SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the Securities Exchange Act
of 1934
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[x] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Dairy Mart Convenience Stores, Inc.
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(Name of Registrant as Specified in Its Charter)
Committee of Concerned Dairy Mart Shareholders
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant
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THE COMMITTEE OF CONCERNED DAIRY MART SHAREHOLDERS
360 BLOOMFIELD AVENUE - SUITE 208
WINDSOR, CT 06095
May 5, 2000
TO: SHAREHOLDERS OF DAIRY MART CONVENIENCE STORES, INC.
Dear Fellow Shareholders:
After six years of watching Dairy Mart's operating performance and
stock market value decline under current management, we formed the Committee of
Concerned Dairy Mart Shareholders. Our goal is to obtain your support at the
court-ordered May 25, 2000 Annual Meeting to remove Bob Stein, Greg Landry and
the other Directors who have generously rewarded management despite Dairy Mart's
dismal performance. WE WILL REPLACE THIS SELF-SERVING CREW WITH INDIVIDUALS
DEVOTED TO MAXIMIZING SHARE VALUE FOR ALL SHAREHOLDERS THROUGH A SALE OF THE
COMPANY.
If you agree with the Committee that Dairy Mart is being operated for
the benefit of its management rather than its shareholders and would like to see
a change, then take advantage of this first meaningful Dairy Mart shareholder
election in the Company's history. VOTE YOUR BLUE PROXY CARD TODAY IN SUPPORT OF
OUR NOMINEES AND AGAINST THE STEIN AND LANDRY BOARD OF DIRECTORS' RECORD OF
DISMAL PERFORMANCE. Do NOT return any white proxy cards that the current Dairy
Mart management sends you.
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IT'S THE SHAREHOLDERS' TURN TO RECEIVE VALUE!
VOTE TODAY TO OUST DAIRY MART'S BOARD!
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. PATHETIC PERFORMANCE! Stock price at an all-time low; Cumulative losses
exceeding $34,000,000 in the past six years; Debt-to-equity ratio at a
staggering 17:1; Book value of a measly $6.8 million!
. MANAGEMENT USING YOUR MONEY TO DEFEND THEIR INADEQUACIES! Current Board has
been sued for breaching their fiduciary duties - and has spent
approximately $4,000,000 of DMC funds defending themselves; insurer has
rejected DMC's claim to recover these expenses; DMC's insurer paid
additional $2,000,000 to settle claims!
. BOARD OPERATING COMPANY FOR THEIR BENEFIT - NOT OURS! Three days after
court signed off on settlement agreement in December, Stein and Landry
amended their "golden parachute" agreements so they would be automatically
triggered by a successful proxy fight. They saw the writing on the wall and
decided to cushion their fall at our expense!
. OUR NOMINEES HAVE YOUR INTERESTS AT HEART! Frank Colaccino, our Committee
Chairman, successfully ran Dairy Mart for five years. He has gathered a
group of qualified and highly-regarded individuals who are committed to
maximizing the value of your shares. WE CURRENTLY BELIEVE THE BEST WAY TO
UNLOCK THIS VALUE IS THROUGH A SALE OF DAIRY MART AND WILL ENGAGE AN
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INVESTMENT BANKER TO HELP US DO JUST THAT!
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READ THE FOLLOWING PAGES TO GET THE FULL STORY
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THE FULL STORY
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For the past six years, Dairy Mart has been in a downward spiral. Its
share price has steadily dropped from over $7 per share in 1995 to a low of
$1 5/8 the day before we announced our intention to replace the Board, this
during the height of the longest bull market in history! The Company's
debt-to-equity ratio is a staggering 17:1, with $123,135,000 of debt against
only $6,869,000 of equity at January 31, 2000. Cumulative net operating losses
before taxes since 1995 exceed $34,000,000 (see chart), with only one
"profitable" year (a meager $25,000 in 1999).
BAR GRAPH OF
DAIRY MART CONVENIENCE STORES INC.
CUMULATIVE PRE-TAX NET LOSSES SINCE 1995"
APPEARS HERE.
Now, in response to our proxy fight to evict them, the Board has
announced a "strategic" initiative to sell or close at least 246 Dairy Mart
stores and use the proceeds to reduce the overwhelming corporate debt it has
incurred. Sound familiar? It should. In June of 1997, the Board authorized the
sale of 156 stores (which Stein called a "major milestone"). Instead of
increasing profitability, that plan put the Company further in debt than before
the stores were sold. Today Dairy Mart's performance is worse than ever. Now
management is singing the same song - this so-called "plan" is nothing more than
empty promises intended to deflect your attention from our proxy fight and yet
another year of pathetic performance. SHAREHOLDERS CANNOT AFFORD TO GIVE THIS
BOARD MORE TIME. WE BELIEVE THE FASTEST WAY TO MAXIMIZE OUR VALUE IS BY OUSTING
THE BOARD AND SELLING THE COMPANY!
EXAMPLES OF THE BOARD'S BRAZEN SELF-DEALING AND ABUSE OF POWER
For the past six years, Dairy Mart has been controlled by Stein,
Landry and a rubber-stamp Board who have put their interests ahead of yours.
They have awarded themselves lavish compensation packages as your stock price
has plummeted - all with the Board's consent. They have been sued for breaching
their fiduciary duties to you and have wasted millions of dollars of Dairy Mart
funds defending themselves. They repriced their options in 1995 to insulate
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their financial interests from their own mismanagement of Dairy Mart -
tellingly, even after the repricing, their options are STILL UNDER WATER - while
our share value has evaporated. Since 1997, the Company's total return has
dropped by almost 50%, but Stein's total compensation has increased by over 50%!
Here's an example of how the current Board operates. After spending
$3,900,000 of your Company's funds to defend directors against lawsuits alleging
breach of their fiduciary duties to shareholders, a settlement agreement was
reached. (The Company's insurer has refused to reimburse this amount, but
management has nevertheless booked $3,000,000 as a "receivable." If not
reimbursed, this will be charged to any future earnings or increase future
losses.) The settlement agreement required that the Company (i) convene a
shareholders' meeting before May 31, 2000; (ii) take steps to eliminate the
supervoting class of stock which has for year insulated current management; and
(iii) pay $2,000,000 to the plaintiffs to settle the claims (fortunately, this
payment was covered by the Company's insurance carrier).
FEATHERING THEIR OWN NESTS?
Stein and Landry knew that the proposed elimination of the supervoting
stock would leave them vulnerable to being ousted by angry shareholders. So on
December 16, 1999, merely three days after the court approved the settlement
agreement, STEIN AND LANDRY AMENDED THEIR EMPLOYMENT AGREEMENTS SO THAT THE
TERMINATION PROVISIONS WOULD BE AUTOMATICALLY TRIGGERED IF THEY WERE REMOVED
FROM THE BOARD IN A PROXY FIGHT AND NOT RENOMINATED! The amended "golden
parachute" agreements provide outrageous payouts to Stein and Landry when
triggered, including:
. Payment of three times the sum of their salaries plus their highest bonus
paid in the past 3 years (grossed up for any excise taxes) - based on
recent filings, this would mean a windfall of $1,440,000 to Stein and
$945,000 to Landry, plus reimbursement for any excise taxes, and
. Title to their Company cars, Company life insurance policies and Company
personal computers, and
. Automatic vesting of all unvested stock and stock options.
Stein and Landry would also benefit greatly from the change in control
provisions of the Supplemental Executive Retirement Plan they implemented in
1998 which could pay them MILLIONS MORE if they were terminated in connection
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with our proxy fight. We believe these amended agreements are an insult to
shareholders and, with your support, will contest their validity. We will also
contest any other self-interested arrangements we uncover which we believe may
constitute a breach of their fiduciary duties to the Company and its
shareholders.
On February 8, 2000, we shareholders voted to eliminate the supervoting
class of stock. Now we have the chance to finish what we started in February and
replace this Board at the court-ordered Annual Meeting of shareholders. TAKE
ADVANTAGE OF THIS CRITICAL OPPORTUNITY TO DIRECTLY AND POSITIVELY AFFECT YOUR
INVESTMENT IN DAIRY MART - VOTE THE BLUE PROXY CARD TODAY AND THROW OUT THIS
UNDERPERFORMING BOARD!
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WHO WE ARE AND WHAT WE PLAN TO DO
Since the Committee announced this contest to replace the Board, Dairy
Mart's stock price has increased significantly. With the former Chief Executive
Officer of Dairy Mart on our team - Frank Colaccino successfully ran the Company
for over five years prior to the woeful Stein and Landry era - we believe that
Dairy Mart's shareholders can achieve maximum value for their shares by electing
a new board of directors that will immediately engage an investment banker and
consider all available alternatives to increase the value of our shares,
including selling Dairy Mart.
Under Frank Colaccino's guidance, Dairy Mart was a healthy and
successful business. The Company's debt-to-equity ratio averaged just over 2:1
(versus 17:1 today). Cumulative pre-tax income exceeded a positive $13,000,000
from 1990 through 1994 and, adjusted for non-recurring extraordinary items such
as accounting rule changes, pre-tax income would have exceeded a positive
$20,000,000 (current management has lost over $34,000,000 in the past six
years). He has the industry and operating experience necessary to run this
Company while the investment bankers are evaluating the Company to maximize the
value of your Dairy Mart shares. Moreover, the Committee's nominees, WHO
COLLECTIVELY OWN MORE THAN 5% OF THE COMPANY, include eight respected and
successful members of the business, investment and legal community who are also
committed to maximizing the value of Dairy Mart's shares, not their salaries and
golden parachutes.
Our plan is straightforward. After our new Board is seated, we will
immediately engage a top-tier investment banking firm to explore all potential
alternatives to maximize share value. We currently believe the only viable
method of unlocking our shares' value is to sell Dairy Mart.
THANKS TO THE COURT, YOU CAN AT LAST INFLUENCE YOUR INVESTMENT
There haven't been many opportunities for Dairy Mart's shareholders to
change the course of their investment. For years, Stein and Landry were shielded
by an unusual system of unequal voting rights that entrenched them and protected
their salaries and bonuses. One significant part of the settlement of the class
action against Dairy Mart and certain of its Directors was to let shareholders
vote to eliminate the old dual class voting system that bolstered Stein and
Landry's control over the Company's fate. You, the shareholders, successfully
helped remove this system with your proxy votes in February. You now have a
choice. Please take advantage of this first meaningful Dairy Mart shareholder
election in the Company's history. VOTE YOUR BLUE PROXY CARD TODAY IN SUPPORT OF
OUR NOMINEES AND AGAINST THE STEIN AND LANDRY BOARD OF DIRECTORS' RECORD OF
DISMAL PERFORMANCE.
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WHAT YOU CAN EXPECT MANAGEMENT TO DO AND SAY
In the next three weeks, you can expect the current board and
management team to jealously and vigorously defend their control of Dairy Mart
and their lavish salaries and bonuses with numerous phone calls, letters,
announcements and promises. They are simply wasting more of your Company's
assets again in a desperate attempt to cling to their cozy power structure. You
should ask yourself how you will benefit if management is allowed to proceed
with its new "strategy" to sell off hundreds of stores. It didn't work in 1997
with the sale of the New England stores - we now have more debt than ever - and
it won't work now. THE COMMITTEE BELIEVES THAT IF DAIRY MART CANNOT BE OPERATED
TO PRODUCE A HIGHER STOCK PRICE FOR SHAREHOLDERS, IT SHOULD SIMPLY BE SOLD.
You can also expect management to personally attack Frank Colaccino,
the Committee's chairman and one of Dairy Mart's largest individual
shareholders. Consider this for what it is - a desperate attempt to shift the
focus from Stein and Landry's disastrous financial performance. Mr. Colaccino
successfully managed the Company profitably for over five years and his sole
interest in replacing the Board is the same as yours: to see the value of our
Dairy Mart shares maximized. As for Mr. Colaccino's departure from the Company,
the same unequal voting rights system that kept management in power for so many
years until now was instrumental in a boardroom coup that helped Messrs. Stein
and Landry gain control of Dairy Mart. The legacy of this management team that
replaced Mr. Colaccino is undeniable and clear: six years of terrible management
and expensive litigation.
IMPORTANT VOTING INFORMATION
VOTE YOUR ENCLOSED BLUE PROXY CARD NOW! Do NOT vote any white proxy
card sent to you by management. Do not even use their card to vote against
management in protest of their performance. If you have questions about the
Committee and its plans, please call me directly at (860) 688-3667. If you need
assistance in voting your shares, please call our proxy solicitation firm,
Georgeson Shareholder Communications, toll-free at (800) 223-2064.
We thank you in advance for your support.
Sincerely yours,
COMMITTEE OF CONCERNED
DAIRY MART SHAREHOLDERS
By: Frank Colaccino, Chairman
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IMPORTANT
1. Be sure to vote on the Committee's BLUE proxy card. We urge you not to sign
any proxy card which is sent to you by Dairy Mart Convenience Stores, Inc.
2. If any of your shares are held in the name of a bank, broker or other
nominee, please contact the person responsible for your account and direct
him or her to vote on the BLUE proxy "FOR" the Committee's nominees.
3. If you have questions or need assistance in voting your shares, please call
toll free:
GEORGESON
SHAREHOLDER
COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, NY 10004
CALL TOLL-FREE (800) 223-2064
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