<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
DAIRY MART CONVENIENCE STORES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[LOGO DAIRY MART]
DM
DAIRY MART CONVENIENCE STORES, INC.
ONE DAIRY MART WAY, 300 EXECUTIVE PARKWAY WEST, HUDSON, OHIO
Dear Dairy Mart Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of
Shareholders of Dairy Mart Convenience Stores, Inc. ("the Company") to be held
at 10:00 a.m. (Eastern time) on Thursday, June 10, 1999, at Dairy Mart
Convenience Stores, Inc., One Dairy Mart Way, 300 Executive Parkway West,
Hudson, Ohio. At the Annual Meeting, eight persons will be elected to the Board
of Directors. The Board of Directors recommends election of each of the named
nominees. Such other business will be transacted as may properly come before the
Annual Meeting.
We hope that you will be able to attend the Annual Meeting. Whether you
plan to attend the Annual Meeting or not, it is important that your shares are
represented. Therefore, we request that you sign, date and return the enclosed
proxy card, even if you plan to attend the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
Dairy Mart Convenience Stores, Inc.
Robert B. Stein, Jr.
Chairman of the Board, President and
Chief Executive Officer
May 14, 1999
<PAGE> 3
DAIRY MART CONVENIENCE STORES, INC.
--------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 10, 1999
--------------------------
Notice is hereby given that the 1999 Annual Meeting of Shareholders of
Dairy Mart Convenience Stores, Inc. will be held at the Company's offices, One
Dairy Mart Way, 300 Executive Parkway West, Hudson, Ohio, on Thursday, June 10,
1999 at 10:00 A.M., (Eastern time), for the following purposes:
1. To elect eight members to the Board of Directors;
2. To transact such other business as may properly come
before the Annual Meeting or any adjournments
thereof.
Only shareholders of record at the close of business on May 7, 1999 are
entitled to notice of and to vote at said meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
Robert B. Stein, Jr.,
Chairman of the Board, President and
Chief Executive Officer
May 14, 1999
- -------------------------------------------------------------------------------
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE RESPECTFULLY URGED TO
EXECUTE AND RETURN THE ENCLOSED PROXY AT THEIR EARLIEST CONVENIENCE.
SHAREHOLDERS WHO EXECUTE A PROXY MAY NEVERTHELESS ATTEND THE MEETING AND VOTE
THEIR SHARES IN PERSON.
- -------------------------------------------------------------------------------
<PAGE> 4
DAIRY MART CONVENIENCE STORES, INC.
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of Dairy
Mart Convenience Stores, Inc., One Dairy Mart Way, 300 Executive Parkway West,
Hudson, Ohio 44236 for use at the Annual Meeting of Shareholders to be held on
Thursday, June 10, 1999, and at any and all adjournments or postponements
thereof. The cost of preparing, assembling and mailing this Proxy Statement and
the material enclosed herewith is being borne by the Company. Directors,
officers and some employees of the Company may solicit proxies personally or by
telephone, without additional compensation. This Proxy Statement and the
accompanying proxy are being mailed to shareholders on or about May 14, 1999.
Shares of Class A Common Stock, par value $ .01 per share ("Class A
Common Stock"), or Class B Common Stock, par value $ .01 per share ("Class B
Common Stock," and together with the Class A Common Stock, "Common Stock"), of
the Company represented by properly executed proxies will be voted as directed
on the proxy. Properly executed proxies containing no voting directions to the
contrary will be voted for the election of the nominees named below. A proxy may
be revoked at any time before it is voted at the Annual Meeting by notifying the
Chief Financial Officer of the Company in writing at the address set forth
above, by submitting a properly executed proxy bearing a later date, or by
revoking the proxy at the Annual Meeting. Attendance at the Annual Meeting will
not by itself operate to revoke a proxy.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has fixed the close of business on May 7, 1999
as the record date for the determination of shareholders entitled to notice of
this Annual Meeting, and only shareholders of record on that date will be
entitled to vote at the meeting. As of May 7, 1999, 3,245,660 shares of Class A
Common Stock were issued and outstanding and 1,467,199 shares of Class B Common
Stock were issued and outstanding. Except with respect to the election of
directors, holders of both classes of Common Stock vote or consent as a single
class on all matters, with each share of Class B Common Stock having one vote
per share and each share of Class A Common Stock having one-tenth of a vote per
share. With respect to the election of directors, holders of Class A Common
Stock are entitled to elect 25% of the Board of Directors (rounded up to the
nearest whole number) to be elected by the holders of Common Stock, so long as
the number of outstanding shares of Class A Common Stock is at least 10% of the
total number of outstanding shares of both classes of Common Stock. The holders
of the Class B Common Stock have the right to elect the remaining directors to
be elected by the holders of Common Stock, so long as the number of outstanding
shares of Class B Common Stock is at least 12.5% of the total number of
outstanding shares of both classes of Common Stock.
1
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning
beneficial ownership of the Company's Common Stock by each shareholder known by
the Company to be the beneficial owner of 5% or more of either class of Common
Stock as of May 7, 1999. This information is furnished in accordance with the
Securities and Exchange Commission ("SEC") regulations relating to any persons
known by the Company to be the beneficial owners of 5% or more of Common Stock.
In preparing the following table, the Company has relied on information filed by
such persons with the SEC, and in some cases, other information provided to the
Company by such persons.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Title Of Class Beneficial Owner Ownership of Class
- -------------- -------------------------------- ------------------ --------
<S> <C> <C> <C>
Class B DM Associates Limited Partnership 638,743 (1) 43.5%
Common Stock 300 Executive Parkway West
Hudson, Ohio
New DM Management Associates I 638,743 (1) 43.5%
300 Executive Parkway West
Hudson, Ohio
Robert B. Stein, Jr. 638,743 (1) 43.5%
300 Executive Parkway West
Hudson, Ohio
Gregory G. Landry 638,743 (1) 43.5%
300 Executive Parkway West
Hudson, Ohio
Wilen Management Company, Inc. 143,075 (2) 9.8%
2360 West Joppa Road
Suite 226
Lutherville, Maryland
Frank Colaccino 78,682 (3) 5.4%
360 Bloomfield Avenue
Suite 208
Windsor, Connecticut
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Title Of Class Beneficial Owner Ownership of Class
- -------------- -------------------------------- ------------------ --------
<S> <C> <C> <C>
Class A Triumph-Connecticut Limited 765,000 (4) 19.1%
Common Stock Partnership
28 State Street, 37th Floor
Boston, Massachusetts
The IDS Mutual Fund Group 372,999 (5) 10.3%
IDS Tower 10
Minneapolis, Minnesota
American International Group, Inc. 360,001 (6) 10.0%
70 Pine Street
New York, New York
Wilen Management Company, Inc. 242,323 (2) 7.5%
2360 West Joppa Road
Suite 226
Lutherville, Maryland
William L. Musser, Jr. and 314,900 (7) 9.7%
New Frontier Capital, L.P.
919 Third Avenue
New York, New York
</TABLE>
Notes to Table
(1) DM Associates Limited Partnership ("DM Associates") is the owner of
record of 638,743 shares of Class B Common Stock of the Company,
representing approximately 43.5% of the issued and outstanding shares of
Class B Common Stock, and 35.6% of the total voting power of both
classes of the Common Stock. The general partner of DM Associates is New
DM Management Associates I ("DM Management I"), which is a general
partnership. The general partners of DM Management I are Robert B.
Stein, Jr., and Gregory G. Landry, each of whom owns 50% of the
partnership interest of DM Management I.
As the sole general partner of DM Associates, DM Management I has the
power to vote and dispose of the 638,743 shares of Class B Common Stock
owned by DM Associates, subject to the required consent of a class of
limited partners of DM Associates for sales of more than 360,000 shares.
The partnership agreement of DM Management I provides that a majority of
the partnership interests of DM Management I is required to vote the
shares of Class B Common Stock owned by DM Associates.
As the managing general partner of DM Management I, Mr. Stein has sole
dispositive power with respect to the 638,743 shares owned by DM
Associates, subject to the limitation described above. As general
partners of DM Management I, Mr. Stein and Mr. Landry share voting power
with respect to the 638,743 shares owned by DM Associates.
The number of shares set forth in the table above does not include
shares of Class A Common Stock or Class B Common Stock that either of
Messrs. Stein and Landry may beneficially own other than in their
capacity as general partners of DM Associates I. See ITEM 1 -- ELECTION
OF DIRECTORS -- Information Concerning Nominees and Certain Executive
Officers.
3
<PAGE> 7
(2) Two Schedules 13G were filed with the SEC by Wilen Management Company,
Inc. ("Wilen") and James Wilen, in his capacity as President and sole
owner of Wilen, to report Wilen's beneficial ownership as an investment
advisor to various clients, of shares of Class A and Class B Common
Stock. The total of Class A and Class B Common Stock of 385,398 shares,
represents approximately 8.2% of the total number of issued and
outstanding shares of both classes of the Company's Common Stock, and
approximately 9.3% of the total voting power of both classes of the
Company's Common Stock.
(3) Frank Colaccino reported on a Schedule 13G filed with the SEC his
beneficial ownership, as a private investor, of shares of Class B Common
Stock. The 78,682 shares represent approximately 1.7% of the total
number of issued and outstanding shares of both classes of the Company's
Common Stock and approximately 4.4% of the total voting power of both
classes of the Company's Common Stock.
(4) Triumph-Connecticut Limited Partnership ("Triumph"), Triumph's general
partner, Triumph-Connecticut Capital Advisors, Limited Partnership
("TCCALP"), and TCCALP's general partners, Triumph-Capital Group, Inc.,
Fredrick W. McCarthy, Fredrick S. Moseley, IV, E. Mark Noonan, Thomas W.
Janes, John M. Chapman and Richard J. Williams, reported on a Schedule
13D filed with the SEC their shared beneficial ownership of currently
exercisable warrants to purchase an aggregate of 765,000 shares of Class
A Common Stock. If the 765,000 shares underlying the warrants were
issued, they would represent approximately 14.0% of the total number of
issued and outstanding shares of both classes of the Company's Common
Stock, and approximately 4.1% of the total voting power of both classes
of the Company's Common Stock.
(5) The IDS Mutual Fund Group, through nominees, holds currently exercisable
warrants to purchase an aggregate of 372,999 shares of Class A Common
Stock. If the 372,999 shares underlying the warrants were issued, they
would represent approximately 7.3% of the total number of issued and
outstanding shares of both classes of the Company's Common Stock, and
approximately 2.0% of the total voting power of both classes of the
Company's Common Stock.
(6) American International Group, Inc. and its affiliates hold currently
exercisable warrants to purchase an aggregate of 360,001 shares of Class
A Common Stock. If the 360,001 shares underlying the warrants were
issued, they would represent approximately 7.1% of the total number of
issued and outstanding shares of both classes of the Company's Common
Stock, and approximately 2.0% of the total voting power of both classes
of the Company's Common Stock.
(7) New Frontier Capital, L.P., and William L. Musser, Jr., in his capacity
as General Partner, reported on a Schedule 13D filed with the SEC its
beneficial ownership, as an investment advisor, of 314,900 shares of
Class A Common Stock. The 314,900 shares represent approximately 6.7% of
the total number of issued and outstanding shares of both classes of the
Company's Common Stock, and approximately 1.8% of the total voting power
of both classes of the Company's Common Stock.
4
<PAGE> 8
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Eight directors have been nominated for election at this Annual
Meeting, to hold office until the next Annual Meeting and until the election and
qualification of their successors. Pursuant to the Company's Certificate of
Incorporation, two of the directors are to be elected by the holders of Class A
shares (the "Class A Directors") and six of the directors are to be elected by
the holders of Class B shares (the "Class B Directors"). The Board of Directors
has nominated Albert T. Adams and Thomas W. Janes as Class A Directors and Frank
W. Barrett, J. Kermit Birchfield, Jr., John W. Everets, William A. Foley,
Gregory G. Landry, and Robert B. Stein, Jr. as Class B Directors. All of the
nominees, except William A. Foley, are currently serving on the Board. It is
intended that proxies of the respective classes of shares will be voted in favor
of all of these persons.
INFORMATION CONCERNING NOMINEES AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
ownership of the Common Stock and other matters with respect to the nominees,
the named executive officers listed in the Summary Compensation Table and all
directors and executive officers as a group, as of May 7, 1999.
<TABLE>
<CAPTION>
SHARES (AND PERCENT) OF COMMON STOCK
NAME (AGE) BENEFICIALLY OWNED AS OF MAY 7, 1999
- --------------------------------------------- ---------------------------------------
PERCENT
DIRECTOR CLASS B CLASS A OF TOTAL
CLASS B DIRECTORS SINCE COMMON STOCK COMMON STOCK VOTING POWER
----------------- ------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Frank W. Barrett (59)..................... 1983 2,500 (*) 14,250 (*)(1) (*)
J. Kermit Birchfield, Jr. (59)............ 1996 3,250 (*) 13,250 (*)(2) (*)
John W. Everets (53)...................... 1994 11,250 (*) 11,750 (*)(3) (*)
William A. Foley (51)..................... --- --- --- ---
Gregory G. Landry (41).................... 1991 651,243 (44.0%) 138,375 (4.1%)(4)(5) 36.6%
Robert B. Stein, Jr. (41)................. 1992 660,618 (44.4%) 227,550 (6.6%)(4)(6) 37.3%
CLASS A DIRECTORS
-----------------
Thomas W. Janes (43)...................... 1995 1,250 773,250 (19.2%)(7)(8) 4.2%
Albert T. Adams (48)...................... 1998 1,250 6,250 (*)(9) (*)
NAMED EXECUTIVE
OFFICERS
- ------------------
Dale W. Fuller (49)....................... N/A 0 0
Scott A. Stein (40)....................... N/A 0 22,500 (*)(10) (*)
Susan D. Adams (41)....................... N/A 0 5,000 (*)(11) (*)
Alice Guiney (45)......................... N/A 0 6,250 (*)(12) (*)
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP
- ----------------------------
(14 persons).............................. N/A 692,618 (45.9%) (13) 1,265,448 (28.8%)(13) 42.0%
</TABLE>
(*) Owns less than 1% of the issued and outstanding class of Common Stock
or of the total voting power.
(1) Includes exercisable, within 60 days of May 7, 1999, non-qualified
stock options granted to Mr. Barrett to purchase 13,250 shares and
1,250 shares of Class A and Class B Common Stock, respectively.
5
<PAGE> 9
(2) Includes exercisable, within 60 days of May 7, 1999, non-qualified
stock options granted to Mr. Birchfield to purchase 7,250 shares and
1,250 shares of Class A and Class B Common Stock, respectively.
(3) Includes exercisable, within 60 days of May 7, 1999, non-qualified
stock options granted to Mr. Everets to purchase 10,750 shares and
1,250 shares of Class A and Class B Common Stock, respectively.
(4) Messrs. Stein and Landry are the general partners of DM Management I
(described in footnote 1 to the Principal Shareholders table above).
The shares of Class B Common Stock set forth in this table for Messrs.
Stein and Landry include the shares beneficially owned by them in their
capacity as general partners of DM Management I.
(5) Includes exercisable, within 60 days of May 7, 1999, incentive stock
options granted to Mr. Landry to purchase 132,125 shares and 12,500
shares of Class A and Class B Common Stock, respectively.
(6) Includes exercisable, within 60 days of May 7, 1999, incentive stock
options granted to Mr. Robert Stein to purchase 199,375 shares and
21,875 shares of Class A and Class B Common Stock, respectively.
(7) The shares of Class A Common Stock set forth in this table for Mr. Janes
include the shares set forth for Triumph in the Principal Shareholders
table. Mr. Janes' pecuniary interest in the 765,000 shares is based upon
his status as general partner of TCCALP, general partner of Triumph, the
entity holding the shares, and is not discernible. Mr. Janes disclaims
beneficial ownership of all shares other than those attributable to him
as a general partner of TCCA.
(8) Includes exercisable, within 60 days of May 7, 1999, non-qualified stock
options granted to Mr. Janes to purchase 7,250 shares and 1,250 shares
of Class A and Class B Common Stock, respectively.
(9) Includes exercisable, within 60 days of May 7, 1999, non-qualified stock
options granted to Mr. Adams to purchase 1,250 shares each of Class A
and Class B Common Stock, respectively.
(10) Includes exercisable, within 60 days of May 7, 1999, incentive stock
options granted to Mr. Scott Stein to purchase 22,500 shares of Class A
Common Stock.
(11) Includes exercisable, within 60 days of May 7, 1999, incentive stock
options granted to Ms. Adams to purchase 5,000 shares of Class A Common
Stock.
(12) Includes exercisable, within 60 days of May 7, 1999, incentive stock
options granted to Ms. Guiney to purchase 6,250 shares of Class A Common
Stock.
(13) Includes exercisable, within 60 days of May 7, 1999, stock options
granted to all directors and executive officers of the Company to
purchase 443,750 shares of Class A Common Stock, 40,625 shares of Class
B Common Stock and currently exercisable Warrants to purchase 765,000
shares of Class A Common Stock.
6
<PAGE> 10
NOMINEES FOR ELECTION AS DIRECTORS
The following sets forth certain information concerning the Company's nominees
for election to the Board of Directors at the Annual Meeting.
INFORMATION AS TO NOMINEES FOR ELECTION AS CLASS A DIRECTORS
ALBERT T. ADAMS
Albert T. Adams has been a partner with the law firm of Baker & Hostetler LLP in
Cleveland, Ohio, since 1984, and has been affiliated with the firm since 1977.
Mr. Adams is a graduate of Harvard College, Harvard Business School and Harvard
Law School. He serves as a member of the Board of Trustees of the Greater
Cleveland Roundtable and of the Western Reserve Historical Society and is a Vice
President of the Harvard Business School Club of Northeastern Ohio. Mr. Adams is
a director of American Industrial Properties REIT, Associated Estates Realty
Corporation, Boykin Lodging Company, Captec Net Lease Realty, Inc. and
Developers Diversified Realty Corporation.
THOMAS W. JANES
Mr. Janes has been a Managing Director since 1990 of Triumph Capital Group,
Inc., a firm engaged in investment management and investment banking. He is also
a general partner of Triumph-Connecticut Capital Advisors Limited Partnership,
the general partner of Triumph-Connecticut Limited Partnership.
INFORMATION AS TO NOMINEES FOR ELECTION AS CLASS B DIRECTORS
FRANK W. BARRETT
Mr. Barrett is Executive Vice President of Family Bank, FSB. He previously
served as Senior Vice President for Bank of Ireland First Holdings, Inc. from
September 1990 to December 1993, as Senior Vice President for Connecticut
National Bank from May 1990 to September 1990, and as Senior Vice President for
Shawmut Bank, N.A. from January 1988 to May 1990. Mr. Barrett is a member of the
Board of Directors of the Providence and Worcester Railroad, which provides
freight rail service in Connecticut, Massachusetts and Rhode Island.
J. KERMIT BIRCHFIELD, JR.
Mr. Birchfield is Chairman of the Board of Displaytech, Inc., a manufacturer of
high resolution miniature ferro-electric liquid crystal displays. From June 1990
to November 1994 he served as Senior Vice President and General Counsel of
M/A-COM, Inc., a telecommunications company. Mr. Birchfield is a member of the
Board of Directors of HPSC, Inc., a publicly held company that provides
financing for the purchase of health care equipment, Intermountain Gas Company,
Inc., an Idaho public utility company, and the Compass Group of Mutual Funds of
MFS, Inc., a wholly owned subsidiary of Sun Life of Canada, a registered mutual
funds company.
7
<PAGE> 11
JOHN W. EVERETS
Mr. Everets has been Chairman of the Board and Chief Executive Officer of HPSC,
Inc., a publicly held company that provides financing for health care equipment
since July 1993 and has been a director of HPSC, Inc. since 1983. He was
Chairman of the Board of T.O. Richardson Co., Inc., a financial services
company, from January 1990 until July 1993. Mr. Everets is also a director of
Eastern Company, a publicly held manufacturing company and Crown Northcorp, a
public asset management company.
WILLIAM A. FOLEY
Mr. Foley has been the Chairman, President, Chief Executive Officer and a
Director of Lesco, Inc., the leading manufacturer and direct marketer of turf
care products and equipment, since July 1993. He was President and Chief
Executive Officer of Imperial Wall Coverings, Inc., a wallpaper producer and
subsidiary of Collins & Aikman, Inc. from October 1990 until February 1993. Mr.
Foley is also a director of Alltrista Corporation, a consumer and industrial
products manufacturing company, and Libby, Inc., a producer of glass products.
GREGORY G. LANDRY
Mr. Landry has served as Chief Financial Officer of the Company since August
1990 and was named Executive Vice President of the Company in April 1992. Mr.
Landry joined the Company in October 1985 and served in various financial
positions, including Treasurer. He is a certified public accountant and a member
of the American Institute of Certified Public Accountants.
ROBERT B. STEIN, JR.
Mr. Stein was elected President of the Company in September 1994, Chief
Executive Officer in June 1995 and Chairman of the Board of Directors in
December 1995. He joined the Company in 1983 and served in various positions
including Treasurer, General Manager of the Midwest Region, and Executive Vice
President-Operations and Marketing.
8
<PAGE> 12
EXECUTIVE OFFICERS
Listed below are the names, positions and ages of the executive
officers of the Company as of May 7, 1999. Each executive officer will serve
until his successor is selected by the Board of Directors or until his earlier
resignation or removal.
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---- -------- ---
<S> <C> <C>
Robert B. Stein, Jr. Chairman of the Board, President and 41
Chief Executive Officer
Gregory G. Landry Executive Vice President and 41
Chief Financial Officer
Dennis J. Tewell Vice President Business Development and 42
Franchise Operations
Alice R. Guiney Vice President Human Resources 45
Daniel W. Wallace Vice President Food Service 50
Darrell J. Davis Vice President Store Operations 40
Susan D. Adams Vice President Finance and Treasurer 41
Jay E. Ross Vice President Marketing and 46
Merchandising
Dale R. Valvo Vice President Gasoline and Store Development 49
</TABLE>
ROBERT B. STEIN, JR.
Mr. Stein was elected President of the Company in September 1994, Chief
Executive Officer in June 1995 and Chairman of the Board of Directors in
December 1995. He joined the Company in 1983 and served in various positions
including Treasurer, General Manager of the Midwest Region, and Executive Vice
President - Operations and Marketing.
GREGORY G. LANDRY
Mr. Landry has served as Chief Financial Officer since August 1990 and was named
Executive Vice President of the Company in April 1992. Mr. Landry joined the
Company in October 1985 and served in various financial positions, including
Treasurer. He is a certified public accountant and a member of the American
Institute of Certified Public Accountants.
DENNIS J. TEWELL
Mr. Tewell was named Vice President Business Development and Franchise
Operations in February 1999. Mr. Tewell joined the former CONNA Corporation in
1985 and has served as Vice President Franchise Operations, Vice President
Business Development, Vice President Store Operations, Director of Operations,
Strategic Planning Coordinator in the Southeast Region, and special consultant
for the Company's international operations in Europe.
9
<PAGE> 13
ALICE R. GUINEY
Ms. Guiney was named Vice President Human Resources in November 1996. Prior to
joining the Company, Ms. Guiney directed corporate and field operational
disciplines of human resources for Sunglass Hut International in Coral Gables,
Florida. Ms. Guiney also held the positions of Director of Merchandising and
Director of Administration during her tenure with Burdines Department Stores.
DANIEL W. WALLACE
Mr. Wallace was named Vice President Food Service in February 1999. During his
tenure with the Company, Mr. Wallace has served as Vice President Corporate
Store Operations, head of Midwest store operations, Director of Operations,
Corporate Operations Coordinator for the Company's point-of-sale project,
Division Manager, Supervisor, and Store Manager. Mr. Wallace was also a special
consultant for the Company's international operations in France.
DARRELL J. DAVIS
Mr. Davis was named Vice President Store Operations in November 1997. Mr. Davis
joined Dairy Mart/CONNA in 1983 as a Regional Coordinator. During his career, he
has been Associate Director of Property Development, Operations Specialist,
Franchising Manager and Director of Operations. In 1994, he was named as head of
operations in the Southeast region.
SUSAN D. ADAMS
Ms. Adams was named Vice President Finance and Treasurer in December 1997. Prior
to joining the Company, Ms. Adams served as Assistant Treasurer for Doubletree
Corporation. She has also served as Assistant Treasurer for Circle K
Corporation.
JAY E. ROSS
Mr. Ross was named Vice President Marketing and Merchandising in November 1997.
Prior to joining the Company, Mr. Ross was Vice President of Merchandising with
Revco D.S., Inc. During his 28-year tenure with Revco, Mr. Ross served in
numerous marketing and merchandising capacities.
DALE R. VALVO
Mr. Valvo was named Vice President Gasoline and Store Development in February
1999. He joined the Company in April 1998 as Vice President Gasoline Operations.
Prior to joining the Company, Mr. Valvo was General Manager Marketing-Southeast
Business Unit for Fina Oil and Chemical Company. Mr. Valvo also served as
President of Harken Marketing Company, a subsidiary of Harken Energy
Corporation.
10
<PAGE> 14
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of Forms 3, 4 and 5, all transactions
occurring during fiscal year 1999 which required the reporting of changes in
beneficial ownership of the Company's Common Stock were timely filed for all of
the Company's executive officers and directors. However, the automatic grant of
options in fiscal year 1998 to purchase 3,500 shares of Class A Common Stock
under the Outside Directors' stock option plan and an award in fiscal year 1998
of 1,000 shares of Class A Common Stock to each of John W. Everets, J. Kermit
Birchfield, Jr., Frank W. Barrett and Thomas W. Janes were not timely filed with
the Securities and Exchange Commission.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the 1999 fiscal year, the Board of Directors of the Company held
six meetings. None of the directors attended fewer than 75% of the total number
of meetings of the Board of Directors and committees of which they were members.
The Board of Directors has established an Audit Committee, a
Compensation Committee and a Nominations Committee. The Audit Committee
currently consists of Messrs. Barrett, Janes and Everets and is responsible for
recommending the appointment of independent accountants and for reviewing the
reports and expenses of the audits conducted by the Company's independent
accountants. The Compensation Committee currently consists of Messrs. Barrett,
Birchfield and Everets, and is responsible for recommending the compensation to
be paid to the Company's executive officers and for administering the Company's
stock option plans. The Nominations Committee currently consists of Messrs.
Adams, Birchfield and Everets, and is responsible for receiving and recommending
to the Board of Directors the nominees for persons to serve as directors of the
Company. During the 1999 fiscal year there were two meetings of the Compensation
Committee and one meeting each of the Audit Committee and the Nominations
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors during the last fiscal year were Messrs. Barrett, Everets and
Birchfield. None of these individuals was at any time during fiscal 1999, or at
any other time, an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee.
SHAREHOLDER NOMINATIONS OF DIRECTORS
In addition to the right of the Board of Directors of the Company to
make nominations of persons for election as Directors, nominations may be made
at a meeting of shareholders by any shareholder of the Company entitled to vote
for the election of Directors at the meeting who complies with certain notice
procedures set forth in the Company's Certificate of Incorporation. Such
nominations, other than those made by or at the direction of the Board of
Directors, must be made pursuant to timely notice in writing to the Secretary of
the Company. To be timely, a shareholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Company not less
than 14 days nor more than 60 days prior to the meeting of shareholders called
for the election of Directors; provided, however, that if fewer than 21 days
notice of the date of the meeting is given to shareholders, notice by the
shareholder to be timely must be so received not later than the close of
business on the
11
<PAGE> 15
tenth day following the day on which notice of the meeting was mailed to
shareholders. A shareholder's notice must set forth as to each person whom the
shareholder proposes to nominate for election or re-election as a Director: (i)
the name, age, business address, and, if known, residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of stock of the Company that are beneficially owned
by such person, and (iv) any other information reasonably requested by the
Company. All such shareholder nominations may be made only at a meeting of
shareholders called for the election of Directors at which such shareholder is
present in person or by proxy.
12
<PAGE> 16
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS' COMPENSATION
The table below provides certain information for the Company's past
three fiscal years regarding the cash and other compensation paid to, earned by,
or awarded to the six most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE LONG TERM
COMPENSATION
ANNUAL COMPENSATION (a) AWARDS (b)
---------------------- -------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION OPTIONS COMPENSATION
POSITION YEAR SALARY BONUS ( c ) ( d ) ( e )
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. Stein, Jr., 1999 $374,998 -- $45,983 175,000 $10,270
President, Chief 1998 331,738 80,000 43,869 -- 9,126
Executive Officer and 1997 282,700 22,500 1,412 -- 9,435
Chairman of the Board
Gregory G. Landry, 1999 244,998 -- -- 100,000 10,009
Executive Vice President 1998 239,230 40,000 1,846 -- 8,670
and Chief Financial 1997 226,346 18,900 47,795 -- 8,670
Officer
Scott A. Stein, 1999 130,000 -- 6,000 -- 388
Vice President Management 1998 124,231 25,000 71,114 10,000 246
Information Systems (f) 1997 113,077 9,000 774 -- 1,216
Dale W. Fuller, 1999 150,000 -- 5,500 25,000 75,000
Executive Vice President and
Chief Administrative Officer
Susan D. Adams, 1999 125,000 -- 45,193 -- --
Vice President Finance and 1998 26,442 -- 15,983 20,000 --
Treasurer
Alice R. Guiney, 1999 125,000 -- 1,508 -- --
Vice President Human 1998 125,000 -- 32,771 15,000 --
Resources 1997 20,846 -- -- 5,000 --
</TABLE>
(a) Annual compensation does not include non-cash compensation
that in the aggregate does not exceed the lesser of $50,000
or 10% of the total annual salary and bonus of each named
executive officer.
(b) The Company did not grant any stock appreciation rights or
make any long-term incentive plan payments during fiscal
years 1999, 1998 or 1997.
(c) Other annual compensation for the following named executive
officers includes the following amounts paid on behalf of, or
received by, each officer; (i) for Mr. Robert Stein $27,731 in
relocation expense and $18,252 in tax reimbursement for fiscal
year 1999 and $42,915 in relocation expense in fiscal year
1998, (ii) $46,488 in relocation expense for Mr. Landry in
fiscal year 1997, (iii) for Mr. Scott Stein $6,000 in
automobile allowance in fiscal year 1999 and $71,098 in
relocation expense in fiscal year
13
<PAGE> 17
1998, (iv) $5,500 in automobile allowance for Mr. Fuller in
fiscal year 1999, (v) $24,100 in relocation expense, $14,093
in tax reimbursement, and $7,000 in automobile allowance for
Ms. Adams in fiscal year 1999. In fiscal year 1998, Ms. Adams
was paid $8,934 in relocation expense and $7,049 in tax
reimbursement. Ms. Adams was employed by the Company as of
November 2, 1997. (vi) $1,508 in automobile allowance for Ms.
Guiney in fiscal year 1999. In fiscal year 1998, Ms. Guiney
was paid $20,591 in relocation expense and $12,180 in tax
reimbursement. Ms. Guiney was employed by the Company as of
November 11, 1996.
(d) The Company granted options to purchase shares of the
Company's Common Stock to certain executive officers under the
Company's 1995 Stock Option and Incentive Award Plan in fiscal
year 1999. Mr. Robert Stein was granted 87,500 options each of
Company's Class A and Class B Common Stock and Mr. Landry was
granted 50,000 options each of Class A and Class B Common
Stock. Mr. Fuller was also granted 25,000 options of Class A
Common Stock in fiscal year 1999. As a result of his
termination, the stock options have expired. In fiscal year
1998, Mr. Scott Stein and Ms. Adams were granted 10,000 and
20,000 options, respectively, of Class A Common Stock. Ms.
Guiney was granted 15,000 and 5,000 options of Class A Common
Stock in fiscal years 1998 and 1997, respectively.
(e) Includes amounts contributed for the benefit of the Company's
executive officers to the Company's qualified profit sharing
plan and premiums paid by the Company for split-dollar and
life insurance for the benefit of certain executive officers
during the applicable years. Company contributions to the
qualified profit sharing plan for each of the 1999, 1998, and
1997 fiscal years, respectively, included $388, $246, and $555
for Mr. Robert Stein, $388, $0, and $0, for Mr. Landry, $388,
$246, and $1,216 for Mr. Scott Stein. Premiums paid on
split-dollar and life insurance for each of the 1999, 1998 and
1997 fiscal years, respectively, included $9,882, $8,880 and
$8,880 for Mr. Robert Stein, and $9,621, $8,670 and $8,670 for
Mr. Landry. Mr. Fuller's employment with the Company was
terminated as of January 29, 1999. The Company is making
payments to Mr. Fuller in the amount of six months salary.
(f) Mr. Scott Stein's employment with the Company was terminated
as of April 30, 1999. Mr. Stein is the brother of Robert B.
Stein, Jr., President, Chief Executive Officer and Chairman of
the Board.
14
<PAGE> 18
LONG-TERM INCENTIVE AWARDS IN LAST FISCAL YEAR
The Company did not grant stock awards in fiscal year 1999 to any of
the executive officers listed in the Summary Compensation Table above.
OPTIONS GRANTS IN LAST FISCAL YEAR
The table below provides certain information regarding stock options
granted during the Company's last fiscal year to the named executive officers
listed in the Summary Compensation Table above:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL EXERCISE PRICE APPRECIATION
UNDERLYING OPTIONS PRICE FOR OPTION TERM
OPTIONS GRANTED TO PER ( c )
GRANTED EMPLOYEES IN SHARE ----------------------
NAME (a) FISCAL YEAR (b) EXPIRATION DATE 5% 10%
----------------------- --------- ------------ ---------- -------------- ------- ---------
<S> <C>
Robert B. Stein, Jr. 87,500 (Class A) 27.3% $ 4.13 June 24, 2008 $227,500 $575,750
87,500 (Class B) 27.3% 4.25 June 24, 2008 233,625 592,375
Gregory G. Landry 50,000 (Class A) 15.6% 4.13 June 24, 2008 130,000 329,000
50,000 (Class B) 15.6% 4.25 June 24, 2008 133,500 338,500
Dale W. Fuller (d) 25,000 (Class A) 7.8% 4.25 Expired -- --
Scott A. Stein -- -- -- -- -- --
Susan D. Adams -- -- -- -- -- --
Alice R. Guiney -- -- -- -- -- --
</TABLE>
a) The options become fully exercisable over four years, with 25% of the
shares subject to the option becoming exercisable on each anniversary
of the option grant date. All options expire ten years from the date of
grant, unless sooner terminated by, for example, the failure to
exercise an option, to the extent it is then exercisable, before three
months after termination of employment, except for termination in the
case of death, in which case, the option is exercisable within one year
from the date of death by the optionee's executor, administrator or
personal representative, to the extent it is then exercisable. The
percent of total options granted is calculated based on total options
of Class A and Class B Common Stock granted in fiscal year 1999.
b) All options were granted at an exercise price per share equal to the
fair market value of the Class A Common Stock or the Class B Common
Stock, as the case may be, on the date of grant, as quoted on the
American Stock Exchange (AMEX).
c) The amounts shown as potential realizable value illustrate what might
be realizable upon exercise immediately prior to expiration of the
option term using the 5% and 10% appreciation rates established in
regulations of the Securities and Exchange Commission, compounded
annually. The potential realizable value is not intended to predict
future appreciation of the Company's stock. The values shown do not
consider nontransferability or termination of the options upon
termination of employment.
d) Mr. Fuller's employment with the Company was terminated as of January
29, 1999. Consequently, the stock options granted to him have expired.
15
<PAGE> 19
FISCAL YEAR-END OPTION VALUES
The table below sets forth information regarding stock options that were
exercised, if any, during the past fiscal year, and unexercised stock options
held as of January 30, 1999, by the executive officers listed in the Summary
Compensation Table above:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT OPTIONS AT
SHARES ACQUIRED FISCAL YEAR END FISCAL YEAR END (1)
ON EXERCISE OF EXERCISABLE (E)/ EXERCISABLE (E)/
NAME OPTIONS VALUE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
- ------------------------------------- --------------- ---------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Robert B. Stein, Jr................ -- -- 177,500 (E) $58,281 (E)
175,000 (U) -- (U)
Gregory G. Landry.................. -- -- 119,625 (E) 46,313 (E)
100,000 (U) -- (U)
Scott A. Stein..................... -- -- 22,500 (E) 9,560 (E)
7,500 (U) -- (U)
Susan D. Adams..................... -- -- 5,000 (E) -- (E)
15,000 (U) -- (U)
Alice R. Guiney.................... -- -- 6,250 (E) -- (E)
13,750 (U) -- (U)
</TABLE>
(1) Values are calculated for options "in the money" by subtracting the
exercise price per share from the closing price per share of the
applicable class of the Company's Class A and Class B Common Stock on
January 30, 1999, which amounts were $3.50 and $3.50 per share,
respectively. Certain of the executive officers have options to
purchase shares of Common Stock at exercise prices greater than the
fair market value of the applicable class of Common Stock as of January
30, 1999. Such options are not "in the money" and their value is,
therefore, not disclosed above.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In March 1998, the Company adopted a Supplemental Executive Retirement
Plan (the "SERP") to provide additional retirement benefits, payable in a lump
sum, to certain executive officers. Currently, only Messrs. Robert Stein and
Landry participate in the SERP. The SERP is an unfunded plan; however, the
Company intends to use the cash surrender value of key life insurance policies
purchased by the Company on the lives of Messrs. Stein and Landry to fund its
obligations under the Plan. Messrs. Stein and Landry have no claim or right to
the proceeds of the cash surrender value of the insurance policies, payable upon
their death. To the extent they have an accrued vested benefit under the SERP,
they will only have a claim against the general assets of the Company.
Under the SERP, 100% of the participants' accrued benefits will vest
upon the earlier of (a) a change of control that is not approved by two-third of
the Board of Directors, (b) a termination of the participant by the
16
<PAGE> 20
Company without "good cause," as defined in the SERP, (c) the death or
disability of the participant, as defined in the SERP, or (d) the participant
being credited with five years of service. Messrs. Stein and Landry each have
been credited with four years of service as of the end of fiscal year 1999.
The benefits under the SERP are payable in a lump sum, which reflects
the annual life benefit determined under the SERP, discounted to its present
value. The lump sum benefit is based on providing the participant the present
value of an annual annuity commencing at age 65 and payable through
participant's death equal to (a) 50% of the average of participant's three
greatest years of compensation during participant's last five years of service
with the Company multiplied by a percentage equal to the actual years of service
credited through retirement divided by the years of service the participant
could have been credited with through the age of 65, less (b) the actuarial
equivalent value, as determined under the SERP, of (i) half the participant's
Social Security benefits and (ii) all Company contributions or allocations on
the participant's behalf to or under any other deferred compensation or
retirement-type plans, such as the Company 401(k) matching contribution, plus
deemed interest equal to seven percent compounded annually, on such
contributions or allocations. Stock option grants and incentive stock awards are
not considered under the SERP as Company contributions or allocations under
a retirement plan. The portion of the benefit that is based on the percentage of
years of service credited to the participant will accelerate to 100% upon (a) a
change of control that is not approved by two-thirds of the Board of Directors
or (b) the Company terminating the participant without "good cause."
The compensation covered under the SERP is generally the same
compensation that is covered in the Summary Compensation Table for Messrs. Stein
and Landry, except that compensation under the SERP does not include the Company
401(k) match or compensation from any equity based compensation plan including
stock options and incentive stock awards.
If Messrs. Stein and Landry, who are both currently 41 years of age,
retired at age 65 and they both received annual increases in their compensation
each year through age 65, they would be entitled to an accrued lump sum benefit
of approximately $3,892,000 and $2,470,000 respectively, at age 65. If any
excise taxes are due on such payments, the payments will be grossed up to cover
such taxes.
DIRECTORS' COMPENSATION
Messrs. Adams, Barrett, Birchfield, Everets and Janes received
Directors' fees of $8,000, $18,000, $18,000, $14,500, and $15,500, respectively,
for the fiscal year ended January 30, 1999. In addition, Messrs. Adams and
Everets each deferred $4,000 in Directors' fees pursuant to the Directors'
Deferred Compensation Plan that was adopted in fiscal 1999. Under the plan, a
Director's compensation is credited to the Director's account and valued
thereafter as if the Director had invested the deferred amount in Class A Common
Stock. The annual fee for outside Directors for the 1999 fiscal year is $12,000
plus $1,000 for each regular or special meeting of the Board attended, plus $500
for telephonic meetings. The remaining Directors, who are employees of the
Company, receive no Directors' fees. In June 1998, Messrs. Adams, Barrett,
Birchfield, Everets and Janes each received an option to purchase 5,000 shares
of Class A Common Stock at $4.13 per share and an option to purchase 5,000
shares of Class B Common Stock at $4.25 per share, pursuant to option plans for
outside Directors. Additionally, Messrs. Barrett, Birchfield, Everets and Janes
each also received options to purchase 3,000 shares of Class A Common Stock at
$4.25 per share in February 1998.
17
<PAGE> 21
EMPLOYMENT AGREEMENTS
In June 1995, the Company entered into employment agreements (the
"Employment Agreements") with Messrs. Robert Stein and Landry. The Employment
Agreements are initially for two (2) year terms, but such terms are
automatically extended each year for an additional year unless the Company or
the employee gives notice before February 28th of each year that it or he does
not desire to have the term extended. Under the Employment Agreements, Messrs.
Stein and Landry receive annual salaries that may be increased, but may not be
decreased. In addition, the Employment Agreements provide that the Board of
Directors, or a committee thereof, may award each employee annual bonuses if
performance criteria to be determined by the Board are met.
Under the Employment Agreements, if the employee's employment is
terminated for any reason, other than by the Company without cause or by the
employee for good reason, or as a result of death or disability, then the
employee will receive his salary and bonus through the date of termination. If
the employee dies or is disabled, he will also receive any additional benefits
that are provided under the Company's death and disability programs in effect at
the time of death or disability. In addition, if an employee is disabled and
there is no disability program in effect or if an employee dies, then the
employee's beneficiary will receive 100% of the employee's annual salary plus an
amount equal to the highest of the aggregate bonus payments earned by the
employee for any of the last three 12-month periods prior to the date of
termination.
The Employment Agreements provide that if the employee's termination is
by the Company without cause or by the employee for good reason, and not as a
result of the employee's death or disability, the employee will receive his full
salary and bonus through the date of termination. The amount of the employee's
bonus will be the highest of the aggregate bonus payments earned by the employee
for any of the last three 12-month periods prior to the date of termination. The
Agreements also provide that after such termination, each of Messrs. Stein and
Landry will also receive a severance payment equal to two (2) times the sum of
his full base salary and annual bonus. If any payment in connection with the
termination of the employee's employment under the Employment Agreement would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the Company will pay the employee an
additional payment equal to the amount of any excise tax the employee incurs as
a result of the employee's receipt of the additional payment.
18
<PAGE> 22
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of outside directors. The Committee, which consists of
Messrs. Everets (Chairman), Barrett and Birchfield, is responsible for
establishing and administering the Company's executive compensation policies and
the Company's stock option and other employee equity plans. This report
addresses the compensation policies for the fiscal year 1999 for executive
officers and in particular for Mr. Robert Stein in his capacity as President,
Chief Executive Officer and Chairman of the Board.
GENERAL COMPENSATION POLICY
The objectives of the Company's executive compensation program are to:
- Provide a competitive compensation package that will attract
and retain superior talent and reward performance;
- Support the achievement of desired Company performance; and
- Align the interests of executives with the long-term interests
of shareholders through award opportunities that can result in
ownership of shares of the Company's Common Stock, thereby
encouraging the achievement of superior results over an
extended period.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised
primarily of: (i) base salary, which is set on an annual basis; (ii) annual
incentive bonuses, which are based on the achievement of predetermined financial
objectives of the Company and individual objectives; (iii) discretionary
bonuses, which are granted under special circumstances; (iv) supplemental
executive retirement plan benefit; and (v) long-term incentive compensation in
the form of periodic stock option and restricted stock grants, with the
objective of aligning the executive officers' long-term interests with those of
the shareholders and encouraging the achievement of superior results over an
extended period.
The Committee performs annual reviews of executive compensation, during
which the Committee reviews executive compensation packages of the Company
compared with available information on other national and regional convenience
store chains, including some, but not all, of the companies included in the Peer
Group Index (defined below).
In considering compensation of the Company's executives, one of the
factors the Committee takes into account is the anticipated tax treatment to the
Company of various components of compensation. The Company does not believe
Section 162(m) of the Internal Revenue Code of 1986, as amended, which generally
disallows a
19
<PAGE> 23
tax deduction for certain compensation in excess of $1 million to any of the
executive officers appearing in the Summary Compensation Table above, will have
an effect on the Company. The Committee has considered the requirements of
Section 162(m) of the Code and its related regulations. It is the Company's
present policy to take reasonable measures to preserve the full deductibility of
substantially all executive compensation, to the extent consistent with its
other compensation objectives.
BASE SALARY
The Committee reviews base salary levels for the Company's executive
officers on an annual basis. In determining salaries, the Committee takes into
consideration individual experience and performance, and comparable compensation
data available on other national and regional convenience store chains. The
Company seeks to set base salaries to be competitive with compensation paid by
comparable companies to persons with similar experience.
ANNUAL INCENTIVE BONUSES
The Committee determines the amount of annual cash bonuses based on
achievement of predetermined financial, operational and strategic objectives.
Giving greatest weight to the attainment of financial targets, specifically
pre-tax earnings and cash flow, the Company also awards bonuses based on various
operational and strategic objectives geared to specific management groups (i.e.,
financial, management, information systems, construction and marketing), and for
Mr.Robert Stein, individually.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation, in the form of stock options and
restricted stock grants, allows the executive officers to share in any
appreciation in the value of the Company's Common Stock. The Committee believes
that an enhanced market value for the Company's shares of Common Stock should be
a primary objective of senior management, and that stock option and restricted
stock grant participation align executive officers' interests with those of the
shareholders. The amounts of the awards are designed to reward past performance
and create incentives to meet long-term objectives. In determining the amount of
each grant, the Committee takes into account the number of shares held by the
executive prior to the grant.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In fiscal year 1999, the Company adopted the SERP to provide additional
retirement benefits to certain key executives. It is intended to attract and
retain these executives. The benefits primarily accrue under the SERP based on
compensation paid to the executive and the years of service the executive
provides to the Company. Currently only Messrs. Robert Stein and Landry
participate in the SERP. The Company believes that these benefits are reasonable
in relation to the executive compensation practices of other companies.
20
<PAGE> 24
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Stein, who holds the positions of President, Chief Executive
Officer and Chairman of the Board, was paid a base salary of $374,998 during
fiscal year 1999. In addition, Mr. Stein was granted 87,500 options to purchase
shares of Class A Common Stock and 87,500 options to purchase shares of Class B
Common Stock. Mr. Stein's salary was increased from fiscal year 1998 as a result
of the Company's progress and his leadership during a challenging period of
growth and change. However, in determining the bonus segment of overall
compensation, the Committee also took into consideration the results of
operations of the Company and therefore no bonus was paid to Mr. Stein in fiscal
year 1999, resulting in lower overall compensation as compared to fiscal year
1998.
THE COMPENSATION COMMITTEE:
John W. Everets, Chairman
Frank W. Barrett
J. Kermit Birchfield, Jr.
21
<PAGE> 25
PERFORMANCE GRAPH
The Performance Graph set forth on the following page compares the
performance of the Class A Common Stock over the past five years with (i) the
cumulative total return on the American Stock Exchange Stock Market (the "AMEX")
and (ii) a peer group index consisting of AMEX Stocks Standard Industry Codes
5410-5419 (grocery stores) ("Peer Group Index").
The figures presented assume the reinvestment of all dividends into
shares of Class A Common Stock on the dividend payment date and that $100 was
invested in Class A Common Stock and in the AMEX Stock Market Index (U.S.
Companies) and Peer Group Index on January 28, 1994, and held through January
30, 1999 (the end of the Company's most recent fiscal year).
22
<PAGE> 26
Comparison of Five-Year Cumulative Total Returns
Performance Graph for
Dairy Mart Convenience Stores, Inc.
Prepared by the Center for Research in Security Prices
Produced on 04/16/1999 including data to 01/29/1999
[GRAPH]
- -------------------------------------------------------------------------------
Legend
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 01/1994 01/1995 02/1996 01/1997 01/1998 01/1999
- ------ ---------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------ - Dairy Mart Convenience Stores, Inc. 100.00 57.4 86.8 85.3 62.8 51.7
- ------ * AMEX Stock Market (US Companies) 100.00 95.2 119.0 124.0 148.9 169.0
- ------ + AMEX Stocks (SIC 5410-5419 US Companies) 100.00 98.5 146.1 150.2 150.1 197.3
Grocery Stores
</TABLE>
- --------------------------------------------------------------------------------
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 01/28/1994.
23
<PAGE> 27
CERTAIN TRANSACTIONS
STOCK OWNED BY DM ASSOCIATES
DM Associates Limited Partnership ("DM Associates") is the
owner of record of 638,743 shares of Class B Common Stock of the Company,
representing approximately 43.5% of the issued and outstanding shares of Class B
Common Stock, and 35.6% of the total voting power of both classes of the Common
Stock. The general partner of DM Associates is New DM Management I, which is a
general partnership. The general partners of New DM Management I are Robert B.
Stein, Jr., a Director and the Chairman of the Board, Chief Executive Officer
and President of the Company, and Gregory G. Landry, a Director and the
Executive Vice President and Chief Financial Officer of the Company.
In March 1992, DM Associates financed part of the purchase of its
1,858,743 shares of Class B Common Stock by obtaining a $7,100,000 loan (the
"Limited Partnership Loan") from the Connecticut Development Authority ("CDA").
The Limited Partnership Loan was secured by DM Associates' collateral pledge of
1,220,000 shares of the Class B Common Stock owned by DM Associates. In
September 1994, FCN Properties Corporation, a corporation owned and controlled
by Charles Nirenberg, a former shareholder, Director and executive officer of
the Company, purchased all of the CDA's right, title and interest in and to the
Limited Partnership Loan. In December 1995, FCN Properties Corporation sold the
Limited Partnership Loan to the Company. The Limited Partnership Loan became due
and payable in full on July 31, 1997. DM Associates failed to pay the Limited
Partnership Loan and in accordance with the loan agreement, the Company took
possession and title to the 1,220,000 shares of Class B Common Stock, without
waiving any deficiency. At the same time, the Company made demand upon DM
Associates for all assets other than the non-recourse assets (defined below).
Upon the Company taking title to and possession of the 1,220,000 shares of Class
B Common Stock, such shares became treasury shares. DM Associates continues to
hold 638,743 shares of Class B Common Stock, which, together with any proceeds
therefrom, are defined under the agreements governing the Limited Partnership
Loans as non-recourse assets and not available to the Company to satisfy DM
Associates' obligation under the Limited Partnership Loan.
On December 12, 1997, the partners in DM Associates entered into a
third amendment to the partnership agreement (the "Amendment"). The Amendment
was executed by New DM Management I, HNB Investment Corp., the Class A limited
partner of DM Associates (the "Class A Limited Partner"), and the Company, as
the Class B limited partner of DM Associates.
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 Company (or its designee) and
New DM Management I (or its designee) and Mr. Stein and Mr. Landry (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), New DM Management I
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 Company also amended its
Preferred Stock Purchase Plan (the "Plan") to provide that none of the Class A
24
<PAGE> 28
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 Company 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.
OUTSIDE COUNSEL
Albert T. Adams, one of the Company's directors, is a partner of Baker
& Hostetler LLP, which acts as the Company's general outside legal counsel. The
Company expects that Baker & Hostetler will continue to provide legal services
in that capacity in fiscal year 2000.
CONSULTING ARRANGEMENT
Michael L. Poole's employment with the Company was terminated as of
August 3, 1998. Mr. Poole, a former executive officer of the Company, was paid
consulting fees in the amount of $94,608 in exchange for continuing to provide
consulting services to the Company.
REQUIRED VOTES OF SHAREHOLDERS
Under Delaware law and pursuant to the Company's Bylaws, the presence
in person or by proxy of the holders of a majority of the voting power of both
classes of Common Stock entitled to vote at the Annual Meeting is necessary for
a quorum to transact business for matters as to which both classes of Common
Stock vote together. With respect to matters as to which each class of Common
Stock is entitled to vote separately, including the election of Directors by the
respective classes, the presence in person or by proxy of the holders of
one-third of the shares of Common Stock of the applicable class is necessary for
a quorum to transact such business. In order for the nominees to be elected as
Directors by the shareholders of their respective classes of Common Stock, the
affirmative vote of a plurality of the Common Stock of the applicable class
present in person or by proxy is necessary. The Company intends to appoint an
independent person to act as an inspector of elections at the Annual Meeting who
will be responsible for counting the votes.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal in the Company's
Proxy Statement for the fiscal year 2000 Annual Meeting of the Shareholders of
the Company may do so in accordance with Securities and Exchange Commission Rule
14a-8 and is advised that the proposal must be received by the Company's Chief
Financial Officer at the Company's principal office located at One Dairy Mart
Way, 300 Executive Parkway West, Hudson, Ohio 44236, no later than January 17,
2000. For those shareholder proposals which are not submitted in accordance with
Rule 14a-8, the proxies designated by the Board of Directors may exercise their
discretionary voting authority, without any discussion on the proposal in next
year's Proxy Statement, with respect to any proposal which is received by the
Company after March 30, 2000.
25
<PAGE> 29
GENERAL
The Company's Annual Report to Shareholders contains financial
statements for the fiscal year ended January 30, 1999, as well as other
information concerning the operations of the Company.
The Company is not aware of any matters other than those set forth in
this Proxy Statement or referred to in the accompanying Notice of Annual Meeting
of Shareholders, which will be presented at the Annual Meeting. However, if any
other matters should properly come before the meeting, it is intended that
proxies will be voted thereon in accordance with the best judgment of the person
or persons voting such proxies.
26
<PAGE> 30
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
DAIRY MART CONVENIENCE STORES, INC.
CLASS A PROXY
JUNE 10, 1999
<TABLE>
<CAPTION>
Please Detach and Mail in the Envelope Provided
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
A[X] Please mark your
votes as in this
example.
FOR WITHHELD
1. Election of [ ] [ ] Nominees: 2. In their discretion such other matters as may
Directors Thomas W. Janes properly come before the meeting.
Albert T. Adams
For, except vote withheld from the following nominees UNLESS A CONTRARY DIRECTION IS INDICATED, THE
(To withhold authority for any individual nominee write SHARES REPRESENTED BY THIS PROXY SHALL BE
that nominee's name in the space provided below.) VOTED FOR THE ELECTION OF THE NOMINEES AS
DIRECTORS AND IN THE DISCRETION OF THE PROXIES
- ------------------------------------------------------- AS TO OTHER MATTERS.
SIGNATURE(S)________________________________________________________________________________DATE:___________________________________
Note: Please sign above exactly as the shares are issued. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full
corporate name by the president or other authorized officer. If a partnership, please sign in partnership name by an authorized
person.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
- --------------------------------------------------------------------------------
CLASS A PROXY
DAIRY MART CONVENIENCE STORES, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1999
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert B. Stein, Jr., Gregory G. Landry
and Albert T. Adams, and each or any of them, with full power of substitution,
the proxies of the undersigned to vote all of the shares of Class A Common Stock
of Dairy Mart Convenience Stores, Inc. ("Dairy Mart") which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of Dairy Mart to be held
at the Dairy Mart Convenience Stores, Inc., One Dairy Mart Way, 300 Executive
Parkway West, Hudson, Ohio on the 10th day of June, 1999 at 10:00 a.m. (eastern
time), and at any adjournment or postponement thereof, with all the powers the
undersigned would possess if personally present upon:
(TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
<PAGE> 32
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
DAIRY MART CONVENIENCE STORES, INC.
CLASS B PROXY
JUNE 10, 1999
Please Detach and Mail in the Envelope Provided
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR WITHHELD
1. Election of / / / / NOMINEES: 2. In their discretion such other matters as may
Directors properly come before the meeting.
Frank W. Barrett
FOR, EXCEPT VOTE WITHHELD FROM THE J. Kermit Birchfield, Jr.
FOLLOWING NOMINEES (TO WITHHOLD AUTHORITY John W. Everets UNLESS A CONTRARY DIRECTION IS INDICATED, THE SHARES
FOR ANY INDIVIDUAL NOMINEE WRITE THAT Gregory G. Landry REPRESENTED BY THIS PROXY SHALL BE VOTED FOR THE
NOMINEE'S NAME IN THE SPACE PROVIDED Robert B. Stein, Jr. ELECTION OF THE NOMINEES AS DIRECTORS AND IN THE
BELOW.) William A. Foley DISCRETION OF THE PROXIES AS TO OTHER MATTERS.
SIGNATURE(S)_________________________________________________________________________________ DATE: ____________
</TABLE>
NOTE: Please sign above exactly as the shares are issued. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by the
president or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.
<PAGE> 33
--------------------------------
WHEN PROXY IS OKAYED PLEASE SIGN
& DATE IT ABOVE
CLASS B PROXY
DAIRY MART CONVENIENCE STORES, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1999
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert B. Stein, Jr., Gregory G.
Landry and Albert T. Adams, and each or any of them, with full power of
substitution, the proxies of the undersigned to vote all of the shares
of Class B Common Stock of Dairy Mart Convenience Stores, Inc. ("Dairy
Mart") which the undersigned is entitled to vote at the Annual Meeting
of Shareholders of Dairy Mart to be held at the Diary Mart Convenience
Stores, Inc., One Dairy Mart Way, 300 Executive Parkway West, Hudson,
Ohio on the 10th day of June, 1999 at 10:00 a.m. (eastern time), and at
any adjournment or postponement thereof, with all the powers the
undersigned would possess if personally present upon:
(TO BE SIGNED ON REVERSE SIDE)
