<PAGE> 1
As filed with the Securities and Exchange Commission on January 30, 1998.
Registration No. 333-01267
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DAIRY MART CONVENIENCE STORES, INC.
(Exact name of registrant as specified in charter)
DELAWARE 04-2497894
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
210 BROADWAY EAST, CUYAHOGA FALLS, OHIO 44222 (330) 923-0421
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
COPY TO:
ROBERT B. STEIN, JR. R. MARK CHAMBERLIN, ESQUIRE
CHIEF EXECUTIVE OFFICER, PRESIDENT MINTZ, LEVIN, COHN, FERRIS,
AND CHAIRMAN OF THE BOARD GLOVSKY AND POPEO, P.C.
DAIRY MART CONVENIENCE STORES, INC. ONE FINANCIAL CENTER
210 BROADWAY EAST, BOSTON, MA 02111
CUYAHOGA FALLS, OHIO 44222 (617) 348-1708
(330) 923-0421
(Name, Address, including zip code, and telephone
number, including area code,
of agent for service)
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis to Rule 415 under the Securities Act of 1933,
as amended (the "1933 Act") check the following box. [X]
<PAGE> 2
DAIRY MART CONVENIENCE STORES, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-2
<TABLE>
<CAPTION>
Form S-2 Item and Caption Location in Prospectus
------------------------- ----------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus ... Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus................. Inside Front and Outside Back Cover
Pages; Available Information;
Documents Incorporated by Reference
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Charges.... Risk Factors; The Company
4. Use of Proceeds........................... Not Applicable
5. Determination of Offering Price........... Not Applicable
6. Dilution.................................. Not Applicable
7. Selling Security Holders.................. Selling Stockholders
8. Plan of Distribution...................... Plan of Distribution
9. Description of Securities to be Registered Description of the Class A Common
Stock and Warrants
10. Interests of Named Experts and Counsel.... Certain Legal Matters; Experts
11. Information with Respect to the Registrant Documents Incorporated by Reference
12. Incorporation of Certain Information by
Reference................................. Documents Incorporated by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
PROSPECTUS
DAIRY MART CONVENIENCE STORES, INC.
-----------------------------------
1,715,000 CLASS A COMMON STOCK PURCHASE WARRANTS
1,715,000 SHARES OF CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------------------------------
The 1,715,000 Class A Common Stock Purchase Warrants (the "Warrants")
and the 1,715,000 shares of Class A Common Stock (the "Class A Common Stock") of
Dairy Mart Convenience Stores, Inc., a Delaware corporation (the "Company" or
"Dairy Mart"), offered hereby are being sold by the selling stockholders
identified herein (the "Selling Stockholders"). Each Warrant entitled the
registered holder thereof to purchase one share of Class A Common Stock at an
initial exercise price of $6.95 per share, which was adjusted in December, 1996
to $5.45 per share, for a period of six years commencing on December 1, 1995.
Offers and sales of the Warrants and the Class A Common Stock may be made on one
or more exchanges, subject to applicable listing requirements, in the
over-the-counter market, or otherwise, at prices and on terms then prevailing,
or at prices related to the then-current market price, or in negotiated
transactions, or by underwriters pursuant to an underwriting agreement in
customary form, or in a combination of any such methods of sale. The Selling
Stockholders may also sell such securities in accordance with Rule 144 under the
Securities Act of 1933, as amended (the "1933 Act"). The Selling Stockholders
are identified and certain information with respect to them is provided under
the caption "Selling Stockholders" herein, to which reference is made. The
expenses of the registration of the securities offered hereby, including fees of
counsel for the Company, and one counsel for the Selling Stockholders, will be
paid by the Company. The following expenses will be borne by the Selling
Stockholders: underwriting discounts and selling commissions, if any, and the
fee of additional legal counsel, if any, for the Selling Stockholders. The
filing by the Company of this Prospectus in accordance with the requirements of
Form S-2 is not an admission that any person whose shares are included herein is
an "affiliate" of the Company.
The Selling Stockholders have advised the Company that they have not
engaged any person as an underwriter or selling agent for any of such
securities, but they may in the future elect to do so, and they will be
responsible for paying such a person or persons customary compensation for so
acting. The Selling Stockholders and any broker executing selling orders on
behalf of any Selling Stockholders may be deemed to be "underwriters" within the
meaning of the 1933 Act, in which event commissions received by any such broker
may be deemed to be underwriting commissions under the 1933 Act. The Company
will not receive any of the proceeds from the sale of the securities offered
hereby, other than receipt of the exercise price. If all of the Warrants are
exercised the Company will receive gross proceeds of $9,346,750. The exercise
of all the Warrants will result in an increase in shares of Class A Common Stock
of 55% of the currently issued and outstanding shares. The Class A Common Stock
is listed on the American Stock Exchange (AMEX) under the symbol "DMC.A." The
Warrants are not currently listed, on Nasdaq or any national securities
exchange. On November 30, 1997, the closing sale price of the Class A Common
Stock, as reported by AMEX was $4.50 per share.
------------------------------
THE WARRANTS AND THE CLASS A COMMON STOCK OFFERED HEREBY
INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION, OR ANY
STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is .
<PAGE> 4
FOR CALIFORNIA RESIDENTS ONLY
WITH RESPECT TO SALES OF THE SECURITIES BEING OFFERED HEREBY TO
CALIFORNIA RESIDENTS, SUCH SECURITIES MAY BE SOLD ONLY TO (1) "ACCREDITED
INVESTORS" WITHIN THE MEANING OF REGULATION D UNDER THE 1933 ACT, (2) BANKS,
SAVINGS AND LOAN ASSOCIATIONS, TRUST COMPANIES, INSURANCE COMPANIES, INVESTMENT
COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, PENSION AND
PROFIT SHARING TRUSTS, CORPORATIONS OR OTHER ENTITIES WHICH, TOGETHER WITH THE
CORPORATION'S OR OTHER ENTITY'S AFFILIATES, HAVE A NET WORTH ON A CONSOLIDATED
BASIS ACCORDING TO THEIR MOST RECENT REGULARLY PREPARED FINANCIAL STATEMENTS
(WHICH SHALL HAVE BEEN REVIEWED, BUT NOT NECESSARILY AUDITED, BY OUTSIDE
ACCOUNTANTS) OF NOT LESS THAN $14,000,000 AND SUBSIDIARIES OF THE FOREGOING, (3)
ANY CORPORATION, PARTNERSHIP OR ORGANIZATION (OTHER THAN A CORPORATION,
PARTNERSHIP OR ORGANIZATION FORMED FOR THE SOLE PURPOSE OF PURCHASING THE
SECURITIES OFFERED HEREBY) WHO PURCHASES AT LEAST $1,000,000 AGGREGATE AMOUNT OF
THE SECURITIES OFFERED HEREBY, (4) ANY NATURAL PERSON WHO (A) HAS INCOME OF
$65,000 AND A NET WORTH OF $250,000, OR (B) HAS A NET WORTH OF $500,000 (IN EACH
CASE, EXCLUDING HOME, HOME FURNISHINGS AND PERSONAL AUTOMOBILES), OR (5) ANY
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED UNDER RULE 144A OF THE 1933 ACT.
AVAILABLE INFORMATION
The Company is subject to certain informational reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). These reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024 of the
Commission's office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC
20549, and at its regional offices located at 7 World Trade Center, Suite 1300,
New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. Copies of such reports, proxy statements and other
information can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549 at prescribed
rates. Additional updating information with respect to the securities covered
herein may be provided in the future to purchasers by means of appendices to
this Prospectus.
The Company has filed with the Commission in Washington, DC a
registration statement (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the 1933 Act with respect to
the securities offered or to be offered hereby. This Prospectus does not contain
all of the information included in the Registration Statement, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information about the Company and the securities offered
hereby, reference is made to the Registration Statement and the exhibits
thereto.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any document incorporated herein by reference, excluding exhibits. Requests
should be made to Dairy Mart Convenience Stores, Inc., 210 Broadway East,
Cuyahoga Falls, Ohio 44222, (330) 923-0421, Attention: Investor Relations.
While the Warrants are outstanding, the Company will furnish holders of
the Warrants with annual reports containing audited consolidated financial
statements and quarterly reports containing unaudited interim consolidated
financial statements.
2
<PAGE> 5
RISK FACTORS
An investment in the shares being offered by this Prospectus involves a
high degree of risk. In addition to the other information contained in this
Prospectus or incorporated herein by reference, prospective investors should
carefully consider the following risk factors before purchasing the shares
offered hereby. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to, the
Risk Factors discussed below.
LEVERAGE; DEBT SERVICE
At November 1, 1997 the Company had consolidated long-term
indebtedness of approximately $95.5 million and a ratio of consolidated
long-term indebtedness to total stockholders' equity of 10.65 to 1. This
substantial degree of leverage may have adverse consequences on the Company
including: (i) impairment of the Company's ability to obtain additional
financing in the future for working capital, capital expenditures or other
purposes; (ii) required use of a substantial portion of the Company's cash flow
from operations to make interest and principal payments; (iii) an adverse effect
on the Company's ability to compete with other businesses that may be less
leveraged; and (iv) the Company's increased vulnerability in the event of a
downturn in its businesses.
The Company has entered into a $30,000,000 senior revolving credit
facility dated April 24, 1996, and amended, as of January 31, 1997 by and among
the Company and Bank of Boston Connecticut (the "Credit Agreement"), which
provides for the availibility initially of up to $20 million of aggregate
extensions of credit of which $15 million will be available for issuance of
letters of credit. As of November 1, 1997, the Company had no outstanding
revolving credit loans, and had outstanding letters of credit in the amount of
$7.7 million. The Credit Agreement contains numerous financial and operating
covenants and requires periodic repayments of amounts borrowed thereunder.
There can be no assurance that the Company will be able to maintain compliance
with the financial covenants that are contained in the Credit Agreement.
Failure to meet such financial tests or other covenants would result in a
default thereunder. The Company expects to generate sufficient cash flow from
operations to meet all of its principal and interest obligations on its and its
subsidiaries' indebtedness, including indebtedness under the Notes (as
hereinafter defined) and the Credit Agreement, if any. However, the Company's
ability to satisfy principal and interest obligations under its credit facility
will depend upon dividends and other intercompany transfers from its
subsidiaries, and will be subject to the successful implementation of the
Company's business strategy and financial, business and other factors affecting
the business and operations of the Company and its subsidiaries, including
factors beyond their control, such as prevailing economic conditions. Based
upon the consolidated long-term indebtedness as of February 1, 1997 principal
and interest payments required for such indebtedness for fiscal 1998 will
amount to approximately $13.5 million.
NET LOSSES
The Company has incurred substantial net losses in its last three fiscal
years. For the fiscal years ended February 1, 1997, February 3, 1996, and
January 28, 1995, the Company experienced net losses of $1,886,000, $6,000,000
and $11,150,000, respectively. There can be no assurance that the Company will
not experience annual net losses in the future.
MANAGEMENT CONTROL OF THE COMPANY
DM Associates Limited Partnership ("DM Associates") owns 638,743
shares of the Company's Class B Common Stock. Five of the Company's seven
directors are currently elected by the holders of the Company's Class B Common
Stock. The remaining two directors are elected by the holders of the Company's
Class A Common Stock. The Company's management, Robert B. Stein, Jr. and Gregory
G. Landry, through their control of the general partner of DM Associates, is
entitled to vote not less than 41.8% of the Company's Class B Common Stock.
Such 41.8% of the Company's Class B Common Stock constitutes 34.8% of the total
voting power of both classes of Stock.
3
<PAGE> 6
The limited partnership agreement for DM Associates, however, requires
that the general partner of DM Associates consult with HNB Investment Corp., a
limited partner of DM Associates, before voting any shares at a meeting of the
Company's shareholders or exercising any consensual rights of such shares. If
such general partner votes or exercises consensual rights of such shares in a
manner in which such limited partner does not agree, the limited partner may
dissolve DM Associates. The limited partnership agreement, as amended December
12, 1997, provides that DM Associates will cease to exist as of December 12,
2002.
CHANGE OF CONTROL
The Company has issued $75,000,000 in principal amount of 10 1/4% Senior
Subordinated Notes due 2004, Series A (the "Series A Notes") and $13,500,000 in
principal amount of 10 1/4% Senior Subordinated Notes due 2004, Series B (the
"Series B Notes" and the Series A Notes sometimes collectively the "Notes")
pursuant to the Amended and Restated Indenture, dated as of December 1, 1995
(the "Indenture"), among the Company, each of the guarantors of said Notes and
First Bank National Association, as trustee. Pursuant to the Indenture, each
holder of Series B and Series A Notes will have the right to require the Company
to repurchase all or any part of such holder's Notes at a repurchase price
equal to 101% of the current principal amount plus accrued interest to the date
of repurchase, in the event of the occurrence of a Change of Control as defined
in the Indenture. Under the Indenture a Change of Control will occur if: (i) any
person or group becomes the beneficial owner of more than 50% of the voting
power of the capital stock of the Company; (ii) during any two year period the
persons serving as members of the Board of Directors at the beginning of said
period cease to comprise a majority of the Board of Directors, (iii) the Company
sells or transfers substantially all of the assets of the Company; (iv)
acceleration of indebtedness under the Credit Agreement occurs as a result of a
change in the beneficial ownership of the capital stock of the Company; or (v)
the Company consolidates or merges with another corporation. As noted in
"Litigation" below, it is possible that as a result of litigation certain
voting rights with respect to shares held by DM Associates will vest with the
Company; in such event it is possible such vesting would constitute a Change in
Control. If a Change of Control were to occur, the Company may be unable to
fulfill its obligations to redeem the Notes and to pay principal and interest
due under the Notes.
ENVIRONMENTAL COMPLIANCE
The Company incurs ongoing costs to comply with federal, state and local
environmental laws and regulations, particularly the comprehensive regulatory
programs governing underground storage tanks ("USTs") used in the Company's
gasoline operations. In addition, in the ordinary course of business, the
Company periodically detects releases of gasoline or other regulated substances
from USTs it owns or operates. In the past three fiscal years ended February 1,
1997, the Company recorded expenses which averaged approximately $1.4 million
annually, net of reimbursements from state trust fund programs, for assessment
and remediation activities in connection with releases into the environment of
regulated substances from USTs at the Company's current or former gasoline
facilities. The Company accrues its estimates of all costs to be incurred for
assessment and remediation for releases at the time they become known. These
accruals are adjusted if and when new information becomes known. Due to the
nature of such releases, the actual costs incurred may vary from these
estimates, and the ongoing costs of assessment and remediation activities may
vary significantly from year to year.
In addition, federal and state regulatory programs mandate that all
existing USTs be upgraded or replaced by December 22, 1998 to meet certain
environmental protection requirements. The Company presently estimates that in
addition to the Company's assessment and remediation costs discussed above, it
will make aggregate capital expenditures ranging from approximately $4.0 million
to $6.0 million over the next two fiscal years to comply with upgrading and
other UST regulatory requirements. The actual costs incurred may vary
substantially from these estimates.
STORE EXPANSION
A major component in the Company's growth strategy is to continue to
build new stores and increase its level of gasoline sales. The opening of new
stores will be dependent upon a number of factors, including general economic
conditions, anticipated competition in the Company's markets, the availability
of desirable locations, the ability to negotiate and enter into lease,
development or acquisition agreements on acceptable terms and the availability
of financing. The Company's experience has been that new stores contribute
positively to operating income after their first year of operation. There can be
no assurance that the Company will be able to open, operate or acquire new
stores on a timely or profitable basis in accordance with the Company's current
plans. The Company's current plans are to open 6 stores and close 35 stores
during fiscal 1998.
COMPETITION
The convenience store and retail gasoline industries are highly
competitive. The number and type of competitors vary by location. The Company
presently competes with other convenience stores, large integrated gasoline
service station operators, super market chains, neighborhood grocery stores,
independent gasoline service stations, fast food operations and other similar
retail outlets, some of which are well-recognized national or regional retail
chains. Some of the Company's competitors have greater financial resources than
the Company. Key competitive factors include, among others, location, ease of
access, store management, product selection, pricing, hours of operation, store
safety, cleanliness, product promotions and marketing.
4
<PAGE> 7
Gasoline sales are very competitive. The Company competes with both
independent and national brand gasoline stations. Gasoline profit margins have a
significant impact on the Company's earnings. These profit margins are often
influenced by factors beyond the Company's control, such as volatility in the
wholesale gasoline market, and are continually influenced by competition in each
local market area.
EFFECT OF WEATHER ON BUSINESS
The Company believes that weather conditions have a significant effect
on its sales, as convenience store customers are more likely to go to stores to
purchase convenience goods and services, particularly higher profit margin items
such as fast food items, fountain drinks and other beverages, when weather
conditions are favorable. Accordingly, the Company's stores generally experience
significantly higher revenues and profit margins during the warmer weather
months, which fall within the Company's second and third fiscal quarters. If
weather conditions are not favorable in the second and third fiscal quarters,
the Company's performance may be adversely affected.
GOVERNMENT REGULATION AND POTENTIAL LEGISLATION
The Company is subject to numerous federal, state and local laws,
regulations and ordinances. In addition, various federal, state and local
legislative and regulatory proposals are made from time to time to, among other
things, increase the minimum wage payable to employees, and increase taxes on,
and regulation of, the retail sale of certain products, such as tobacco products
and alcoholic beverages. Changes to such laws, regulations or ordinances may
adversely affect the Company's performance by increasing the Company's costs or
affecting its sales of certain products. To the best of the Company's knowledge
it is currently in material compliance with the federal, state and local laws,
regulations and ordinances.
NO PRIOR MARKET FOR THE WARRANTS
The Warrants are not listed on the NASDAQ Stock Market or a national
securities exchange. It is unlikely that an active trading market will develop
for the Warrants. Accordingly, the purchasers of the Warrants may not be readily
able to liquidate their investments. If an active trading market develops for
the Warrants, future trading prices of such securities will depend on many
factors, including, among other things, the Company's results of operations and
the market for similar securities. Depending on these and other factors,
including the financial condition of the Company, the market price for the
Warrants may be adversely affected.
EFFECT OF WARRANT EXERCISE ON STOCK PRICE
The exercise of all the Warrants will result in an increase of shares of
Class A Common Stock issued and outstanding of 55% of the currently issued and
outstanding shares. Sales of a substantial amount of shares of Class A Common
Stock received pursuant to the exercise of the Warrants in the public market
could adversely affect the prevailing market price of the Class A Common Stock.
EFFECT OF LACK OF EFFECTIVE REGISTRATION STATEMENT
In the event a holder of a Warrant, who is an affiliate of the Company,
as defined in Rule 144 under the 1933 Act, and who has exercised, in whole or
part, such Warrants while an effective registration statement was in effect,
sells shares of Class A Common Stock in the absence of an effective registration
statement such holder may be deemed to be an underwriter and will be subject to
the volume and certain other requirements of Rule 144. In the absence of an
effective registration statement, the Warrants and shares of Class A Common
Stock received upon the exercise of a Warrant in such absence will be "
restricted securities" and subject to substantial restrictions on
transferability. See "Description of Class A Common Stock and Warrants-
Warrants."
LITIGATION
The Company is currently involved in two derivative lawsuits in which
the plaintiffs allege, among other things, that in connection with the Company's
purchase of certain interests from Charles Nirenberg, a former stockholder,
director and officer of the Company (the "Nirenberg Transaction"), the Board of
Directors violated their fiduciary duty to the Company and its stockholders,
violated provisions of Delaware corporate law and wasted corporate assets. The
plaintiffs seek, among other things, a declaration that the current structure of
the general partner of DM Associates is invalid and that certain voting rights
with respect to the Class B Common Stock held by DM Associates should be vested
in the Company. Although the Company is contesting these claims, if the Company
became a general partner of DM Associates, a Change of Control of the Company
under the Indenture could result. If a Change of Control were to occur, the
Company may be unable to fulfill its obligations to redeem the Notes and to pay
principal and interest due under the Notes. In addition, if a plaintiff pursues
this claim, management of the Company could be forced to commit time and
resources to the defense of this action. There can be no assurance that this
claim will not have a material adverse effect on the Company's business,
operating results and financial condition. The Company is not able to determine
at this time what the outcome of such litigation might be.
5
<PAGE> 8
THE COMPANY
Dairy Mart was founded in 1957 and operates one of the nation's largest
convenience store chains. As of the fiscal year ended February 1, 1997, the
Company operated or franchised approximately 811 stores under the "Dairy Mart"
name in 11 states located in the Northeast, Midwest and Southeast, of which 360
stores sold gasoline and 268 stores were franchised.
On June 21, 1997, Dairy Mart Convenience Stores, Inc. (the "Company")
completed the sale of the assets relating to 156 convenience store and gasoline
locations in Connecticut, Massachusetts, Rhode Island, and New York to DB
Companies, Inc. The Company received cash consideration of approximately $39.3
million in the sale transaction.
Dairy Mart stores offer a wide range of products and services which
cater to the convenience needs of its customers, including milk, ice cream,
groceries, beverages, snack foods, candy, deli products, publications, health
and beauty aids, tobacco products, lottery tickets and money orders. The stores
are typically located in densely populated, suburban areas on sites which are
easily accessible to customers and provide ample parking. Dairy Mart stores are
generally free standing structures which are well-lit and are designed to
encourage customers to purchase high profit margin products, such as deli items,
coffee, fountain drinks and other fast food items.
The Company is incorporated in Delaware and maintains its principal
executive offices at 210 Broadway East, Cuyahoga Falls, Ohio 44222. The
Company's telephone number is (330) 923-0421.
SELLING STOCKHOLDERS
The securities offered hereby by the Selling Stockholders consist of
Warrants to purchase 1,715,000 shares of Class A Common Stock and 1,715,000
shares of Class A Common Stock issuable upon exercise of the Warrants. The
Warrants were acquired by the Selling Stockholders (i) in connection with the
issuance and sale by the Company of its Series B Notes and Warrants pursuant to
several Note and Warrant Purchase Agreements dated as of December 1, 1995
between the Company and the Selling Stockholders (filed as an exhibit to the
Registration Statement) and (ii) the issuance of Warrants to the holders of the
Company's Series A Notes. The following table sets forth information with
respect to the beneficial ownership of the Company's Class A Common Stock as of
January 30, 1998 (including shares of Class A Common Stock issuable upon
exercise of the Warrants) and as adjusted to reflect the sale of the
Warrants/Class A Common Stock offered hereby by each Selling Stockholder. None
of the Selling Stockholders has had a material relationship with the Company
within the past three years other than as a result of the ownership of the
Warrants and the Notes.
6
<PAGE> 9
<TABLE>
<CAPTION>
Number of
Shares of Class A Percent Number of
Common Stock of Class A Shares of
Beneficially Common Percent of Class A Common
Owned Prior to Stock Warrants Stock Being
Selling Stockholder Offering(l) Outstanding(2) Outstanding(3) Offered(4)
- ------------------- ----------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
The IDS Mutual Fund Group(5) 372,999 12.0% 21.7% 372,999
OKGBD & Co. (6) 360,001 11.6% 21.0% 360,001
Triumph-Connecticut Limited Partnership(7) 765,000 24.7% 44.6% 765,000
Evelyn R. Cross 60 * * 60
Margaret H. Effinger, Trustee of the Margaret E. Effinger Trust 67 * * 67
Robert O. Effinger, Trustee of the Robert O. Effinger Trust 33 * * 33
Joseph E. Golder, Trustee of the Joseph E. Golder Trust 167 * * 167
Vernell B. Markle, Trustee of Vernell B. Markle Trust 67 * * 67
Doris I. Morrison and William I. Morrison, Trustees of the
Doris I. Morrison Revocable Living Trust 67 * * 67
Patricia Morrow 67 * * 67
Ruth M. Wilson Revocable Trust 100 * * 100
Harold Haller and Glenda Haller, Joint Tenants 67 * * 67
Jeanne A. Biz 33 * * 33
Chanoch Inc. Defined Benefit Plan 67 * * 67
Roy W. Gividen and M. Gladys Gividen, Joint Tenants 67 * * 67
Desdie B. Smith and Martha S. Harris, Joint Tenants 67 * * 67
Dr. A. Kanter P.C. Pension Plan B 100 * * 100
Robert J. Lynch and Emma J. Lynch, Joint Tenants 27 * * 27
Margaret M. O'Neil 67 * * 67
Agenor C. Rochet 400 * * 400
R. Burns Ross, Trustee of the R. Burns Ross Trust 67 * * 67
Benjamin Schwartz and Beatrice Schwartz, Joint Tenants 167 * * 167
Bernard Shapiro 133 * * 133
Linda Shields 167 * * 167
Dean Witter Reynolds, Inc. 667 * * 667
Prudential Securities, Inc. 1,627 * * 1,627
Fechtor, Detwiler & Co. 134 * * 134
Charles Schwab & Co. 654 * * 654
Herzog, Heine, Geduld, Inc. 1,787 * * 1,787
Smith Barney Inc. 167 * * 167
JJB Hilliard, WL Lyons, Inc. 2,240 * * 2,240
Lack & Lindsay 10,533 * * 10,533
Emp & Co. 9,999 * * 9,999
Charles Schwab & Co. 6,666 * * 6,666
J.B. Hanauer & Co. 1,434 * * 1,434
Patterson & Co. 1,334 * * 1,334
Merrill, Lynch, Pierce, Fenner & Smith 67 * * 67
J. Romeo & Co. 23,632 * 1.4% 23,632
Hare & Co. 23,331 * 1.4% 23,331
Giles B. Mizock Irrevocable Trust 66 * * 66
Claro L. Lavina M.D., P.A FBO Claro L. Lavina Profit Sharing Plan 332 * * 332
A.G. Edwards & Sons, Inc. 2 * * 2
William M. Casey, Trustee, William M. Casey and
Joanne L. Casey Family Trust 66 * * 66
Elaine W. Jaspan 999 * * 999
Paine Webber Inc. 2 * * 2
Hare & Co. 167 * * 167
Bear Stearns Securities 17,166 * 1.0% 17,166
Salkeld & Co. 1,667 * * 1,667
A.G. Edwards & Sons, Inc., Custodian For Lester R. Mapes IRA Acct 333 * * 333
Abby B. Burden 99 * * 99
Joseph A. Penner, M.D. 134 * * 134
Small Family Ltd. Partnership 134 * * 134
Hare & Co. 33,330 1.1% 1.9% 33,330
Ferris, Baker, Watts, Inc. 1,167 * * 1,167
Genius & Co. 666 * * 666
Gesture & Co. 666 * * 666
Linnet & Co. 4,999 * * 4,999
Awl & Co. 14,998 * * 14,998
Battlehold & Co. 1,666 * * 1,666
Locker & Co. 5 * * 5
Janice K. Warner 133 * * 133
Societe Generale Securities Corp. 8,333 * * 8,333
Bear Stearns Securities Corp. 2,535 * * 2,535
Hare & Co. 6,331 * * 6,331
Herzog, Heine, Geduld, Inc., Custodian FBO James J. Bryant IRA 167 * * 167
J. Romeo & Company 166 * * 166
Knotty & Company 6,666 * * 6,666
Atwell & Co. 15,839 * * 15,839
E.S. Bertalmio and A. Bertalmio, Trustees of the
Albert Bertalmio Trust 166 * * 166
MAC & Co. 11,666 * * 11,666
Cede & Co. 5 * * 5
--------- ---- ----- ---------
Total: 1,715,000 55.4% 100.0% 1,715,000
- ---------------------------------------------------
<FN>
*Less than 1% of the outstanding class of security.
(1) Includes shares of Class A Common Stock issuable upon exercise of the
Warrants. The persons named in this table have sole voting and investment
power with respect to all shares of Class A Common Stock shown as
beneficially owned by them, subject to the information contained in the
footnotes to this table.
(2) Rounded to nearest one-tenth of one percent, based on 3,096,369 shares of
Class A Common Stock outstanding on November 1, 1997.
(3) Rounded to nearest one-tenth of one percent, based on 1,715,000 warrants
outstanding on November 1, 1997.
(4) The Selling Stockholders may offer and sell the Warrants held by them, or
may elect to exercise the Warrants and offer and sell the shares of Class A
Common Stock acquired thereby, or may offer and sell a combination of
Warrants and shares of Class A Common Stock. Therefore, no estimate can be
given as to the amount and percentage of the Class A Common Stock to be
owned by each Selling Stockholder after the completion of the offering.
(5) Includes Warrants held of record: (1) by VAR & Co. as nominee for IDS Bond
Fund, Inc., and IDS Extra Income Fund, Inc. and (2) by Wrap Fund Co. as
nominee for IDS Life Special Income Fund, Inc. Management Trust.
(6) Includes Warrants held for record by OKGBD & Co. as nominee for SunAmerica,
Inc. and affiliates and formerly held of record by SunAmerica, Inc.,
SunAmerica Life Insurance Company, and First SunAmerica Life Insurance
Company.
(7) Triumph-Connecticut Limited Partnership ("Tri-Conn") has shared voting and
investment power with respect to all shares of Class A Common Stock shown
as beneficially owned by them. The sole general partner of Tri-Conn is
Triumph-Connecticut Capital Advisors Limited Partnership, the managing
general partner of which is Frederick W. McCarthy. Thomas W. Janes, as
affiliate of Tri-Conn, is a director of the Company.
</TABLE>
<PAGE> 10
PLAN OF DISTRIBUTION
The 1,715,000 Warrants and the 1,715,000 shares of Class A Common Stock
of the Company offered hereby may be offered and sold from time to time by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such offers and sales may be made from time to time on one or more
exchanges, subject to applicable listing requirements, or in the
over-the-counter market, or otherwise, at prices and on terms then prevailing or
at prices related to the then-current market price, or in negotiated
transactions. The Warrants and the shares of Class A Common Stock may be sold by
one or more of the following: (a) a block trade in which the broker or dealer so
engaged will attempt to sell such securities as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account; (c) an exchange distribution in accordance with the rules of
such exchange; (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (e) privately negotiated transactions; and (f) a
combination of any such methods of sale. In effecting sales, brokers or dealers
engaged by the Selling Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers may receive commissions or discounts from
Selling Stockholders or from the purchasers in amounts to be negotiated
immediately prior to the sale. The Selling Stockholders may also sell such
securities in accordance with Rule 144 under the 1933 Act.
The Company has agreed to use its best efforts to maintain the
effectiveness of the registration of the Warrants and the shares of Class A
Common Stock being offered hereunder for a period of at least three years or
such shorter period which will terminate when all of the Warrants and the shares
of Class A Common Stock offered hereby have been sold.
The Selling Stockholders and any brokers participating in such sales may
be deemed to be underwriters within the meaning of the 1933 Act. There can be no
assurance that the Selling Stockholders will sell any or all of the Warrants and
the shares of Class A Common Stock offered hereunder.
All proceeds from any such sales will be the property of the Selling
Stockholders, who will bear the expense of underwriting discounts and selling
commissions, if any.
DESCRIPTION OF CLASS A COMMON STOCK AND WARRANTS
The authorized capital stock of the Company consists of 20,000,000
shares of Class A Common Stock, par value $.01 per share (the "Class A Common
Stock"), 10,000,000 shares of Class B Common Stock, par value $.01 per share
(the "Class B Common Stock" and, together with the Class A Common Stock, the
"Common Stock") and 1,000,000 shares of Serial Preferred Stock, par value $.01
per share (the "Serial Preferred Stock").
VOTING RIGHTS--COMMON STOCK
As of November 1, 1997, there were 3,096,369 shares of Class A Common
Stock issued and outstanding held of record by approximately 620 stockholders
and 1,528,049 shares of Class B Common Stock issued and outstanding held of
record by approximately 415 stockholders.
Holders of Class A Common Stock are entitled to elect 25% of the Board
of Directors (rounded up to the nearest whole number) elected by the holders of
Common Stock so long as the number of outstanding shares of Class A Common Stock
is at least 10% of the total number of outstanding shares of both classes of
Common Stock. Currently, the holders of Class A Common Stock are entitled, as a
class, to elect two directors of the Company, and the holders of the Class B
Common Stock are entitled, as a class, to elect the remaining five directors.
The holders of a majority of the Class B Common Stock can and will continue to
be able to elect a majority of the directors elected by the holders of Common
Stock, so long as the number of outstanding shares of Class B Common
8
<PAGE> 11
Stock is at least 12.5% of the number of outstanding shares of both classes of
Common Stock. If the number of outstanding shares of Class B Common Stock falls
below that percentage, directors not elected by the holders of Class A Common
Stock will be elected by the holders of both classes of Common Stock, with
holders of Class A Common Stock having one-tenth vote per share and holders of
Class B Common Stock having one vote per share.
Directors may be removed, with or without cause, by the holders of the
class or classes of Common Stock that elected them. Vacancies in a directorship
may be filled by the vote of the class of shares that had previously filled that
vacancy, or by the remaining directors of that class; however, if there are no
such directors, the vacancy may be filled by the remaining directors.
After the exercise of the Warrants and the issuance and sale of the
Class A Common Stock offered by this Prospectus, the outstanding shares of that
class will be 76% (assuming no conversions of Class B Common Stock and no
additional issuances of Common Stock prior to the exercise of the Warrants) of
the total number of shares of both classes outstanding. If the number of
outstanding shares of Class A Common Stock should become less than 10% of the
total number of outstanding shares of both classes of Common Stock, the holders
of Class A Common Stock would not have the right to elect 25% of the Board of
Directors elected by the holders of Common Stock. Directors would then be
elected by all stockholders voting as one class, except holders of Class A
Common Stock would have one-tenth vote per share and holders of Class B Common
Stock would have one vote per share. The holders of Class A Common Stock and
Class B Common Stock must vote together as a single class in order to amend the
Company's Certificate of Incorporation to increase or decrease the aggregate
number of authorized shares of any class or classes of stock.
Except for the election or removal of directors as described above and
except for class votes as required by law, holders of both classes of Common
Stock vote or consent as a single class on all matters, with each share of Class
A Common Stock having one-tenth vote per share and each share of Class B Common
Stock having one vote per share. The present holders of Class B Common Stock
will have approximately 44% (assuming no conversions of Class B Common Stock and
no additional issuances of Common Stock prior to the exercise of the Warrants)
of the combined voting power of both classes of Common Stock after the
conversion of the Warrants and the issuance and sale of the Class A Common Stock
offered by this Prospectus.
DIVIDENDS--COMMON STOCK
Cash or property dividends can be declared and paid on the Class A
Common Stock without being declared and paid on the Class B Common Stock. No
cash or property dividend may be paid on the Class B Common Stock unless a
dividend at least equal in amount per share is paid concurrently on the Class A
Common Stock.
Dividends paid on shares of Class A Common Stock or Class B Common Stock
may be paid only as follows:
(i) shares of Class A Common Stock may be paid only to holders
of shares of Class A Common Stock unless there is no Class A Common
Stock outstanding, and shares of Class B Common Stock may be paid only
to holders of Class B Common Stock; and
(ii) the same number of shares shall be paid in respect of each
outstanding share of Class A and Class B Common Stock. For example, if a
stock dividend of two shares of Class A Common Stock were paid for each
share of Class A Common Stock held, a stock dividend of two shares of
Class B Common Stock would simultaneously be paid for each share of
Class B Common Stock held.
The Company has not paid any cash dividends during the last three fiscal
years and pursuant to loan covenants contained in the Credit Agreement, is
currently restricted from paying any dividends on its capital stock.
9
<PAGE> 12
CONVERSION--COMMON STOCK
At the option of the holder of record, each share of Class B Common
Stock is convertible at any time into one share of Class A Common Stock.
Conversion of a significant number of shares of Class B Common Stock into Class
A Common Stock could put control of the entire Board of Directors into the hands
of the current holders of the Class B Common Stock.
OTHER RIGHTS--COMMON STOCK
Shareholders of the Company have no preemptive or other rights to
subscribe for additional shares. On liquidation, dissolution or winding up of
the Company, all shareholders, regardless of class, are entitled to share
ratably in any assets available for distribution to holders of shares of Common
Stock. No shares of either class are subject to redemption. All outstanding
shares are, and all shares of Class A Common Stock offered by this Prospectus
will be, when sold, legally issued, fully paid and nonassessable. The Company
may not subdivide or combine shares of either class without at the same time
proportionally subdividing or combining shares of the other class.
TRANSFER AGENT
The transfer agent and registrar for shares of the Class A Common Stock
and Class B Common Stock is the American Stock Transfer Company.
SERIAL PREFERRED STOCK
The Board of Directors may, without action of the shareholders of the
Company, issue Preferred Stock from time to time in one or more series with
distinctive serial designations.
The Board of Directors is authorized to determine, among other things,
with respect to each series which may be issued: (i) the dividend rate and
conditions and the dividend preferences, if any; (ii) whether dividends would be
cumulative and, if so, the date from which dividends on such series would
accumulate; (iii) whether, and to what extent, the holders of such series would
enjoy voting rights, if any, in addition to those prescribed by law; (iv)
whether, and upon what terms, such series would be convertible into or
exchangeable for shares of any other class of capital stock or other series of
Preferred Stock; (v) whether, and upon what terms, such series would be
redeemable; (vi) whether or not a sinking fund would be provided for the
redemption of such series and, if so, the terms and conditions thereof; and
(vii) the preference, if any, to which such series would be entitled in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Company. With regard to dividends, redemption and liquidation preference, any
particular series of Preferred Stock may rank junior to, on a parity with or
senior to any other series of Preferred Stock and any class of the Common Stock.
It is not possible to state the actual effect of the authorization of
the Preferred Stock upon the rights of holders of the Common Stock, either Class
A or Class B, until the Board of Directors determines the specific rights of the
holders of a series of the Preferred Stock. However, such effects might include
(a) restrictions on dividends on the Common Stock if dividends on Preferred
Stock have not been paid; (b) dilution of the voting power of the Common Stock
to the extent that the Preferred Stock has voting rights; (c) dilution of the
equity interest of the Common Stock to the extent that the Preferred Stock is
converted into Common Stock; or (d) the Common Stock not being entitled to share
in the Company's assets upon liquidation until satisfaction of any liquidation
preference granted the holders of the Preferred Stock. Issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could make it more difficult for a
third party to acquire a majority of the
10
<PAGE> 13
outstanding voting stock. Accordingly, the issuance of Preferred Stock may be
used as an "anti-takeover" device without further action on the part of the
shareholders of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
WARRANTS
As of November 1, 1997, there were Warrants to purchase 1,715,000
shares of Series A Common Stock issued and outstanding, held of record by 70
holders.
The Warrants were issued pursuant to several (Series B) Note and Warrant
Purchase Agreements between the Company and certain purchasers dated as of
December 1, 1995 (the "Series B Purchase Agreements") and the Amended and
Restated Indenture, dated as of December 1, 1995, among the Company, certain
guarantors and First National Bank, as trustee (the "Indenture"), pursuant to
which the Series A Notes were issued. The following statements are subject to
the detailed provisions of the Series B Purchase Agreements, the Indenture and
the Warrants and are qualified in their entirety by reference to the Series B
Purchase Agreements, the Indenture and the Warrants, copies of the form of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
At any time until December 1, 2001, each Warrant entitles the registered
holder to purchase the number of shares of the Company's Class A Common Stock
specified in such warrant at an exercise price of $5.45 per share. The Warrants
may be exercised by surrendering to the Company or its designated agent the
Warrants and the payment of the exercise price (i) by wire transfer, cash, check
or money order, payable in United States funds, (ii) by delivering the Series A
Notes and Series B Notes, (iii) to the extent permitted by the Indenture and the
Credit Agreement by authorizing the Company to withhold from such issuance of
shares of Common Stock upon exercise of the Warrant a number of Shares of Common
Stock determined by dividing the warrant exercise price by the closing Class A
Common Stock price on the date immediately preceding the exercise date or (iv)
any combination thereof. No fractional shares of Class A Common Stock will be
issued in connection with the exercise of Warrants. If the holder would
otherwise be entitled to receive a fractional share of Class A Common Stock, the
number of shares issuable upon exercise will be rounded up to the next larger
whole share. The Company is required to keep available a sufficient number of
authorized shares of Class A Common Stock for issuance to permit exercise of the
Warrants. The Warrants are not redeemable by the Company.
The Warrants will expire at 5:00 pm., New York time on December 1, 2001.
In the event a holder of Warrants fails to exercise the Warrants prior to their
expiration, the Warrants will expire and the holder thereof will have no further
rights with respect to the Warrants. A holder of Warrants does not have any
rights, privileges or liabilities as a stockholder of the Company.
The exercise price of the Warrants and the number of shares issuable
upon exercise of the Warrants are subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions, reclassifications, purchases or redemptions of Class B Common
Stock at a price greater than the Class A Common Stock, or issuances of Class A
Common Stock (or convertible securities, options, grants or other rights to
purchase Class A Common Stock, excluding shares issuable upon exercise of
currently outstanding options and up to 650,000 shares issuable for future
grants under the Company's option plans) at a price less than the greater of the
market price or warrant price of Class A Common Stock. The adjustments to the
exercise price and number of shares
11
<PAGE> 14
issuable upon exercise of the Warrants occurs at the time of issuance of a
convertible security, option or right, and in the event such convertible
securities, options or rights later expire or terminate, the exercise price of
the Warrants may be increased and the number of shares issuable upon exercise of
the Warrants may be decreased. No assurance can be given that the market price
of the Company's Class A Common Stock will exceed the exercise price of the
Warrants at any time during the exercise period.
Holders of the Warrants have the right to exercise the Warrants to
purchase shares of Class A Common Stock whether or not an effective registration
statement relating to such shares is then in effect and whether or not the
shares are qualified for sale under the securities laws of the jurisdictions in
which the various holders of the Warrants reside. In the event the holders of
the Warrants exercise the Warrants in the absence an effective registration
statement relating to such shares and qualification for sale under the
securities laws of the various jurisdictions, the Warrants and the shares issued
upon exercise of the Warrants will be "restricted securities" as that term is
defined under the Securities Act. As such, the shares will not be transferable
in the absence of an effective registration statement or an opinion from counsel
that an exemption therefrom exists, and the value of the Warrants and the shares
may be materially affected. The Company generally must be notified prior to the
transfer of such restricted securities, although certain transfers of such
"restricted securities" to institutional accredited investors may be effected
without prior notice to the Company. The Company has undertaken to maintain the
effectiveness of the Registration Statement of which this Prospectus is a part
for a period of three years or such shorter period which will terminate when all
of the Warrants and the shares of Class A Common Stock offered hereby have been
sold, but there can be no assurance that the Company will be able to do so. The
Warrants may be deprived of any value if this Prospectus is not kept effective
or if the Warrants or such Class A Common Stock are not qualified or exempt from
qualification in the jurisdictions in which the holders of the Warrants reside.
In the event a holder of a Warrant who is an affiliate of the Company as defined
in Rule 144 under the 1933 Act and who has exercised, in whole or part, such
Warrants while an effective registration statement was in effect, sells shares
of Class A Common Stock in the absence of an effective registration statement,
such sale will be subject to the volume and certain other requirements of Rule
144 under the 1933 Act.
For the life of the Warrants, a holder thereof is given the opportunity
to profit from a rise in the market price of the Class A Common Stock that may
result in a dilution of the interest of other stockholders. In addition, the
Company may find it more difficult to raise equity capital if it should be
needed for the business of the Company while the Warrants are outstanding. At
any time when the holders of Warrants might be expected to exercise them, the
Company would, in all likelihood, be able to obtain additional equity capital on
terms more favorable than those provided in the Warrants.
The Company does not intend to apply for the listing of the Warrants on
the NASDAQ Stock Market, or a national securities exchange. In the event the
Warrants are so listed there is no assurance that an active trading market will
develop for the Warrants. Accordingly, the purchasers of the Warrants may not
be readily able to liquidate their investments. If an active trading market
develops for the Warrants, future trading prices of such securities will depend
on many factors including, among other things, the Company's results of
operations and the market for similar securities. Depending on these and other
factors, including the financial condition of the Company, the market price for
the Warrants may be adversely affected.
The exercise of all the Warrants will result in an increase of shares of
Class A Common Stock issued and outstanding of 55% of the currently issued and
outstanding shares. Sales of a substantial amount of shares of Class A Common
Stock received pursuant to the exercise of the Warrants in the public market
could adversely affect the prevailing market price of the Class A Stock.
CERTAIN LEGAL MATTERS
The validity of the issuance of the Warrants and the shares of Class A
Common Stock offered hereby is being passed upon for the Company by Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts.
EXPERTS
The Consolidated Financial Statements and schedule of the Company for
each of the three years in the period ended February 1, 1997, incorporated by
reference into this Prospectus, have been audited by Arthur Andersen LLP,
Independent Public Accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
12
<PAGE> 15
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
February 1, 1997, as amended by Amendments No. 1, 2, and 3 on Forms 10-K/A.
(b) The Company's Current Report on Form 8-K dated March 19, 1997.
(c) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended May 3, 1997.
(d) The Company's Current Report on Form 8-K dated June 21, 1997.
(e) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 2, 1997, as amended by Amendment No. 1 on Form 10-Q/A.
(f) The Company's Current Report on Form 8-K dated December 12, 1997.
(g) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 1, 1997.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any statement modified or superseded shall not be deemed, except as
modified or superseded, to constitute part of this Prospectus.
This Prospectus is accompanied by the Company's Form 10-K, as amended,
for the fiscal year ended February 1, 1997 and Form 10-Q for the Quarter
ended November 1, 1997. The Company will provide to each person to whom this
Prospectus is delivered, including any beneficial owner of Warrants, upon
written or oral request of such person, a copy of the documents incorporated by
reference into this Prospectus (not including exhibits to such documents unless
the exhibits are specifically incorporated by reference into the documents
which this Prospectus incorporates). Requests for such documents should be
directed to the Company at Dairy Mart Convenience Stores, Inc., 210 Broadway
East, Cuyahoga Falls, Ohio 44222; Attention: Investor Relations, telephone
number (330) 923-0421.
13
<PAGE> 16
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy to any person in any jurisdiction in which such offer or solicitation would
be unlawful. Neither the delivery of this Prospectus nor any offer or sale
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company or that the information contained
herein is correct as of any date subsequent to the date hereof.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information ............................................. 2
Risk Factors ...................................................... 3
The Company ....................................................... 6
Selling Stockholders .............................................. 6
Plan of Distribution .............................................. 7
Description of Class A Common Stock and Warrants................... 8
Certain Legal Matters ............................................. 12
Experts ........................................................... 12
Documents Incorporated by Reference ............................... 12
</TABLE>
DAIRY MART CONVENIENCE
STORES, INC.
1,715,000
CLASS A COMMON STOCK
PURCHASE WARRANTS AND
1,715,000 SHARES OF CLASS
A COMMON STOCK
--------------
PROSPECTUS
--------------
--------------
================================================================================
14
<PAGE> 17
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the
registration fee, the amounts stated are estimates.
<TABLE>
<S> <C>
Registration Fee $ 4,110.00
Legal Fees and Expenses 25,000.00
Accounting Fees and Expenses 10,000.00
Miscellaneous 2,000.00
----------
TOTAL $41,110.00
==========
</TABLE>
No portion of the above-listed fee will be borne by the Selling
Stockholders. In connection with the sale of the securities being registered,
the Selling Stockholders will pay underwriting discounts and selling
commissions, if any, and the fees of additional legal counsel, if any, for the
Selling Stockholders.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the General Corporation Law of the State of Delaware
("DGCL") provides that a corporation has the power to indemnify its officers and
directors against the expenses, including attorney's fees, judgments, fines or
settlement amounts, actually and reasonably incurred by them in connection with
the defense of any action by reason of being or have been directors or officers,
if such person shall have acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation,
except that if such action shall be in the right of the corporation, no such
indemnification shall be provided as to any claim, issue or matter as to which
such person shall have been judged to have been liable to the corporation unless
and to the extent that the Court of Chancery of the State of Delaware, or
another court in which the suit was brought, shall determine upon application
that, in view of all of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity. The Registrant's certificate of incorporation
provides for indemnification of its directors and officers to the fullest extent
permitted by the DGCL.
As permitted by Section 102 of the DGCL, the Registrant's certificate of
incorporation provides that no director shall be liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director
other than: (i) for breaches of the director's duty of loyalty to the Registrant
or its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) for the
unlawful payment of dividends or unlawful stock purchases or redemptions under
Section 174 of the DGCL; and (iv) for any transaction from which the director
derived an improper personal benefit.
The Registrant has purchased a liability insurance policy which insures:
(i) the Registrant, under certain circumstances, in the event it indemnifies a
director or officer of the Registrant or the subsidiary pursuant to the
foregoing provisions of the certificate of incorporation or by-laws of the
Registrant or otherwise: and (ii) directors and officers, under certain
circumstances, against liability and costs (including the cost of defending any
action) incurred by directors or officers in their capacity as such.
In addition, the Registration Rights Agreement dated as of December 1,
1995, filed as Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended October 28, 1995, incorporated herein by reference,
provides for indemnification by the Registrant of the Selling Stockholders
against certain liabilities under the 1933 Act, the 1934 Act, state securities
laws or otherwise, and provides for indemnification by the Selling
II-1
<PAGE> 18
Stockholders of the Registrant and its directors, its officers and certain
control persons against certain liabilities under the 1933 Act, the 1934 Act,
state securities laws, or otherwise.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.1 The Registrant's Restated Certificate of Incorporation (incorporated by
reference to Exhibits 3.1 to the Registrant's Annual Report on Form
10-K for the fiscal year ended February 1, 1992.
4.2 The Registrant's Amended and Restated Bylaws (incorporated by reference
to Exhibit 3.2 to the Registrant's Form 1O-Q for the fiscal quarter
ended July 29, 1995).
4.3 Instruments defining the rights of the holders of the Registrant's
Common Stock (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form 5-1 (Registration No.
33-639)) dated November 5, 1985
4.4 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of
Class A Common Stock of the Registrant (Initially Exercisable for an
Aggregate of 1,215,000 Shares of Class A Common Stock (incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended October 28, 1995)
4.5 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of
Class A Common Stock of the Registrant (Initially Exercisable for an
Aggregate of 500,000 Shares of Class A Common Stock (incorporated by
reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form
1O-Q for the fiscal quarter ended October 28, 1995))
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with
respect to the legality of the securities being registered
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5)
24** Power of Attorney
99.1 Note Purchase Agreement, dated as of December 1, 1995, by and between
the Registrant and the Purchasers Listed in the Schedule of Purchasers
therein, relating to 10 1/4% Senior Subordinated Notes (Series B) due
March 15, 2004 (incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 28, 1995)
99.2 Registration Rights Agreement, dated as of December 1, 1995, by and
among the Registrant and the Holders of (i) 10 1/4% Senior Subordinated
Notes (Series B) of the Registrant, due March 15, 2004, and (ii)
Warrants to Purchase 1,715,000 shares of Class A Common Stock, par
value $.01 per share, of the Registrant (incorporated by reference
</TABLE>
II-2
<PAGE> 19
to Exhibit 10.4 to the Registrant's Quarterly Report on Form lO-Q for
the fiscal quarter ended October 28, 1995)
- ------------------------
**Previousiy filed.
ITEM 17. UNDERTAKINGS.
A. Rule 415 Offering
-----------------
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section lO(a)(3) of
the 1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ((5) 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
PROVIDED, HOWEVER, that paragraphs (l)(i) and (l)(ii) do not apply if
this Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the 1934 Act that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-3
<PAGE> 20
B. Request for Acceleration of Effective Date or Filing of
-------------------------------------------------------
Registration Statement on Form S-8
----------------------------------
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Cuyahoga Falls, Ohio, on January 30, 1998.
DAIRY MART CONVENIENCE STORES, INC.
By:/s/ Robert B. Stein, Jr.
------------------------------------
Robert B. Stein, Jr.
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Robert B. Stein, Jr. President, Chief Executive January 30, 1998
- --------------------------- Officer and Chairman of
Robert B. Stein, Jr. the Board
(principal executive officer)
/s/ Robert B. Stein, Jr. Executive Vice President, January 30, 1998
- --------------------------- Chief Financial Officer,
Gregory G. Landry, signed and Director (principal
pursuant to power of attorney financial officer)
</TABLE>
II-5
<PAGE> 22
<TABLE>
<S> <C> <C>
/s/ Robert B. Stein, Jr. Director January 30, 1998
- ---------------------------
Frank W. Barrett, signed
pursuant to power of attorney
/s/ Robert B. Stein, Jr. Director January 30, 1998
- ---------------------------
J. Kermit Birchfield, Jr., signed
pursuant to power of attorney
/s/ Robert B. Stein, Jr. Director January 30, 1998
- ---------------------------
John W. Everets, Jr., signed
pursuant to power of attorney
/s/ Robert B. Stein, Jr. Director January 30, 1998
- ---------------------------
Thomas W. Janes, signed
pursuant to power of attorney
/s/ Robert B. Stein, Jr. Director January 30, 1998
- ---------------------------
Truby G. Proctor, Jr., signed
pursuant to power of attorney
</TABLE>
II-6
<PAGE> 23
DAIRY MART CONVENIENCE, INC.
----------------------------
INDEX TO EXHIBITS FILED WITH
FORM S-2 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------ ----------- --------
<S> <C> <C>
4.1 The Registrant's Restated Certificate of Incorporation and Amended and
Restated Bylaws (incorporated by reference to Exhibits 3.1 and 3.2 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
January 28, 1995, file No. 0-12497)
4.2 Instruments defining the rights of the holders of the Registrant's
Common Stock (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-1 (Registration No. 33-
639)) dated November 5, 1985
4.3 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of
Class A Common Stock of the Registrant (Initially Exercisable for an
Aggregate of 1,215,000 Shares of Class A Common Stock (incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form
l0-Q for the fiscal quarter ended October 28, 1995)
4.4 Form of Stock Purchase Warrant to Subscribe for and Purchase Shares of
Class A Common Stock of the Registrant (Initially Exercisable for an
Aggregate of 500,000 Shares of Class A Common Stock (incorporated by
reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended October 28, 1995))
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with
respect to the legality of the securities being registered
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5)
24** Power of Attorney
99.1 Note Purchase Agreement, dated as of December 1, 1995, by and between
the Registrant and the Purchasers Listed in the Schedule of Purchasers
therein, relating to 10 1/4% Senior Subordinated Notes (Series B) due
March 15, 2004 (incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 28, 1995)
99.2 Registration Rights Agreement, dated as of December 1, 1995, by and
among the Registrant and the Holders of (i) 10 1/4% Senior
Subordinated Notes (Series B) of the Registrant, due March 15, 2004,
and (ii) Warrants to Purchase 1,715,000 shares of Class A Common
Stock, par value $.01 per share, of the Registrant (incorporated by
reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form
l0-Q for the fiscal quarter ended October 28, 1995)
</TABLE>
- ---------------
** Previously filed.
II-4
<PAGE> 1
Exhibit 5
January 30, 1998
Board of Directors
Dairy Mart Convenience Stores, Inc.
210 Broadway East
Cuyahoga Falls, Ohio 44222
Ladies and Gentlemen:
We have acted as counsel to Dairy Mart Convenience Stores, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission of a Post-effective
amendment No. 1 to a Registration Statement on Form S-2 (File #33-31266) (the
"Registration Statement"), pursuant to which the Company is registering under
the Securities Act of 1933, as amended, a total of 1,715,000 Class A Common
Stock Purchase Warrants (the "Warrants") and 1,715,000 shares of the Company's
Class A Common Stock, par value $.01 per share ("Shares") to be issued pursuant
to the exercise of the Warrants, for resale to the public by the current
holders thereof. This opinion is being rendered in connection with the filing
of the Registration Statement. All capitalized terms used herein and not
otherwise defined shall have the respective meanings given to them in the
Registration Statement.
In connection with this opinion, we have examined the Company's amended
and restated certificate of incorporation and by-laws, both as currently in
effect, such other records of the corporate proceedings of the Company and
certificates of the Company's officers as we have deemed relevant and the
Registration Statement and the exhibits thereto.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Warrants
and the Shares have been duly and validly authorized by the Company and (ii) the
Shares, upon receipt by the Company of the exercise price provided for, and upon
the terms set forth, in the Warrants, will have been duly and validly issued,
fully paid and non-assessable shares of the Class A Common Stock, par value of
$.01 per share.
Our opinion is limited to the General Corporation Laws of the State of
Delaware, and we express no opinion with respect to the laws of any other
jurisdiction. No opinion is expressed herein with respect to the qualification
of the Shares under the securities or blue sky laws of any state or any foreign
jurisdiction.
<PAGE> 2
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Dairy Mart Convenience Stores, Inc.
January 30, 1998
2
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto. We hereby further consent
to the reference to us under the caption "Certain Legal Matters" in the
prospectus included in the Registration Statement.
Very truly yours,
MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY AND POPEO, P.C.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our reports dated
April 10, 1997 (except with respect to the matter discussed in Note 6, as to
which the date is April 29, 1997), included in Dairy Mart Convenience Stores,
Inc.'s Form 10-K for the year ended February 1, 1997, as amended by Amendment
No. 1, on Form 10-K/A, and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Cleveland, Ohio
January 30, 1998
