-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, huP6RST4oui14eS/v1If0/aSyFDaL89xA7qgV4WJ2SAYwKfTRc9DQSCtPBpqNal7 j43afuHv0Rm0K7MORH5u/Q== 0000950109-94-000923.txt : 19940603 0000950109-94-000923.hdr.sgml : 19940603 ACCESSION NUMBER: 0000950109-94-000923 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940129 FILED AS OF DATE: 19940531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAIRY MART CONVENIENCE STORES INC CENTRAL INDEX KEY: 0000721675 STANDARD INDUSTRIAL CLASSIFICATION: 5412 IRS NUMBER: 042497894 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-12497 FILM NUMBER: 94532310 BUSINESS ADDRESS: STREET 1: ONE VISION DRIVE CITY: ENFIELD STATE: CT ZIP: 06082 BUSINESS PHONE: 2037414444 10-K/A 1 AMENDMENT NUMBER 1 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 29, 1994 ---------------- --- 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 Identification No.) incorporation or organization) 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. [X] As of April 1, 1994, 2,747,104 shares of Class A Common Stock and 2,780,058 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 $23,700,000. -1- 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 29, 1994, 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 1994 annual meeting of shareholders, as such proxy statement will not be filed within 120 days after the fiscal year ended January 29, 1994; the information required by such items is now set forth in full in Part III and is filed herewith. -2- DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- None PART I ------ ITEM 1. BUSINESS GENERAL Dairy Mart Convenience Stores, Inc., and its subsidiaries (the "Company" or "Dairy Mart"), operates one of the nation's largest convenience store chains. Founded in 1957, the Company operates or franchises approximately 1,000 stores under the "Dairy Mart" name in 11 states located in the Northeast, Midwest and Southeast. Approximately 420 stores sell gasoline and approximately 335 stores are franchised. The Company also manufactures, processes and distributes certain dairy and other products. 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. The Company's primary growth strategy is to increase its retail gasoline presence. As a result, almost all of the stores recently opened by the Company are retail units, known as "super pumper" stores, which have approximately four times the gasoline retailing capacity and a significantly larger in-store size than the Company's traditional convenience stores. The Company plans to open approximately 20 new super pumper stores in the fiscal year ending January 28, 1995 and approximately 30 new super pumper stores per year thereafter for the foreseeable future. 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. 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 -3- 420 locations also sell gasoline, which the Company believes is an important convenience for customers. 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 traditional Dairy Mart store is typically 2,400 square feet and most are free standing structures. As of January 29, 1994, the Company operated and franchised retail convenience stores in the following three regions of the United States:
NUMBER OF NORTHEAST REGION STORES --------- Massachusetts.............................................. 73 Connecticut................................................ 67 New York................................................... 37 Rhode Island............................................... 25 ----- Total Northeast Stores................................ 202 ----- MIDWEST REGION Ohio....................................................... 518 Michigan................................................... 49 Pennsylvania............................................... 41 ----- Total Midwest Stores.................................. 608 ----- SOUTHEAST REGION Kentucky................................................... 169 Indiana.................................................... 18 Tennessee.................................................. 14 North Carolina............................................. 11 ----- Total Southeast Stores................................ 212 ----- Total Stores...................................... 1,022 =====
SUPER PUMPER STORES Super pumper stores are an important part of the Company's strategy to expand and increase its profitability. Super pumper stores have approximately four times the gasoline retailing capacity of traditional gasoline convenience stores. Generally 2,700 square feet, super pumper stores are significantly larger than the Company's traditional convenience stores. The stores are designed to devote a greater amount of space to fast food counters, deli areas and refrigeration display units which attract customers to high profit margin products such as fountain drinks and fresh made sandwiches. Super pumper stores are generally located at high-traffic intersections to provide convenient access to customers, and all have -4- canopies to shield gasoline customers from inclement weather. As of January 29, 1994, the Company had 34 super pumper stores, a majority of which have been opened since February, 1992 and all of which have been opened since the beginning of fiscal 1990. UPGRADING EXISTING STORE BASE Over the next four fiscal years, the Company plans to upgrade and remodel up to 400 stores in order to modernize the stores' look, upgrade their equipment and increase the space devoted to higher profit margin items, such as fountain drinks and fast food and deli items. Management expects that this remodeling program will favorably impact the amount of maintenance capital expenditures required on its existing store base due to the installation of newer, more reliable equipment. The Company also intends to convert approximately 40 traditional gasoline convenience stores to super pumper status over the same period. Stores recently upgraded to super pumper status have shown significantly higher inside store and gasoline sales. CLOSING UNDER PERFORMING STORES The Company continually evaluates the performance of each of its stores in order to identify actions aimed at improving the Company's overall profitability. Based upon these evaluations, the Company continues to sell or close certain under performing stores. The Company considers various factors in deciding to sell or close stores, including store location, lease term, rental and other obligations and store performance. Sales or closures of stores, while reducing revenues, generally do not have an adverse effect on overall results, since a majority of such stores operate at a loss. The Company sold or closed approximately 60 stores in fiscal 1994. GASOLINE OPERATIONS A major part of the Company's growth strategy is to continue to increase its level of gasoline sales. This strategy enables the Company to significantly increase a store's total level of sales without a commensurate increase in overhead. The Company believes that the sale of gasoline at its stores offers a significant competitive advantage and that customers value this additional convenience. Gasoline sales accounted for approximately 37% of total revenues of the Company for each of the past three fiscal years. As of January 29, 1994, 419 stores sold gasoline. 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 on page F-15. 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 an 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. Substantial decreases in gasoline profit margins, or the volume of gasoline sold, may have an adverse impact on the Company's earnings. -5- 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 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. Central to these efforts has been the Company's installation of fast food counters, the "Hot Dog Central" program which includes hot dog grills and related equipment and/or deli areas in approximately 500 stores over the last three fiscal years. 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 new private label products, including ice cream products and juices, which generally carry a higher gross profit margin than the Company's average gross profit margin on comparable products. These private label products include Dairy Mart's "Party Time" (R) and "Special Occasion" (R) ice cream. POS SYSTEM The Company has initiated a program to install a Point-of-Sale (POS) system in all stores within three years. The Company anticipates that, upon completion of this program, each store will be equipped with a scanner and with a dedicated personal computer, into which sales, inventory and other data will be input at scheduled daily intervals, and then automatically transmitted to the Company's headquarters. The Company believes that the POS system will: (i) provide more accurate and timely information regarding store operations, including sales and merchandising, and inventory levels and composition; (ii) reduce paperwork for store managers, thereby allowing them to spend more time interacting with customers and improving operations; (iii) decrease administrative overhead, since the input and verification of data will be automated at both the store and office level; and (iv) improve verification of product costs and retail pricing. The cost of the POS system, including new cash registers and personal computers, is currently estimated to be approximately $7.0 million to $9.0 million, and is anticipated to be funded by third-party equipment financing. The Company believes it will be among the first of the larger convenience store chains to implement a chain-wide POS system. MANUFACTURING AND DISTRIBUTION OPERATIONS The Company supplies its stores and most franchised stores through a product distribution system which includes 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 supplies 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 are not produced by the Company are supplied to the Northeast and Midwest regions by one wholesale distributor under a ten- year contract entered into in February, 1988. The Company supplies the Southeast region stores in large part through its 35,000 square foot distribution facility located in Louisville, Kentucky. -6- In fiscal 1993, the Company reversed a prior policy and began to actively market its excess manufacturing and processing capacity to third parties, such as wholesalers and supermarkets. These efforts have resulted in a wholesale arrangement with a regional brand name ice cream distributor which has more than doubled the utilization of the Company's ice cream production capacity since the beginning of fiscal 1993. To accommodate additional growth in the sale of ice cream to third party purchasers, the Company invested approximately $1.4 million to further enhance product quality and to improve the efficiency and capacity of its ice cream production. The Company also intends to continue to pursue sales to third parties of other products produced at its manufacturing and processing facilities. FRANCHISE OPERATIONS The Company franchises approximately 335 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. The Company currently franchises only existing stores. Most franchisees purchase milk, ice cream, dairy products, fruit juices and other non-carbonated beverages distributed by the Company and generally purchase other products through the same 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 29, 1994, there were 161 full franchise locations and 174 limited franchise locations. The Company has recently revised its franchising strategy in order 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:
January 29, 1994 January 30, 1993 February 2, 1992 ----------------------------- ----------------------------- ----------------------------- Company Franchise Company Franchise Company Franchise Operated Operated Total Operated Operated Total Operated Operated Total --------- ---------- ------ --------- ---------- ------ --------- ---------- ------ At beginning of period.... 709 370 1,079 685 449 1,134 725 465 1,190 Opened or acquired........ 4 -- 4 6 -- 6 6 -- 6 Closed or sold............ (50) (11) (61) (34) (27) (61) (48) (14) (62) Transferred (net)......... 24 (24) -- 52 (52) -- 2 (2) -- --- --- ----- --- --- ----- --- --- ----- At end of period.......... 687 335 1,022 709 370 1,079 685 449 1,134 === === ===== === === ===== === === =====
-7- 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, and continues to pursue similar arrangements in other countries. As with the Company's prior international arrangements, both such agreements require a specified commitment 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. Largely in response to such research, the Company launched a new advertising program entitled "Close to Home" which emphasizes the high percentage of neighborhood locations throughout Dairy Mart's operating regions. 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, supermarket 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 29, 1994, exclusive of franchisees and franchisees' employees, the Company employed, on a full-time or part-time basis, approximately 5,000 employees. 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 -8- 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 expected 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 $16.0 million to $20.0 million in the aggregate over the next five 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 of compliance. The Company's estimates 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 estimates noted above. EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY Set forth below are the Company's executive officers, directors and persons nominated for election as a director for the first time at the Company's 1994 annual meeting of shareholders. 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. -9-
Name and Age Title - - ------------ ----- Frank Colaccino (44) President and Chief Executive Officer, and a Class B Director since 1988 John W. Everets, Jr. (48) Nominee for election as a Class B Director for the first time Mitchell J. Kupperman (42) Executive Vice President-Human Resources, Secretary, and a Class B Director since 1988 Gregory G. Landry (36) Executive Vice President, Chief Financial Officer, and a Class B Director since 1991 Charles Nirenberg (70) Chairman of the Company, and a Class B Director since 1972 Robert B. Stein, Jr. (36) Executive Vice President-Store Operations, and a Class B Director since 1992 Frank W. Barrett (54) Class A Director since 1983 Theodore W. Leed (67) Class A Director since 1983 David A Beckman (47) Vice President-Operations (Midwest North Region) Patricia A Cascarelli (41) Vice President-Field Human Resources Thomas A Chicoine (44) Vice President-Manufacturing and Distribution Edward M. Doyle (40) Vice President-Strategic Marketing Gregg O. Guy (45) Vice President-Operations (Southeast Region) David J. Jeffco (41) Vice President-Field Marketing Jeffrey W. Jones (32) Vice President-Controller Lawrence R. Pellegrini (52) Vice President-Real Estate and Construction Scott A. Stein (35) Vice President-Administration and Management Information Systems Dennis J. Tewell (37) Vice President-Operations (Northeast Region) Daniel W. Wallace (45) Vice President-Operations (Midwest Central Region) Gregory Wozniak (46) Vice President-Corporate Counsel Elizabeth A Yopko (35) Vice President-Corporate Communications
-10- 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. Mr. Colaccino was elected Chief Executive Officer in March 1992 and has served as President since January 1989. He joined the Company in 1976 and was named Vice President-Real Estate in 1979, and Vice President-Corporate Development in 1985. He is a Vice Chairman of the National Association of Convenience Stores' (NACS) Board of Directors and serves on the Board of Trustees for Western New England College, Springfield, Massachusetts. 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. Mr. Everets is Vice Chairman of the Connecticut Development Authority and Chairman of the Loan Committee of the Connecticut Development Authority. He is also a director of Eastern Company, a publicly held company. 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. Kupperman attended the University of Connecticut where he obtained a doctoral degree in Educational Administration. 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 is a member of the American Institute of Certified Public Accountants. Mr. Nirenberg is the founder of the Company. He served as its 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. Mr. Stein was named Executive Vice President-Store Operations in 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. He is a member of the Ohio Association of Convenience Stores' Board of Directors. Mr. Barrett has served as Senior Vice President for Springfield Institution for Savings since January 1994. 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. Dr. Leed has been, for more than five years, a professor (and is currently 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. Mr. Beckman was named Vice President-Operations for the Midwest North Region in January 1991. He previously held the position of Director of Operations-Midwest North Region from March 1990 to December 1990. Prior to joining the Company, Mr. Beckman had served as Vice President of Operations, Operations Manager and Zone Manager during 14 years with Stop-N-Go Foods, Inc. Ms. Cascarelli was named Vice President-Field Human Resources in December 1992. She joined the Company in 1973 as a store manager and has served as Vice President-Human Resources, Human Resources Director of the Southeast Region, Human Resources Manager of the Midwest Region, and a Field Trainer. 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 was also 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, Connecticut Food Association and the Southern Association of Dairy Food Manufacturers. -11- 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. Mr. Guy was named Vice President-Operations for the Southeast Region in December 1992, and had served as Vice President and General Manager of the 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 Marketing for the CONNA Corporation. Mr. Guy is a member of the Board of Directors of the Kentucky Retail Federation. Mr. Jeffco was named Vice President-Field Marketing in February 1993. He joined the Company in December 1990 and served as Director and Vice President-Marketing for the Midwest Region. Prior to joining the Company, Mr. Jeffco served as Vice President of Merchandising and Marketing, Assistant to the Vice President of Operations, and Director of Merchandising and Marketing with Uni-Marts, Inc. Mr. Jones was named Vice President-Controller in October 1993. He joined the Company in February 1988 as Assistant Controller of the Southeast Region, and was later named Controller of that region. He has also served as Controller, Assistant Treasurer and Treasurer of the Company. He is a certified public accountant and is a member of the American Institute of Certified Public Accountants. Mr. Pellegrini joined the Company in December 1992 as Vice President-Real Estate. In March 1993, he was named Vice President-Real Estate and Construction. He was formerly a partner in the consulting firm of Pellegrini & Blair in Springfield, Massachusetts and Director of Real Estate-Northeast Division for the Friendly Ice Cream Corporation. Mr. Stein was named Vice President-Administration and Management Information Systems (MIS) in April 1994. He joined the Company in September 1992 as Director of Store Automation, and his role was later expanded to MIS Director. 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. Tewell was named Vice President-Operations for the Northeast Region in September 1992. He previously served as Vice President-Store Operations for the Southeast Region. Mr. Tewell has also served in the positions of Strategic Planning Coordinator, Director of Operations, and special consultant for the Company's international operations in Europe. Mr. Wallace was named Vice President-Operations for the Midwest Central Region in December 1992. He had served as Director of Operations for the Midwest Central Region 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. 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. Ms. Yopko was named Vice President-Corporate Communications in April 1991. She joined the Company in June 1988 as Vice President-Human Resources of the Midwest Region with responsibilities encompassing public relations. Prior to joining the Company, Ms. Yopko acted as a consultant and advisor to the Company in the area of corporate communications, and as an employee or proprietor of various public relations firms. She is a member of the Public Relations Society of America and of the Ohio Association of Convenience Stores' Board of Directors. RECENT DEVELOPMENTS SALE OF SENIOR SUBORDINATED NOTES On March 3, 1994, the Company issued $75 million of 10.25% Senior Subordinated Notes due 2004 (the "Notes") through a public offering underwritten by Bear, Stearns & Co., Inc. (the "Underwriter"). The Company used part of the net proceeds from the sale of the Notes: (1) to repay the entire indebtedness outstanding of approximately $34.0 million under the Company's credit agreement with -12- Chemical Bank (as successor to Manufacturers Hanover Trust Company) as agent lender, along with other lenders party thereto, dated as of January 9, 1991, as amended (the "Existing Credit Agreement"); and (2) to redeem all of the Company's outstanding 14.25% Subordinated Debentures Due 2000 ("Subordinated Debentures") in the aggregate principal amount of $27.9 million, which amount includes a premium for early redemption, and which redemption was completed on April 4, 1994. The net proceeds of the sale of the Notes remaining after the payment of the indebtedness under the Existing Credit Agreement, the redemption of the Subordinated Debentures, the payment of the Underwriter's discount, and the payment of fees and expenses was approximately $11.0 million and will be used for working capital and general corporate purposes. In connection with the above transaction, the Company entered into a senior revolving credit facility with Fleet Bank, National Association ("Fleet") and Society National Bank ("Society") (the "New Credit Agreement"). The New Credit Agreement provides for the availability of up to $30.0 million in revolving credit loans reduced by letters of credit not to exceed $15.0 million in the aggregate. All outstanding indebtedness, if any, under the New Credit Agreement will be due and payable in full on March 1, 1997; however, provided no default exists under the New Credit Agreement, the Company may extend such due date for up to two additional one-year periods, with the consent of the lenders. All amounts outstanding under the New Credit Agreement are secured by the pledge of all of the outstanding capital stock of most of the Company's direct and indirect subsidiaries, and by amounts payable to the Company which arise by, from, or were created by, loans or other extensions of credit by the Company to any of its subsidiaries. Loans under the New Credit Agreement will generally bear interest, at the Company's option, at the per annum rate of either (1) 0.25% above Fleet's then current prime rate and/or (2) from 2.00% to 2.50% above LIBOR. -13- 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 were, as of January 29, 1994, (i) the Company's Chief Executive Officer and (ii) the four most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 for the last fiscal year: Summary Compensation Table
Long Term Annual Compensation Compensation -------------------------------- ------------- Total Securities Salary Underlying All Other Name and Principal Fiscal and Options/SAR's Compensation Position Year Salary Bonus Bonus (#) (a) (b) - - ---------------------- ------ -------- ------- -------- ------------- ------------ Frank Colaccino, 1994 $300,000 $25,000 $325,000 10,000 $27,828 President and Chief 1993 286,442 0 286,442 -- 13,942 Executive Officer (c) 1992 254,038 50,000 304,038 60,000 -- Mitchell J. Kupperman, 1994 205,000 7,500 212,500 5,000 12,794 Executive Vice 1993 215,000 0 215,000 -- 6,899 President--Human 1992 187,308 35,000 222,308 30,000 -- resources Gregory G. Landry, 1994 160,000 12,500 172,500 6,500 8,758 Executive Vice 1993 143,654 0 143,654 -- 4,923 President and Chief 1992 107,885 30,000 137,885 30,000 -- Financial Officer Charles Nirenberg, 1994 500,000 0 500,000 -- -- Chairman of the 1993 500,000 0 500,000 -- 567 Company (d) 1992 500,000 0 500,000 -- -- Robert B. Stein, Jr., 1994 175,000 12,500 187,500 7,500 11,633 Executive Vice 1993 160,481 0 160,481 -- 6,657 President--Store 1992 131,923 30,000 161,923 30,000 -- Operations
- - -------- (a) Pursuant to the transitional provisions of the Securities and Exchange Commission's revised rules on disclosure of executive compensation, amounts of "All Other Compensation" have not been included in the table above for the fiscal year ended February 1, 1992. (b) Includes amounts contributed for the benefit of the Company's executive officers to its 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 29, 1994 and January 30, 1993. Company contributions to its qualified profit sharing plan for each of the 1994 and 1993 fiscal years, respectively, included $2,263 and $567 for Frank Colaccino, $661 and $531 for Mitchell J. Kupperman, $88 and $358 for Gregory G. Landry, $0 and $567 for Charles Nirenberg, and $650 and $467 for Robert B. Stein, Jr.,. Premiums paid on split-dollar and term life insurance for each of the 1994 and 1993 fiscal years, respectively, included $25,565 and $13,375 for Frank Colaccino, $12,133 and $6,368 for Mitchell J. Kupperman, $8,670 and $4,565 for Gregory G. Landry, and $10,983 and $6,190 for Robert B. Stein, Jr. -14- (c) Mr. Colaccino was elected Chief Executive Officer of the Company effective on March 12, 1992. Prior to that date, he served as President of the Company since January 1, 1989. (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. 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:
Individual Grants --------------------------------------------------- Number of Securities Potential Realizable Underlying Value at Assumed Options/ % Of Total Exercise Annual Rates of Stock SARs Options/SARs or Base Price Appreciation Granted Granted to Price Per Expiration for Option Term (#) Employees in Share Date ---------------------- Name (a) Fiscal Year (b) (a) 5% 10% ---- ---------- ------------ --------- ----------------- ---------- ----------- Frank Colaccino......... 10,000 10.0 $5.25 February 23, 2003 $33,017 $83,671 Mitchell J. Kupperman... 5,000 5.0 5.25 February 23, 2003 16,508 41,836 Gregory G. Landry....... 6,500 6.5 5.25 February 23, 2003 21,461 54,386 Charles Nirenberg....... -- -- -- -- -- -- Robert B. Stein, Jr..... 7,500 7.5 5.25 February 23, 2003 24,763 62,754
- - -------- (a) 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. 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. 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 29, 1994, by the executive officers listed in the Summary Compensation Table above: -15-
Value of Number of Unexercised Unexercised In-the-Money Options/SARs at Options/SARs at FY-End (#) FY-End (2) --------------- ---------------- Shares Acquired Exercisable(e)/ Exercisable (e)/ on Exercise Unexercisable Unexercisable Name of Options (#) Value Realized (U) (U) ---- --------------- -------------- --------------- ---------------- Frank Colaccino......... 15,250 $22,875 (1) 106,250 (E) $ 51,000 (E) 43,750 (U) 19,625 (U) Mitchell J. Kupperman... -- -- 80,750 (E) 105,630 (E) 22,500 (U) 11,000 (U) Gregory G. Landry....... -- -- 33,125 (E) 9,563 (E) 22,750 (U) 10,500 (U) Charles Nirenberg....... -- -- -- (E) -- (E) -- (U) -- (U) Robert B. Stein, Jr..... -- -- 48,875 (E) 15,563 (E) 24,375 (U) 12,938 (U)
- - -------- (1) Reflects the market value as of January 29, 1994 of the 15,250 shares of Class B Common Stock acquired by Mr. Colaccino upon exercise of a stock option, minus the exercise price. However, Mr. Colaccino did not realize any cash value upon exercise of the stock option as he did not sell any shares of the Class B Common Stock acquired through the exercise. (2) 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 29, 1994, which amounts were $6.50 and $7.00 per share, respectively. Each of the executive officers has 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 29, 1994. Such options are not "in the money" and their value is, therefore, not disclosed above. DIRECTORS' COMPENSATION Mr. Leed and Mr. Barrett received directors' fees of $17,000 each for the fiscal year ended January 29, 1994. The annual fee for outside directors for the 1995 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 April 26, 1994. 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. -16-
Name and Address of Amount and Nature of Percent Title of Class Beneficial Owner Beneficial Ownership of Class - - -------------- ------------------------------- -------------------------- ------------- Class B DM Associates Limited 1,858,743 held in the 66.9 (1) Common Stock Partnership and DM Management capacity set forth in Associates footnote 1 One Vision Drive Enfield, Connecticut Frank Colaccino 1,918,125 held in the 68.7 (2) One Vision Drive capacity set forth in Enfield, Connecticut footnote 2 - - ------------------------------------------------------------------------------------------- Class A Heine Securities Corporation 225,250 held in the 8.2 (3) Common Stock and Michael F. Price capacity set forth in 51 J.F.K. Parkway footnote 3 Short Hills, New Jersey Wanger Asset Management L.P. 294,000 held in the 10.7 (4) and Wanger Asset Management, capacity set forth in LTD. footnote 4 227 West Monroe Street Suite 3000 Chicago, Illinois Acorn Investment Trust, Series 197,000 held in the See Footnote (4) Designated Acorn Fund capacity set forth in 227 West Monroe Street footnote 4 Suite 3000 Chicago, Illinois James Wilen and Wilen 251,073 held in the 9.1 (5) Management Corporation capacity set forth in 2360 West Joppa Road footnote 5 Suite 226 Lutherville, Maryland Eagle Asset Management, Inc. 414,300 held in the 15.1 (6) 880 Carillon Parkway capacity set forth in St. Petersburg, Florida footnote 6 Heartland Advisors, Inc. 277,400 held in the 10.1 (7) 790 North Milwaukee Street capacity set forth in Milwaukee, Wisconsin footnote 7
- - ---------- Notes to Table (1) DM Associates Limited Partnership ("DM Associates"), DM Management Associates ("DM Management") and Frank Colaccino filed as a group a Schedule 13D with the SEC to report that on March 12, 1992, they acquired the beneficial ownership of 1,858,743 shares of Class B Common Stock (see "Certain Transactions" below). DM Associates is the direct beneficial owner of such 1,858,743 shares. DM Management is a general partnership which itself is the general partner of DM Associates. As such general partner, DM Management has the power to cause the voting and disposition of the 1,858,743 shares, and is therefore an indirect beneficial owner of such shares. The 1,858,743 shares represent approximately 33.6% of the total number of issued and outstanding shares of both classes of the Company's Common Stock, and approximately 60.8% of the total voting power of both classes of the Company's Common Stock. (2) Mr. Colaccino is the managing general partner of DM Management (described in footnote 1 above), and has the power to act on behalf of DM Management with respect to its voting and other rights in relation to DM Associates, including the voting of the 1,858,743 shares of Class B Common Stock beneficially owned by DM Associates, subject to the right of the other partners of DM Management to consent as to certain matters. Mr. Colaccino therefore shares voting and dispositive power with respect to the 1,858,743 shares, and is an indirect beneficial owner of such shares. In addition to such 1,858,743 shares, Mr. Colaccino beneficially owns individually and directly 59,382 shares of Class B Common Stock, 10,000 of which are beneficially owned by virtue of currently exercisable options to purchase shares of Class B Common Stock. The 1,858,743 shares and the 59,382 shares aggregate 1,918,125 shares of Class B Common Stock and represent approximately 34.6% of the total number of issued and outstanding shares of both classes of the Company's Common Stock, and approximately 62.7% of the total voting power of both classes of the Company's Common Stock. -17- (3) A Schedule 13G was filed with the SEC by Heine Securities Corporation ("Heine") and Michael F. Price, in his capacity as President of Heine, to report Heine's beneficial ownership, as an investment advisor to various clients, of 225,250 shares of Class A Common Stock. Such number represents approximately 4.1% 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. (4) Wanger Asset Management, L.P. ("WAM") and Wanger Asset Management, Ltd. ("WAM Ltd.") (collectively, "Wanger"), have reported in their Schedule 13G filed with the SEC that they are the beneficial owners of 294,000 shares of Class A Common Stock. WAM is a beneficial owner of such shares as it is an investment advisor to various persons, and WAM, Ltd. is a beneficial owner of such shares as it is the sole general partner of WAM. Of the 294,000 shares of Class A Common Stock, Wanger has the sole power to dispose of or to direct the disposition of 97,000 of such shares, and shares such dispositive power with respect to the other 197,000 shares. WAM's power to dispose of 197,000 shares is shared with the Acorn Investment Trust, Series Designated Acorn Fund ("Acorn"), a registered investment company, which separately reported its beneficial ownership of such 197,000 shares. As WAM serves as an investment advisor to Acorn and WAM has the power to manage Acorn's investment of such shares, Wanger reported that it was also the beneficial owner of such 197,000 shares owned by Acorn. The 294,000 shares of Class A Common Stock represents approximately 5.3% of the total number of issued and outstanding shares of both classes of the Company's Common Stock and approximately 1% of the total voting power of both classes of the Company's Common Stock. The 197,000 shares of Class A Common Stock beneficially owned by Acorn represents approximately 7.2% of the total number of issued and outstanding shares of Class A Common Stock. (5) 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 251,073 shares of Class A Common Stock. Such number represents approximately 4.5% 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. (6) A Schedule 13G was filed with the SEC by Eagle Asset Management, Inc., ("Eagle"), a registered investment advisor, to report Eagle's beneficial ownership of 414,300 shares of Class A Common Stock. Such number represents approximately 7.5% of the total number of issued and outstanding shares of both classes of the Company's Common Stock, and approximately 1.4% of the total voting power of both classes of the Company's Common Stock. (7) Heartland Advisors, Inc. reported on a Schedule 13G filed with the SEC its beneficial ownership, as an investment advisor, of 277,400 shares of Class A Common Stock representing 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% of the total voting power of both classes of the Company's Common Stock. STOCK OWNERSHIP OF MANAGEMENT The following table sets forth certain information furnished by the directors and nominees for election as directors, certain executive officers, and all directors and executive officers as a group concerning ownership of the Company's Common Stock as of April 26, 1994:
Shares (and Percent) of Common Stock Name Beneficially Owned as of April 26, 1994 ---- ---------------------------------------------------------------- Percent Class B Class A of Total Common Stock Common Stock Voting Power ----------------- -------------- -------------- Frank Colaccino......... 1,918,125 (68.7%) 103,225 (3.6%) (62.7%) (1) John W. Everets, Jr. ... 0 0 (2) Mitchell J. Kupperman... 40,354 (1.4%) 60,545 (2.2%) (1.5%) (3)(4) Gregory G. Landry....... 0 34,750 (1.2%) (*) (3)(5) Charles Nirenberg....... 0 0 (3)(6) Robert B. Stein, Jr. ... 750 (*) 54,270 (1.9%) (*) (3)(7) Frank W. Barrett........ 1,250 (*) 2,500 (*) (*) (8) Theodore W. Leed........ 1,552 (*) 2,500 (*) (*) (8) All Directors and Executive Officers as a Group ----------------------- (21 persons)............ 1,974,781 (69.8%) 340,951 (11.1%) (64.1%) (9)
-18- - - -------- (*) Owns less than 1% of the issued and outstanding class of Common Stock. (1) Mr. Colaccino is the direct and individual beneficial owner of 59,382 shares of Class B Common Stock, 10,000 of which are beneficially owned by virtue of currently exercisable incentive stock options to purchase Class B Common Stock. In addition to such 59,382 shares, Mr. Colaccino is the indirect beneficial owner of 1,858,743 shares of Class B Common Stock beneficially owned by DM Associates and DM Management. See footnote (1) under "Principal Shareholders" above. The 103,225 shares of Class A Common Stock beneficially owned by Mr. Colaccino include currently exercisable incentive stock options to purchase 98,750 shares of Class A Common Stock. (2) Mr. Everets has been nominated for the first time for election as a director at the Company's 1994 annual meeting of shareholders. (3) Messrs. Kupperman, Landry and Stein are each partners of DM Management, which is the general partner of DM Associates (described in footnote 1 above), and Mr. Nirenberg is a limited partner of DM Associates. However, such persons do not deem themselves to be beneficial owners of any of the 1,858,743 shares of Class B Common Stock beneficially owned by DM Associates or DM Management. (4) Includes currently exercisable incentive stock options granted to Dr. Kupperman to purchase 25,750 shares of Class B Common Stock and 56,250 shares of Class A Common Stock. Also includes shares of Common Stock owned by Dr. Kupperman's wife and children. (5) Represents currently exercisable incentive stock options granted to Mr. Landry to purchase 34,750 shares of Class A Common Stock. (6) 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. (7) 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 50,000 shares of Class A Common Stock. (8) 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. (9) Includes currently exercisable stock options granted to all directors and executive officers of the Company to purchase 49,250 shares of Class B Common Stock and 334,627 shares of Class A Common Stock. POTENTIAL CHANGE OF CONTROL OF THE COMPANY DM Associates Limited Partnership ("DM Associates") beneficially owns 1,858,743 shares of Class B Common Stock of the Company, representing approximately 66.9% of the issued and outstanding shares of Class B Common Stock, and 60.8% of the total voting power of both classes of the Company's Common Stock. DM Associates is controlled by its general partner, DM Management Associates ("DM Management"), which itself is a general partnership. The general partners of DM Management include four executive officers and directors of the Company, including Frank Colaccino, President and Chief Executive Officer, who is the managing general partner; Mitchell J. Kupperman, Executive Vice President - Human Resources; Gregory G. Landry, Executive Vice President and Chief Financial Officer; and Robert B. Stein, Jr., Executive Vice President - Store Operations. 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 "CDA Loan") from the Connecticut Development Authority ("CDA"). The CDA Loan is secured by DM Associates' collateral pledge to the CDA of 1,220,000 shares of Class B Common Stock owned by DM Associates (the "CDA Pledged Shares"), representing 43.9% of the issued and outstanding shares of Class B Common Stock and 39.9% of the total voting power of both classes of Common Stock. The CDA Loan provides that a default of the CDA Loan will result upon certain events occurring. If a default occurs under the CDA Loan, the CDA has the right to sell or otherwise dispose of the CDA Pledged Shares which could result in a change in control of the Company. Unless such a default occurs, DM Associates has the right to vote the CDA Pledged Shares, subject to having received the required consents of the CDA as set forth above with respect to certain matters. In addition, the limited partnership agreement of DM Associates provides that if the term of the limited partnership is 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. 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 of control of the Company could result. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None -19- 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 31, 1994 DAIRY MART CONVENIENCE STORES, INC. By /s/ Frank Colaccino By /s/ Gregory G. Landry ---------------------------- -------------------------- Frank Colaccino Gregory G. Landry President and Executive Vice President and Chief Executive Officer Chief Financial Officer -20- -----END PRIVACY-ENHANCED MESSAGE-----