SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
(Mark one)
X Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended January 28, 1995
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period From to
Commission File Number 0-12497
DAIRY MART CONVENIENCE STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2497894
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE VISION DRIVE, ENFIELD, CT 06082
(Address of principal executive offices)
Registrant's telephone number, including area code
(203) 741-4444
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock (Par Value $.01)
Class B Common Stock (Par Value $.01)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of May 8, 1995, 2,782,109 shares of Class A Common Stock and
2,785,665 shares of Class B Common Stock were outstanding, and
the aggregate market value of both classes of Common Stock
outstanding of DAIRY MART CONVENIENCE STORES, INC., held by
nonaffiliates was approximately $17,547,101.00.
<PAGE>
This Form 10-K/A Amendment No.1 amends the Form 10-K of Dairy
Mart Convenience Stores, Inc. (the "Company") filed for the fiscal
year ended January 28, 1995, as follows: (i) a subsection of Item
1 has been added entitled "Executive Officers and Directors of the
Company," and Item 1 is filed in its entirety as amended; and (ii)
the information required by Items 10, 11, 12 and 13 of Part III is
no longer incorporated by reference from the Company's definitive
proxy statement for its 1995 annual meeting of shareholders, as
such proxy statement will not be filed within 120 days after the
fiscal year ended January 28, 1995; the information required by
such items is now set forth in full in Part III and is filed
herewith.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART I
ITEM 1. BUSINESS
General
Dairy Mart Convenience Stores, Inc., and its subsidiaries (the
"Company" or "Dairy Mart"), was founded in 1957 and operates one of
the nation's largest convenience store chains. As of the fiscal
year ended January 28, 1995, the Company operated or franchised
approximately 960 stores under the "Dairy Mart" name in 11 states
located in the Northeast, Midwest and Southeast, of which 406
stores sold gasoline and 317 stores were franchised.
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's facilities in Enfield, Connecticut and Cuyahoga
Falls, Ohio manufacture and process milk, fruit juices, and other
non-carbonated beverages which are distributed to stores in the
Northeast and the Midwest regions. The dairy plant in Ohio
manufactures and distributes ice cream to most stores. In the
Southeast region, the Company distributes dairy products, tobacco
products, candy and certain other merchandise to stores in Kentucky
and Indiana. However, subsequent to the end of fiscal 1995, the
Company entered into agreements to sell its dairy manufacturing and
distribution operations in both Connecticut and Ohio and announced
its intention to sell its distribution center in Kentucky (see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS-Strategic Initiatives-Dairy Manufacturing &
Distribution Operations").
The Company is incorporated in Delaware and maintains its
principal executive offices at One Vision Drive, Enfield,
Connecticut 06082. The Company's telephone number is (203)
741-4444.
<PAGE>
Stores
The Company's stores are generally located in densely
populated suburban areas, and are situated close to single-family
homes and apartments to attract neighborhood shoppers. Store
location, design, lighting and layout are intended to cater to
customers' desire for fast and convenient access. Approximately 400
locations also sell gasoline. Shelving and displays, including
refrigeration units, deli and other fast food counters and
displays, are designed to encourage customers to purchase high
profit margin products including impulse purchase items such as
candy, fountain drinks and ice cream novelties. Stores are located
on sites which are well-lit, easily accessible by customers and
provide ample parking. All of the Company's stores also offer
extended hours for additional convenience, with over one-half of
the stores open 24 hours per day. A typical Dairy Mart store ranges
between 2,400 and 2,700 square feet and is a free standing
structure.
As of January 28, 1995, the Company operated and franchised
retail convenience stores in the following three regions of the
United States:
<TABLE>
<CAPTION
Number of
Northeast Region Stores
<S> <C>
Massachusetts .............................. 64
Connecticut ................................ 59
New York ................................... 37
Rhode Island ............................... 22
Total Northeast Stores ................... 182
<CAPTION>
Midwest Region
<S> <C>
Ohio ....................................... 498
Michigan ................................... 43
Pennsylvania ............................... 31
Total Midwest Stores ..................... 572
<CAPTION>
Southeast Region
<S> <C>
Kentucky ................................... 16
Indiana .................................... 21
Tennessee .................................. 14
North Carolina ............................. 12
Total Southeast Stores ................... 207
Total Stores ........................... 961
</TABLE>
<PAGE>
Upgrade and Remodel of Existing Store Base and Closing
Underperforming Stores
Management has implemented a plan to upgrade and remodel the
Company's retail and gasoline locations and to downsize its store
operations through the closing or sale of underperforming
locations. During fiscal 1995, the Company decided to close or sell
143 retail convenience stores, of which 72 had been closed or sold
as of January 28, 1995. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Strategic
Initiatives-Upgrade and Remodel of Existing Store Base" and "-
Underperforming Stores").
Gasoline Operations
Gasoline sales enable the Company to significantly increase a
store's total level of sales without a commensurate increase in
overhead. Gasoline sales accounted for approximately 35% of total
revenues of the Company for each of the past three fiscal years. As
of January 28, 1995, 406 stores sold gasoline; however, the Company
plans to close or sell approximately 57 additional gasoline
facilities that do not meet the Company's criteria for capital
investment in fiscal 1996. Financial information related to the
Company's gasoline operations for the last three fiscal years is
set forth in Note 9 to the Consolidated Financial Statements.
The Company's gasoline pricing strategy is designed, in part,
to provide value to customers by offering the same quality gasoline
offered by major oil companies at prices which are generally below
nationally advertised brands and comparable to other convenience
store chains. The Company obtains its gasoline from major oil
company suppliers, primarily through spot market purchases, and
believes that there are adequate supplies of fuel available from a
number of sources at competitive prices.
Gasoline profit margins have a significant impact on the
Company's income. Such profit margins could be adversely influenced
by factors beyond the Company's control, such as volatility in the
wholesale gasoline market due to supply interruptions. In addition,
gasoline profit margins are continually influenced by competition
in each local market area.
Product Selection
All stores generally offer more than 3,000 food and non-food
items limited to a few, well-known brand names as well as the
Company's private label products. Most of these items would
typically be offered in supermarkets. Food items include a wide
variety of products, including canned foods and groceries, dairy
products, beverages, snack items, candy, baked goods and food
<PAGE>
service items, such as fountain soft drinks, coffee, hot dogs, deli
meats and deli sandwiches and similar foods. Non-food products and
services include gasoline, cigarettes, health and beauty aids,
publications, lottery tickets and money orders. In addition to
selling well-known brand name products, the stores offer many
products that bear the "Dairy Mart" private label, including milk,
bakery products, juices and other non-carbonated beverages, ice
cream and other dairy products such as dips and cheeses.
In recent years, the Company has been altering the mix of
products to emphasize the sale of items carrying higher profit
margins. Fast food items not only carry higher profit margins but
also tend to lead to the purchase of other high profit margin
products and impulse items, including salty-snacks, candy and
beverages. Dairy Mart has introduced a number of private label
products, which generally carry a higher gross profit margin than
the Company's average gross profit margin on comparable products.
Manufacturing and Distribution Operations
The Company supplied its stores and most franchised stores
through a product distribution system which included the Company's
own manufacturing, distribution and processing facilities, and
other distributors. Through its manufacturing, processing and
distribution facilities in Connecticut and Ohio, the Company
supplied all of the milk and a substantial portion of the ice
cream, juices and non-carbonated beverages for the stores in the
Northeast and the Midwest. Many other products which were not
produced by the Company were, and continue to be, supplied to the
Northeast and Midwest regions by one wholesale distributor under a
ten-year contract entered into in February, 1988. The Company
supplied the Southeast region stores in large part through its
35,000 square foot distribution facility located in Louisville,
Kentucky. In April, 1995, the Company entered into agreements to
sell its dairy manufacturing and distribution operations in both
Connecticut and Ohio and announced its intention to sell its
distribution center in Kentucky. In conjunction with these
transactions, the Company has entered into long-term marketing and
supply agreements to purchase milk and dairy products at
competitive prices, primarily under the Company's private label
(see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-Strategic Initiatives-Dairy Manufacturing
& Distribution Operations").
Franchise Operations
The Company franchises 317 stores throughout its three
geographic regions. Franchise stores generally follow the same
operating policies as Company stores, and are subject to Company
supervision under franchise agreements. Company operated and
franchise stores are of the same basic store design and sell
substantially the same products. In the past, most franchisees
<PAGE>
purchased their products from the Company or the suppliers used by
the Company. In the future, since the Company has agreed to sell
its manufacturing and distribution businesses in both Connecticut
and Ohio and announced its intention to sell its distribution
center in Kentucky, the Company will encourage its franchisees to
purchase their products from the suppliers used by the Company.
The Company offers two types of franchising arrangements- the
"full" franchise and the "limited" franchise. Under a full
franchise agreement, the franchisee purchases and owns both the
merchandise inventory and the equipment located in the store, and
leases or subleases the store from the Company. Under a limited
franchise agreement, the franchisee owns only the merchandise
inventory while the Company retains ownership of the store
equipment. Franchise fees are higher for limited franchisees. As of
January 28, 1995, there were 146 full franchise locations and 171
limited franchise locations.
The Company's franchising strategy seeks to: (i) improve the
level of retail experience of its new franchisees; and (ii)
increase the level of financial commitment by new franchisees. As
part of this strategy, new franchisees are now required to undergo
more rigorous and thorough interviews and background checks,
receive increased levels of financial and retail training, and
typically make larger initial cash payments.
The following table sets forth the number of stores, on both
a Company operated and franchise operated basis, that were opened
or acquired, closed or sold, and transferred between Company
operated and franchise operated, during the last three fiscal
years:
<TABLE>
<CAPTION>
January 28, 1995 January 29, 1994 January 30, 1993
CompanyFranchise CompanyFranchise CompanyFranchise
OperatedOperated TotalOperatedOperatedTotalOperatedOperatedTotal
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
At beginning of period. 687 335 1,022 709 3701,079 685 4491,134
Opened or acquired..... 10 1 11 4 - 4 6 - 6
Closed or sold......... (57) (15) (72) (50) (11) (61) (34) (27) (61)
Transferred (net)...... 4 (4) -- 24 (24) -- 52 (52) --
At end of period....... 644 317 961 687 335 1,022 709 370 1,079
</TABLE>
International Operations
The Company conducts business outside the United States as a
joint-venturer, licensor or consultant. Currently, the Company is
a party to two agreements with convenience store operators in South
Korea and Mexico. As with the Company's prior international
arrangements, both such agreements require a specified commitment
<PAGE>
of Company personnel, but do not require any significant commitment
of capital.
Advertising
To promote a uniform image for all stores, the Company designs
and coordinates advertising for all stores to complement its
marketing strategy, which is derived, in part, from market surveys
and research. In-store, newspaper, and direct-mail advertising,
special promotions and seasonal radio and television advertising
usually feature certain items which can be purchased at the stores,
and frequently include national brand items for which advertising
costs are often supplemented by the national brand suppliers. Sales
promotions are generally established and maintained on a bi-weekly
or monthly basis.
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.
Seasonality
Weather conditions have a significant effect on the Company's
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 higher
revenues and profit margins during the warmer weather months, which
fall within the Company's second and third fiscal quarters.
Employees
As of January 28, 1995, exclusive of franchisees and
franchisees' employees, the Company employed, on a full-time or
part-time basis, approximately 4,400 employees.
<PAGE>
Environmental Compliance
The Company incurs ongoing costs to comply with federal, state
and local environmental laws and regulations, including costs for
assessment, compliance, remediation and certain capital
expenditures relating to its gasoline operations. These laws and
regulations relate primarily to underground storage tanks ("USTs").
The United States Environmental Protection Agency has established
standards for, among other things: (i) maintaining leak detection;
(ii) upgrading UST systems; (iii) taking corrective action in
response to releases; (iv) closing USTs to prevent future releases;
(v) keeping appropriate records; and (vi) maintaining evidence of
financial responsibility for taking corrective action and
compensating third parties for bodily injury and property damage
resulting from releases. A number of states in which the Company
operates also have adopted UST regulatory programs.
In the ordinary course of business, the Company periodically
detects releases of gasoline or other regulated substances from
USTs it owns or operates. As part of its program to manage USTs,
the Company is involved in environmental assessment and remediation
activities with respect to releases of regulated substances from
its existing and previously operated retail gasoline facilities.
The Company accrues its estimates of all costs to be incurred for
assessment and remediation for known releases. These accruals are
adjusted if and when new information becomes known. Additionally,
the Company records as receivables the estimated reimbursements of
a portion of the total costs from various state environmental trust
funds which have provisions for sharing or reimbursing certain
costs incurred by UST owners or operators based upon compliance
with the terms and conditions of such funds. Due to the nature of
such releases, the actual costs of assessment and remediation
activities may vary significantly from year to year. Under current
federal and state regulatory programs, the Company also will be
obligated by December 22, 1998 to upgrade or replace most existing
USTs it owns or operates to meet certain corrosion-, overfill- and
spill-protection and leak-detection requirements. The Company
currently is evaluating each site on an individual basis to
determine the type of expenditures required to comply with these
and other requirements under the federal and state UST regulatory
programs.
In addition to ongoing assessment and remediation costs, the
Company presently estimates that it will be required to make
capital expenditures, including those requiring upgrading or
replacing of existing USTs, ranging from approximately $12.0 to
$16.0 million in the aggregate over the next four fiscal years to
comply with current federal and state UST regulations, which
capital expenditures could be reduced for locations (especially low
volume locations) which may be closed in lieu of the capital costs
<PAGE>
of compliance. During fiscal 1995, the Company decided to close 81
retail gasoline facilities that do not meet the Company's criteria
for capital investment. The Company had closed 24 of these
locations by January 28, 1995 (see "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Liquidity
and Capital Resources-Environmental Responsibility").
The Company's estimate of costs to be incurred for
environmental assessment and remediation and for UST upgrading and
other regulatory compliance are based on factors and assumptions
that could change due to modifications of regulatory requirements,
detection of unanticipated environmental conditions, or other
unexpected circumstances. As a result, the actual costs incurred
may vary significantly from the estimate noted above.
Executive Officers and Directors of the Company
Set forth below are the Company's executive officers and
directors. Each executive officer is appointed by the Board of
Directors and serves for a one year term, and each director serves
for a one year term and until the election and qualification of his
successor.
<TABLE>
<CAPTION>
Name and (Age) Title
<S> <C>
John W. Everets, Jr. (49) Class B Director since 1994
Mitchell J. Kupperman (43) Executive Vice President-Human
Resources, Secretary, and a
Class B Director since 1988
Gregory G. Landry (37) Executive Vice President,
Chief Financial Officer, and
a Class B Director since 1991
Charles Nirenberg (71) Chairman of the Company, and a
Class B Director since 1972
Robert B. Stein, Jr. (37) President, and a Class B
Director since 1992
Frank W. Barrett (55) Class A Director since 1983
Theodore W. Leed (68) Class A Director since 1983
Thomas A. Chicoine (45) Vice President-Manufacturing
and Distribution
<PAGE>
Darrell J. Davis (36) Vice President-Operations
(Southeast Region)
Edward M. Doyle (41) Vice President-Strategic
Marketing
Gregg O. Guy (46) Executive Vice President-
Operations and Marketing
Gary A. Payne (52) Vice President-Business
Development
Scott A. Stein (36) Vice President-Management
Information Systems
Dennis J. Tewell (38) Vice President-Operations
(Northeast Region)
Daniel W. Wallace (46) Vice President-Operations
(Midwest Region)
Gregory Wozniak (47) Vice President-Corporate
Counsel
</TABLE>
Except as noted below, each of the executive officers of the
Company has been employed by the Company for more than the last
five (5) years, in areas similar to or encompassed by their current
responsibilities.
John W. Everets, Jr.
Mr. Everets has been Chairman of the Board and Chief Executive
Officer of HPSC, Inc., a publicly held company which 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. Previously, he was Executive Vice
President of Advest, Inc., an investment banking firm, from 1983 to
January 1990. Mr. Everets also served as Chairman of the Board of
Billings and Co., Inc., a real estate investment banking firm, and
Chairman of Advest Credit Corp., both subsidiaries of Advest Group,
Inc. He is also a director of Eastern Company, a publicly held
company, and serves on the Board of Directors of Crown Northcorp.
Mitchell J. Kupperman
Dr. Kupperman joined the Company in 1983 as Director of Human
Resources and was named Vice President-Human Resources in 1985. He
was elected Executive Vice President-Human Resources and Secretary
of the Company in January 1989. Prior to joining the Company, Dr.
<PAGE>
Kupperman attended the University of Connecticut, where he obtained
a doctoral degree in Educational Administration.
Gregory G. Landry
Mr. Landry was named Executive Vice President of the Company in
April 1992 and has served as Chief Financial Officer since August
1990. Mr. Landry joined the Company in October 1985 and served in
various financial positions until he was named Treasurer of the
Company in July 1989 and served in this capacity until April 1991.
He is a certified public accountant and a member of the American
Institute of Public Accountants.
Charles Nirenberg
Mr. Nirenberg is the founder of the Company. He served as Chief
Executive Officer and President since its formation in 1957 until
January 1989, when Mr. Nirenberg resigned as President of the
Company, and until March 1992, when Mr. Nirenberg resigned as Chief
Executive Officer. Mr. Nirenberg continues to serve as Chairman of
the Company. Additionally, Mr. Nirenberg is Dr. Kupperman's father-
in-law.
Robert B. Stein, Jr.
Mr. Stein was elected President of the Company in September 1994.
He previously served as Executive Vice President-Operations and
Marketing since April 1992. He joined the Company in 1983 and
served in various positions until serving as Treasurer of the
Company from January 1989 until June 1989. Subsequently, Mr. Stein
served as General Manager of the Company's Midwest Region from July
1989 until March 1992.
Frank W. Barrett
Mr. Barrett is Executive Vice President of Springfield Institution
for Savings. He previously served as Senior Vice President for Bank
of Ireland First Holdings, Inc. from September 1990 to December
1993, as Senior Vice President for Connecticut National Bank from
May 1990 to September 1990, and as Senior Vice President for
Shawmut Bank, N.A. from January 1988 to May 1990. Mr. Barrett also
served as President and Chief Executive Officer of Shawmut Home
Bank in Hartford, Connecticut from April 1987 to December 1987 and
prior to that was Executive Vice President for Shawmut Worcester
County Bank in Worcester, Massachusetts since 1982.
<PAGE>
Theodore W. Leed
Dr. Leed is a professor emeritus of food marketing at the
University of Massachusetts and a lecturer, author and consultant
to numerous companies on the subject of food merchandising. He
holds a doctoral degree in agricultural economics from Ohio State
University. Dr. Leed is a principal of Group 7, Inc., a management
consulting company.
Thomas A. Chicoine
Mr. Chicoine was named Vice President-Manufacturing and
Distribution in July 1989. He previously served the Company in the
same capacity from 1985 to 1987. Mr. Chicoine also served in
managerial capacities at Massachusetts-based dairies prior to 1982
and during a period between 1987 and 1989 before rejoining the
Company. He also served as Vice President-Manufacturing of the
Lawson Company from 1982 to 1985. Mr. Chicoine serves on the Board
of the International Dairy Food Association, and is a member of the
Milk Industry Foundation
Darrell J. Davis
Mr. Davis was named Vice President-Operations for the Company's
Southeast Region in October 1994. He formerly served as Director of
Operations from December 1990 until October 1994. Mr. Davis joined
the Company in April 1983 as Franchise Coordinator. He has also
held the positions of Manager of Franchising, Associate Director of
Property Development and International Consultant/Operations
Specialist.
Edward M. Doyle
Mr. Doyle was named Vice President-Strategic Marketing in February
1993. Since joining the Company in August 1990, he has served as
acting Corporate Director of Marketing and Corporate Director of
Food Services. Prior to joining the Company, he served as Chief
Operating Officer for 6-Twelve Convenient Mart, Inc., and Director
of Beverage Programs for the Circle K Corporation.
Gregg O. Guy
Mr. Guy was named Executive Vice President-Operations and Marketing
in October 1994. He previously served as Vice President-Operations
for the Company's Southeast Region since December 1992 and had
served as Vice President and General Manager of the Company's
Southeast Region since December 1989. He also served as an
international consultant for the Company from December 1986 through
December 1988. Prior to joining the Company, Mr. Guy had served as
Vice President of Operations and Corporate Vice President of
<PAGE>
Marketing for the CONNA Corporation. Mr. Guy is a member of the
Board of Directors of the Kentucky Retail Federation.
Gary A. Payne
Mr. Payne was named Vice President-Business Development in October
1994. He previously served as Corporate Director of Franchising.
Mr. Payne joined the former CONNA Corporation, now the Company's
Southeast Region, in 1970. Between 1970 and 1984, he served in
various roles including Supervisor, Merchandising Manager, Vice
President-Marketing and Vice President-Business Development. Mr.
Payne left the CONNA Corporation in September 1984 to operate his
own business, and returned to the Company in October 1988 as Vice
President-Franchise Sales.
Scott A. Stein
Mr. Stein was named Vice President-Management Information Systems
in November 1994. He joined the Company in September 1992 as
Director of Store Automation, and his role was later expanded to
MIS Director. He was promoted to Vice President-Administration and
Management Information Systems in April 1994. Prior to joining the
Company, Mr. Stein was Director, Client/Server Computing for
Technology Investment Strategies Corporation. Mr. Stein also has
consulting, training and systems analysis experience through former
roles with Orion Group, Inc. and the Hartford Insurance Group. Mr.
Stein is the brother of Robert B. Stein, Jr., President of the
Company
Dennis J. Tewell
Mr. Tewell was named Vice President-Operations for the Company's
Northeast Region in September 1992. He previously served as Vice
President-Store Operations in the Southeast Region since December
1990. Mr. Tewell has also served in the positions of Director of
Operations, Strategic Planning Coordinator and special consultant
for the Company's international operations in Europe.
Daniel W. Wallace
Mr. Wallace as named Vice President-Operations for the Company's
Midwest Region in December 1992. He had served as Director of
Operations since December 1991. Mr. Wallace has also served as
Corporate Operations Coordinator for the Company's Point-of-Sale
(POS) project, Division Manager, Supervisor and Store Manager. He
also spent two years as a special consultant for the Company's
international operations.
<PAGE>
Gregory Wozniak
Mr. Wozniak was named Vice President-Corporate Counsel in December
1992. He is an attorney and has served as counsel to the Company
since the Company's 1985 acquisition of the Lawson Company. In
1989, he was promoted to Corporate Counsel.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding directors and
executive officers of the Company is set forth under the caption
"Executive Officers And Directors Of The Company" in Item 1 of this
Form 10-K/A Amendment No. 1 and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Executive Officers' Compensation
The following table provides certain information for the
Company's past three fiscal years regarding the cash and other
compensation paid to, earned by, or awarded to those persons who,
during the last fiscal year, (i) served as the Company's Chief
Executive Officer or in a similar capacity and (ii) were the four
most highly compensated executive officers whose total annual
salary and bonus exceeded $100,000:
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Annual CompensationCompensation
Awards
Securities
Underlying All Other
Name and PrincipalFiscal Total SalaryOptions/SARsCompensation
Position Year Salary Bonus and Bonus (#)(a) (b)
<S> <C> <C> <C> <C> <C> <C>
Robert B. Stein, Jr.,1995$199,808$35,000$234,808 96,945 $11,588
President (c) 1994 175,000 12,500 187,500 7,500 11,633
1993 160,481 0 160,481 -- 6,657
Mitchell J. Kupperman,1995 208,655 25,000 233,655 87,500 14,213
Executive Vice President-1994 205,000 7,500 212,500 5,000 12,794
Human Resources 1993 215,000 0 215,000 -- 6,899
Gregory G. Landry,1995 179,041 35,000 214,041 70,543 9,118
Executive Vice President1994 160,000 12,500 172,500 6,500 8,758
and Chief Financial Officer1993 143,654 0 143,654 -- 4,923
Gregg O. Guy, 1995 131,860 20,000 151,860 50,000 1,263
Executive Vice President-1994 120,000 10,000 130,000 3,500 1,046
Operations and Marketing1993 119,545 0 119,545 -- 349
Charles Nirenberg,1995 500,000 0 500,000 -- --
Chairman of the Company (d)1994 500,000 0 500,000 -- --
1993 500,000 0 500,000 -- 567
Frank Colaccino, 1995 187,311 70,000 257,311 150,000 149,901
President and Chief1994 300,000 25,000 325,000 10,000 27,828
Executive Officer (e)1993 286,442 0 286,442 -- 13,942
<FN>
__________________________
<PAGE>
(a) The options to purchase shares of Common Stock granted to Messrs. Stein, Kupperman, Landry and Guy in
the last fiscal year were granted to replace existing options, except for new options to purchase
24,445 shares, 10,000 shares, 14,688 shares and 31,500 shares that were granted to Messrs. Stein,
Kupperman, Landry and Guy, respectively, that were granted for the first time. The options to purchase
150,000 shares granted to Mr. Colaccino were granted to replace options previously granted to him that
expired after the termination of his employment described in footnote (e) below.
(b) 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 term life insurance
for the benefit of certain executive officers during the fiscal years ended January 28, 1995, January
29, 1994 and January 30, 1993. Company contributions to the qualified profit sharing plan for each of
the 1995, 1994 and 1993 fiscal years, respectively, included $1,984, $650 and $467 for Robert B. Stein,
Jr.; $2,080, $661 and $531 for Mitchell J. Kupperman; $448, $88 and $358 for Gregory G. Landry; $1,263,
$1,046 and $349 for Gregg O. Guy; $0, $0 and $567 for Charles Nirenberg; and $1,093, $2,263 and $567
for Frank Colaccino. Premiums paid on split-dollar and term life insurance for each of the 1995, 1994
and 1993 fiscal years, respectively, included $9,604, $10,983 and $6,190 for Robert B. Stein, Jr.;
$12,133, $12,133 and $6,368 for Mitchell J. Kupperman; $8,670, $8,670 and $4,565 for Gregory G. Landry;
and $0, $25,565 and $13,375 for Frank Colaccino.
(c) Mr. Stein was elected President of the Company in September 1994. He previously served as Executive
Vice President - Operations and Marketing since April 1992.
(d) Mr. Nirenberg has an employment agreement with the Company pursuant to which Mr. Nirenberg is employed
as Chairman of the Company for a five year term that began on February 1, 1992 and ends on January 31,
1997, unless terminated earlier. Under the employment agreement, Mr. Nirenberg receives an annual
salary of $500,000, payable in installments according to the Company's normal compensation policy, plus
customary fringe benefits. If Mr. Nirenberg dies during the term of the employment agreement, his
designated beneficiary is entitled to receive his salary for the remainder of the term. The Company has
purchased insurance insuring the life of Mr. Nirenberg and has designated itself as beneficiary.
(e) Mr. Colaccino served as President and Chief Executive Officer of the Company from March 12, 1992 until
August 25, 1994. Prior to March 12, 1992, he served as President of the Company since January 1, 1989.
On August 25, 1994, Mr. Colaccino's employment as President and Chief Executive Officer was terminated.
In order to settle certain disagreements with Mr. Colaccino concerning the termination of his
employment, the Company entered into an agreement with Mr. Colaccino that provides for certain payments
and other benefits to him. Under the agreement, the Company agreed to pay to Mr. Colaccino $365,000 per
year for three years commencing August 25, 1994. The amount set forth above under "All Other
Compensation" for Mr. Colaccino includes $148,808 of such payments made to him after his termination
of employment through January 28, 1995. The Company also agreed to pay Mr. Colaccino $306,032 to cover
certain expenses. The Company will also provide certain health insurance benefits and has granted
certain stock options described in footnote (a) above.
</FN>
</TABLE>
<PAGE>
Option/SAR Grants In Last Fiscal Year
The table below provides certain information regarding stock
options granted during the Company's last fiscal year to the
executive officers listed in the Summary Compensation Table above:
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable
Value at Assumed
Number of Annual Rates of Stock
Securities Price Appreciation
Underlying % Of Total for Option Term
Options/SARsOptions/SARsExercise or
Granted Granted toBase Price
(#) Employees in Per Share Expiration Date
Name (a) Fiscal Year (b) (a) 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert B. Stein, Jr 12,500 1.9%$ 2.75December 17, 1996$ 3,838$ 7,913
12,500 1.9% 2.75 October 31, 1999 9,497 20,986
22,500 3.4% 2.75 January 27, 2002 26,278 61,716
7,500 1.1% 2.75 February 23, 2003 10,355 25,059
2,500 0.4% 2.75 May 6, 1997 926 1,929
7,500 1.1% 2.75 September 11, 2000 6,904 15,638
24,445 3.7% 2.88 November 1, 2004 44,198 112,007
7,500 1.1% 2.75 January 27, 2002 8,759 20,572
Mitchell J. Kupperman 26,250 3.9%$ 2.75October 31, 1999$19,944$ 44,071
30,000 4.5% 2.75 January 27, 2002 35,037 82,288
10,000 1.5% 2.75 September 11, 2000 9,205 20,850
5,000 0.7% 2.75 February 23, 2003 6,903 16,706
10,000 1.5% 2.88 November 1, 2004 18,081 45,820
6,250 0.9% 2.75 May 6, 1997 2,315 4,822
Gregory G. Landry 8,438 1.3%$ 2.88 November 1, 2004$15,257$ 38,663
7,500 1.1% 2.75 January 27, 2002 8,759 20,572
6,250 0.9% 2.75 May 6, 1997 2,315 4,822
22,500 3.4% 2.75 January 27, 2002 26,278 61,716
5,000 0.7% 2.75 September 11, 2000 4,603 10,425
6,500 1.0% 2.75 February 23, 2003 8,974 21,718
6,230 0.9% 2.88 November 1, 2004 11,264 28,546
8,125 1.2% 2.75 October 31, 1999 6,173 13,641
Gregg O. Guy 31,500 4.7% $ 2.88 November 1, 2004$56,954$144,333
2,500 0.4% 2.75 April 8, 1997 894 1,860
12,500 1.9% 2.75 October 31, 1999 9,497 20,986
3,500 0.5% 2.75 February 23, 2003 4,832 11,694
Charles Nirenberg -- -- -- -- -- --
Frank Colaccino 15,000 2.2% $ 4.60 July 26, 1996$ 5,261$ 10,695
10,000 1.5% 5.25 July 26, 1996 4,003 8,138
60,000 9.0% 7.25 July 26, 1996 33,169 67,425
48,750 7.3% 6.20 July 26, 1996 23,047 46,849
6,250 0.9% 6.60 July 26, 1996 3,145 6,394
10,000 1.5% 5.50 July 26, 1996 4,194 8,525
<FN>
________________________
(a) All options granted in the last fiscal year to Messrs. Stein, Kupperman, Landry and Guy were granted
to replace options previously granted (the "Repriced Options") except for the options whose exercise
price is $2.88, which options were granted for the first time. The Repriced Options continued the
<PAGE>
vesting schedules contained in the options that were replaced. The options granted to Mr. Colaccino
were granted in connection with the termination of his employment and replaced previous options that
expired after his employment terminated. Except for the Repriced Options and Mr. Colaccino's options,
each option becomes fully exercisable over four years, with 25% of the shares subject to the option
becoming exercisable on each anniversary of the option grant date. Except for the Repriced Options and
Mr. Colaccino's options, 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.
(b) All options were granted at an exercise price per share equal to the fair market value of the Common
Stock on the date of grant, as quoted on the NASDAQ Stock Market, except for Mr. Colaccino's options,
which were granted at the same exercise price per share as those that they replaced.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR 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 28, 1995, by the
executive officers listed in the Summary Compensation Table above:
<TABLE>
<CAPTION>
Number of Value of
Shares Underlying Unexercised
Unexercised In-the-Money
Options/SARs atOptions/SARs at
Shares Acquired FY-End (#) FY-End (1)
on Exercise of Exercisable (E)/Exercisable (E)/
Name Options (#)Value RealizedUnexercisable (U)Unexercisable (U)
<S> <C> <C> <C> <C>
Robert B. Stein, Jr........... -- -- 60,125 (E)$ 52,250 (E)
37,570 (U) 30,006 (U)
Mitchell J. Kupperman......... -- -- 70,000 (E) 58,300 (E)
21,250 (U) 17,450 (U)
Gregory G. Landry............. -- -- 43,500 (E) 38,280 (E)
27,043 (U) 21,964 (U)
Gregg O. Guy.................. -- -- 15,875 (E) 13,970 (E)
34,125 (U) 26,092 (U)
Charles Nirenberg............. -- -- -- --
-- --
Frank Colaccino............... -- --150,000 (E) -0- (E)
-0- (U) -0- (U)
<FN>
____________________________
(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 28, 1995, which amounts were $3.63 and $3.63 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 28, 1995. Such options are not "in
the money" and their value is, therefore, not disclosed above.
</FN>
</TABLE>
Employment Related Agreements
Messrs. Stein, Kupperman and Landry, executive officers of the
Company, entered into agreements with the Company dated September
16, 1994, pursuant to which they will receive certain payments if
<PAGE>
their employment is terminated under certain circumstances. The
terms of the agreements provide that if the Company terminates any
of such executive officer's employment for any reason, other than
as a result of death, disability or cause, or if such executive
officer terminates his employment for "good reason", as described
below, such executive officer is entitled to receive, among other
things, a payment equal to two times the sum of base salary plus
annual bonus; health and medical insurance coverage; ownership of
life insurance policies held by the Company that insure such
executive officer; and the immediate vesting of all stock options
held by such executive officer with the right to exercise them for
up to eighteen months after termination of employment. Any of the
executive officers would have "good reason" to terminate his
employment and receive such payments and benefits if any of the
following occur and such executive officer terminates his
employment between September 16, 1995 and September 16, 1996: (i)
he is assigned duties that are inconsistent with his current status
as an executive officer, or he is removed from that position; (ii)
the Company reduces his annual base salary, annual bonus or fringe
benefits in effect on September 16, 1994, or as they may be
increased from time to time thereafter; or (iii) the Board of
Directors of the Company fails to nominate the executive officer
for election as a director of the Company, except if his employment
is terminated as a result of death, disability or cause, or he
terminates his employment for any reason other than those in (i) or
(ii) above. The agreements expire on September 16, 1996.
Directors' Compensation
Messrs. Everets, Leed and Barrett each received directors'
fees of $17,000, $21,000 and $21,000, respectively, for the fiscal
year ended January 28, 1995. The annual fee for outside directors
for the 1996 fiscal year is $12,000 plus $1,000 for each regular or
special meeting of the Board attended. The remaining directors, who
are employees of the Company, receive no directors' fees.
ITEM 12. 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 8, 1995. 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
<PAGE>
some cases, other information provided to the Company by such
persons.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Title of Class Name and Address of Beneficial Owner OwnershipPercent of Class
<S> <C> <C> <C>
Class B New DM Management Associates I1,531,938 (1)55.0%
Common Stock One Vision Drive
Enfield, Connecticut
New DM Management Associates II326,805 (1)11.7%
One Vision Drive
Enfield, Connecticut
Charles Nirenberg 1,531,888 (1) 55.0%
One Vision Drive
Enfield, Connecticut
Robert B. Stein, Jr. 1,525,336 (1) 54.7%
One Vision Drive
Enfield, Connecticut
Gregory G. Landry 1,527,426 (1) 54.8%
One Vision Drive
Enfield, Connecticut
Mitchell J. Kupperman 1,524,659 (1) 54.7%
One Vision Drive
Enfield, Connecticut
Frank Colaccino 365,770 (1) 13.1%
57 Thistledown
Suffield, Connecticut
____________________________________________________________________________________________________________
Class A James Wilen and Wilen Management277,425 (2)10.0%
Common Stock Corporation
2360 West Joppa Road
Suite 226
Lutherville, Maryland
Heartland Advisors, Inc. 558,250 (3) 20.0%
790 North Milwaukee Street
Milwaukee, Wisconsin
Liberty Investment Management, Inc.287,800 (4)10.3%
2502 Rocky Point Drive
Tampa, Florida
<FN>
____________________________
Notes to Table
(1) New DM Management Associates I ("DM Management I") is a Connecticut general partnership which
is a general partner of DM Associates Limited Partnership ("DM Associates"), a Connecticut limited partnership.
New DM Management Associates II ("DM Management II") is a Connecticut general partnership which is a special
general partner of DM Associates. The individual general partners of DM Management I are Charles Nirenberg,
<PAGE>
Robert B. Stein, Jr., Mitchell J. Kupperman and Gregory G. Landry. The individual general partners of DM
Management II are Messrs. Nirenberg, Stein, Kupperman, Landry and Frank Colaccino.
DM Associates is the owner of record of 1,858,743 shares of Class B Common Stock, representing
approximately 66.7% of the Class B Common Stock and approximately 60.7% of the total voting power of both Class
B Common Stock and Class A Common Stock. However, as the general partners of DM Associates and by virtue of the
provisions of its limited partnership agreement, DM Management I and DM Management II have the power to vote
and dispose of 1,531,938 shares and 326,805 shares, respectively, of the 1,858,743 shares owned of record by
DM Associates. As general partners of each of DM Management I and/or DM Management II, and by virtue of the
respective general partnership agreements of each of such partnerships, Messrs. Nirenberg, Stein, Kupperman and
Landry are each indirect beneficial owners (through shared and/or sole voting and dispositive power) of
1,531,388, 1,524,586, 1,506,305 and 1,527,426 shares of Class B Common Stock, respectively. As a general partner
of DM Management II and by virtue of the provisions of its partnership agreement, Mr. Colaccino is the indirect
beneficial owner of 306,388 shares of Class B Common Stock. In addition, the partnership agreements require
certain consents of partners having certain percentage interests in the partnerships before shares of Class B
Common Stock may be voted or disposed of.
The number of shares of Class B Common Stock set forth above for each of Messrs. Nirenberg, Stein,
Kupperman, Landry and Colaccino also includes the following amounts that are beneficially owned individually:
500 shares for Mr. Nirenberg; 750 shares for Mr. Stein (which represent currently exercisable options to
purchase 750 shares); 18,354 shares for Mr. Kupperman (including currently exercisable options to purchase 3,750
shares); 0 shares for Mr. Landry; and 59,382 shares for Mr. Colaccino (including currently exercisable options
to purchase 10,000 shares). The foregoing number of shares, or those set forth in the table above, do not
include shares of Class A Common Stock that any of Messrs. Nirenberg, Stein, Kupperman, Landry or Colaccino may
beneficially own. In addition, Mr. Nirenberg is an officer, director and the sole shareholder of FCN Properties
Corporation ("FCN") which is the pledgee of 1,220,000 shares of Class B Common Stock owned of record by DM
Associates. Mr. Nirenberg has shared voting and dispositive power with FCN as to these shares which are part
of the 1,531,888 shares listed in the table above for Mr. Nirenberg. See "Certain Information Regarding DM
Associates."
(2) A Schedule 13G was filed with the SEC by Wilen Management Corporation ("Wilen") and James Wilen
in his capacity as President and sole owner of Wilen, to report Wilen's beneficial ownership as an investment
advisor to various clients, of shares of Class A Common Stock. The 277,425 shares represent approximately 5.0%
of the total number of issued and outstanding shares of both classes of the Company's Common Stock, and less
than 1.0% of the total voting power of both classes of the Company's Common Stock.
(3) Heartland Advisors, Inc. reported on a Schedule 13G filed with the SEC its beneficial
ownership, as an investment advisor, of shares of Class A Common Stock. The 558,250 shares represent
approximately 10% 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) The 287,800 shares of Class A Common Stock represent approximately 5.2% of the total number
of issued and outstanding shares of both classes of the Company's Common Stock and less than 1% of the total
voting power of both classes of the Company's Common Stock.
</FN>
</TABLE>
Stock Ownership of Management
The following table sets forth certain information furnished
by the directors, certain executive officers, and all directors and
executive officers as a group concerning ownership of the Company's
Common Stock as of May 8, 1995:
<PAGE>
<TABLE>
<CAPTION>
Shares (and Percent) of Common Stock
Name Beneficially Owned as of May 8, 1995
Percent
Class B Class A of Total
Common Stock Common Stock Voting Power
<S> <C> <C> <C>
Frank W. Barrett............... 1,250 (*) 2,500 (*) (*) (1)
John W. Everets, Jr............ 10,000 (*) 0 (*)
Mitchell J. Kupperman..........1,524,659 (54.7%) 72,795 (2.6%) (49.8%) (2)(3)
Gregory G. Landry..............1,527,426 (54.8%) 45,125 (1.6%) (49.9%) (2)(4)
Theodore W. Leed............... 1,552 (*) 2,500 (*) (*) (1)
Charles Nirenberg..............1,531,888 (55.0%) 500 (*) (50.0%) (2)(5)
Robert B. Stein, Jr............1,525,336 (54.7%) 66,020 (2.3%) (49.9%) (2)(6)
All Directors and Executive
Officers as a Group
____________________________
(16 persons) 1,591,511 (56.9%)254,607 (8.4%) (52.2%) (7)
____________________________
<FN>
(*) Owns less than 1% of the issued and outstanding class of Common Stock.
(1) Includes currently exercisable non-qualified stock options granted to each of Messrs. Barrett and Leed
to purchase 2,500 shares of Class A Common Stock. Such options were not granted pursuant to any stock
option plan of the Company.
(2) Messrs. Kupperman, Landry, Nirenberg and Stein are each partners of DM Management I and DM Management
II (described in footnote 1 to the Principal Shareholders table above). The shares of Class B Common
Stock Set forth in this table for each of such persons include the shares set forth for each person in
the Principal Shareholders table above.
(3) Includes currently exercisable incentive stock options granted to Dr. Kupperman to purchase 3,750
shares of Class B Common Stock and 67,500 shares of Class A Common Stock. Also includes shares of
Common Stock owned by Dr. Kupperman's wife and children.
(4) Includes currently exercisable incentive stock options granted to Mr. Landry to purchase 45,125 shares
of Class A Common Stock.
(5) Does not include shares of Class B Common Stock and shares of Class A Common Stock owned by Mr.
Nirenberg's children, the ownership of which Mr. Nirenberg disclaims.
(6) Includes currently exercisable incentive stock options granted to Mr. Stein to purchase 750 shares of
Class B Common Stock and currently exercisable incentive stock options to purchase 61,250 shares of
Class A Common Stock.
(7) Includes currently exercisable stock options granted to all directors and executive officers of the
Company to purchase 11,250 shares of Class B Common Stock and 232,875 shares of Class A Common Stock.
The following executive officers and directors of the Company did not timely file with the SEC, on
certain occasions, their reports on Forms 3, 4 or 5 to report changes in their beneficial ownership of the
Company's Common Stock: Mr. Everets (one report due upon becoming a director); Gary A. Payne (one report due
upon becoming an executive officer and one report for one transaction); and Gregory Wozniak, Darrell J. Davis,
Robert B. Stein, Jr., Mitchell J. Kupperman, Gregory G. Landry, Edward M. Doyle, Gregg O. Guy, Scott A. Stein,
Dennis J. Tewell and Daniel W. Wallace (one report each for one transaction each).
</FN>
</TABLE>
<PAGE>
Certain Information Regarding DM Associates
DM Associates Limited Partnership ("DM Associates") is the
owner of record of 1,858,743 shares of Class B Common Stock of the
Company, representing approximately 66.7% of the issued and
outstanding shares of Class B Common Stock, and 60.7% of the total
voting power of both classes of the Company's Common Stock. The
general partners of DM Associates are New DM Management Associates
I ("DM Management I") and New DM Management Associates II ("DM
Management II"), both of which are general partnerships. DM
Management I and DM Management II are the beneficial owners of
1,531,938 and 326,805 shares, respectively, of the 1,858,743 shares
of Class B Common Stock owned of record by DM Associates. The
general partners of DM Management I and DM Management II include
Robert B. Stein, Jr., President; Charles Nirenberg, Chairman of the
Company; Mitchell J. Kupperman, Executive Vice President-Human
Resources; and Gregory G. Landry, Executive Vice President and
Chief Financial Officer.
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 "Loan") from the Connecticut Development
Authority ("CDA"). The Company has been advised that on September
30, 1994, FCN Properties Corporation ("FCN"), a corporation owned
and controlled by Charles Nirenberg, purchased all of the CDA's
right, title and interest in and to the Loan. FCN paid the CDA
$3,600,000 and gave the CDA a promissory note for $3,500,000 (the
"FCN Note").
The Loan is secured by DM Associates' collateral pledge of
1,220,000 shares of Class B Common Stock owned by DM Associates
(the "Pledged Shares"), representing 43.8% of the issued and
outstanding shares of Class B Common Stock and 39.8% of the total
voting power of both classes of Common Stock. To secure the FCN
Note to the CDA, the Company has been advised that FCN granted a
lien to the CDA on, among other things, FCN's rights to the Pledged
Shares (the "FCN Lien"). The Loan provides that a default of the
Loan will result upon certain events occurring. If a default occurs
under the Loan, FCN has the right to sell or otherwise dispose of
the Pledged Shares. If a default occurs under the FCN Note or the
FCN Lien while there is a default under the Loan, the CDA has the
right to sell or otherwise dispose of the Pledged Shares. In either
event, such a sale or disposal could result in a change in control
of the Company. Unless a default occurs under the Loan, DM
Associates has the right to vote the Pledged Shares, subject to
having received the required consents of FCN with respect to
certain matters.
In addition, the limited partnership agreement of DM
Associates provides that if the term of the limited partnership is
<PAGE>
extended beyond September 12, 1997, any limited partner whose
percentage interest in DM Associates is greater than 30% may sell
all or a portion of his or its interest, subject to DM Associates
right of first refusal to purchase such interest. If DM Associates
and such limited partner do not agree on the terms of acquiring
such limited partner's interest, and there is not a third party
purchaser, such limited partner has the right to: (i) demand the
dissolution of DM Associates and the distribution of its assets to
its partners; or (ii) cause such assets to be sold. The limited
partnership agreement also requires DM Management I and DM
Management II to consult with 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 DM
Management I and/or DM Management II 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. As
DM Associates' principal asset is its 1,858,743 shares of Class B
Common Stock, if such a dissolution or sale occurs, a change in
control of the Company could result.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 30, 1995
DAIRY MART CONVENIENCE STORES, INC.
By /s/ Robert B. Stein, Jr. By /s/ Gregory G. Landry
Robert B. Stein, Jr. Gregory G. Landry
President and Chief Executive Vice President and
Operating Officer Chief Financial Officer
