================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 12, 1997
DAIRY MART CONVENIENCE STORES, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-12497 04-2497894
- -------------------------------------- ---------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
210 BROADWAY EAST, CUYAHOGA FALLS, OHIO 44222
- -------------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
(330) 923-0421
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
Item 5. Other Events
- ------ ------------
The Registrant has entered into a Third Amendment (the
"Amendment") to the Partnership Agreement of DM Associates Limited Partnership,
a Connecticut limited partnership ("DM Associates"). The Amendment, made as of
December 12, 1997, was executed by New DM Management Associates I, the general
partner of DM Associates (the "General Partner"), HNB Investment Corp., the
class A limited partner of DM Associates (the "Class A Limited Partner"), and
the Registrant, as the class B limited partner of DM Associates. DM Associates
is the holder of 638,743 shares of the class B common stock of the Registrant,
representing approximately 41.8% of the outstanding shares of class B common
stock.
The Amendment extends the term of DM Associates to December
12, 2002, subject to earlier dissolution pursuant to the terms of the
Partnership Agreement of DM Associates, as amended through the date of the
Amendment. The Amendment also provides the Class A Limited Partner with the
right during specified periods to cause the securities held by DM Associates to
be valued by an independent investment banking firm and, in the discretion of
the Class A Limited Partner, sold at such appraised value or at such other
amount as the Class A Limited Partner may determine, with the Registrant (or its
designee), the General Partner (or its designee) and the general partners of the
General
<PAGE>
Partner (or their designees) having a first right to purchase the shares at
their appraised value or such lower amount that may be offered by a third-party
unaffiliated buyer. The Amendment also provides that for a one-year period
following any dissolution of DM Associates and the resulting distribution of the
securities held by DM Associates to the Class A Limited Partner (or its
designee), the General Partner will have a right of first refusal with respect
to any sale of such shares by the Class A Limited Partner (or its designee).
The Registrant also amended its Preferred Stock Purchase Plan
(the "Plan") to provide that none of the Class A Limited Partner, any purchaser
of the shares held by DM Associates in accordance with the terms of the
Amendment or any transferee of the Class A Limited Partner or any such purchaser
will be deemed to be an "Acquiring Person" as defined in the Plan. The
Registrant also agreed in the Amendment not to further amend the Plan or adopt
any successor plan or amendment to its certificate of incorporation or by-laws
that would (i) impair or restrict the ability of DM Associates to sell its
securities pursuant to the Amendment, (ii) dilute or adversely affect the voting
rights of the securities held by DM Associates or (iii) otherwise frustrate the
terms of the Amendment.
2
<PAGE>
The foregoing description of the Amendment is only a summary
and is qualified in its entirety by reference to the terms of the Amendment. A
copy of the Amendment is attached as an exhibit hereto and incorporated herein
by reference.
3
<PAGE>
SIGNATURES
----------
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
---------------------------------
Name: Gregory G. Landry
Title: Executive Vice President
December 22, 1997
4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ---------- -----------
1. Third Amendment to Partnership Agreement of DM
Associates Limited Partnership
5
NYFS10...:\84\39984\0001\139\FRMD197R.040
EXHIBIT 1
THIRD AMENDMENT
PARTNERSHIP AGREEMENT OF
DM ASSOCIATES LIMITED PARTNERSHIP
---------------------------------
This Agreement is made as of this 12th day of December, 1997,
among New DM Management Associates I, HNB Investment Corp. and Dairy Mart
Convenience Stores, Inc., as an amendment to the Limited Partnership Agreement
of DM Associates Limited Partnership (the "Partnership"), dated March 12, 1992,
as previously amended by the First Amendment to Partnership Agreement of DM
Associates Limited Partnership, dated September 8, 1994 and Second Amendment to
Partnership Agreement of DM Associates Limited Partnership, dated as of
September 11, 1997 (as so amended, the "Partnership Agreement").
PREAMBLE
--------
The parties hereto, all of the Partners of the Partnership,
wish to amend the Partnership Agreement as provided herein. Capitalized terms
used herein without definition shall have the respective meanings ascribed to
them in the Partnership Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. a. Section 4.1 of the Partnership Agreement hereby
is amended to read in its entirety as follows:
<PAGE>
"The Term of the Partnership shall continue until December 12,
2002, as it may be extended to allow for the actions provided for in Section
15.7(k) to be carried out, provided, however, that the Partnership shall be
sooner dissolved, and the Term thereby shortened, upon the happening of any of
the events set forth in Article XV of this Agreement".
b. Section 8.1(e) of the Partnership Agreement
hereby is deleted.
2. Section 15.1 of the Partnership Agreement hereby is amended
(a) by deleting all of the words appearing before subsection (a) thereof and
replacing them with "The Partnership shall be dissolved as provided in Section
15.7 or upon the first to occur of the following:" and (b) by deleting Section
15.1(b) (without any redesignation of the remaining existing subsections of
Section 15.1).
3. A new Section 15.7 of the Partnership Agreement hereby is
added to read in its entirety as follows:
"Section 15.7 Certain Dissolution and Purchase Rights.
---------------------------------------
(a) The Class A Limited Partner may, in its absolute
discretion, deliver a written notice to the General Partner stating that it does
not wish to continue as a Limited Partner of the Partnership (any such notice
hereinafter is referred to as the "LP Notice"). The LP Notice may only be
delivered to the General Partner on a day that falls within either of the
following two 30-day periods: June 12, 2000 - July 11, 2000 or December 12, 2001
- - January 10, 2002. The LP Notice also shall set forth the names of three
nationally-recognized investment banking firms.
(b) Within ten business days after its receipt of a LP Notice,
the General Partner shall select one of the investment banking firms named in
the LP Notice as the firm to be retained by the Partnership for the purpose of
determining the fair market value of the DMCS Shares held by the Partnership.
The General Partner shall notify the Class A Limited Partner of its
2
<PAGE>
selection. As promptly as practicable after the selection, the investment
banking firm shall enter into a retention agreement with the Partnership for the
fee and on the other terms (including customary indemnification and
confidentiality provisions) agreed upon by the General Partner. The fees of such
firm shall be paid by the Partnership, except to the extent provided below in
subsection (d).
(c) Within 30 days after its retention, the investment banking
firm shall determine the fair market value of the DMCS Shares held by the
Partnership as of the date of its determination. For these purposes, the "fair
market value" of the DMCS Shares held by the Partnership shall be the value
determined by the investment banking firm as the price that would be paid by a
non-affiliated willing buyer of the shares in an arms-length transaction. DMCS
shall provide to the investment banking firm on a confidential basis such
information about DMCS's business, financial condition, operations and prospects
as may be requested by such firm in connection with its determination. In making
its determination, the investment banking firm shall take into consideration
that the DMCS Shares held by the Partnership represent a controlling voting
interest in DMCS. The investment banking firm will not take into consideration
any restrictions on the transferability of the DMCS Shares held by the
Partnership imposed by this Partnership Agreement, federal or state securities
laws or state corporate law. Subject to the foregoing, the investment banking
firm shall employ the methodologies that it deems appropriate in making its
determination, which shall be final and binding on the parties. The investment
banking firm shall simultaneously inform the General Partner and the Class A
Limited Partner of its determination of the fair market value of the DMCS Shares
held by the Partnership, which is referred to herein as the "FMV". The date of
the investment banking firm's determination is referred to herein as the "FMV
Determination Date".
(d) The Class A Limited Partner may rescind the LP Notice by
delivering a written notice to such effect to the General Partner at any time
during the period commencing on the FMV Determination Date and ending on the
10th day thereafter. In such event, the Class A Limited Partner shall pay the
fees and expenses of the investment banking firm retained by the Partnership
pursuant to subsection (b) above. If the LP Notice is not rescinded, then,
during the period of time commencing on the 11th day after the FMV Determination
Date and ending on the 30th day thereafter, the General Partner, and/or its
general partners, the Class B Limited Partner and/or one or more third-party
designees (collectively or individually, as the case may
3
<PAGE>
be, referred to as the "GP Group") shall have the right to inform the Class A
Limited Partner of its intent to purchase all (and not less than all) of the
DMCS Shares held by the Partnership for a cash purchase price equal to the FMV.
If the GP Group delivers such a notice to the Class A Limited Partner within
such time period, then the GP Group shall consummate such purchase within 90
days after the FMV Determination Date.
(e) If the GP Group does not deliver a notice of its intent to
purchase the DMCS Shares held by the Partnership to the Class A Limited Partner
within the 30-day period specified in subsection (d) above, then the Partnership
shall use commercially reasonable efforts to locate a buyer unaffiliated with
the GP Group for all (and not less than all) of the DMCS Shares held by the
Partnership. In connection therewith, the General Partner will cause the
Partnership, not later than 40 days after the FMV Determination Date, to retain
the investment banking firm selected pursuant to subsection (b) above (or
another investment banking firm acceptable to the Class A Limited Partner) to
market the block of DMCS Shares held by the Partnership, such retention to
include customary terms and conditions (including as to fees and indemnities).
The Class A Limited Partner shall be entitled, but shall not be required, to
consult and participate in meetings with such investment banking firm. DMCS will
provide reasonable access to potential buyers of the shares for purposes of due
diligence, subject to customary confidentiality agreements. DMCS will not be
required to make any representations or warranties to prospective buyers of such
shares except as set forth in subsection (g) below. If a buyer is located, the
Partnership must notify the General Partner and the Class A Limited Partner
within 90 days after the FMV Determination Date that it has located a buyer for
the DMCS Shares held by the Partnership (a "Third Party Buyer") and the cash
price that the Third Party Buyer is willing to pay ( a "Willing Buyer Notice").
If the Third Party Buyer is willing to pay a cash price equal to or greater than
FMV, then the General Partner will cause the Partnership to effect such sale to
the Third Party Buyer, which shall be consummated within 60 days after the
delivery of the Willing Buyer Notice. If two Third Party Buyers are identified,
such sale will be made to the one willing and able to pay the highest cash
price.
(f) If the Third Party Buyer is willing to pay a cash price
for the DMCS Shares held by the Partnership that is less than FMV, then the GP
Group shall have the right to purchase the DMCS Shares held by the Partnership
at the price offered by the Third Party Buyer. To exercise the right, the GP
Group must deliver notice of its intent to purchase to the Class A Limited
4
<PAGE>
Partner within 10 days after delivery of the Willing Buyer Notice. If the GP
Group delivers its notice to the Class A Limited Partner of its intent to
purchase the DMCS Shares held by the Partnership within such time period, then
the GP Group shall consummate such purchase within 60 days after it furnishes
the Class A Limited Partner of its notice of purchase. If the GP Group does not
deliver a notice of purchase to the Class A Limited Partner within the 10-day
period specified above, then the General Partner will cause the Partnership to
effect the sale to the Third Party Buyer, which shall be consummated within 70
days after the delivery of the Willing Buyer Notice.
(g) In connection with the sale of the DMCS Shares held by the
Partnership to any buyer (whether the GP Group or a Third Party Buyer), DMCS
will make representations and warranties in customary form to such buyer as to
the valid issuance of such shares, the accuracy of DMCS's filings with the
Securities and Exchange Commission, including the financial information
contained therein, and to the effect that the buyer will not be deemed an
"Acquiring Person" (or any other designation of similar or like import) within
the meaning of DMCS's existing Preferred Stock Purchase Rights Plan (or any
successor thereto or replacement therefor) (the "Rights Plan"). At the closing
of any purchase, one or more stock certificates for the DMCS Shares being
purchased, registered in the name of the Partnership, shall be delivered to the
purchaser(s), free and clear of any liens, encumbrances, or rights of any kind
of any third party, duly endorsed or accompanied by instruments of assignment in
blank, with signatures guaranteed by a national bank or member firm of a
registered national securities exchange and with all necessary transfer tax
stamps duly affixed, together with any and all other documents required to
effectively transfer such DMCS Shares to the purchaser(s).
(h) If the DMCS Shares held by the Partnership are sold
pursuant to the provisions of this Section 15.7, or if an LP Notice shall have
been given and not rescinded and the DMCS Shares held by the Partnership shall
not have been sold within 365 days of the delivery of such LP Notice, then the
General Partner shall cause the Partnership to dissolve and be wound up as soon
as practicable thereafter.
(i) The Class A Limited Partner acknowledges and agrees that
no options to purchase DMCS securities or restricted or other DMCS securities
granted by DMCS to the general partners of the General Partner subsequent to
December 12, 1997 shall be subject to any pledge in favor of the Class A Limited
Partner. If the General Partner receives a LP Notice which is not
5
<PAGE>
rescinded in the time therefor, then any and all options to purchase DMCS
securities pledged by the general partners of the General Partner to the Class A
Limited Partner ("Pledged Options") automatically shall be released. In
addition, the following percentage of the Pledged Options (with the oldest
grants released first) shall be released if either (x) DMCS is sold (by way of
merger, sale of assets or otherwise) and the stockholders of DMCS realize from
such sale per share cash proceeds and/or securities with an aggregate value
equal to or greater than the amounts set forth below or (y) the closing price of
the Class A Common Stock of DMCS (the "Class A Common Stock") equals or exceeds
the per share price set forth below for 60 consecutive business days:
Percentage Price
---------- -----
15% $ 7
30% $ 9
65% $ 11
100% $ 13
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 American Stock Exchange), or, if the Class A Common Stock is not
listed or admitted to trading on the American Stock Exchange, as reported in the
applicable transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Class A Common Stock are
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 or such other system then in use; or, if no bids for the Class
A Common Stock 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 mutually selected by the Board of Directors of the Company and
the Class A Limited Partner. The Class A Limited Partner shall execute any
documents reasonably requested by the general partners of the General Partner to
give effect to the provisions of this subsection (i). The Class A Limited
Partner acknowledges and agrees that any options to purchase DMCS securities
granted by DMCS to either general partner of the General Partner from and
6
<PAGE>
after December 12, 1997 shall not be pledged in favor of the Class A Limited
Partner.
(j) If the GP Group delivers a notice of its intent to
purchase pursuant to subsection (d) or (f) above but fails to consummate such
purchase within the time provided in such subsections, the General Partner will
cause the Partnership to sell such of the DMCS Shares held by the Partnership,
to such persons, for such prices and form of consideration and on such terms and
conditions, as may be as instructed by the Class A Limited Partner.
(k) If an LP Notice is not given pursuant to the provisions of
subsection (a) above (or if any LP Notice is given but rescinded pursuant to the
provisions of subsection (d) above) then, on or within 20 days prior to December
12, 2002, the Class A Limited Partner shall deliver a written notice to the
General Partner setting forth the names of three nationally recognized
investment banking firms (the "Final LP Notice"). Within ten business days after
its receipt of the Final LP Notice, the General Partner shall select one of the
investment banking firms named in the Final LP Notice as the firm to be retained
by the Partnership for the purpose of determining the fair market value of the
DMCS Shares held by the Partnership. The General Partner shall notify the Class
A Limited Partner of its selection. As promptly as practicable after the
selection, the investment banking firm shall enter into a retention agreement
with the Partnership for the fee and upon the other terms (including customary
indemnification and confidentiality provisions) agreed upon by the General
Partner. The fees of such firm shall be paid by the Partnership.
(l) Within 30 days after its retention, the investment banking
firm shall determine the fair market value of the DMCS Shares held by the
Partnership as of the date of its determination in accordance with the
procedures set out above in subsection (c).
(m) The Class A Limited Partner may rescind the Final LP
Notice by delivering a written notice to such effect to the General Partner at
any time during the period commencing on the FMV Determination Date and ending
on the 10th day thereafter. If the Final LP Notice is not rescinded then, during
the period of time commencing on the 11th day after the FMV Determination Date
and ending on the 30th day thereafter, the GP Group shall have the right to
inform the Class A Limited Partner of its intent to purchase all of the DMCS
Shares held by the Partnership for a cash purchase price equal to the FMV. If
the GP Group delivers
7
<PAGE>
such a notice to the Class A Limited Partner within such time period, then the
GP Group shall consummate such purchase within 90 days of the FMV Determination
Date.
(n) The Partnership shall promptly be dissolved and wound up
upon the occurrence of (i) the rescission of the Final LP Notice, (ii) the
failure of the GP Group to deliver a notice of its intent to purchase the DMCS
Shares held by the Partnership within the time provided in subsection (m) or
(iii) the failure of the GP Group, following the timely delivery of a notice of
its intent to purchase the DMCS Shares held by the Partnership, to consummate
such purchase within the time provided in subsection (m) (any of such events, a
"Dissolution Event").
(o) For a period of one year following the occurrence of a
Dissolution Event, the Class A Limited Partner shall not sell or transfer, other
than to a Trust, of which the Class A Limited Partner is the beneficiary, and
which Trust agrees to be bound by the provisions hereof, any of the DMCS Shares
distributed to the Class A Limited Partner upon the dissolution of the
Partnership (the "Restricted Shares") without complying with the following
procedures. If the Class A Limited Partner locates a buyer for the Restricted
Shares, it shall give notice to the General Partner identifying the proposed
buyer and setting forth the price that such buyer is prepared to pay (the "Sale
Notice"). If the General Partner (or its designee) is willing to pay a price
equal to such price in cash, then the General Partner (or its designee) shall
have the right to purchase the Restricted Shares for such price in cash,
providing that it (or its designee) gives notice of intent to do so within 10
days after receiving the Sale Notice and consummates such purchase within 60
days after receiving the Sale Notice. If the General Partner either fails timely
to give such a notice of intent or timely to consummate such purchase, the Class
A Limited Partner shall be free to sell the Restricted Shares to the buyer
identified in the Sale Notice for the price therein stated. The provisions of
this subsection (o) also shall apply to any trust, affiliate or other person
which receives Restricted Shares from or at the direction of the Class A Limited
Partner other than pursuant to a bona fide sale transaction.
4. a. DMCS hereby represents and warrants that the Rights Plan
has been amended to provide that none of the Class A Limited Partner (as a
result of any purchase of DMCS Shares held by the Partnership pursuant to the
provisions of Section 15.7 of
8
<PAGE>
the Partnership Agreement or receipt of DMCS Shares held by the Partnership
following the expiration of the term of the Partnership on December 12, 2002 or
the Partnership's earlier termination pursuant to the terms of the Partnership
Agreement), any purchaser of the DMCS Shares held by the Partnership pursuant to
the provisions of Section 15.7 of the Partnership Agreement or any transferee of
the Class A Limited Partner or any such purchaser shall be deemed to be an
"Acquiring Person" as defined in the Rights Plan. DMCS covenants with the
General Partner and the Class A Limited Partner not to further amend the Rights
Plan or adopt any successor plan or amendment to its certificate of
incorporation or by-laws that would (i) impair or restrict the ability of the
Partnership to sell its DMCS Shares pursuant to the provisions of Section 15.7
of the Partnership Agreement, (ii) dilute or adversely affect the voting rights
of the DMCS Shares held by the Partnership or (iii) otherwise frustrate the
terms of Section 15.7 of the Partnership Agreement.
b. If DMCS breaches any of its representations and
warranties or covenants set forth in paragraph 4(a) of this Amendment, which
breach (if it is capable of being cured) is not so cured within 30 days after
the Class A Limited Partner provides notice to DMCS (an "Uncured Breach"), then
DMCS shall pay to the Class A Limited Partner the damages suffered by the Class
A Limited Partner as a result of the Uncured Breach as
9
<PAGE>
determined in accordance with this paragraph 4(b). Upon any such breach, DMCS
shall notify the Class A Limited Partner. Within 10 days after any such breach
becoming an Uncured Breach, the Class A Limited Partner shall provide DMCS with
the names of three nationally recognized investment banking firms. Within 7 days
after its receipt of such list of names, DMCS shall choose one of such firms for
the purposes of this paragraph 4(b). DMCS shall be responsible for the fees and
expenses of such firm. Such firm as promptly as practicable shall determine the
diminution in the fair market value of the DMCS Shares held by the Partnership
(determined in accordance with Section 15.7(c) of the Partnership Agreement)
resulting from the Uncured Breach (the "Damage Amount"). The firm shall advise
DMCS and the Class A Limited Partner of its determination of the Damage Amount
(which determination shall be final and binding on the parties) as soon as
practicable. DMCS shall wire transfer to an account designated by the Class A
Limited Partner immediately available federal funds in the Damage Amount within
10 days after it is notified by the banking firm of the Damage Amount.
c. The term "Class A Limited Partner" shall
include any person or entity to which the Class A Limited Partner sells or
assigns its interest in the Partnership in accordance with the terms of the
Partnership Agreement.
10
<PAGE>
5. Each of the General Partner, the Class A Limited Partner
and DMCS hereby represents and warrants that this Amendment has been duly
authorized by all requisite partnership or corporate action, has been duly
executed and constitutes its legal, valid and binding obligation.
6. The General Partner shall have the authority to prepare,
execute and file with the relevant governmental authorities any and all
instruments made necessary by or appropriate with reference to the matters set
forth herein.
7. Except as set forth above, the Partnership Agreement
remains in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
New DM Management Associates I
By: /s/Robert B. Stein, Jr.
-------------------------------------
HNB Investment Corp.
By: /s/D.B Levene
-------------------------------------
Dairy Mart Convenience Stores, Inc.
By: /s/Robert B. Stein, Jr.
-------------------------------------
11
NYFS10...:\84\39984\0001\139\FRMD197R.040
