal Party at less than the then Fair
Market Value per share (determined pursuant to Section 11(b) hereof) or
securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then Fair Market Value (other
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<PAGE>
than to holders of Rights pursuant to this Section 13) or (ii) providing for any
special tax or similar payment in connection with the issuance to any holder of
a Right of Common Stock of such Principal Party pursuant to the provisions of
this Section 13, then, in such event, the Company shall not consummate any such
transaction unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall have been canceled,
waived or amended, or that the authorized securities shall be redeemed, so that
the applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights (i.e., Rights
----
to acquire less than one one-hundredth of a share of Preferred Stock), unless
such fractional Rights result from a transaction referred to in Section 11(a)(i)
hereof. If the Company shall determine not to issue such fractional Rights,
then, in lieu of such fractional Rights, there shall be paid to the holders of
record of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of the
Fair Market Value of a whole Right.
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<PAGE>
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one-
hundredth of a share) upon exercise of the Rights or to distribute certificates
which evidence fractional shares (other than fractions which are integral
multiples of one-hundredth of a share). In lieu of issuing fractions of shares
of Preferred Stock, the Company may, at its election, issue depositary receipts
evidencing fractions of shares pursuant to an appropriate agreement between the
Company and a depositary selected by it, provided that such agreement shall
provide that the holders of such depositary receipts shall have all of the
rights, privileges and preferences to which they would be entitled as owners of
the Preferred Stock. With respect to fractional shares that are not integral
multiples of one-hundredth of a share, if the Company does not issue such
fractional shares or depositary receipts in lieu thereof, there shall be paid to
the holders of record of Right Certificates at the time such Right Certificates
are exercised as herein provided an amount in cash equal to the same fraction of
the Fair Market Value of a share of Preferred Stock.
(c) The holder of a Right by the acceptance of a Right expressly
waives his right to receive any fractional Right or any fractional shares of
Preferred Stock (other than fractions which are integral multiples of one one-
hundredth of a share) upon exercise of a Right.
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<PAGE>
Section 15. Rights of Action. All rights of action in respect of
----------------
this Rights Agreement, except the rights of action given to the Rights Agent in
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the holders of record of the
Common Stock); and any holder of record of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Rights Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Rights Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this Rights
Agreement.
Section 16. Agreement of Right Holders. Each holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
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<PAGE>
(a) prior to the Distribution Date, the Rights shall be evidenced by
the certificates for Common Stock registered in the name of the holders of
Common Stock (together, as applicable, with the Summary of Rights), which
certificates for Common Stock shall also constitute certificates for
Rights, and not by separate Right Certificates, and each Right shall be
transferable only simultaneously and together with the transfer of shares
of Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Right Certificates or the associated Common
Stock certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any
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<PAGE>
purpose the holder of Preferred Stock or any other securities which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof (except as
provided in Section 7(f) hereof), or to give or withhold consent to any
corporate action (except as provided in Section 7(f) hereof), or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 24 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or
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<PAGE>
omitted to be done by the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the cost and expenses of
defending against any claim of liability relating to the Rights or this Rights
Agreement.
(b) The Rights Agent shall be protected against, and shall incur no
liability for or in respect of, any action taken, suffered or omitted by it in
connection with its administration of this Rights Agreement in reliance upon any
Right Certificate or certificate for Preferred Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons.
Section 19. Merger or Consolidation of, or Change in Name of, the
-----------------------------------------------------
Rights Agent.
- ------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Rights Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for
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<PAGE>
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Rights Agreement any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Rights Agreement upon the following terms
and conditions, by all of
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<PAGE>
which the Company and the holders of Right Certificates by their acceptance
thereof shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President
or any Vice President and by the Treasurer or the Secretary of the Company and
delivered to the Rights Agent. Any such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Rights Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Rights Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but
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<PAGE>
all such statements and recitals are and shall be deemed to have been made by
the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Rights Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or 13 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate describing any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock to be issued pursuant to this Rights Agreement or any Right
Certificate or as to whether any shares of Preferred Stock will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the
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<PAGE>
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of the Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President or any Vice President or the Secretary or
the Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such
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<PAGE>
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Stock and the Preferred Stock by registered or
certified mail. The Company may remove the Rights Agent or any successor Rights
Agent (with or without cause) upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and the Preferred Stock by registered or certified
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
Notwithstanding the foregoing provisions of this Section 21, in no event shall
the resignation or removal of a Rights Agent be effective until a successor
Rights Agent shall have been appointed and have accepted such appointment. If
the Company shall fail to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the incumbent Rights Agent or the holder of
record of any Right Certificate may apply to any court of competent jurisdiction
for the appointment
- 57 -
<PAGE>
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States or of any state thereof, in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination in the
conduct of its corporate trust or stock transfer business by federal or state
authorities and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $5,000,000 or (b) an Affiliate
controlled by a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed, but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any
such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor
- 58 -
<PAGE>
Rights Agent, as the case may be. Notwithstanding the foregoing provisions, in
the event of resignation, removal or incapacity of the Rights Agent, the Company
shall have the authority to act as the Rights Agent until a successor Rights
Agent shall have assumed the duties of the Rights Agent hereunder.
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Exercise Price per share and the number or kind or class of
shares of stock or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Rights Agreement.
Section 23. Redemption.
----------
(a) The Company may, at its option, but only by the vote of a
majority of the Board of Directors, redeem all but not less than all of the then
outstanding Rights, at any time prior to the Close of Business on the earlier of
(i) the tenth day following the Stock Acquisition Date (subject to extension by
the Company as provided in Section 26 hereof) or (ii) the Final Expiration Date,
at a redemption price of $.01 per Right, subject to adjustments as provided in
subsection (c) below (the "Redemption Price"); provided, however, that from and
after the time that any Person shall become an Acquiring Person (other than
pursuant to a Qualifying Tender Offer), the Company may redeem
- 59 -
<PAGE>
the Rights only if at the time of the action of the Board of Directors there are
then in office not less than two Continuing Directors and such redemption is
approved by a majority of the Continuing Directors then in office.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable pursuant to Section 11(a)(ii) prior to the expiration
of the Company's right of redemption hereunder.
(b) Without any further action and without any notice, the right to
exercise the Rights will terminate at the effective time of the action of the
Board of Directors ordering the redemption of the Rights and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
Within 10 days after the effective time of the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the holders of the then outstanding Rights by mailing such notice
to all such holders at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each notice of redemption will state the method by which
the payment of the Redemption Price will be made. At the option of the Board of
Directors, the Redemption Price may be paid in cash to each Rights holder or by
the issuance of shares (and, at the Company's election pursuant to Section 14(b)
hereof, cash or
- 60 -
<PAGE>
depositary receipts in lieu of fractions of shares other than fractions which
are integral multiples of one one-hundredth (1/100) of a share) of Preferred
Stock having a Fair Market Value equal to such cash payment.
(c) In the event the Company shall at any time after the date of this
Rights Agreement (A) pay any dividend on Common Stock in shares of Common Stock,
(B) subdivide or split the outstanding shares of Common Stock into a greater
number of shares or (C) combine or consolidate the outstanding shares of Common
Stock into a smaller number of shares or effect a reverse split of the
outstanding shares of Common Stock, then, and in each such event, the Redemption
Price shall be adjusted so that the Redemption Price after such event shall
equal the Redemption Price immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to such event;
provided, however, that in each case such adjustment to the Redemption Price
shall be made only if the amount of the Redemption Price shall be reduced or
increased by $.01 per Right.
Section 24. Notice of Proposed Actions.
--------------------------
(a) In case the Company, after the Distribution Date, shall propose
(i) to effect any of the transactions referred to in Section 11(a)(i) or 11(g)
or (ii) to offer to the holders of record of its Common Stock options, warrants,
or other rights to
- 61 -
<PAGE>
subscribe for or to purchase shares of Common Stock (including any security
convertible into or exchangeable for Common Stock) or shares of stock of any
class or any other securities, options, warrants, convertible or exchangeable
securities or other rights, or (iii) to effect any reclassification of its
Preferred Stock or Common Stock or any recapitalization or reorganization of the
Company, or (iv) to effect any consolidation or merger with or into, or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one or more transactions, of more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to, any other Person or Persons, or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of record of a Right Certificate, in accordance with
Section 25, notice of such proposed action, which shall specify the record date
for the purposes of such transaction referred to in Section 11(a)(i) or such
dividend or distribution, or the date on which such reclassification,
recapitalization, reorganization, consolidation, merger, sale or transfer of
assets, liquidation, dissolution, or winding up is to take place and the record
date for determining participation therein by the holders of record of Common
Stock or Preferred Stock, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least 10 days prior to the record date for determining holders of record of the
Preferred
- 62 -
<PAGE>
Stock for purposes of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of record of Common Stock or
Preferred Stock, whichever shall be the earlier. The failure to give notice
required by this Section 24 or any defect therein shall not affect the legality
or validity of the action taken by the Company or the vote upon any such action.
(b) In case any of the transactions referred to in Section 11(a)(i),
11(g) or 13 of this Rights Agreement are proposed, then, in any such case, the
Company shall give to each holder of Rights, in accordance with Section 25
hereof, notice of the proposal of such transaction at least 10 days prior to
consummating such transaction, which notice shall specify the proposed event and
the consequences of the event to holders of Rights under Section 11(a)(i), 11(g)
or 13 hereof, as the case may be, and, upon consummating such transaction, shall
similarly give notice thereof to each holder of Rights.
Section 25. Notices. Notices or demands authorized by this Rights
-------
Agreement to be given or made by the Rights Agent or by the holder of record of
any Right Certificate or Right to or on the Company shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Rights Agent) as follows:
Dairy Mart Convenience Stores, Inc.
One Vision Drive
Enfield, CT 06082
- 63 -
<PAGE>
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of record
of any Right Certificate or Right to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of record of any Right Certificate
or Right shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 26. Supplements and Amendments. For as long as the Rights
--------------------------
are then redeemable and except as provided in the last sentence of this Section
26, the Company may in its sole and absolute discretion, and the Rights Agent
shall if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of the Rights. At any time when
the Rights are not then redeemable and except as provided in the last sentence
of this Section 26, the Company may, and the Rights Agent shall if the Company
so directs, supplement or amend this Rights Agreement without the approval of
any holders of Right Certificates (i) to cure any ambiguity, (ii) to correct or
- 64 -
<PAGE>
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein or (iii) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable,
provided that no such supplement or amendment pursuant to this clause (iii)
shall materially adversely affect the interest of the holders of Right
Certificates. Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. This Agreement may be amended or supplemented at
any time with the approval of a majority of the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Stock).
Notwithstanding anything contained in this Rights Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price or the
Final Expiration Date and supplements or amendments may be made after the time
that any Person becomes an Acquiring Person (other than pursuant to a Qualifying
Tender Offer) only if at the time of the action of the Board of Directors
approving such supplement or amendment there are then in office not less than
two Continuing Directors and such supplement or amendment is approved by a
majority of the Continuing Directors then in office.
Section 27. Successors. All of the covenants and provisions of this
----------
Rights Agreement by or for the benefit of the
- 65 -
<PAGE>
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 28. Benefits of this Rights Agreement. Nothing in this
---------------------------------
Rights Agreement shall be construed to give to any person or corporation other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the holders of Common Stock
in their capacity as holders of the Rights) any legal or equitable right, remedy
or claim under this Rights Agreement; but this Rights Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the holders of
record of the Right Certificates (and, prior to the Distribution Date, the
holders of Common Stock in their capacity as holders of the Rights).
Section 29. Delaware Contract. This Rights Agreement and each Right
-----------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed and enforced in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state.
Section 30. Counterparts. This Rights Agreement may be executed in
------------
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
- 66 -
<PAGE>
Section 31. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Rights Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
Section 32. Severability. If any term, provision, covenant or
------------
restriction of this Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed, all as of the day and year first above written.
DAIRY MART CONVENIENCE STORES, INC.
Attest: /s/ Gregory G. Landry By /s/ Robert B. Stein, Jr.
----------------------- ---------------------------------
(SEAL) Name: Robert B. Stein, Jr.
Title: President and Chief Executive
Officer
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Nancy Macchia
---------------------------------
Name: Nancy Macchia
Title: Vice President
Attest: /s/ Davis Young
-------------------
(SEAL)
- 67 -
<PAGE>
EXHIBIT A
UNDER CERTAIN CIRCUMSTANCES AS PROVIDED IN THE RIGHTS AGREEMENT (AS
REFERRED TO BELOW), RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY
ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS SHALL BE NULL AND VOID AND MAY NOT BE TRANSFERRED TO ANY
PERSON.
DAIRY MART CONVENIENCE STORES, INC.
SUMMARY OF RIGHTS TO PURCHASE
SERIES A JUNIOR PREFERRED STOCK
On January 19, 1996, the Board of Directors of Dairy Mart Convenience
Stores, Inc. (the "Company") declared a dividend distribution of one Preferred
Stock Purchase Right for each outstanding share of Class A Common Stock, par
value $.01 per share, and Class B Common Stock, par value $0.01 per share (the
"Common Stock"), of the Company. The distribution is payable as of January 29,
1996 to stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-hundredth (1/100) of a share of
preferred stock of the Company, designated as Series A Junior Preferred Stock
(the "Preferred Stock") at a price of $30 per one one-hundredth (1/100) of a
share ("Exercise Price"). The description and terms of the Rights are set forth
in a Rights Agreement (the "Rights Agreement") between the Company and
The First National Bank of Boston, as Rights Agent (the "Rights Agent").
As discussed below, initially the Rights will not be exercisable,
-----------------------------------------------------------------
certificates will not be sent to stockholders and the Rights will automatically
- -------------------------------------------------------------------------------
trade with the Common Stock.
- ----------------------------
The Rights, unless earlier redeemed by the Board of Directors, become
exercisable upon the close of business on the day (the "Distribution Date")
which is the earlier of (i) the tenth day following a public announcement that a
person or group of affiliated or associated persons, with certain exceptions set
forth below, has acquired beneficial ownership of either (x) 25% or more of the
outstanding shares of any class of voting stock of the Company or (y) 15% or
more of the total number of outstanding shares of the voting stock of the
Company (an "Acquiring Person") and (ii) the tenth business day (or such later
date as may be determined by the Board of Directors prior to such time as any
person or group of affiliated or associated persons becomes an Acquiring Person)
after the date of the commencement or announcement of a person's or group's
intention to commence a tender or exchange offer the consummation of which would
result
<PAGE>
in the ownership of 30% or more of the outstanding shares of either class of
voting stock (even if no shares are actually purchased pursuant to such offer);
prior thereto, the Rights would not be exercisable, would not be represented by
a separate certificate, and would not be transferable apart from the Company's
Common Stock, but will instead be evidenced, with respect to any of the Common
Stock certificates outstanding as of January 29, 1996, by such Common Stock
certificate with a copy of this Summary of Rights attached thereto. An
Acquiring Person does not include (A) the Company, (B) any subsidiary of the
Company, (C) DM Associates Limited Partnership (and its general partner(s) and
the holders of the outstanding equity interests in such general partner(s) in
their capacities as such) so long as DM Associates does not increase its
beneficial ownership of the voting stock of the Company, (D) any employee
benefit plan or employee stock plan of the Company or of any subsidiary of the
Company, or any trust or other entity organized, appointed, established or
holding Common Stock for or pursuant to the terms of any such plan or (E) any
person or group whose ownership of 25% or more of the shares of any class of the
voting stock of the Company then outstanding or 15% of the total number of
shares of voting stock of the Company then outstanding results solely from (i)
any action or transaction or transactions approved by the Board of Directors
before such person or group became an Acquiring Person or (ii) a reduction in
the number of issued and outstanding shares of voting stock of the Company
pursuant to a transaction or transactions approved by the Board of Directors
(provided that any person or group that does not become an Acquiring Person by
reason of clause (i) or (ii) above shall become an Acquiring Person upon
acquisition of an additional 1% of the Company's voting stock unless such
acquisition of additional voting stock will not result in such person or group
becoming an Acquiring Person by reason of such clause (i) or (ii)).
Until the Distribution Date (or earlier redemption or expiration of
the Rights), new Common Stock certificates issued after January 29, 1996 will
contain a legend incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Common Stock certificates outstanding as of
January 29, 1996, with or without a copy of this Summary of Rights attached
thereto, will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate certificates alone
will evidence the Rights from and after the Distribution Date.
<PAGE>
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on January 19, 2006, unless earlier
redeemed by the Company as described below.
The Preferred Stock is nonredeemable and, unless otherwise provided in
connection with the creation of a subsequent series of preferred stock,
subordinate to any other series of the Company's preferred stock. The Preferred
Stock may not be issued except upon exercise of Rights. Each share of Preferred
Stock will be entitled to receive when, as and if declared, a quarterly dividend
in an amount equal to the greater of $.10 per share or 100 times the cash
dividends declared on the Company's Class B Common Stock. In addition,
Preferred Stock is entitled to 100 times any non-cash dividends (other than
dividends payable in equity securities) declared on the Class B Common Stock, in
like kind. In the event of the liquidation of the Company, the holders of
Preferred Stock will be entitled to receive a payment in an amount equal to the
greater of $100.00 per one one-hundredth share or 100 times the payment made per
share of Class B Common Stock. Each share of Preferred Stock will have 1 vote,
voting together with the Class B Common Stock. In the event of any merger,
consolidation or other transaction in which Class B Common Stock is exchanged,
each share of Preferred Stock will be entitled to receive 100 times the amount
received per share of Class B Common Stock. The rights of Preferred Stock as to
dividends, liquidation and voting are protected by anti-dilution provisions.
The number of shares of Preferred Stock issuable upon exercise of the
Rights is subject to certain adjustments from time to time in the event of a
stock dividend on, or a subdivision or combination of, the Common Stock. The
Exercise Price for the Rights is subject to adjustment in the event of
extraordinary distributions of cash or other property to holders of Common
Stock.
Unless the Rights are earlier redeemed, in the event that, after the
time that a Person becomes an Acquiring Person (other than pursuant to a
Qualifying Tender Offer (as defined below)), the Company were to be acquired in
a merger or other business combination (in which any shares of Common Stock are
changed into or exchanged for other securities or assets) or more than 50% of
the assets or earning power of the Company and its subsidiaries (taken as a
whole) were to be sold or transferred in one or a series of related
transactions, the Rights Agreement provides that proper provision will be made
so that each holder of record of a Right will from and after such date have the
right to receive, upon payment of the Exercise Price, that number of shares of
common stock of the acquiring company having a market value at the time of such
transaction equal to two times the Exercise Price. In addition, unless the
Rights are earlier
-3-
<PAGE>
redeemed, in the event that a person or group becomes the beneficial owner of
25% or more of either class of the Company's voting stock or 15% or more of the
total number of shares of voting stock then outstanding (other than pursuant to
a tender or exchange offer (a "Qualifying Tender Offer") for all outstanding
shares of Common Stock that is approved by the Board of Directors, after taking
into account the long-term value of the Company and all other factors they
consider relevant in the circumstances), the Rights Agreement provides that
proper provisions will be made so that each holder of record of a Right, other
than the Acquiring Person (whose Rights will thereupon become null and void),
will thereafter have the right to receive, upon payment of the Exercise Price,
that number of shares of the Preferred Stock having a market value at the time
of the transaction equal to two times the Exercise Price (such market value to
be determined with reference to the market value of the Company's Common Stock
as provided in the Rights Agreement).
Fractions of shares of Preferred Stock (other than fractions which are
integral multiples of one one-hundredth of a share) may, at the election of the
Company, be evidenced by depositary receipts. The Company may also issue cash
in lieu of fractional shares which are not integral multiples of one one-
hundredth of a share.
At any time on or prior to the close of business on the earlier of (i)
the tenth day after the time that a person has become an Acquiring Person (or
such later date as a majority of the Board of Directors may determine) or (ii)
January 19, 2006, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (the "Redemption Price"). The Rights may be
redeemed after the time that any Person has become an Acquiring Person only if
approved by a majority of the Continuing Directors. Immediately upon the
effective time of the action of the Board of Directors of the Company
authorizing redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
For as long as the Rights are then redeemable, the Company may, except
with respect to the redemption price or date of expiration of the Rights, amend
the Rights in any manner, including an amendment to extend the time period in
which the Rights may be redeemed. At any time when the Rights are not then
redeemable, the Company may amend the Rights in any manner that does not
materially adversely affect the interests of holders of the Rights as such.
Amendments to the Rights Agreement from and after the time that any Person
becomes an Acquiring Person requires the approval of a majority of the
Continuing Directors (as provided in the Rights Agreement).
-4-
<PAGE>
Until a Right is exercised, the holder, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Current Report on Form 8-K dated January
19, 1996. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement which is
incorporated in this summary description herein by reference.
-5-
<PAGE>
EXHIBIT B
[Form of Right Certificate]
Certificate No. W- ______ Rights
NOT EXERCISABLE AFTER JANUARY 19, 2006 OR EARLIER IF REDEEMED. THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY AND UNDER CERTAIN
OTHER CIRCUMSTANCES, AT $.01 PER RIGHT (SUBJECT TO ADJUSTMENT), ON THE
TERMS SET FORTH OR REFERRED TO IN THE RIGHTS AGREEMENT. UNDER CERTAIN
-------------
CIRCUMSTANCES AS PROVIDED IN THE RIGHTS AGREEMENT (AS REFERRED TO BELOW),
-------------------------------------------------------------------------
RIGHTS ISSUED TO OR BENEFICIALLY OWNED BY ACQUIRING PERSONS OR THEIR
--------------------------------------------------------------------
AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
-----------------------------------------------------------------
AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL BE NULL AND VOID
-------------------------------------------------------------------------
AND MAY NOT BE TRANSFERRED TO ANY PERSON.
----------------------------------------
Right Certificate
DAIRY MART CONVENIENCE STORES, INC.
This certifies that __________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of January 19, 1996 (the "Rights Agreement") between Dairy
Mart Convenience Stores, Inc., a Delaware corporation (the "Company"), and The
First National Bank of Boston a Delaware Corporation (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M. (Connecticut time) on
January 19, 2006 at the office of the Rights Agent designated in the Rights
Agreement for such purpose, or its successor as Rights Agent, in Boston,
Massachusetts, one one-hundredth (1/100) of a fully paid nonassessable share of
Series A Junior Preferred Stock (the "Preferred Stock") of the
<PAGE>
Company at a purchase price of $30, as the same may from time to time be
adjusted in accordance with the Rights Agreement (the "Exercise Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase attached hereto duly executed.
As provided in the Rights Agreement, the Exercise Price and the number
of shares of Preferred Stock which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events and, upon the happening of
certain events, securities other than shares of Preferred Stock, or other
property, may be acquired upon exercise of the Rights evidenced by this Right
Certificate, as provided in the Rights Agreement.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent,
the Company and the holders of record of Right Certificates. Copies of the
Rights Agreement are on file at the principal executive office of the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated in the Rights Agreement
for such purpose, may be exchanged for another Right Certificate or Right
Certificates of
<PAGE>
like tenor and date evidencing Rights entitling the holder of record to purchase
a like aggregate number of shares of Preferred Stock as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof, another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option or
under certain other circumstances at a redemption price of $.01 per Right.
No fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-hundredth (1/100) of a share) are required to
be issued upon the exercise of any Right or Rights evidenced hereby, and in lieu
thereof the Company may cause depositary receipts to be issued and/or a cash
payment may be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted
- 3 -
<PAGE>
to stockholders at meeting thereof, or to give or withhold consent to any
corporate action or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _____________, 199_.
ATTEST: DAIRY MART CONVENIENCE
STORES, INC.
By
- ----------------------- ------------------------
Secretary Title:
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON
By
--------------------
Authorized Signature
- 4 -
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificates.)
FOR VALUE RECEIVED __________________________________________________
hereby sells, assigns and transfers unto ______________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
Rights evidenced by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
____________________ Attorney to transfer the within Right Certificate on the
books of the within-named Company, with full power of substitution.
Dated: ________________, 199__
-----------------------------------
Signature
Signature Guaranteed:
- 5 -
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned
or transferred by or on behalf of a Person who is or was an Acquiring Person or
an Associate or an Affiliate thereof (as such terms are defined in the Rights
Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
Dated: ____________, 199__ -------------------------------------
Signature
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
- 6 -
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if registered holder
desires to exercise the Right Certificate.)
TO DAIRY MART CONVENIENCE STORES, INC.:
The undersigned hereby irrevocably elects to exercise
_________________ Rights represented by this Right Certificate to purchase the
shares of Preferred Stock issuable upon the exercise of such Rights and requests
that certificates for such share(s) be issued in the following name:
Please insert social security
or other identifying number: ___________________________________________________
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
- 7 -
<PAGE>
Please insert social security
or other identifying number: ___________________________________________________
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: _____________, 199__
-------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the fact of this
Right Certificate)
Signature Guaranteed:
- 8 -
<PAGE>
EXHIBIT C
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PREFERRED STOCK
OF
DAIRY MART CONVENIENCE STORES, INC.
Pursuant to Section 151 of the Delaware
General Corporation Law
Dairy Mart Convenience Stores, Inc., a corporation organized and
existing under the Delaware General Corporation Law (the "Company"), in
accordance with the provisions of Section 151 of such law, DOES HEREBY CERTIFY
that pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of the Company, the Board of Directors on
January 19, 1996 adopted the following resolution which creates a series of
89,400 shares of Preferred Stock designated as Series A Junior Preferred Stock,
as follows:
RESOLVED, that pursuant to Section 151(g) of the Delaware General
Corporation Law and the authority vested in the Board of Directors of the
Company in accordance with the provisions of ARTICLE IV, paragraph B of the
Restated Certificate of Incorporation of the Company, a series of Preferred
Stock of the Company be, and hereby is, created, and the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof, be, and hereby are, as follows:
<PAGE>
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series A Junior Preferred Stock" (the "Series A Preferred
Stock") and the number of shares constituting such series shall be 89,400.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, (i) cash dividends in an amount per share (rounded to
the nearest cent) equal to 100 times the aggregate per share amount of all cash
dividends declared or paid on the Class B Common Stock, $0.01 par value per
share, of the Company (the "Common Stock") and (ii) a preferential cash dividend
(the "Preferential Dividends"), if any, in preference to the holders of any
class of Common Stock, on the first day of February, May, August and November of
each year (each a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, payable in an amount (except in the case
of the first Quarterly Dividend Payment if the date of the first issuance of
Series A Preferred Stock is a date other than a Quarterly Dividend Payment date,
in which case such payment shall be a prorated amount of such amount) equal to
$.10 per share of Series A Preferred Stock less the per share amount of all cash
dividends declared on the Series A Preferred Stock
<PAGE>
pursuant to clause (i) of this sentence since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Company shall, at any time after the
issuance of any share or fraction of a share of Series A Preferred Stock, make
any distribution on the shares of Common Stock of the Company, whether by way of
a dividend or a reclassification of stock, a recapitalization, reorganization or
partial liquidation of the Company or otherwise, which is payable in cash or any
debt security, debt instrument, real or personal property or any other property
(other than cash dividends subject to the immediately preceding sentence, a
distribution of shares of Common Stock or other capital stock of the Company or
a distribution of rights or warrants to acquire any such share, including any
debt security convertible into or exchangeable for any such share, at a price
less than the Fair Market Value (as hereinafter defined) of such share), then,
and in each such event, the Company shall simultaneously pay on each then
outstanding share of Series A Preferred Stock of the Company a distribution, in
like kind, of 100 times such distribution paid on a share of Common Stock
(subject to the provisions for adjustment hereinafter set forth). The dividends
and distributions on the Series A Preferred Stock to which holders thereof are
entitled pursuant to clause (i) of the first sentence of this paragraph and
pursuant to the second sentence of this paragraph are hereinafter referred to as
-3-
<PAGE>
"Dividends" and the multiple of such cash and non-cash dividends on the Common
Stock applicable to the determination of the Dividends, which shall be 100
initially but shall be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Dividend Multiple". In the event the Company
shall at any time after January 29, 1996 declare or pay any dividend or make any
distribution on Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combination, consolidation or reverse split of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case the Dividend Multiple thereafter applicable
to the determination of the amount of Dividends which holders of shares of
Series A Preferred Stock shall be entitled to receive shall be the Dividend
Multiple applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Company shall declare each Dividend at the same time it
declares any cash or non-cash dividend or distribution on the Common Stock in
respect of which a Dividend is required to be paid. No cash or non-cash
dividend or distribution on the Common Stock in respect of which a Dividend is
required to be paid shall be paid or set aside for payment on the Common Stock
unless a Dividend in respect of such dividend or
-4-
<PAGE>
distribution on the Common Stock shall be simultaneously paid, or set aside for
payment, on the Series A Preferred Stock.
(C) Preferential Dividends shall begin to accrue on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of any shares of Series A Preferred Stock.
Accrued but unpaid Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series A
-------------
Preferred Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 1
vote on all matters submitted to a vote of the holders of the Common Stock. The
number of votes which a holder of Series A Preferred Stock is entitled to cast,
as the same may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Vote Multiple". In the event the Company shall
at any time after January 29, 1996 declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common
-5-
<PAGE>
Stock, then in each such case the Vote Multiple thereafter applicable to the
determination of the number of votes per share to which holders of shares of
Series A Preferred Stock shall be entitled after such event shall be the Vote
Multiple immediately prior to such event multiplied by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Restated Certificate
of Incorporation or By-laws, the holders of shares of Series A Preferred Stock
and the holders of shares of Common Stock shall vote together as one class on
all matters submitted to a vote of stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the
Series A Preferred Stock for four or more quarterly dividend periods, whether
consecutive or not, shall not have been declared and paid or irrevocably set
aside for payment, the holders of record of Preferred Stock of the Company of
all series (including the Series A Preferred Stock), other than any series in
respect of which such right is expressly withheld by the Restated Certificate of
Incorporation or the authorizing resolutions included in any Certificate of
Designations therefor, shall have the right, at the next meeting of stockholders
called for the election of directors, to elect two members to the Board of
Directors, which directors shall be in addition to the number
-6-
<PAGE>
required by the By-laws prior to such event, to serve until the next Annual
Meeting and until their successors are elected and qualified or their earlier
resignation, removal or incapacity or until such earlier time as all accrued and
unpaid Preferential Dividends upon the outstanding shares of Series A Preferred
Stock shall have been paid (or irrevocably set aside for payment) in full. The
holders of shares of Series A Preferred Stock shall continue to have the right
to elect directors as provided by the immediately preceding sentence until all
accrued and unpaid Preferential Dividends upon the outstanding shares of Series
A Preferred Stock shall have been paid (or set aside for payment) in full. Such
directors may be removed and replaced by such stockholders, and vacancies in
such directorships may be filled only by such stockholders (or by the remaining
director elected by such stockholders, if there be one) in the manner permitted
by law; provided, however, that any such action by stockholders shall be taken
at a meeting of stockholders and shall not be taken by written consent thereto.
(D) Except as otherwise required by the Restated Certificate of
Incorporation or By-laws or set forth herein, holders of Series A Preferred
Stock shall have no other special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for the taking of any corporate action.
-7-
<PAGE>
Section 4. Certain Restrictions.
--------------------
(A) Whenever Preferential Dividends or Dividends are in arrears or
the Company shall be in default of payment thereof, thereafter and until all
accrued and unpaid Preferential Dividends and Dividends, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been paid
or set irrevocably aside for payment in full, and in addition to any and all
other rights which any holder of shares of Series A Preferred Stock may have in
such circumstances, the Company shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration, any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity as to dividends with the Series A
Preferred Stock, unless dividends are paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled if the full dividends accrued thereon were to
be paid;
(iii) except as permitted by subparagraph (iv) of this paragraph 4(A),
redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or
-8-
<PAGE>
winding up) with the Series A Preferred Stock, provided that the Company
may at any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the Company ranking
junior (both as to dividends and upon liquidation, dissolution or winding
up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up), except in accordance with a purchase offer made
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Company shall not permit any Subsidiary (as hereinafter
defined) of the Company to purchase or otherwise acquire for consideration any
shares of stock of the Company unless the Company could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner. A "Subsidiary" of the Company shall mean any corporation or other
entity of which securities or other ownership interests having ordinary voting
power sufficient to elect a majority of the board of directors of such
corporation or
-9-
<PAGE>
other entity or other persons performing similar functions are beneficially
owned, directly or indirectly, by the Company or by any corporation or other
entity that is otherwise controlled by the Company.
(C) The Company shall not issue any shares of Series A Preferred
Stock except upon exercise of Rights issued pursuant to that certain Rights
Agreement dated as of January 19, 1996 between the Company and The First
National Bank of Boston, a copy of which is on file with the Secretary of the
Company at its principal executive office and shall be made available to
stockholders of record without charge upon written request therefor addressed to
said Secretary. Notwithstanding the foregoing sentence, nothing contained in the
provisions hereof shall prohibit or restrict the Company from issuing for any
purpose any series of Preferred Stock with rights and privileges similar to,
different from, or greater than, those of the Series A Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
upon their retirement and cancellation shall become authorized but unissued
shares of Preferred Stock, without designation as to series, and such shares may
be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
-10-
<PAGE>
Section 6. Liquidation, Dissolution or Winding Up. Upon any
--------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the Company,
no distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless the holders of shares of Series A
Preferred Stock shall have received, subject to adjustment as hereinafter
provided, (A) $100.00 per one one-hundredth (1/100) share plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment or, (B) if greater than the amount
specified in clause (i)(A) of this sentence, an amount equal to 100 times the
aggregate amount to be distributed per share to holders of Common Stock, as the
same may be adjusted as hereinafter provided and (ii) to the holders of stock
ranking on a parity upon liquidation, dissolution or winding up with the Series
A Preferred Stock, unless simultaneously therewith distributions are made
ratably on the Series A Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of shares of
Series A Preferred Stock are entitled under clause (i)(A) of this sentence and
to which the holders of such parity shares are entitled, in each case upon such
liquidation, dissolution or winding up. The amount to which holders of Series A
Preferred Stock may be entitled upon liquidation, dissolution or winding up of
the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter
referred
-11-
<PAGE>
to as the "Participating Liquidation Amount" and the multiple of the amount to
be distributed to holders of shares of Common Stock upon the liquidation,
dissolution or winding up of the Company applicable pursuant to said clause to
the determination of the Participating Liquidation Amount, as said multiple may
be adjusted from time to time as hereinafter provided, is hereinafter referred
to as the "Liquidation Multiple". In the event the Company shall at any time
after January 29, 1996 declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common Stock into a
greater or lesser number of shares of Common Stock, then, in each such case, the
Liquidation Multiple thereafter applicable to the determination of the
Participating Liquidation Amount to which holders of Series A Preferred Stock
shall be entitled after such event shall be the Liquidation Multiple applicable
immediately prior to such event multiplied by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Certain Reclassifications and Other Events.
------------------------------------------
(A) In the event that holders of shares of Common Stock of the
Company receive after January 29, 1996 in respect of their shares of Common
Stock any share of capital stock of the Company (other than any share of Common
Stock of the Company),
-12-
<PAGE>
whether by way of reclassification, recapitalization, reorganization, dividend
or other distribution or otherwise (a "Transaction"), then, and in each such
event, the dividend rights, voting rights and rights upon the liquidation,
dissolution or winding up of the Company of the shares of Series A Preferred
Stock shall be adjusted so that after such event the holders of Series A
Preferred Stock shall be entitled, in respect of each share of Series A
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect immediately prior
to such Transaction multiplied by the additional dividends which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock, (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such Transaction
multiplied by the additional voting rights which the holder of a share of Common
Stock shall be entitled to receive by virtue of the receipt in the Transaction
of such capital stock and (iii) such additional distributions upon liquidation,
dissolution or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such Transaction multiplied by the additional amount
which the holder of a share of Common Stock shall be entitled to receive upon
liquidation, dissolution or winding up of the Company by virtue of the receipt
in the
-13-
<PAGE>
Transaction of such capital stock, as the case may be, all as provided by the
terms of such capital stock.
(B) In the event that holders of shares of Common Stock of the
Company receive after January 29, 1996 in respect of their shares of Common
Stock any right or warrant to purchase Common Stock (including as such a right,
for all purposes of this paragraph, any security convertible into or
exchangeable for Common Stock) at a purchase price per share less than the Fair
Market Value of a share of Common Stock on the date of issuance of such right or
warrant, then and in each such event the dividend rights, voting rights and
rights upon the liquidation, dissolution or winding up of the Company of the
shares of Series A Preferred Stock shall each be adjusted so that after such
event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple
shall each be the product of the Dividend Multiple, the Vote Multiple and the
Liquidation Multiple, as the case may be, in effect immediately prior to such
event multiplied by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock which could be
acquired upon exercise in full of all such rights or warrants and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the number of shares
of Common Stock which could be purchased, at the Fair Market Value of the Common
Stock at the time of such issuance, by the maximum
-14-
<PAGE>
aggregate consideration payable upon exercise in full of all such rights or
warrants.
(C) In the event that holders of shares of Common Stock of the
Company receive after January 29, 1996 in respect of their shares of Common
Stock any right or warrant to purchase capital stock of the Company (other than
shares of Common Stock), including as such a right, for all purposes of this
paragraph, any security convertible into or exchangeable for capital stock of
the Company (other than Common Stock), at a purchase price per share less than
the Fair Market Value of such shares of capital stock on the date of issuance of
such right or warrant, then and in each such event the dividend rights, voting
rights and rights upon liquidation, dissolution or winding up of the Company of
the shares of Series A Preferred Stock shall each be adjusted so that after such
event each holder of a share of Series A Preferred Stock shall be entitled, in
respect of each share of Series A Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior to
such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the Discount
Fraction (as hereinafter defined) and (ii) such additional voting rights as
equal the Vote Multiple in effect
-15-
<PAGE>
immediately prior to such event multiplied, first, by the additional voting
rights to which the holder of a share of Common Stock shall be entitled upon
exercise of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount Fraction and
(iii) such additional distributions upon liquidation, dissolution or winding up
of the Company as equal the Liquidation Multiple in effect immediately prior to
such event multiplied, first, by the additional amount which the holder of a
share of Common Stock shall be entitled to receive upon liquidation, dissolution
or winding up of the Company upon exercise of such right or warrant by virtue of
the capital stock which could be acquired upon such exercise and multiplied
again by the Discount Fraction. For purposes of this paragraph, the "Discount
Fraction" shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a right
or warrant distributed to holders of shares of Common Stock of the Company as
contemplated by this paragraph immediately after the distribution thereof and
the purchase price per share for such share of capital stock pursuant to such
right or warrant and the denominator of which shall be the Fair Market Value of
a share of such capital stock immediately after the distribution of such right
or warrant.
(D) For purposes of this Certificate of Designations, the "Fair
Market Value" of a share of capital stock of the Company (including a share of
Common Stock) on any date shall be
-16-
<PAGE>
deemed to be the average of the daily closing price per share thereof over the
30 consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that, in the event that such Fair Market
Value of any such share of capital stock is determined during a period which
includes any date that is within 30 Trading Days after (i) the ex-dividend date
for a dividend or distribution on stock payable in shares of such stock or
securities convertible into shares of such stock, or (ii) the effective date of
any subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then, and in each such case, the Fair Market
Value shall be appropriately adjusted by the Board of Directors of the Company
to take into account ex-dividend or post-effective date trading. The closing
price for any day shall be the last sale price, regular way, or, in case, no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way (in either case, as reported in the applicable transaction
reporting system with respect to securities listed or admitted to trading on the
New York Stock Exchange), or, if the shares are not listed or admitted to
trading on the New York Stock Exchange, as reported in the applicable
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares are listed or admitted to
trading or, if the shares are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted,
-17-
<PAGE>
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or if on any such
date the shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the shares selected by the Board of Directors of the Company. The
term "Trading Day" shall mean a day on which the principal national securities
exchange on which the shares are listed or admitted to trading is open for the
transaction of business or, if the shares are not listed or admitted to trading
on any national securities exchange, on which the New York Stock Exchange or
such other national securities exchange as may be selected by the Board of
Directors of the Company is open. If the shares are not publicly held or not so
listed or traded on any day within the period of 30 Trading Days applicable to
the determination of Fair Market Value thereof as aforesaid, "Fair Market Value"
shall mean the fair market value thereof per share as determined in good faith
by the Board of Directors of the Company. In either case referred to in the
foregoing sentence, the determination of Fair Market Value shall be described in
a statement filed with the Secretary of the Company.
Section 8. Consolidation, Merger, etc. In case the Company shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are
-18-
<PAGE>
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each outstanding share of Series A Preferred
Stock shall at the same time be similarly exchanged for or changed into the
aggregate amount of stock, securities, cash and/or other property (payable in
like kind), as the case may be, for which or into which each share of Common
Stock is changed or exchanged multiplied by the highest of the Vote Multiple,
the Dividend Multiple or the Liquidation Multiple in effect immediately prior to
such event.
Section 9. Effective Time of Adjustments.
-----------------------------
(A) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(B) The Company shall give prompt written notice to each holder of a
share of Series A Preferred Stock of the effect of any adjustment to the voting
rights, dividend rights or rights upon liquidation, dissolution or winding up of
the Company of such shares required by the provisions hereof. Notwithstanding
the foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 10. No Redemption. The shares of Series A Preferred Stock
-------------
shall not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Series A Preferred Stock in any other manner permitted by law,
-19-
<PAGE>
the provisions hereof and the Restated Certificate of Incorporation of the
Company.
Section 11. Ranking. Unless otherwise provided in the Restated
-------
Certificate of Incorporation of the Company or a Certificate of Designations
relating to a subsequent series of preferred stock of the Company, the Series A
Preferred Stock shall rank junior to all other series of the Company's preferred
stock as to the payment of dividends and the distribution of assets on
liquidation, dissolution or winding up and senior to the Common Stock.
Section 12. Amendment. The provisions hereof and the Restated
---------
Certificate of Incorporation of the Company shall not be amended in any manner
which would adversely affect the rights, privileges or powers of the Series A
Preferred Stock without, in addition to any other vote of stockholders required
by law, the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series A Preferred Stock, voting together as a single
class.
IN WITNESS WHEREOF, I have executed and subscribed this Certificate of
Designations and do affirm the foregoing as true under the penalties of perjury
this 29th day of January, 1996.
DAIRY MART CONVENIENCE STORES, INC.
By: /s/Gregory G. Landry
----------------------------
Gregory G. Landry,
Executive Vice President
and Chief Financial Officer
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FOR IMMEDIATE RELEASE
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January 19, 1996
NEWS RELEASE
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DAIRY MART CONVENIENCE STORES, INC.
ELECTS DIRECTORS AND ADOPTS RIGHTS PLAN
Enfield, Connecticut -- Dairy Mart Convenience Stores, Inc. (NASDAQ - DMCVA &
DMCVB) announced that at its annual shareholders' meeting today the shareholders
elected Thomas W. Janes and Truby G. Proctor, Jr. as Class A Directors and Frank
W. Barrett, J. Kermit Birchfield, Jr., John W. Everets, Jr., Gregory G. Landry
and Robert B. Stein, Jr. as Class B directors. The shareholders also approved a
non-discretionary stock option plan for non-management directors and a
discretionary stock option plan for employees.
The Company further announced that its Board of Directors had adopted a Rights
Plan designed to protect the Company's stockholders in the event of an attempt
to acquire control of the Company on terms which do not deal fairly with all of
the Company's stockholders.
Terms of the Rights Plan provide for a dividend distribution of one right for
each share of common stock of Dairy Mart Convenience Stores, Inc. to holders of
record at the close of business on January 29, 1996. The rights will become
exercisable only in the event, with certain exceptions, an acquiring party
accumulates 25% or more of either class of Dairy Mart's common
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stock or 15% or more of Dairy Mart's total issued and outstanding common stock,
or if a party announces an offer to acquire 30% or more. The Rights will expire
on January 19, 2006. Each right will entitle the holder to buy one one-
hundredth of a share of a new series of preferred stock at a price of $30. In
addition, upon the occurrence of certain events, holders of the rights will be
entitled to purchase either Dairy Mart stock or shares in an "acquiring entity"
at half of market value.
Dairy Mart will generally be entitled to redeem the Rights at $.01 per right at
any time until the tenth day following the acquisition of a 25% position in
either class of its common stock or 15% or more of its total issued and
outstanding voting stock.
Commenting on the Rights Plan, Robert B. Stein, Jr., Dairy Mart's Chairman of
the Board, President and Chief Executive Officer, said that the Board of
Directors believes that the Rights Plan represents a sound and reasonable means
of safeguarding the interests of stockholders. Mr. Stein said the plan is
similar to those adopted by a number of other companies following favorable
rulings by courts in various jurisdictions, including the Delaware Supreme
Court. Further, Mr. Stein noted that Dairy Mart is not aware of any intent on
the part of any potential acquirer to commence a bid for control of the Company.
Issuance of the Rights will have no dilutive effect, will not affect reported
earnings per share, and will not change the way in which Dairy
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Mart's shares of Class A and Class B Common Stock are currently traded.
Details of the new Rights Plan will be outlined in a letter to be mailed to the
stockholders following the records date for the right dividend.
Dairy Mart, with its corporate offices in Enfield, Connecticut, operates in 11
states with approximately 900 stores, 350 of which sell gasoline.
For further information, please contact:
Gregory G. Landry
Executive Vice President and
Chief Financial Officer
860-741-4516
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