<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
DAIRY MART CONVENIENCE STORES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
DAIRY MART CONVENIENCE STORES, INC.
Dear Dairy Mart Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of Dairy Mart Convenience Stores, Inc. (the "Company") to be held at 10:00 a.m.
(eastern time) on Thursday, December 11, 1997, at the Renaissance Hotel, 24
Public Square, Cleveland, Ohio. At the Annual Meeting, seven persons will be
elected to the Board of Directors. The Board of Directors recommends election of
each of the named nominees. Such other business will be transacted as may
properly come before the Annual Meeting.
We hope that you will be able to attend the Annual Meeting. Whether you
plan to attend the Annual Meeting or not, it is important that your shares are
represented. Therefore, we request that you sign, date and return the enclosed
proxy card, even if you plan to attend the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
Dairy Mart Convenience Stores, Inc.
Robert B. Stein, Jr.,
Chairman of the Board, President and
Chief Executive Officer
November 14, 1997
<PAGE> 3
DAIRY MART CONVENIENCE STORES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 11, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of DAIRY
MART CONVENIENCE STORES, INC. will be held on Thursday, December 11, 1997, at
10:00 a.m. (eastern time) at the Renaissance Hotel, 24 Public Square, Cleveland,
Ohio for the following purposes:
(1) To elect seven members to the Board of Directors; and
(2) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only shareholders of record as shown by the transfer books of the Company
at the close of business on November 12, 1997, are entitled to notice of, and to
vote at, the Annual Meeting.
By Order of the Board of Directors
Dairy Mart Convenience Stores, Inc.
Gregory G. Landry,
Executive Vice President and Chief
Financial Officer
November 14, 1997
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE RESPECTFULLY URGED TO
EXECUTE AND RETURN THE ENCLOSED PROXY AT THEIR EARLIEST CONVENIENCE.
SHAREHOLDERS WHO EXECUTE A PROXY MAY NEVERTHELESS ATTEND THE MEETING AND VOTE
THEIR SHARES IN PERSON.
<PAGE> 4
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF DAIRY MART CONVENIENCE STORES, INC.
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of DAIRY MART
CONVENIENCE STORES, INC., 210 Broadway East, Cuyahoga Falls, Ohio 44222 (the
"Company"), for use at the Annual Meeting of Shareholders to be held on
Thursday, December 11, 1997, and at any and all adjournments or postponements
thereof. The cost of preparing, assembling and mailing this Proxy Statement and
the material enclosed herewith is being borne by the Company. Directors,
officers and some employees of the Company may solicit proxies personally or by
telephone, without additional compensation. This Proxy Statement and the
accompanying proxy are being mailed to shareholders on or about November 14,
1997.
Shares of Class A Common Stock, par value $.01 per share ("Class A Common
Stock"), or Class B Common Stock, par value $.01 per share ("Class B Common
Stock," and together with the Class A Common Stock, "Common Stock"), of the
Company represented by properly executed proxies will be voted as directed on
the proxy. Properly executed proxies containing no voting directions to the
contrary will be voted for the election of the nominees named below. A proxy may
be revoked at any time before it is voted at the Annual Meeting by notifying the
Chief Financial Officer of the Company in writing at the address set forth
above, by submitting a properly executed proxy bearing a later date, or by
revoking the proxy at the Annual Meeting. Attendance at the Annual Meeting will
not by itself operate to revoke a proxy.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has fixed the close of business on November 12,
1997, as the record date for the determination of shareholders entitled to
notice of this Annual Meeting, and only shareholders of record on that date will
be entitled to vote at the meeting. As of October 24, 1997, 3,096,369 shares of
Class A Common Stock were issued and outstanding and 1,528,049 shares of Class B
Common Stock were issued and outstanding. Except with respect to the election of
Directors, holders of both classes of Common Stock vote or consent as a single
class on all matters, with each share of Class B Common Stock having one vote
per share and each share of Class A Common Stock having one-tenth of a vote per
share. With respect to the election of Directors, holders of Class A Common
Stock are entitled to elect 25% of the Directors (rounded up to the nearest
whole number) to be elected by the holders of Common Stock, so long as the
number of outstanding shares of Class A Common Stock is at least 10% of the
total number of outstanding shares of both classes of Common Stock. The holders
of the Class B Common Stock have the right to elect the remaining Directors to
be elected by the holders of Common Stock, so long as the number of outstanding
shares of Class B Common Stock is at least 12.5% of the total number of
outstanding shares of both classes of Common Stock.
<PAGE> 5
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning beneficial
ownership of the Common Stock by each shareholder known by the Company to be the
beneficial owner of 5% or more of either class of Common Stock as of October 24,
1997. In preparing the table, the Company has relied on information filed by
certain of such persons with the Securities and Exchange Commission and, in some
cases, other information provided to the Company by such persons.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ----------------- ------------------------------------------ -------------------- ----------
<S> <C> <C> <C>
Class B DM Associates Limited Partnership 638,743(1) 41.8%
Common Stock 210 Broadway East
Cuyahoga Falls, Ohio
New DM Management Associates I 638,743(1) 41.8%
210 Broadway East
Cuyahoga Falls, Ohio
Robert B. Stein, Jr. 638,743(1) 41.8%
210 Broadway East
Cuyahoga Falls, Ohio
Gregory G. Landry 638,743(1) 41.8%
210 Broadway East
Cuyahoga Falls, Ohio
James Wilen and Wilen Management 111,925(2) 7.3%
Corporation
2360 West Joppa Road
Lutherville, Maryland
- ----------------------------------------------------------------------------------------------------
Class A James Wilen and Wilen Management 275,125(2) 8.9%
Common Stock Corporation
2360 West Joppa Road
Lutherville, Maryland
Heartland Advisors, Inc.
790 North Milwaukee Street 172,500(3) 5.6%
Milwaukee, Wisconsin
The IDS Mutual Fund Group 374,665(4) 10.8%
IDS Tower 10
Minneapolis, Minnesota
OKGBD & Co. 360,001(5) 10.4%
c/o Bankers Trust
P.O. Box 704
Church Street Station
New York, New York
Triumph-Connecticut Limited Partnership 765,000(6) 19.8%
60 State Street, 21st Floor
Boston, Massachusetts
</TABLE>
- ---------------
Notes to Table
(1) DM Associates Limited Partnership ("DM Associates") is the owner of record
of 638,743 shares of Class B Common Stock of the Company, representing
approximately 41.8% of the issued and outstanding shares of Class B Common
Stock, and 34.8% of the total voting power of both classes of the Common
Stock. The general partner of DM Associates
2
<PAGE> 6
is New DM Management Associates I ("DM Management I"), which is a general
partnership. The general partners of DM Management I are Robert B. Stein,
Jr. and Gregory G. Landry, each of whom owns 50% of the partnership
interests of DM Management I.
As the sole general partner of DM Associates and by virtue of the provisions
of the limited partnership agreement of DM Associates, DM Management I has
the power to vote and dispose of such 638,743 shares owned by DM Associates,
subject to the consent of the limited partners of DM Associates being
required for any sale of more than 360,000 shares. In addition, the
partnership agreement of DM Associates provides that, prior to voting the
638,743 shares, DM Management I shall consult with a certain limited partner
as to the voting of such shares. If, after consultation with the limited
partner, DM Management I votes the shares in a manner with which the limited
partner disagrees, the limited partner shall have the right to dissolve DM
Associates. The partnership agreement of DM Management I provides that a
majority of the partnership interests of DM Management I determine how to
vote the shares of Class B Common Stock owned by DM Associates.
As the managing general partner of DM Management I, Mr. Stein has sole
indirect dispositive power with respect to the 638,743 shares owned by DM
Associates. As general partners of DM Management I, Mr. Stein and Mr. Landry
share voting power with respect to the 638,743 shares.
The number of shares set forth in the table above does not include shares of
Class A Common Stock that either of Messrs. Stein and Landry may
beneficially own other than in their capacity as general partners of DM
Associates I. See "ITEM 1 -- ELECTION OF DIRECTORS -- Information Concerning
Nominees and Certain Executive Officers."
(2) Two Schedules 13G were filed with the SEC by Wilen Management Corporation
("Wilen") and James Wilen, in his capacity as President and sole owner of
Wilen, to report Wilen's beneficial ownership, as an investment advisor to
various clients, of shares of Class A and Class B Common Stock. The total of
Class A and Class B Common Stock of 387,050 Shares, represents approximately
8.4% of the total number of issued and outstanding shares of both classes of
Common Stock and approximately 7.6% of the total voting power of both
classes of Common Stock.
(3) Heartland Advisors, Inc. reported on a Schedule 13G filed with the SEC its
beneficial ownership, as an investment advisor, of 172,500 shares of Class A
Common Stock. The 172,500 shares represent approximately 3.7% of the total
number of issued and outstanding shares of both classes of the Common Stock
and approximately .9% of the total voting power of both classes of Common
Stock.
(4) The IDS Mutual Fund Group, through nominees, holds currently exercisable
Warrants to purchase an aggregate of 374,665 shares of Class A Common Stock.
If the 374,665 shares underlying the Warrants were issued, they would
represent approximately 7.5% of the total number of issued and outstanding
shares of both classes of Common Stock, and approximately 2.0% of the total
voting power of both classes of Common Stock.
(5) OKGBD & Co. and its affiliates hold currently exercisable Warrants to
purchase an aggregate of 360,001 shares of Class A Common Stock. If the
360,001 shares underlying the Warrants were issued, they would represent
approximately 7.2% of the total number of issued and outstanding shares of
both classes of Common Stock, and approximately 1.9% of the total voting
power of both classes of Common Stock.
(6) Triumph-Connecticut Limited Partnership ("Triumph"), Triumph's general
partner, Triumph-Connecticut Capital Advisors, Limited Partnership
("TCCALP"), and TCCALP's general partners, Triumph Capital Group, Inc.,
Frederick W. McCarthy, Frederick S. Moseley, IV, E. Mark Norman, Thomas W.
Janes, John M. Chapman and Richard J. Williams, reported on a Schedule 13D
filed with the SEC their shared beneficial ownership of currently
exercisable Warrants to purchase an aggregate of 765,000 shares of Class A
Common Stock. If the 765,000 shares underlying the Warrants were issued,
they would represent approximately 14.2% of the total number of issued and
outstanding shares of both classes of Common Stock, and approximately 4.0%
of the total voting power of both classes of Common Stock.
3
<PAGE> 7
ITEM 1 -- ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Seven Directors have been nominated for election at the Annual Meeting, to
hold office until the next Annual Meeting and until the election and
qualification of their successors. Pursuant to the Company's Certificate of
Incorporation, two of the Directors are to be elected by the holders of Class A
shares (the "Class A Directors") and five of the Directors are to be elected by
the holders of Class B shares (the "Class B Directors"). The Board of Directors
has nominated 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. All of the nominees are
currently serving on the Board. It is intended that proxies of the respective
classes of shares will be voted in favor of all of these persons.
INFORMATION CONCERNING NOMINEES AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth certain information concerning the ownership
of the Common Stock and other matters with respect to the nominees, the
executive officers listed in the Summary Compensation Table and all Directors
and executive officers as a group, as of October 24, 1997.
<TABLE>
<CAPTION>
SHARES (AND PERCENTAGE) OF COMMON STOCK
BENEFICIALLY OWNED AS OF OCTOBER 24, 1997
----------------------------------------------------------------------
PERCENT
OF TOTAL
DIRECTOR CLASS B CLASS A VOTING
NAME (AND AGE) SINCE COMMON STOCK COMMON STOCK POWER
- ------------------------------ -------- ------------ ------------ --------
<S> <C> <C> <C> <C>
NOMINEES FOR
CLASS B DIRECTOR
Frank W. Barrett (57)......... 1983 1,250(*) 10,375(*)(1) (*)
J. Kermit Birchfield,
Jr.(57)..................... 1996 2,000(*) 9,375(*)(2) (*)
John W. Everets, Jr.(51)...... 1994 10,000(*) 7,875(*)(3) (*)
Gregory G. Landry(39)......... 1991 638,743(41.8%) 90,874(2.9%)(5)(4) 35.1%
Robert B. Stein, Jr.(39)...... 1992 638,743(41.8%) 141,675(4.4%)(4)(6) 35.3%
NOMINEES FOR
CLASS A DIRECTOR
Thomas W. Janes(41)........... 1995 0 769,375(19.9%)(7)(8) 4.0%
Truby G. Proctor, Jr.(61)..... 1996 13,000(*) 4,375(*)(9) (*)
NAMED EXECUTIVE OFFICERS
Scott A. Stein(38)............ N/A 0 10,750(*)(10) (*)
Gregory Wozniak(50)........... N/A 0 19,075(*) (*)
Gregg O. Guy (49)............. N/A 0 56,899(1.8%)(11) (*)
ALL DIRECTORS AND EXECUTIVE
OFFICERS
AS A GROUP (14 PERSONS) N/A 664,993(43.5%)(10) 1,139,228(27.3%)(12) 40.1%
</TABLE>
- ---------------
(*) Owns less than 1% of the issued and outstanding class of Common Stock or of
the total voting power.
(1) Includes currently exercisable non-qualified stock options granted to Mr.
Barrett to purchase 10,375 shares of Class A Common Stock.
(2) Includes currently exercisable non-qualified stock options granted to Mr.
Birchfield to purchase 4,375 shares of Class A Common Stock.
4
<PAGE> 8
(3) Includes currently exercisable non-qualified stock options granted to Mr.
Everets to purchase 7,875 shares of Class A Common Stock.
(4) Messrs. Stein and Landry are the general partners of DM Management I
(described in footnote 1 to the table under the heading "Principal
Shareholders" above). The shares of Class B Common Stock set forth in this
table for Messrs. Stein and Landry include the shares beneficially owned by
them in their capacity as general partners of DM Management I.
(5) Includes currently exercisable incentive stock options granted to Mr.
Landry to purchase 84,624 shares of Class A Common Stock.
(6) Includes currently exercisable incentive stock options granted to Mr. Stein
to purchase 117,500 shares of Class A Common Stock.
(7) The shares of Class A Common Stock set forth in this table for Mr. Janes
include the shares set forth for Triumph in the Principal Shareholders
table above. Mr. Janes' pecuniary interest in the 765,000 shares is based
upon his status as general partner of TCCALP, general partner of Triumph,
the entity holding the shares, and is not discernable. Mr. Janes disclaims
beneficial ownership of all shares other than those attributable to him as
a general partner of TCCALP.
(8) Includes currently exercisable non-qualified stock options granted to Mr.
Janes to purchase 4,375 shares of Class A Common Stock.
(9) Includes currently exercisable non-qualified stock options granted to Mr.
Proctor to purchase 4,375 shares of Class A Common Stock.
(10) Includes currently exercisable incentive stock options granted to Mr. Stein
to purchase 10,750 shares of Class A Common Stock.
(11) Includes currently exercisable incentive stock options granted to Mr. Guy
to purchase 47,500 shares of Class A Common Stock.
(12) Includes currently exercisable stock options granted to all Directors and
executive officers of the Company to purchase 305,874 shares of Class A
Common Stock and currently exercisable Warrants to purchase 765,000 shares
of Class A Common Stock.
The following sets forth certain information concerning the Company's
nominees for election to the Board of Directors at the Annual Meeting.
INFORMATION AS TO NOMINEES FOR ELECTION AS CLASS B DIRECTORS
FRANK W. BARRETT
Mr. Barrett is Executive Vice President of Springfield Institution for
Savings. He previously served as Senior Vice President for Bank of Ireland First
Holdings, Inc. from September 1990 to December 1993, as Senior Vice President
for Connecticut National Bank from May 1990 to September 1990, and as Senior
Vice President for Shawmut Bank, N.A. from January 1988 to May 1990.
J. KERMIT BIRCHFIELD
Mr. Birchfield is Chairman of the Board of Displaytech, Inc., a
manufacturer of high resolution fertile liquid crystal. From June 1990 to
November 1994 he served as Senior Vice President and General Counsel of
M/A-COM, Inc., a telecommunications company. Mr. Birchfield is a member of the
Board of Directors for HSPC, Inc., a publicly held company that provides
financing for the purchase of health care equipment, Intermountain Gas Company,
Inc., an Idaho public utility company, and MFS, Inc., a wholly-owned subsidiary
of Sun Life of Canada, a registered mutual funds company.
5
<PAGE> 9
JOHN W. EVERETS, JR.
Mr. Everets has been Chairman of the Board and Chief Executive Officer of
HSPC, Inc., a publicly held company that provides financing for health care
equipment, since July 1993 and has been a director of HSPC, Inc. since 1993. He
was Chairman of the Board of T.O. Richardson Co., Inc., a financial services
company, from January 1990 until July 1993. Mr. Everets is also a director of
Eastern Company, a publicly held manufacturing company and Crown Northcorp, a
publicly held company that holds real estate.
GREGORY G. LANDRY
Mr. Landry has served as Chief Financial Officer since August 1990 and was
named Executive Vice President of the Company in April 1992. Mr. Landry joined
the Company in October 1985 and served in various financial positions, including
Treasurer. He is a certified public accountant and a member of the American
Institute of Public Accountants.
ROBERT B. STEIN, JR.
Mr. Robert B. Stein, Jr. was elected President of the Company in September
1994, Chief Executive Officer in June 1995 and Chairman of the Board of
Directors in December 1995. He joined the Company in 1983 and served in various
positions including Treasurer, General Manager of the Midwest Region, and
Executive Vice President-Operations and Marketing.
INFORMATION AS TO NOMINEES FOR ELECTION AS CLASS A DIRECTORS
THOMAS W. JANES
Mr. Janes has been a Managing Director since 1990 of Triumph Capital Group,
Inc., a firm engaged in investment banking and investment management. He is also
a general partner of Triumph-Connecticut Capital Advisors, Limited Partnership,
the general partner of Triumph-Connecticut Limited Partnership, and a limited
partner of Triumph-California Advisors, L.P., the general partner of
Triumph-California Limited Partnership.
TRUBY G. PROCTOR, JR.
Mr. Proctor is Chairman and Chief Executive Officer of Lee-Moore Oil
Company, located in Sanford, North Carolina, a privately held North Carolina
based oil jobber. From August 1987 to July 1994, Mr. Proctor served as Chairman
and Chief Executive Officer of The Pantry Inc., a privately held 460 store
convenience chain headquartered in North Carolina. Mr. Proctor is a director of
Yadkin Valley Bank.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following executive officers and Directors of the Company did not
timely file with the SEC, on certain occasions, their reports on Forms 3, 4 or 5
to report changes in their beneficial ownership of the Common Stock: Robert J.
Pietrick (one report due upon becoming an executive officer and one report for
one transaction); Michael L. Poole (one report due upon becoming an executive
officer and one report for one transaction); Frank W. Barrett (one report for
one transaction); J. Kermit Birchfield, Jr. (one report for one transaction);
John W. Everets, Jr. (one report for one transaction); Thomas W. Janes (one
report for one transaction); Truby G. Proctor, Jr. (one report for one
transaction); Robert B. Stein (one report for one transaction); Alice Guiney
(one report for one transaction) and Dennis J. Tewell (one report for one
transaction).
6
<PAGE> 10
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the 1997 fiscal year, the Board of Directors of the Company held
seven meetings. None of the directors attended fewer than 75% of the total
number of meetings of the Board of Directors and committees of which they were
members.
The Board of Directors has established an Audit Committee, a Compensation
and Stock Option Committee and a Nominations Committee. The Audit Committee
currently consists of Messrs. Barrett, Everets, and Proctor and is responsible
for recommending the appointment of independent accountants and for reviewing
the reports and expenses of the audits conducted by the Company's independent
accountants. The Compensation and Stock Option Committee currently consists of
Messrs. Barrett, Birchfield, and Everets, and is responsible for recommending
the compensation to be paid to the Company's executive officers and for
administering the Company's stock option plans. The Nominations Committee
currently consists of Messrs. Birchfield, Everets and Janes, and is responsible
for receiving and recommending to the Board of Directors the nominees for
persons to serve as Directors of the Company. During the 1997 fiscal year there
were two meetings of the Compensation and Stock Option Committee, two meetings
of the Audit Committee, and one meeting of the Nominations Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors during the last fiscal year were Messrs. Barrett, Everets and
Birchfield. None of these individuals was at any time during fiscal 1997, or at
any other time, an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
SHAREHOLDER NOMINATIONS OF DIRECTORS
In addition to the right of the Board of Directors of the Company to make
nominations of persons for election as Directors, nominations may be made at a
meeting of shareholders by any shareholder of the Company entitled to vote for
the election of Directors at the meeting who complies with certain notice
procedures set forth in the Company's Certificate of Incorporation. Such
nominations, other than those made by or at the direction of the Board of
Directors, must be made pursuant to timely notice in writing to the Secretary of
the Company.
To be timely, a shareholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the Company not less than 14
days nor more than 60 days prior to the meeting of shareholders called for the
election of Directors; provided, however, that if fewer than 21 days' notice of
the date of the meeting is given to shareholders, notice by the shareholder to
be timely must be so received not later than the close of business on the tenth
day following the day on which notice of the meeting was mailed to shareholders.
A shareholder's notice must set forth as to each person whom the shareholder
proposes to nominate for election or re-election as a Director: (i) the name,
age, business address, and, if known, residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of stock of the Company that are beneficially owned by such person, and
(iv) any other information reasonably requested by the Company. All such
shareholder nominations may be made only at a meeting of shareholders called for
the election of Directors at which such shareholder is present in person or by
proxy.
7
<PAGE> 11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS' COMPENSATION
The following table provides certain information for the Company's past
three fiscal years regarding the cash and other compensation paid to, earned by,
or awarded to those persons who, during the last fiscal year, served as the
Company's Chief Executive Officer or in a similar capacity and were the four
most highly compensated executive officers whose total annual salary and bonus
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS (b)
ANNUAL COMPENSATION(a) ----------------------
------------------------------------------------ RESTRICTED SECURITIES ALL
OTHER ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION($) AWARDS($) OPTIONS($) COMPENSATION
POSITION YEAR SALARY($) BONUS($) (c) (d) (e) ($) (f)
- ---------------------------------- ------ ---------- -------- --------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert B. Stein, Jr. 1997 $282,700 $ 22,500 $ 1,412 $ -- $ -- $ 9,435
President, Chief 1996 254,808 162,500 -- 230,000 95,555 9,533
Executive Officer and Chairman of 1995 199,808 35,000 -- -- 96,945 11,588
the Board
Gregory G. Landry, 1997 226,346 18,900 47,795 -- -- 8,670
Executive Vice President 1996 214,038 131,500 -- 115,000 55,332 8,670
and Chief Financial Officer 1995 179,041 35,000 -- -- 70,543 9,118
Gregory Wozniak, 1997 116,541 14,900 58,345 -- -- 485
Former Vice President- 1996 112,122 16,500 -- 57,500 6,250 528
Corporate Counsel (g) 1995 108,754 15,000 20,033 -- 2,500 592
Scott A. Stein, 1997 113,077 9,000 774 -- -- 1,216
Vice President -- Management 1996 100,098 15,000 926 57,500 5,000 173
Information Systems 1995 92,311 10,000 291 -- 14,000 --
Gregg O. Guy, 1997 166,346 18,500 108,479 -- -- 505
Former Executive Vice 1996 152,885 22,500 37,554 86,250 -- 645
President -- Operations (h) 1995 131,860 20,000 -- -- 50,000 1,263
</TABLE>
- ---------------
(a) Annual compensation does not include non-cash compensation that in the
aggregate does not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus of each named executive officer.
(b) The Company did not grant any stock appreciation rights or make any
long-term incentive plan payments during fiscal 1997, 1996 or 1995.
(c) Other annual compensation for the following named executive officers
includes the following amounts paid on behalf of, or received by, each
officer (i) $46,488 in relocation expense for Mr. Landry in fiscal 1997,
(ii) $108,277 and 28,801 in relocation expense for Mr. Guy in fiscal 1997
and 1996, respectively, (iii) $57,554 in relocation expense for Mr. Wozniak
in fiscal 1997, and (iv) an $11,250 gain related to an exercised stock
option to purchase 6,000 shares of Common Stock and $5,771 for automobile
expenses for Mr. Wozniak in fiscal 1995.
(d) In January 1996, the Company awarded restricted stock to certain executive
officers under the Company's 1995 Stock Option and Incentive Award Plan.
Robert B. Stein, Jr., Gregory G. Landry, Gregory Wozniak, Gregg O. Guy and
Scott A. Stein were awarded 40,000, 20,000, 10,000, 15,000 and 10,000 shares
of Class A Common Stock, respectively. The restricted shares will vest
equally over a three-year period following the grant date, if the closing
price of the Company's Class A Common Stock as reported on the American
Stock Exchange achieves price targets, in each case for a consecutive
ten-day period, of $9.00, $11.00, and $13.00, respectively, during the
first, second and third years from the date of the grant. Dividends will not
be paid on unvested restricted stock awards. These named executive officers
have not received any other restricted stock awards. The restricted stock
awards to Mr. Guy and Mr. Wozniak have been or will be repurchased by the
Company in accordance with the terms of the awards for a nominal cash
payment.
(e) The Company did not grant options to purchase shares of the Company's common
stock in fiscal year 1997 to any of the named executive officers.
(f) Includes amounts contributed for the benefit of the Company's executive
officers to the Company's qualified profit sharing plan and premiums paid by
the Company for split-dollar and life insurance for the benefit of certain
executive officers during the applicable years. Company contributions to the
qualified profit-sharing plan for each of the 1997, 1996, and 1995 fiscal
years, respectively, included $555, $645 and $1,984 for Robert B. Stein,
Jr.; $0, $0 and $448 for Gregory G. Landry; $505, $645 and $1,263, for Gregg
O. Guy; $485, $528
8
<PAGE> 12
and $592 for Gregory Wozniak; and $1,216, $173 and $0 for Scott A. Stein.
Premiums paid on split-dollar and life insurance for each of the 1997, 1996
and 1995 fiscal years, respectively, included $8,880, $8,888 and $9,604 for
Robert B. Stein, Jr. and $8,670, $8,670, and $8,670 for Gregory G. Landry.
(g) Mr. Wozniak's employment with the Company was terminated as of September 19,
1997. The Company made severance payments to Mr. Wozniak pursuant to a
Settlement Agreement in the amount of one year's salary, and entered into a
consulting arrangement with Mr. Wozniak pursuant to which Mr. Wozniak was
paid $30,000.
(h) Mr. Guy's employment with the Company was terminated as of May 16, 1997. Mr.
Guy had an employment agreement with the Company pursuant to which the
Company paid to Mr. Guy $318,750 in severance costs.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant options in fiscal year 1997 to any of the
executive officers listed in the Summary Compensation Table above.
FISCAL YEAR-END OPTION VALUES
The table below sets forth information regarding unexercised stock options
held as of February 1, 1997, by the persons listed in the Summary Compensation
Table above, none of whom exercised options during the Company's fiscal year:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT OPTIONS AT
SHARES ACQUIRED FY-END (#) FY-END(#)(1)
ON EXERCISE OF VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
NAME OPTIONS REALIZED UNEXERCISABLE(U) UNEXERCISABLE(U)
- ------------------------------- --------------- -------- ----------------- ----------------
<S> <C> <C> <C> <C>
Robert B. Stein, Jr............ 12,500 $ 21,875 94,236(E) $260,100(E)
85,764(U) 192,634(U)
Gregory G. Landry.............. -- -- 75,417(E) 213,125(E)
50,458(U) 113,901(U)
Gregory Wozniak................ -- -- 15,813(E) 45,901(E)
6,938(U) 16,524(U)
Scott A. Stein................. -- -- 9,000(E) 25,055(E)
11,000(U) 28,855(U)
Gregg O. Guy................... -- -- 33,375(E) 98,078(E)
16,625(U) 47,828(U)
</TABLE>
- ---------------
(1) Values are calculated for options "in the money" by subtracting the exercise
price per share from the closing price per share of the applicable class of
the Company's Class A and Class B Common Stock on February 1, 1997, which
amounts were each $5.75 per share. Certain of the executive officers have
options to purchase shares of Common Stock at exercise prices greater than
the fair market value of the applicable class of Common Stock as of February
1, 1997. Such options are not "in the money" and therefore, their value is
not disclosed above.
DIRECTORS' COMPENSATION
Messrs. Barrett, Birchfield, Everets, Janes and Proctor received Directors'
fees of $19,000, $19,000, $19,000, $18,000, and $19,000, respectively, for the
fiscal year ended February 1, 1997. The annual fee for outside Directors for the
1998 fiscal year is $12,000, plus $1,000 for each regular or special meeting of
the Board attended. The remaining Directors, who are employees of the Company,
receive no Directors' fees. In addition to
9
<PAGE> 13
the foregoing fees, on February 1, 1997, Messrs. Barrett, Birchfield, Everets,
Janes, and Proctor each received an option to purchase 3,500 shares of Class A
Common Stock at $5.75 per share, pursuant to the Company's 1995 Stock Option
Plan for Outside Directors.
EMPLOYMENT AGREEMENTS
In June 1995, the Company entered into employment agreements (the
"Employment Agreements") with Messrs. Stein and Landry. The Employment
Agreements are initially for two-year terms, but such terms are automatically
extended each year for an additional year unless the Company or the employee
gives notice before February 28 of each year that it or he does not desire to
have the term extended. Under the Employment Agreements, Messrs. Stein and
Landry receive annual salaries that may be increased, but may not be decreased.
In addition, the Employment Agreements provide that the Board of Directors, or a
committee thereof, may award each employee annual bonuses if performance
criteria to be determined by the Board are met.
Under the Employment Agreements, if the employee's employment is terminated
for any reason, other than by the Company without cause or by the employee for
good reason, or as a result of death or disability, then the employee will
receive his salary and bonus through the date of termination. If the employee
dies or is disabled, he will also receive any additional benefits that are
provided under the Company's death and disability programs in effect at the time
of death or disability. In addition, if an employee is disabled and there is no
disability program in effect or if an employee dies, then the employee's
beneficiary will receive 100% of the employee's annual salary plus an amount
equal to the highest of the aggregate bonus payments earned by the employee for
any of the last three 12-month periods prior to the date of termination.
The Employment Agreements provide that if the employee's termination is by
the Company without cause or by the employee for good reason, and not as a
result of the employee's death or disability, the employee will receive his full
salary and bonus through the date of termination. The amount of the employee's
bonus will be the highest of the aggregate bonus payments earned by the employee
for any of the last three 12-month periods prior to the date of termination. The
Agreements also provide that after such termination, each of Messrs. Stein and
Landry will also receive a severance payment equal to two times the sum of his
full base salary and annual bonus. If any payment in connection with the
termination of the employee's employment under the Employment Agreement would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the Company will pay the employee an
additional payment equal to the amount of any excise tax the employee incurs as
a result of his receipt of the additional payment.
10
<PAGE> 14
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") is composed entirely of outside Directors. The Committee, which
consists of Messrs. Everets, Chairman, Mr. Barrett and Mr. Birchfield, is
responsible for establishing and administering the Company's executive
compensation policies and the Company's stock option and other employee equity
plans. This report addresses the compensation policies for the fiscal year 1997
for executive officers and, in particular, for Mr. Stein in his capacity as
President and Chief Executive Officer.
GENERAL COMPENSATION POLICY
The objectives of the Company's executive compensation program are to:
- Provide a competitive compensation package that will attract and retain
superior talent and reward performance;
- Support the achievement of desired Company performance; and
- Align the interests of executives with the long-term interests of
shareholders through award opportunities that can result in ownership of
shares of the Company's Common Stock, thereby encouraging the achievement
of superior results over an extended period.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of: (i)
base salary, which is set on an annual basis; (ii) annual incentive bonuses,
which are based on the achievement of predetermined financial objectives of the
Company and individual objectives; (iii) discretionary bonuses, which are
granted under special circumstances; and (iv) long-term incentive compensation
in the form of periodic stock option and restricted stock grants, with the
objective of aligning the executive officers' long-term interests with those of
the shareholders and encouraging the achievement of superior results over an
extended period.
The Committee performs annual reviews of executive compensation, during
which the Committee reviews executive compensation packages of the Company
compared with available information on other national and regional convenience
store chains, including some, but not all, of the companies included in the Peer
Group Index (defined below).
In considering compensation of the Company's executives, one of the factors
the Committee takes into account is the anticipated tax treatment to the Company
of various components of compensation. The Company does not believe Section
162(m) of the Internal Revenue Code of 1986, as amended, which generally
disallows a tax deduction for certain compensation in excess of $1 million to
any of the executive officers appearing in the Summary Compensation Table above,
will have an effect on the Company. The Committee has considered the
requirements of Section 162(m) of the Code and its related regulations. It is
the Company's present policy to take reasonable measures to preserve the full
deductibility of substantially all executive compensation, to the extent
consistent with its other compensation objectives.
11
<PAGE> 15
BASE SALARY
The Committee reviews base salary levels for the Company's executive
officers on an annual basis. In determining salaries, the Committee takes into
consideration individual experience and performance, and comparable compensation
data available on other national and regional convenience store chains. The
Company seeks to set base salaries to be competitive with compensation paid by
comparable companies to persons with similar experience.
ANNUAL INCENTIVE BONUSES
The Committee determines the amount of annual cash bonuses based on
achievement of predetermined financial, operational and strategic objectives.
Giving greatest weight to the attainment of financial targets, specifically
pre-tax earnings and cash flow, the Company also awards bonuses based on various
operational and strategic objectives geared to specific management groups (i.e.,
financial, management, information systems, construction, and marketing), and
for Mr. Stein, individually.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation, in the form of stock options and
restricted stock grants, allows the executive officers to share in any
appreciation in the value of the Company's Common Stock. The Committee believes
that an enhanced market value for the Company's shares of Common Stock should be
a primary objective of senior management, and that stock option and restricted
stock grant participation align executive officers' interests with those of the
shareholders. The amounts of the awards are designed to reward past performance
and create incentives to meet long-term objectives. In determining the amount of
each grant, the Committee takes into account the number of shares held by the
executive prior to the grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Stein, who holds the position of President, Chief Executive Officer and
Chairman of the Board, was paid a base salary of $282,700 during fiscal year
1997. The Committee believes that Mr. Stein managed the Company well in fiscal
1997 in a challenging business climate and took the steps necessary to position
the Company appropriately to meet its long-term strategic objectives. However,
in determining the bonus segment of overall compensation, the Committee also
took into consideration the results of operations of the Company and therefore
Mr. Stein's bonus was lower than the previous year's, resulting in lower overall
compensation.
THE COMPENSATION AND STOCK OPTION COMMITTEE:
John W. Everets, Chairman
Frank W. Barrett
J. Kermit Birchfield, Jr.
12
<PAGE> 16
PERFORMANCE GRAPH
Until September 29, 1996, the Company's Common Stock was traded on Nasdaq
National Market under the symbols DMCVA and DMCVB. On September 30, 1996, the
Company's Common Stock was listed on the American Stock Exchange under the
symbol DMCA and DMCB, and trading of Common Stock on the Nasdaq National Market
was discontinued.
The two graphs that follow compare the yearly percentage change in
cumulative shareholder return on the Class A Common Stock over the past five
years with the returns on both the NASDAQ Stock Market and the American Stock
Exchange. The first graph compares the performance of the Class A Common Stock
over the past five years with (i) the cumulative total return on the Nasdaq
Stock Market Index (U.S. Companies) and (ii) a peer group index consisting of
Nasdaq Stocks Standard Industry Codes 5400-5499 (food stores) ("Peer Group
Index"). The two Nasdaq indices are included in accordance with the Commission's
rules, which require that any indices included in last year's proxy statement be
shown in the Performance Graph. The two Nasdaq indices will not be included in
future proxy statements.
The second graph compares the performance of the Class A Common Stock with
(i) the cumulative total return on the American Stock Exchange Stock Market (the
"AMEX") and (ii) a peer group index consisting of AMEX Stocks Standard Industry
Codes 5400-5499 (food stores) ("Peer Group Index").
The figures presented on the following graphs assume the reinvestment of
all dividends into shares of Class A Common Stock on the dividend payment date
and assume that $100 was invested in Class A Common Stock and in the Market
Index (U.S. Companies) and Peer Group Index for the NASDAQ and American Stock
Exchange Stock Markets respectively on January 31, 1992, and held through
February 1, 1997 (the end of the Company's most recent fiscal year).
13
<PAGE> 17
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR DAIRY MART CONVENIENCE STORES, INC.
<TABLE>
<CAPTION>
NASDAQ STOCKS
DAIRY MART NASDAQ STOCK (SIC 5400-5499 US
MEASUREMENT PERIOD CONVENIENCE MARKET (US COMPANIES) FOOD
(FISCAL YEAR COVERED) STORES, INC. COMPANIES) STORES
<S> <C> <C> <C>
01/31/92 100 100 100
02/28/92 107.717 102.266 95.829
04/01/92 110.093 97.154 97.432
05/01/92 121.386 93.182 82.791
06/01/92 116.472 94.998 80.638
07/01/92 96.716 91.68 77.576
07/31/92 97.677 93.994 74.98
09/01/92 94.238 91.562 73.589
10/01/92 84.763 93.666 80.97
10/30/92 84.763 98.231 79.602
12/01/92 86.609 106.24 73.003
12/31/92 83.931 109.952 69.928
01/29/93 84.854 113.082 67.161
03/01/93 73.578 108.674 63.633
04/01/93 71.731 111.414 65.205
04/30/93 68.448 107.234 65.385
06/01/93 70.322 114.256 70.318
07/01/93 71.827 114.059 67.823
07/30/93 82.211 114.3 69.532
09/01/93 81.309 120.622 72.498
10/01/93 81.198 123.739 71.716
11/01/93 86.439 127.207 78.704
12/01/93 78.722 124.285 74.719
12/31/93 85.6 126.218 77.943
01/28/94 92.435 129.377 74.163
03/01/94 92.434 128.148 69.135
03/31/94 92.434 120.913 63.276
04/29/94 87.33 119.345 66.132
06/01/94 73.629 119.742 63.892
07/01/94 61.648 115.359 69.52
08/01/94 59.068 118.207 68.046
09/01/94 53.064 123.957 69.483
09/30/94 43.647 124.804 68.056
11/01/94 43.66 126.34 68.814
12/01/94 51.337 121.506 65.893
12/30/94 56.486 123.38 63.669
01/27/95 53.059 124.686 61.841
03/01/95 54.718 130.314 64.058
03/31/95 54.898 134.505 62.824
05/01/95 58.948 138.275 64.888
06/01/95 68.345 142.971 68.92
06/30/95 73.472 153.851 71.377
08/01/95 67.076 163.451 74.07
09/01/95 88.863 168.333 75.465
09/29/95 80.311 172.382 74.937
11/01/95 82.012 172.24 79.283
12/01/95 93.128 174.757 76.776
12/29/95 76.05 174.485 76.042
02/02/96 80.309 177.183 72.145
03/01/96 84.716 179.58 74.762
04/01/96 79.685 183.529 81.56
05/01/96 82.1 199.318 87.562
05/31/96 79.485 206.856 84.914
07/01/96 83.006 199.632 89.3
08/01/96 75.259 183.077 89.329
08/30/96 80.671 190.019 91.067
10/01/96 74.281 203.58 95.761
11/01/96 67.02 202.256 94.981
11/29/96 67.02 214.8 93.75
12/31/96 60.622 214.608 93.586
01/31/97 78.541 229.861 92.549
</TABLE>
14
<PAGE> 18
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR DAIRY MART CONVENIENCE STORES, INC.
<TABLE>
<CAPTION>
AMEX STOCKS (SIC
DAIRY MART 5400-5499 US
MEASUREMENT PERIOD CONVENIENCE AMEX STOCK MARKET COMPANIES FOOD
(FISCAL YEAR COVERED) STORES, INC. (US COMPANIES) STORES
<S> <C> <C> <C>
01/31/92 100 100 100
02/28/92 107.717 101.718 105.611
04/01/92 110.093 96.025 97.428
05/01/92 121.386 95.053 91.834
06/01/92 116.472 94.683 88.978
07/01/92 96.716 92.186 89.291
07/31/92 97.677 93.175 86.454
09/01/92 94.238 91.001 85.456
10/01/92 84.763 90.582 77.65
10/30/92 84.763 93.42 78.074
12/01/92 86.609 99.713 92.48
12/31/92 83.931 101.39 95.64
01/29/93 84.854 105.088 96.389
03/01/93 73.578 102.439 95.673
04/01/93 71.731 105.653 111.683
04/30/93 68.448 103.926 112.205
06/01/93 70.322 108.07 117.018
07/01/93 71.827 108.424 113.475
07/30/93 82.211 109.991 116.876
09/01/93 81.309 116.023 107.329
10/01/93 81.198 117.916 105.201
11/01/93 86.439 121.423 109.189
12/01/93 78.722 116.489 104.264
12/31/93 85.6 119.192 113.999
01/28/94 92.435 120.01 108.999
03/01/94 92.434 117.956 118.467
03/31/94 92.434 110.818 105.239
04/29/94 87.33 109.665 107.253
06/01/94 73.629 109.603 99.337
07/01/94 61.648 106.565 97.425
08/01/94 59.068 110.489 95.901
09/01/94 53.064 113.286 105.367
09/30/94 43.647 115.272 105.172
11/01/94 43.66 113.669 108.17
12/01/94 51.337 108.75 105.318
12/30/94 56.486 111.147 102.999
01/27/95 53.059 114.234 107.368
03/01/95 54.718 117.876 115.116
03/31/95 54.898 119.483 113.421
05/01/95 58.948 122.872 126.341
06/01/95 68.345 125.235 135.691
06/30/95 73.472 128.8 135.095
08/01/95 67.076 135.439 146.915
09/01/95 88.863 139.378 152.21
09/29/95 80.311 141.838 150.806
11/01/95 82.012 136.603 154.667
12/01/95 93.128 140.396 161.349
12/29/95 76.05 143.001 152.711
02/02/96 80.309 142.768 159.263
03/01/96 84.716 145.724 161.167
04/01/96 79.685 147.082 158.994
05/01/96 82.1 153.007 159.212
05/31/96 79.485 156.971 169.476
07/01/96 83.006 149.041 175.2
08/01/96 75.259 137.874 167.625
08/30/96 80.671 140.702 165.828
10/01/96 74.281 143.613 168.451
11/01/96 67.02 142.908 168.071
11/29/96 67.02 147.516 166.271
12/31/96 60.622 145.288 169.32
01/31/97 78.541 148.668 163.738
</TABLE>
15
<PAGE> 19
CERTAIN TRANSACTIONS
STOCK OWNED BY DM ASSOCIATES
DM Associates Limited Partnership ("DM Associates") is the owner of record
of 638,743 shares of Class B Common Stock of the Company, representing
approximately 41.8% of the issued and outstanding shares of Class B Common
Stock, and 34.8% of the total voting power of both classes of Common Stock. The
general partner of DM Associates is New DM Management Associates I ("DM
Management I") which is a general partnership. The general partners of DM
Management I are Robert B. Stein, Jr., a Director and the Chairman of the Board,
Chief Executive Officer and President of the Company, and Gregory G. Landry, a
Director and the Executive Vice President and Chief Financial Officer of the
Company.
In March 1992, DM Associates financed part of the purchase of its 1,858,743
shares of Class B Common Stock by obtaining a $7,100,000 loan (the "Limited
Partnership Loan") from the Connecticut Development Authority ("CDA"). The
Limited Partnership Loan was secured by DM Associates' collateral pledge of
1,220,000 shares of the Class B Common Stock then owned by DM Associates. In
September 1994, FCN Properties Corporation, a corporation owned and controlled
by Charles Nirenberg, a former shareholder, Director and executive officer of
the Company, purchased all of the CDA's right, title and interest in and to the
Limited Partnership Loan. In December 1995, FCN Properties Corporation sold the
Limited Partnership Loan to the Company. The note evidencing the Limited
Partnership Loan became due and payable in full on July 31, 1997. DM Associates
failed to pay the note and as such in accordance with the terms or the Limited
Partnership Loan, the Company took possession and title to the 1,220,000 shares
of Class B stock, without waiving any deficiency. At the same time, the Company
made demand upon DM Associates for all assets other than the nonrecourse assets
(defined below). Upon the Company taking title to and possession of the
1,220,000 shares of stock, such shares became treasury shares. DM Associates
continues to hold 638,743 shares of Class B stock, which, together with any
proceeds therefrom, are defined as nonrecourse assets under the documents
evidencing the Limited Partnership Loan.
REQUIRED VOTES OF SHAREHOLDERS
Under Delaware law and pursuant to the Company's Bylaws, the presence in
person or by proxy of the holders of a majority of the voting power of both
classes of Common Stock entitled to vote at the Annual Meeting is necessary for
a quorum to transact business for matters as to which both classes of Common
Stock vote together. With respect to matters as to which each class of Common
Stock is entitled to vote separately, including the election of Directors by the
respective classes, the presence in person or by proxy of the holders of
one-third of the shares of Common Stock of the applicable class is necessary for
a quorum to transact such business. In order for the nominees to be elected as
Directors by the shareholders of their respective classes of Common Stock, the
affirmative vote of a plurality of the Common Stock of the applicable class
present in person or by proxy is necessary. The Company intends to appoint an
independent person to act as an inspector of elections at the Annual Meeting who
will be responsible for counting the votes.
SHAREHOLDER PROPOSALS
If a shareholder desires to present a proposal for inclusion in next year's
Proxy Statement relating to the 1998 Annual Meeting of the Shareholders of the
Company, such shareholder must submit such proposal in writing to: Dairy Mart
Convenience Stores, Inc., 210 Broadway East, Cuyahoga Falls, Ohio 44222,
Attention: Gregory G. Landry, Executive Vice President and Chief Financial
Officer, within a reasonable time prior to next year's Annual Meeting, which is
currently planned for June 1998.
16
<PAGE> 20
GENERAL
The Company's Annual Report to Shareholders, mailed to shareholders in June
1997, contains financial statements for the fiscal year ended February 1, 1997,
as well as other information concerning the operations of the Company.
The Company is not aware of any matters other than those set forth in this
Proxy Statement or referred to in the accompanying Notice of Annual Meeting of
Shareholders, which will be presented at the Annual Meeting. However, if any
other matters should properly come before the meeting, it is intended that
proxies will be voted thereon in accordance with the judgment of the person or
persons voting such proxies.
17
<PAGE> 21
CLASS A PROXY
DAIRY MART CONVENIENCE STORES, INC.
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 11, 1997
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert B. Stein, Jr., Gregory G. Landry and
Frank W. Barrett, and each or any of them, with full power of substitution, the
proxies of the undersigned to vote all of the shares of Class A Common Stock of
Dairy Mart Convenience Stores, Inc. ("Dairy Mart") which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of Dairy Mart to be held
at the Renaissance Hotel, 24 Public Square, Cleveland, Ohio on the 11th day of
December, 1997 at 10:00 a.m. (eastern time), and at any adjournment or
postponement thereof, with all the powers the undersigned would possess if
personally present upon:
(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 22
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
DAIRY MART CONVENIENCE STORES, INC.
CLASS A PROXY
DECEMBER 11, 1997
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
____
| | PLEASE MARK YOUR |
| X | VOTES AS IN THIS |
|____| EXAMPLE. |_____
<TABLE>
<S> <C> <C> <C> <C>
FOR WITHHELD
____ ____
1. Election of | | | | NOMINEES: 2. In their discretion such other matters as may properly come
Directors | | | | Thomas W. Janes before the meeting.
|____| |____| Truby G. Proctor, Jr.
For, except vote withheld from the UNLESS A CONTRARY DIRECTION IS INDICATED, THE SHARES
following nominees (To withhold REPRESENTED BY THIS PROXY SHALL BE VOTED FOR THE ELECTION OF
authority for any individual nominee THE NOMINEES AS DIRECTORS AND IN THE DISCRETION OF THE PROXIES
write that nominee's name in the space AS TO OTHER MATTERS.
provided below.)
_____________________________
</TABLE>
SIGNATURE(S)________________________________________________ DATE:_____________
<PAGE> 23
CLASS B PROXY
DAIRY MART CONVENIENCE STORES, INC.
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 11, 1997
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert B. Stein, Jr., Gregory G. Landry and
Frank W. Barrett, and each or any of them, with full power of substitution, the
proxies of the undersigned to vote all of the shares of Class B Common Stock of
Dairy Mart Convenience Stores, Inc. ("Dairy Mart") which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of Dairy Mart to be held
at the Renaissance Hotel, 24 Public Square, Cleveland, Ohio on the 11th day of
December, 1997 at 10:00 a.m. (eastern time), and at any adjournment or
postponement thereof, with all the powers the undersigned would possess if
personally present upon:
(TO BE SIGNED ON REVERSE SIDE)
<PAGE> 24
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
DAIRY MART CONVENIENCE STORES, INC.
CLASS B PROXY
DECEMBER 11, 1997
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
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| | PLEASE MARK YOUR |
| X | VOTES AS IN THIS |
|____| EXAMPLE. |_____
<TABLE>
<S> <C> <C> <C> <C>
FOR WITHHELD
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1. Election of | | | | NOMINEES: 2. In their discretion such other matters as may properly come
Directors | | | | Frank W. Barrett before the meeting.
|____| |____| J. Kermit Birchfield, Jr.
John W. Everets, Jr.
For, except vote withheld from the Gregory G. Landry UNLESS A CONTRARY DIRECTION IS INDICATED, THE SHARES
following nominees (To withhold Robert B. Stein, Jr. REPRESENTED BY THIS PROXY SHALL BE VOTED FOR THE ELECTION OF
authority for any individual nominee THE NOMINEES AS DIRECTORS AND IN THE DISCRETION OF THE PROXIES
write that nominee's name in the space AS TO OTHER MATTERS.
provided below.)
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</TABLE>
SIGNATURE(S)________________________________________________ DATE:_____________
