<PAGE> 1
As filed with the Securities and Exchange Commission on April 4, 2000
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE TO
Tender Offer Statement under Section 14(d)(1) or
Section 13(e)(1) of the Securities Exchange Act of 1934
(Amendment No. 1)
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
(Name of Subject Company (issuer))
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.-- ISSUER
Names of Filing Persons (identifying status as offeror, issuer or other person)
COMMON STOCK, $0.03 PAR VALUE PER SHARE
(Title of Class of Securities)
774678403
(CUSIP Number of Class of Securities)
FRANKLIN E. CRAIL
CHAIRMAN OF THE BOARD AND PRESIDENT
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
265 TURNER DRIVE
DURANGO, COLORADO 81301
(970) 259-0554
(Name, address, and telephone numbers of person
authorized to receive notices and communications on
behalf of filing persons)
Copy to:
STEVEN K. COCHRAN, ESQ.
THOMPSON & KNIGHT L.L.P.
1700 PACIFIC AVENUE, SUITE 3300
DALLAS, TEXAS 75201
(214) 969-1387
MARCH 21, 2000
(Date Tender Offer First Published, Sent or Given to Security Holders)
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CALCULATION OF FILING FEE*
<TABLE>
<S> <C>
Transaction valuation Amount of filing fee
$2,500,000 $500
</TABLE>
* Filing fee is one-50th of one percent of the aggregate dollar amount of
cash being offered by the Company to purchase 400,000 shares of its
common stock, based on a price of $6.25 per share.
[X] Check the box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the
offsetting fee was previously paid. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously Paid: $500 Filing Party: Rocky Mountain Chocolate
Factory, Inc.
Form or Registration No.: Schedule TO Date Filed: March 21, 2000
5-38695
</TABLE>
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[ ] third-party tender offer subject to Rule 14d-1.
[X] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
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INTRODUCTORY STATEMENT
This Amendment No. 1 to Tender Offer Statement on Schedule TO relates to
the tender offer by Rocky Mountain Chocolate Factory, Inc., a Colorado
corporation, to purchase up to 400,000 shares of its common stock, par value
$.03 per share (such shares, together with the associated common stock purchase
rights issued pursuant to the Rights Agreement, dated as of May 18, 1999,
between the Company and American Securities Transfer & Trust, Inc. as Rights
Agent, are hereinafter referred to as the "Shares"), at a price of $6.25 per
share, net to the seller in cash, on the terms and subject to the conditions set
forth in the Offer to Purchase dated March 21, 2000 and the related Letter of
Transmittal.
Item 12. Exhibits
(A) (1) Amended Form of Offer to Purchase, dated March 21, 2000.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Schedule TO is true, complete and
correct.
April 4, 2000 ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
By: /s/ FRANKLIN E. CRAIL
------------------------------------
Franklin E. Crail
Chairman of the Board and President
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(A) (1) Amended Form of Offer to Purchase, dated March 21, 2000.
</TABLE>
<PAGE> 1
EXHIBIT (A)(1)
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
265 Turner Drive
Durango, Colorado 81301
(970) 259-0554
Offer to Purchase for Cash
Up to 400,000 Shares of its
Common Stock, Par Value $0.03 Per Share
At a Purchase Price of $6.25 Per Share
----------------------------
THE OFFER TO PURCHASE, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., NEW YORK TIME, ON APRIL 19, 2000,
UNLESS THE OFFER TO PURCHASE IS EXTENDED
----------------------------
Questions or requests for assistance or for additional copies of this offer
to purchase, the letter of transmittal or other tender offer materials may be
directed to the Company at the address and telephone number set forth on the
back cover of this offer to purchase, and such copies will be furnished promptly
at the Company's expense. Stockholders may also contact their local broker,
dealer, commercial bank or trust company for assistance concerning the offer.
No person has been authorized to make any recommendation on behalf of the
Company as to whether stockholders should tender shares pursuant to the offer.
No person has been authorized to give any information or to make any
representations in connection with the offer other than those contained herein
or in the related letter of transmittal. If given or made, the recommendation
and the other information and representations must not be relied upon as having
been authorized by Rocky Mountain Chocolate Factory, Inc.
The date of this offer to purchase is March 21, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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<S> <C>
SUMMARY ................................................................... 1
1. NUMBER OF SHARES; PRORATION ........................................... 2
2. PROCEDURE FOR TENDERING SHARES ........................................ 3
3. WITHDRAWAL RIGHTS ..................................................... 4
4. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE ........ 5
5. CONDITIONAL TENDER OF SHARES .......................................... 6
6. CONDITIONS OF THE OFFER ............................................... 6
7. PRICE RANGE OF SHARES; DIVIDENDS ...................................... 8
8. PURPOSE OF THE OFFER; CERTAIN EFFECTS ................................. 8
9. SOURCE AND AMOUNT OF FUNDS ............................................ 9
10. INFORMATION CONCERNING ROCKY MOUNTAIN CHOCOLATE FACTORY .............. 10
11. INTEREST OF DIRECTORS AND OFFICERS; TRANSACTIONS
AND ARRANGEMENTS CONCERNING SHARES ................................... 10
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES;
REGISTRATION UNDER THE EXCHANGE ACT .................................. 11
13. LEGAL MATTERS; REGULATORY APPROVALS .................................. 11
14. FEDERAL INCOME TAX CONSEQUENCES ...................................... 12
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS .................. 14
16. SOLICITATION FEES AND EXPENSES ....................................... 15
17. WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION .......................... 15
</TABLE>
i
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To the Holders of Shares of Common Stock of
Rocky Mountain Chocolate Factory, Inc.
SUMMARY
Rocky Mountain Chocolate Factory, Inc. is inviting its stockholders to sell
shares of its common stock, including the associated common stock purchase
rights issued pursuant to the Rights Agreement, dated May 18, 1999, between the
Company and American Securities Transfer & Trust, Inc. as Rights Agent, back to
the Company for cash. Set forth below are the material terms of this offer:
o We will agree to purchase up to 400,000 shares of common stock. See
"Number of Shares; Proration" on page 2 in this offer to purchase.
o We will purchase these shares at a price of $6.25 per share. On March
20, 2000, the closing price of the shares on the Nasdaq National Market
was $3.75 per share. See "Number of Shares; Proration" on page 2 in
this offer to purchase.
o You must determine whether to sell your stock and how much to sell. Our
board of directors has approved the tender offer. However, neither the
board nor the company makes any recommendation as to whether you should
tender or refrain from tendering your shares. See "Number of Shares;
Proration" on page 2 and "Procedure for Tendering Shares" on page 3 of
this offer to purchase.
o We will purchase all shares at the same purchase price. See "Number of
Shares; Proration" on page 2 of this offer to purchase.
o If more than 400,000 shares are tendered, we will acquire shares on a
pro rata basis. However, we have reserved the right to increase the
number of shares we will purchase in the offer. See "Number of Shares;
Proration" on page 2 of this offer to purchase.
o The offer is not conditioned upon any minimum number of shares being
tendered. The offer is, however, subject to other conditions. See
"Conditions of the Offer" on page 6 of this offer to purchase.
o You must properly complete, execute and deliver the letter of
transmittal by 5:00 p.m. on April 19, 2000 in order to sell your shares
to us in this offer. See "Procedure for Tendering Shares" on page 3 of
this offer to purchase.
o This offer is scheduled to expire at 5:00 p.m. April 19, 2000. See
"Number of Shares; Proration" on page 2 of this offer to purchase.
o We may extend the offering period by making a public announcement. See
"Extension of Tender Period; Termination; Amendments" on page 15 of
this offer to purchase.
o You may withdraw tendered shares at any time prior to the expiration of
the offering, which is currently scheduled on April 19, 2000. Tenders
will then be irrevocable until May 16, 2000, when they may be withdrawn
by stockholders if they have not been accepted for payment by the
Company. See "Withdrawal Rights" on page 4 of this offer to purchase.
o You must provide written notice if you want to withdraw your shares.
The information required and method of notification is different if you
hold your shares directly or through a broker. See "Withdrawal Rights"
on page 5 of this offer to purchase.
o The depositary will issue checks for all accepted tenders. See
"Acceptance for Payment of Shares and Payment of Purchase Price" on
page 4 of this offer to purchase.
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o We expect to announce final results on any proration of shares to be
purchased within seven trading days of the expiration date. See
"Acceptance for Payment of Shares and Payment of Purchase Price" on
page 5 of this offer to purchase.
o Stockholders who do not tender will increase their percentage ownership
in the Company. This will include the executive officers and directors
of the Company who do not intend to tender any of their shares. See
"Purpose of the Offer; Certain Effects of the Offer" on page 8 and
"Interest of Directors and Officers; Transaction and Arrangements
Concerning Shares" on page 10 of this offer to purchase.
o Generally, you will be expected to recognize gain or loss on the
tendered shares equal to the difference between the cash paid by the
Company and the stockholder's basis. See "Federal Income Tax
Consequences" on page 11 of this offer to purchase.
o If you have any questions about the tender offer, call Bryan Merryman
or Franklin Crail at (970) 259-0554.
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions described herein and in the
letter of transmittal, we will purchase up to 400,000 shares that are validly
tendered on or prior to the expiration date of the offer, and not properly
withdrawn in accordance with section 3, at a price of $6.25 per share. The later
of 5:00 p.m., New York time, on Wednesday, April 19, 2000, or the latest time
and date to which the offer is extended pursuant to section 15, is referred to
herein as the "expiration date." The proration period also expires on the
expiration date.
The Company reserves the right, in its sole discretion, to purchase more
than 400,000 Shares pursuant to the offer. See Section 15. In accordance with
applicable regulations of the Securities and Exchange Commission (the "SEC"),
the Company may purchase pursuant to the offer an additional amount of Shares
not to exceed 2% of the outstanding Shares without amending or extending the
offer. If (i) the Company increases or decreases the price to be paid for the
Shares, the Company increases the number of Shares being sought and such
increase in the number of Shares being sought exceeds 2% of the outstanding
Shares, or the Company decreases the number of Shares being sought; and (ii) the
offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given in the manner
specified in Section 15, the offer will be extended until the expiration of such
period of ten business days. THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER
OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE SECTION 6.
The Company will pay the $6.25 purchase price for shares validly tendered
and not withdrawn pursuant to this offer, taking into account the number of
shares so tendered and the prices specified by tendering stockholders. All
shares not purchased pursuant to this offer, including shares not purchased
because of proration or because they were conditionally tendered and not
accepted for purchase, will be returned to the tendering stockholders at our
expense as promptly as practicable following the expiration date.
Upon the terms and subject to the conditions of this offer, if 400,000 (or
such greater number of Shares as the Company may elect to Purchase) or fewer
Shares have been validly and not withdrawn on or prior to the expiration date,
we will purchase all the Shares. Upon the terms and subject to the conditions of
this offer, if more than 400,000 Shares (or such greater number of Shares as the
Company may elect to Purchase) have been validly tendered and not withdrawn on
or prior to the expiration date, we will purchase Shares in the following order
of priority:
(i) on a pro rata basis, all of the Shares properly and unconditionally
tendered, and all of the Shares properly and conditionally tendered for
which the condition can be satisfied; and
(ii) if the number of Shares acquired under (i) is less than 400,000,
such additional Shares to total 400,000, by lot from shareholders who
conditionally tendered their Shares for which the condition could not be
met and in the respective amounts that each such stockholder indicated as
the minimum number of Shares to be purchased by the Company.
2
<PAGE> 5
If proration of tendered Shares is required, we do not expect that we will
be able to announce the final proration factor or to commence payment for any
Shares purchased pursuant to this offer until approximately seven Nasdaq
National Market trading days after the expiration date. Preliminary results of
proration will be announced by press release as promptly as practicable after
the expiration date. Holders of Shares may obtain such preliminary information
from the Company.
We expressly reserve the right, in our sole discretion, at any time or from
time to time, to extend the period of time during which the offer is open by
giving oral or written notice of such extension to the depositary and making a
public announcement thereof. See section 15. There can be no assurance, however,
that we will exercise our right to extend the offer.
For purposes of the offer, a "business day" means any day other than a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York time.
Copies of this offer to purchase and the related letter of transmittal are
being mailed to record holders of Shares and will be furnished to brokers, banks
and similar persons whose names, or the names of whose nominees, appear on our
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
To tender Shares validly pursuant to the offer, a properly completed and
duly executed letter of transmittal or facsimile thereof, together with any
required signature guarantees and any other documents required by the letter of
transmittal, must be received by the depositary at its address set forth on the
back cover of this offer to purchase and either (i) certificates for the Shares
to be tendered must be received by the depositary at such address or (ii) the
Shares must be delivered pursuant to the procedures for book-entry transfer
described below, and a confirmation of the delivery received by the depositary,
in each case on or prior to the expiration date.
The depositary will establish an account with respect to the Shares at The
Depositary Trust Company, which is a book-entry transfer facility, for purposes
of the offer within two business days after the date of this offer, and any
financial institution that is a participant in the system of the book-entry
transfer facility may make delivery of Shares by causing the book-entry transfer
facility to transfer such Shares into the depositary's account in accordance
with the procedures of the book-entry transfer facility. Although delivery of
Shares may be effected through book-entry transfer, a properly completed and
duly executed letter of transmittal or a manually signed copy thereof, or an
agent's message, as defined below, together with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the depositary at its address set forth on the back cover of
this offer on or prior to the expiration date. Delivery of required documents to
the book-entry transfer facility in accordance with its procedures does not
constitute delivery to the depositary and will not constitute a valid tender.
The term "agent's message" means a message transmitted by the book-entry
transfer facility to, and received by, the depositary and forming a part of a
book-entry confirmation, which states that the book-entry transfer facility has
received an express acknowledgment from the participant in the book-entry
transfer facility tendering the Shares, that the participant has received and
agrees to be bound by the terms of the letter of transmittal and that we may
enforce the agreement against the participant.
Except as set forth below, all signatures on a letter of transmittal must
be guaranteed by a firm that is a member of a registered national securities
exchange or the National Association of Securities Dealers, Inc., or by a
commercial bank, a trust company, a savings bank, a savings and loan association
or a credit union which has membership in an approved signature guarantee
medallion program, each of the foregoing being referred to as an "eligible
institution". Signatures on a letter of transmittal need not be guaranteed if
(a) the letter of transmittal is signed by the registered holder of the Shares,
which term, for the purposes of this section, includes a participant in the
book-entry transfer facility whose name appears on a security position listing
as the holder of the Shares, tendered therewith and the holder has not completed
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the letter of transmittal or (b) the Shares are
tendered for the account of an eligible institution. See instructions 1 and 5 of
the letter of transmittal.
3
<PAGE> 6
The method of delivery of Shares and all other required documents is at the
option and risk of the tendering stockholder. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases sufficient time should be allowed to assure timely delivery.
To prevent United States federal income tax backup withholding equal to 31%
of the gross payments made pursuant to the offer, each tendering stockholder
must provide the depositary with the stockholder's correct taxpayer
identification number and certain other information by properly completing the
substitute Form W-9 included in the letter of transmittal. Foreign stockholders,
as defined in section 14, must submit a properly completed Form W-8, which may
be obtained from the depositary, in order to prevent backup withholding. In
general, backup withholding does not apply to corporations or to foreign
stockholders subject to 30%, or lower treaty rate, withholding on gross payments
received pursuant to the offer, as discussed in section 14. For a discussion of
certain federal income tax consequences to tendering stockholders, see section
14. Each stockholder is urged to consult with his or her own tax advisor
regarding his, her or its qualification for exemption from backup withholding
and the procedure for obtaining any applicable exemption.
It is a violation of Rule 14e promulgated under the Securities Exchange Act
of 1934, as amended, for a person to tender Shares for his or her own account
unless the person so tendering (i) has a net long position equal to or greater
than the amount of (x) Shares tendered or (y) other securities immediately
convertible into, exercisable or exchangeable for the amount of Shares tendered
and will acquire such Shares for tender by conversion, exercise or exchange of
such other securities and (ii) will cause such Shares to be delivered in
accordance with the terms of the offer. Rule 14e-4 provides a similar
restriction applicable to the tender on behalf of another person. The tender of
Shares pursuant to any one of the procedures described above will constitute the
tendering stockholder's representation and warranty that (i) the stockholder has
a net long position in the Shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares
complies with Rule 14e-4. Our acceptance for payment of Shares tendered pursuant
to the offer will constitute a binding agreement between the tendering
stockholder and us upon the terms and subject to the conditions of the offer.
All questions as to the form of documents, the number of Shares to be
accepted and the validity, eligibility, including time of receipt, and
acceptance for payment of any tender of Shares will be determined by us, in our
sole discretion, which determination shall be final and binding on all parties.
We reserve the absolute right to reject any or all tenders of Shares that we
determine are not in proper form or the acceptance for payment of or payment for
Shares that may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any defect or irregularity in any tender of any
particular Shares. None of the Company, the depositary or any other person is or
will be under any duty to give notice of any defect or irregularity in tenders,
nor shall any of them incur any liability for failure to give any such notice.
Certificates for Shares, together with a properly completed letter of
transmittal, or, in the case of a book-entry transfer, an agent's message, and
any other documents required by the letter of transmittal, must be delivered to
the depositary and not to the Company. Any such documents delivered to us will
not be forwarded to the depositary and therefore will not be deemed to be
properly tendered.
3. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the offer may be withdrawn at any time
prior to the expiration date. Thereafter, tenders are irrevocable, except that
they may be withdrawn after 12:00 midnight, New York City time, May 16, 2000
unless previously accepted for payment by us as provided in this offer to
purchase. If we extend the period of time during which the offer is open, are
delayed in purchasing Shares or are unable to purchase Shares pursuant to the
offer for any reason, then, without prejudice to our rights under the offer, the
depositary may, on behalf of us, retain all Shares tendered, and the Shares may
not be withdrawn except as otherwise provided in this section 3, subject to Rule
13e-4(f)(5) under the Exchange Act, which provides that the issuer making the
tender offer shall either pay the consideration offered, or return the tendered
securities promptly after the termination or withdrawal of the tender offer.
Withdrawal of Shares Held in Physical Form. Tenders of Shares made pursuant
to the offer may not be withdrawn after the expiration date, except that they
may be withdrawn after 12:00 midnight, New York time, May 16, 2000 unless
accepted for payment by us as provided in this offer. For a withdrawal to be
effective prior to that time, a
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stockholder of Shares held in physical form must provide a written, telegraphic
or facsimile transmission notice of withdrawal to the depositary at its address
set forth on the back cover page of this offer before the expiration date, which
notice must contain: (A) the name of the person who tendered the Shares; (B) a
description of the Shares to be withdrawn; (C) the certificate numbers shown on
the particular certificates evidencing the Shares; (D) the signature of the
stockholder executed in the same manner as the original signature on the letter
of transmittal, including any signature guarantee, if such original signature
was guaranteed; and (E) if the Shares are held by a new beneficial owner,
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Shares. A purported notice of
withdrawal which lacks any of the required information will not be an effective
withdrawal of a tender previously made.
Withdrawal of Shares Held with the Book-Entry Transfer Facility. Tenders of
Shares made pursuant to the offer may not be withdrawn after the expiration
date, except that they may be withdrawn after 12:00 midnight, New York time, May
16, 2000 unless accepted for payment by the Company as provided in this offer.
For a withdrawal to be effective prior to that time, a stockholder of Shares
held with the book-entry transfer facility must (i) call his or her broker and
instruct the broker to withdraw the tender of Shares by debiting the
depositary's account at the book-entry transfer facility for all Shares to be
withdrawn; and (ii) instruct the broker to provide a written, telegraphic or
facsimile transmission notice of withdrawal to the depositary on or before the
expiration date. The notice of withdrawal shall contain (A) the name of the
person who tendered the Shares; (B) a description of the Shares to be withdrawn;
and (C) if the Shares are held by a new beneficial owner, evidence satisfactory
to us that the person withdrawing the tender has succeeded to the beneficial
ownership of the Shares. A purported notice of withdrawal which lacks any of the
required information will not be an effective withdrawal of a tender previously
made.
Any permitted withdrawals of tenders of Shares may not be rescinded, and
any Shares so withdrawn will thereafter be deemed not validly tendered for
purposes of the offer; provided, however, that withdrawn Shares may be
re-tendered by following the procedures for tendering prior to the expiration
date.
All questions as to the form and validity, including time of receipt, of
any notice of withdrawal will be determined by us, in our sole discretion, which
determination shall be final and binding on all parties. None of the Company,
the depositary or any other person is or will be under any duty to give
notification of any defect or irregularity in any notice of withdrawal or incur
any liability for failure to give any such notification.
4. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the offer and as promptly
as practicable after the expiration date, we will, subject to the proration and
conditional tender provisions of the offer, accept for payment and pay the
purchase price for Shares validly tendered and not withdrawn. Thereafter,
payment for all Shares validly tendered on or prior to the expiration date and
accepted for payment pursuant to the offer will be made by the depositary by
check as promptly as practicable. In all cases, payment for Shares accepted for
payment pursuant to the offer will be made only after timely receipt by the
depositary of certificates for such Shares, or of a timely confirmation of a
book-entry transfer of such Shares into the depositary's account at the
book-entry transfer facility, a properly completed and duly executed letter of
transmittal or a manually signed copy thereof, with any required signature
guarantees, or in the case of a book-entry delivery an agent's message, and any
other required documents.
For purposes of the offer, we shall be deemed to have accepted for payment,
and thereby purchased, subject to proration and conditional tenders, Shares that
are validly tendered and not withdrawn, if and when we give oral or written
notice to the depositary of our acceptance for payment of the Shares. In the
event of proration, we will determine the proration factor and pay for those
tendered Shares accepted for payment as soon as practicable after the expiration
date. However, we do not expect to be able to announce the final results of any
such proration until approximately seven Nasdaq National Market trading days
after the expiration date. We will pay for Shares that we have purchased
pursuant to the offer by depositing the aggregate purchase price therefor with
the depositary. The depositary will act as agent for tendering stockholders for
the purpose of receiving payment from us and transmitting payment to tendering
stockholders. Under no circumstances will interest be paid on amounts to be paid
to tendering stockholders, regardless of any delay in making such payment.
Certificates for all Shares not purchased, including Shares not purchased
because of proration and Shares that were conditionally tendered and not
accepted, will be returned, or, in the case of Shares tendered by book-entry
transfer, the
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Shares will be credited to an account maintained with the book-entry transfer
facility by the participant therein who so delivered the Shares, as promptly as
practicable following the expiration date without expense to the tendering
stockholder.
Payment for Shares may be delayed in the event of difficulty in determining
the number of Shares properly tendered or if proration is required. See section
1. In addition, if certain events occur, we may not be obligated to purchase
Shares pursuant to the offer. See section 6.
We will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to us or our order pursuant to the offer.
If, however, payment of the purchase price is to be made to, or a portion of the
Shares delivered, whether in certificated form or by book entry, but not
tendered or not purchased are to be registered in the name of, any person other
than the registered holder, or if tendered Shares are registered in the name of
any person other than the person signing the letter of transmittal, unless the
person is signing in a representative or fiduciary capacity, the amount of any
stock transfer taxes, whether imposed on the registered holder, such other
person or otherwise, payable on account of the transfer to the person will be
deducted from the purchase price unless satisfactory evidence of the payment of
such taxes, or exemption therefrom, is submitted. See instruction 6 to the
letter of transmittal.
Any tendering stockholder or other payee who fails to complete fully and
sign the substitute Form W-9 included in the letter of transmittal, or, in the
case of a foreign individual, a Form W-8, may be subject to required federal
income tax withholding of 31% of the gross proceeds paid to such stockholder or
other payee pursuant to the offer. See section 2.
5. CONDITIONAL TENDER OF SHARES
Under certain circumstances and subject to the exceptions set forth in
section 1, we may prorate the number of Shares purchased pursuant to the offer.
As discussed in section 14, the number of Shares to be purchased from a
particular stockholder might affect the tax treatment of the purchase for the
stockholder and the stockholder's decision whether to tender. Each stockholder
is urged to consult with his or her own tax advisor. Accordingly, a stockholder
may tender Shares subject to the condition that a specified minimum number of
the stockholder's Shares tendered pursuant to a letter of transmittal must be
purchased if any Shares so tendered are purchased. Any stockholder desiring to
make a conditional tender must so indicate in the box captioned "Conditional
Tender" in the letter of transmittal.
Any tendering stockholders wishing to make a conditional tender must
calculate and appropriately indicate the minimum number of Shares to be
tendered. If the effect of accepting tenders on a pro rata basis would be to
reduce the number of Shares to be purchased from any stockholder, tendered
pursuant to a letter of transmittal, below the minimum number so specified, the
tender will automatically be regarded as withdrawn, except as provided in the
next paragraph, and all Shares tendered by the stockholder pursuant to the
applicable letter of transmittal will be returned as promptly as practicable
thereafter.
If conditional tenders, that would otherwise be so regarded as withdrawn,
would cause the total number of Shares to be purchased to fall below 400,000,
then, to the extent feasible, we will select enough conditional tenders that
would otherwise have been so withdrawn to permit us to purchase 400,000 Shares.
In selecting among these conditional tenders, we will select by lot and will
limit our purchase in each case to the minimum number of Shares designated by
the stockholder in the applicable letter of transmittal as a condition to his or
her tender.
6. CONDITIONS OF THE OFFER
Notwithstanding any other provision of the offer, we will not be required
to accept for payment or pay for any Shares tendered, and may terminate or amend
and may postpone, subject to the requirements of the Exchange Act for prompt
payment for or return of Shares tendered, the acceptance for payment of Shares
tendered, if, at any time after March 21, 2000 and prior to the time of payment
for such shares, any of the following shall have occurred:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person,
domestic or foreign, or before any court, authority, agency or tribunal
that (i) challenges the acquisition of Shares pursuant
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<PAGE> 9
to the offer or otherwise in any manner relates to or affects the offer or
(ii) in the reasonable judgment of the Company, could materially and
adversely affect the business, condition, financial or other, income,
operations or prospects of the Company and our subsidiaries, taken as a
whole, or otherwise materially impair in any way the contemplated future
conduct of the business of the Company or any of our subsidiaries or
materially impair the offer's contemplated benefits to us;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the offer or the Company or
any of our subsidiaries, by any legislative body, court, authority, agency
or tribunal which, in our reasonable judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit consummation of
the offer, (ii) delay or restrict the ability of the Company, or render us
unable, to accept for payment or pay for some or all of the Shares, (iii)
materially impair the contemplated benefits of the offer to us or (iv)
materially affect the business, condition, financial or other, income,
operations or prospects of the Company and our subsidiaries, taken as a
whole, or otherwise materially impair in any way the contemplated future
conduct of the business of the Company or any of our subsidiaries;
(c) it shall have been publicly disclosed or we shall have learned that
(i) any person or "group," within the meaning of Section 13(d)(3) of the
Exchange Act, has acquired or proposes to acquire beneficial ownership of
more than 5% of the outstanding Shares whether through the acquisition of
stock, the formation of a group, the grant of any option or right, or
otherwise, other than as disclosed in a Schedule 13D or 13G on file with
the SEC on March 21, 2000, or (ii) any person or group that on or prior to
March 21, 2000 had filed a Schedule 13D or 13G with the SEC thereafter
shall have acquired or shall propose to acquire, whether through the
acquisition of stock, the formation of a group, the grant of any option or
right, or otherwise, beneficial ownership of additional Shares representing
2% or more of the outstanding Shares;
(d) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market, (ii) any significant decline in the
market price of the Shares or in the general level of market prices of
equity securities in the United States or abroad, (iii) any change in the
general political, market, economic or financial condition in the United
States or abroad that could have a material adverse effect on our business,
condition, financial or otherwise, income, operations, prospects or ability
to obtain financing generally or the trading in the Shares, (iv) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or any limitation on, or any event
which, in our reasonable judgment, might affect the extension of credit by
lending institutions in the United States, (v) the commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States or (vi) in the case of any of the
foregoing existing at the time of the commencement of the offer, in our
reasonable judgment, a material acceleration or worsening thereof;
(e) a tender or exchange offer with respect to some or all of the
Shares, other than the offer, or a merger, acquisition or other business
combination proposal for the Company, shall have been proposed, announced
or made by another person or group, within the meaning of Section 13(d) (3)
of the Exchange Act;
(f) there shall have occurred any event or events that has resulted, or
may in the reasonable judgment of the Company result, directly or
indirectly, in an actual or threatened change in the business, condition,
financial or other, income, operations, stock ownership or prospects of the
Company and our subsidiaries;
and, in the reasonable judgment of the Company, such event or events make it
undesirable or inadvisable to proceed with the offer or with such acceptance for
payment.
The foregoing conditions are for the reasonable benefit of the Company and
may be asserted by us regardless of the circumstances, including any action or
inaction by us, giving rise to any of these conditions, and any such condition
may be waived by us, in whole or in part, at any time and from time to time in
our reasonable discretion. The failure by the Company at any time to exercise
any of the foregoing rights shall not be deemed a waiver of the right and each
of these rights shall be deemed an ongoing right which may be asserted at any
time and from time to time. Any determination by us concerning the events
described above will be final and binding on all parties.
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<PAGE> 10
Acceptance of Shares validly tendered in the offer is subject to the
condition that, as of the expiration date, and after giving pro forma effect to
the acceptance of Shares validly tendered, the Company would continue to have at
least 300 stockholders and the Shares would remain listed for quotation on the
Nasdaq National Market. This condition may not be waived.
The Exchange Act requires that all conditions to the offer must be
satisfied or waived before the expiration date.
7. PRICE RANGE OF SHARES; DIVIDENDS
The following table sets forth the high and low sales prices for the Shares
as reported on the Nasdaq National Market for the periods indicated. Our fiscal
year end is February 28 (29).
<TABLE>
<CAPTION>
Fiscal 1999 High Low
- ----------- -------- -------
<S> <C> <C>
1st Quarter $7.750 $4.750
2nd Quarter 7.125 4.250
3rd Quarter 6.500 4.000
4th Quarter 5.625 3.938
Fiscal 2000
- -----------
1st Quarter $6.688 $3.000
2nd Quarter 6.375 5.250
3rd Quarter 6.125 3.625
4th Quarter 5.875 4.000
Fiscal 2001
- -----------
1st Quarter (through March 20, 2000) $3.75 $3.375
</TABLE>
On March 20, 2000, the closing price of the Shares on the Nasdaq National
Market was $3.75 per share. Stockholders are urged to obtain current market
quotations for the Shares.
The Company has not paid dividends on its Common Stock since its inception
and does not intend to pay cash dividends for the foreseeable future. Any future
earnings will be retained for use in the Company's business.
8. PURPOSE OF THE OFFER; CERTAIN EFFECTS
The offer will enable stockholders who are considering the sale of all or a
portion of their Shares the opportunity to sell Shares for cash without the
usual transaction costs associated with open-market sales. The offer may also
give stockholders the opportunity to sell Shares at prices greater than market
prices prevailing prior to the announcement of the offer. See section 7. In
addition, qualifying stockholders owning beneficially fewer than 100 Shares,
whose Shares are purchased pursuant to the offer, not only will avoid the
payment of brokerage commissions but will also avoid any applicable odd lot
discounts to the market price typically charged by brokers for executing odd lot
trades.
The Company's Board of Directors believes that the offer is in the best
interests of the company. The offer affords to those stockholders who desire
liquidity an opportunity to sell all or a portion of their Shares without the
usual transaction costs associated with open market sales. The Company believes
that the offer will be accretive to earnings per share (on both a basic and a
diluted basis) in the Company's fiscal year ending February 28, 2001 because the
offer will reduce the number of shares outstanding, which should more than
offset the effect on earnings per share of the increased interest expense
associated with the offering. There can be no assurance that the tender offer
will actually increase earnings per share.
The market price of the Company's Common Stock has been negatively impacted
over the last several months. The Company continues to believe that its primary
business initiatives represent significant business opportunities for the
Company and will eventually translate into improved financial performance of the
Company. There are, however, many uncertainties associated with realizing such
improved results of operations and financial condition, and no assurances can be
given that the Company's efforts will succeed.
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<PAGE> 11
The Board of Directors has determined that the Company's financial
condition and outlook and current market conditions, including recent trading
prices of the Shares, make this an attractive time to repurchase a significant
portion of the outstanding Shares. In the view of the Company, the offer
represents an attractive investment for the Company and use of the Company's
cash generation abilities that should benefit the Company and its stockholders
over the long term. In deciding to approve the offer, the Board of Directors
took into account the expected financial impact of the offer including the
increased interest expense and financial and operating constraints associated
with the financing required to fund the offer. The Company believes that its
cash, short-term investments and access to credit facilities following the
completion of the offer, together with its anticipated cash flow from
operations, are adequate for its needs in the foreseeable future.
Stockholders who do not tender their Shares pursuant to the offer and
stockholders who otherwise retain an equity interest in the Company as a result
of a partial tender of Shares or a proration pursuant to section 1 of the offer
to purchase will continue to be owners of the Company with the attendant risks
and rewards associated with owning the equity securities of the Company.
Stockholders who determine not to accept the offer will realize a
proportionate increase in their relative equity interest in the Company and,
thus, in the Company's earnings and assets, subject to any risks resulting from
our purchase of Shares and our ability to issue additional equity securities in
the future. In addition, to the extent the purchase of Shares pursuant to the
offer results in a reduction of the number of stockholders of record, our costs
for services to stockholders may be reduced.
If fewer than 400,000 Shares are purchased pursuant to the offer, we may
repurchase the remainder of the Shares on the open market, in privately
negotiated transactions or otherwise. In the future, we may determine to
purchase additional Shares on the open market, in privately negotiated
transactions, through one or more tender offers or otherwise. Any purchases may
be on the same terms as, or on terms which are more or less favorable to
stockholders than, the terms of the offer. However, Rule 13e-4 under the
Exchange Act prohibits us and our affiliates from purchasing any Shares, other
than pursuant to the offer, until at least ten business days after the
expiration date. Any future purchases of Shares by the Company would depend on
many factors, including the market price of the Shares, our business and
financial position, and general economic and market conditions.
Shares we acquire pursuant to the offer will be restored to the status of
authorized and unissued Shares and will be available for us to issue without
further stockholder action, except as required by applicable law or the rules of
the Nasdaq National Market or any other securities exchange on which the Shares
are listed, for purposes including, but not limited to, the acquisition of other
businesses, the raising of additional capital for use in our business and the
satisfaction of obligations under existing or future employee benefit plans. We
have no current plans for reissuance of the Shares repurchased pursuant to the
offer.
Neither the Company nor our board of directors makes any recommendation to
any stockholder as to whether to tender all or any Shares. Each stockholder must
make his or her own decision whether to tender Shares and, if so, how many
Shares to tender and at what price. Directors, officers and employees of the
Company who own Shares may participate in the offer on the same basis as our
other stockholders. We have been advised that none of the directors or officers
of the Company intend to tender Shares pursuant to the offer.
9. SOURCE AND AMOUNT OF FUNDS
Assuming that the Company purchases 400,000 Shares pursuant to the offer at
a purchase price of $6.25 per Share, net to the sellers in cash, the Company
expects the maximum aggregate cost, including all fees and expenses applicable
to the offer, to be approximately $2,600,000. The Company estimates that the
funds necessary to pay such amounts will come primarily from the Company's
existing line of credit and a new loan in an amount not to exceed $1,000,000
(the "Loan") from Norwest Bank of Durango, N.A. (the "Bank"). Under the terms of
the new loan, twelve interest only payments will begin one month from the
origination date of the loan, and twelve monthly principal and interest payments
of $31,685 will begin thirteen months from the origination date of the Loan. A
final payment of all remaining principal and accrued interest will be due
twenty-five months following origination. The Loan will bear interest at a fixed
rate of 8.75%. Repayment of the Loan will be secured by an interest in the
Company's assets.
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<PAGE> 12
The Company intends to repay the Loan through cash flow from operations.
It is estimated that the Company will incur approximately $100,000 in
financing, legal and other one-time charges associated with the tender offer.
10. INFORMATION CONCERNING ROCKY MOUNTAIN CHOCOLATE FACTORY
GENERAL
Founded in 1981 and incorporated in Colorado in 1982, the Company is a
manufacturer, international franchiser and retail operator. The Company is
headquartered in Durango, Colorado and manufactures an extensive line of premium
chocolate candies and other confectionery products. As of February 29, 2000,
there were 34 Company-owned and 194 franchised Rocky Mountain Chocolate Factory
stores operating in 42 states, Canada and Guam.
Approximately 40% of the products sold at the Company-owned and franchised
the Company stores are prepared on the premises. The Company believes this
in-store preparation creates a special store ambiance and the aroma and sight of
products being made attracts foot traffic and assures customers that products
are indeed fresh.
The Company believes that its principal competitive strengths lie in its
name recognition, its reputation for the quality, variety and the taste of its
products; the special ambiance of its stores; its knowledge and experience in
applying criteria for selection of new store locations; its expertise in the
manufacture of chocolate candy products and the merchandising and marketing of
chocolate and other candy products; and the control and training infrastructures
it has implemented to assure consistent customer service and execution of
successful practices and techniques at its franchised and Company-owned stores.
11. INTEREST OF DIRECTORS AND OFFICERS; TRANSACTIONS
AND ARRANGEMENTS CONCERNING SHARES
As of March 20, 2000, the Company had 2,386,879 Shares issued and
outstanding and had reserved 306,000 Shares for issuance upon exercise of
outstanding stock options. The 400,000 Shares that we are offering to purchase
represent approximately 16.7% of the outstanding Shares. As of March 20, 2000,
our directors and executive officers as a group, 9 persons, beneficially owned
an aggregate of 965,198 Shares, including 154,000 Shares covered by currently
exercisable options granted under our stock option plan, representing
approximately 38.0% of the outstanding Shares, assuming the exercise by such
persons of their currently exercisable options. Directors, officers and
employees of the Company who own Shares may participate in the offer on the same
basis as our other stockholders. We have been advised that none of our directors
or executive officers intend to tender Shares pursuant to the offer.
Assuming we purchase 400,000 Shares pursuant to the offer, and neither the
trustee of the Company's 401(k) plan nor any of our directors or executive
officers tender any Shares pursuant to the offer, then after the purchase of
Shares pursuant to the offer, our executive officers and directors as a group
would own beneficially approximately 45.1% of the outstanding Shares, assuming
the exercise by these persons of their currently exercisable options.
Between January 27, 1999 and February 7, 2000, the Company repurchased
148,100 Company Shares on the open market at an average price of $5.50 per
share, and, on February 7, 2000 Clyde Engle, a Director of the Company,
purchased 8,000 Shares for $5.50 per share. Except option grants to certain
directors of the Company and the transactions discussed in the foregoing
sentence, neither the Company, nor any subsidiary of the Company nor, to the
best of our knowledge, any of the Company's directors and executive officers,
nor any affiliate of any of the foregoing, had any transactions involving the
Shares during the 60 days prior to the date hereof.
Except for outstanding options to purchase Shares granted from to time to
time over recent years to certain directors and employees, including executive
officers, of the Company pursuant to our stock option plan, and except as set
forth below and otherwise described herein, neither the Company nor, to the best
of our knowledge, any of our affiliates, directors or executive officers, or any
of the directors or executive officers of any of its affiliates, is a party to
any contract, arrangement, understanding or relationship with any other person
relating, directly or indirectly, to the offer with respect to any securities of
the Company including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option
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<PAGE> 13
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies, consents or authorizations. Notwithstanding
the foregoing, five officers and directors of the Company borrowed funds to fund
purchases of Company stock and owe a total aggregate balance of $237,025. Such
borrowings are secured by an interest in the stock purchased by such officers
and directors.
Except as disclosed in this offer, the Company, its directors and executive
officers have no current plans or proposals which relate to or would result in:
o the acquisition by any person of additional securities of the Company
or the disposition of securities of the Company; or an extraordinary
corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of our subsidiaries;
o a purchase, sale or transfer of a material amount of assets of the
Company or any of our subsidiaries;
o any change in the present board of directors or management of the
Company;
o any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company; or any other material
change in the Company's corporate structure or business;
o any change in our certificate of incorporation or bylaws or any
actions which may impede the acquisition of control of the Company by
any person;
o a class of equity security of the Company being delisted from a
national securities exchange;
o a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Exchange Act; or
o the suspension of our obligation to file reports pursuant to Section
15(d) of the Exchange Act.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES;
REGISTRATION UNDER THE EXCHANGE ACT
The Company's purchase of Shares pursuant to this offer will reduce the
number of Shares that might otherwise trade publicly and may reduce the number
of stockholders. Nonetheless, we anticipate that there will be a sufficient
number of Shares outstanding and publicly traded following consummation of the
offer to ensure a continued trading market for the Shares. Based upon published
guidelines of the Nasdaq National Market, we believe that following our purchase
of Shares pursuant to the offer, our remaining Shares will continue to qualify
to be quoted on the Nasdaq National Market.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit to their customers using such Shares as collateral. We believe
that, following the purchase of Shares pursuant to the offer, the Shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that we furnish certain information to our stockholders and the
SEC and comply with SEC's proxy rules in connection with meetings of our
stockholders.
13. LEGAL MATTERS; REGULATORY APPROVALS
We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our acquisition of
Shares as contemplated herein or of any approval or other action by, or any
filing with, any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
acquisition or ownership of Shares by us as contemplated herein. Should any
approval or other action be required, we presently contemplate that the approval
or other action will be sought. We are unable to predict whether we may
determine that we are required to delay the acceptance for payment of or payment
for Shares
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<PAGE> 14
tendered pursuant to this offer pending the outcome of any such matter. There
can be no assurance that any approval or other action, if needed, would be
obtained or would be obtained without substantial conditions or that the failure
to obtain any approval or other action might not result in adverse consequences
to our business. Our obligations under the offer to accept for payment and pay
for Shares is subject to certain conditions. See section 6.
14. FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following is a discussion of the material United States
federal income tax consequences to stockholders with respect to a sale of Shares
pursuant to the offer. The discussion is based upon the provisions of the
Internal Revenue Code of 1986, as amended, Treasury regulations, Internal
Revenue Service rulings and judicial decisions, all in effect as of the date
hereof and all of which are subject to change, possibly with retroactive effect,
by subsequent legislative, judicial or administrative action. The discussion
does not address all aspects of United States federal income taxation that may
be relevant to a particular stockholder in light of the stockholder's particular
circumstances or to certain types of holders subject to special treatment under
the United States federal income tax laws, such as certain financial
institutions, tax-exempt organizations, life insurance companies, dealers in
securities or currencies, employee benefit plans or stockholders holding the
Shares as part of a conversion transaction, as part of a hedge or hedging
transaction, or as a position in a straddle for tax purposes. In addition, the
discussion below does not consider the effect of any foreign, state, local or
other tax laws that may be applicable to particular stockholders. The discussion
assumes that the Shares are held as "capital assets" within the meaning of
Section 1221 of the Internal Revenue Code. We have neither requested nor
obtained a written opinion of counsel or a ruling from the IRS with respect to
the tax matters discussed below.
Each stockholder should consult his or her own tax advisor as to the
particular United States federal income tax consequences to that stockholder
tendering Shares pursuant to the offer and the applicability and effect of any
state, local or foreign tax laws and recent changes in applicable tax laws.
Characterization of the Surrender of Shares Pursuant to the offer. The
surrender of Shares by a stockholder to the Company pursuant to the offer will
be a taxable transaction for United States federal income tax purposes and may
also be a taxable transaction under applicable state, local and foreign tax
laws. The United States federal income tax consequences to a stockholder may
vary depending upon the stockholder's particular facts and circumstances. Under
Section 302 of the Internal Revenue Code, the surrender of Shares by a
stockholder to the Company pursuant to the offer will be treated as a "sale or
exchange" of Shares for United States federal income tax purposes, rather than
as a distribution by the Company with respect to the Shares held by the
tendering stockholder, if the receipt of cash upon surrender (i) is
"substantially disproportionate" with respect to the stockholder, (ii) results
in a "complete redemption" of the stockholder's interest in the Company, or
(iii) is "not essentially equivalent to a dividend" with respect to the
stockholder, each as described below.
If any of the above three tests is satisfied, and the surrender of the
Shares is therefore treated as a "sale or exchange" of Shares for United States
federal income tax purposes, the tendering stockholder will recognize gain or
loss equal to the difference between the amount of cash received by the
stockholder and the stockholder's tax basis in the Shares surrendered pursuant
to the offer. Any gain or loss will be capital gain or loss, and will be long
term capital gain or loss if the Shares have been held for more than one year.
If none of the above three tests is satisfied, the tendering
stockholder will be treated as having received a distribution by the Company
with respect to the stockholder's Shares in an amount equal to the cash received
by the stockholder pursuant to the offer. The distribution will be treated as a
dividend taxable as ordinary income to the extent of the Company's current or
accumulated earnings and profits for tax purposes. The amount of the
distribution in excess of the Company's current or accumulated earnings and
profits will be treated as a return of the stockholder's tax basis in the
Shares, and then as gain from the sale or exchange of the Shares. If a
stockholder is treated as having received a distribution by the Company with
respect to his or her Shares, the stockholder's tax basis in his or her
remaining Shares will generally be adjusted to take into account the
stockholders return of basis in the Shares tendered.
CONSTRUCTIVE OWNERSHIP. In determining whether any of the three tests
under Section 302 of the Internal Revenue Code is satisfied, stockholders must
take into account not only the Shares that are actually owned by the
stockholder, but also Shares that are constructively owned by the stockholder
within the meaning of Section 318 of the Internal Revenue Code. Under Section
318 of the Code, a stockholder may constructively own Shares actually owned,
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<PAGE> 15
and in some cases constructively owned, by certain related individuals or
entities and Shares that the stockholder has the right to acquire by exercise of
an option or by conversion.
PRORATION. Contemporaneous dispositions or acquisitions of Shares by a
stockholder or related individuals or entities may be deemed to be part of a
single integrated transaction and may be taken into account in determining
whether any of the three tests under Section 302 of the Internal Revenue Code
has been satisfied. Each stockholder should be aware that because proration may
occur in the offer, even if all the Shares actually and constructively owned by
a stockholder are tendered pursuant to the offer, fewer than all of these Shares
may be purchased by the Company. Thus, proration may affect whether the
surrender by a stockholder pursuant to the offer will meet any of the three
tests under Section 302 of the Code. See Section 5 for information regarding
each stockholder's option to make a conditional tender of a minimum number of
Shares. A stockholder should consult his or her own tax advisor regarding
whether to make a conditional tender of a minimum number of Shares, and the
appropriate calculation thereof.
SECTION 302 TESTS. The receipt of cash by a stockholder will be
"substantially disproportionate" if the percentage of the outstanding Shares in
the Company actually and constructively owned by the stockholder immediately
following the surrender of Shares pursuant to the offer is less than 80% of the
percentage of the outstanding Shares actually and constructively owned by the
stockholder immediately before the sale of Shares pursuant to the offer.
Stockholders should consult their tax advisors with respect to the application
of the "substantially disproportionate" test to their particular situation.
The receipt of cash by a stockholder will be a "complete redemption" if
either (i) the stockholder owns no Shares in the Company either actually or
constructively immediately after the Shares are surrendered pursuant to the
offer, or (ii) the stockholder actually owns no Shares in the Company
immediately after the surrender of Shares pursuant to the offer and, with
respect to Shares constructively owned by the stockholder immediately after the
offer, the stockholder is eligible to waive, and effectively waives,
constructive ownership of all such Shares under procedures described in Section
302(c) of the Internal Revenue Code. A director, officer or employee of the
Company is not eligible to waive constructive ownership under the procedures
described in Section 302(c) of the Internal Revenue Code.
Even if the receipt of cash by a stockholder fails to satisfy the
"substantially disproportionate" test or the "complete redemption" test, a
stockholder may nevertheless satisfy the "not essentially equivalent to a
dividend" test if the stockholder's surrender of Shares pursuant to the offer
results in a "meaningful reduction" in the stockholder's interest in the
Company. Whether the receipt of cash by a stockholder will be "not essentially
equivalent to a dividend" will depend upon the individual stockholder's facts
and circumstances. The IRS has indicated in published rulings that even a small
reduction in the proportionate interest of a small minority stockholder in a
publicly held corporation who exercises no control over corporate affairs may
constitute such a "meaningful reduction." Stockholders expecting to rely upon
the "not essentially equivalent to a dividend" test should consult their own tax
advisors as to its application in their particular situation.
CORPORATE STOCKHOLDER DIVIDEND TREATMENT. If a sale of Shares by a
corporate stockholder is treated as a dividend, the corporate stockholder may be
entitled to claim a deduction equal to 70% of the dividend under Section 243 of
the Internal Revenue Code, subject to applicable limitations. Corporate
stockholders should, however, consider the effect of Section 246(c) of the
Internal Revenue Code, which disallows the 70% dividends-received deduction with
respect to stock that is held for 45 days or less. For this purpose, the length
of time a taxpayer is deemed to have held stock may be reduced by periods during
which the taxpayer's risk of loss with respect to the stock is diminished by
reason of the existence of certain options or other transactions. Moreover,
under Section 246A of the Internal Revenue Code, if a corporate stockholder has
incurred indebtedness directly attributable to an investment in Shares, the 70%
dividends-received deduction may be reduced.
In addition, amounts received by a corporate stockholder pursuant to
the offer that are treated as a dividend may constitute an "extraordinary
dividend" under Section 1059 of the Internal Revenue Code. The "extraordinary
dividend" rules of the Internal Revenue Code are highly complicated.
Accordingly, any corporate stockholder that might have a dividend as a result of
the sale of Shares pursuant to the offer should review the "extraordinary
dividend" rules to determine the applicability and impact of such rules to it.
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<PAGE> 16
ADDITIONAL TAX CONSIDERATIONS. The distinction between long-term
capital gains and ordinary income is relevant because, in general, individuals
currently are subject to taxation at a reduced rate on their "net capital gain,"
which is the excess of net long-term capital gains over net short-term capital
losses, for the year. Tax rates on long-term capital gain for individual
shareholders vary depending on the shareholders' income and holding period for
the Shares. In particular, reduced tax rates apply to gains recognized by an
individual from the sale of capital assets held for more than one year,
currently 20 percent or less.
Stockholders are urged to consult their own tax advisors regarding any
possible impact on their obligation to make estimated tax payments as a result
of the recognition of any capital gain, or the receipt of any ordinary income,
caused by the surrender of any Shares to the Company pursuant to the offer.
FOREIGN STOCKHOLDERS. The Company will withhold United States federal
income tax at a rate of 30% from gross proceeds paid pursuant to the offer to a
foreign stockholder or his agent, unless we determine that a reduced rate of
withholding is applicable pursuant to a tax treaty or that an exemption from
withholding is applicable because the gross proceeds are effectively connected
with the conduct of a trade or business by the foreign stockholder within the
United States. For this purpose, a foreign stockholder is any stockholder that
is not (i) a citizen or resident of the United States, (ii) a domestic
corporation or domestic partnership, (iii) an estate the income of which from
sources without the United States is effectively connected with the conduct of a
trade or business within the United States, or (iv) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust, and one or more United States persons have the
authority to control all substantial decisions of the trust. Without definite
knowledge to the contrary, we will determine whether a stockholder is a foreign
stockholder by reference to the stockholder's address. A foreign stockholder may
be eligible to file for a refund of the tax or a portion of the tax if the
stockholder (i) meets the "complete redemption," "substantially
disproportionate" or "not essentially equivalent to a dividend" tests described
above, (ii) is entitled to a reduced rate of withholding pursuant to a treaty
and the Company withheld at a higher rate, or (iii) is otherwise able to
establish that no tax or a reduced amount of tax was due. In order to claim an
exemption from withholding on the ground that gross proceeds paid pursuant to
the offer are effectively connected with the conduct of a trade or business by a
foreign stockholder within the United States or that the foreign stockholder is
entitled to the benefits of a tax treaty, the foreign stockholder must deliver
to the depositary, or other person who is otherwise required to withhold United
States tax, a properly executed statement claiming such exemption or benefits.
These statements may be obtained from the depositary. Foreign stockholders are
urged to consult their own tax advisors regarding the application of United
States federal income tax withholding, including eligibility for a withholding
tax reduction or exemption and the refund procedures.
BACKUP WITHHOLDING. See Section 3 with respect to the application of
the United States federal income tax backup withholding.
The tax discussion set forth above is included for general information
only and may not apply to Shares acquired in connection with the exercise of
stock options or pursuant to other compensation arrangements with the Company.
The tax consequences of a sale pursuant to the offer may vary depending upon,
among other things, the particular circumstances of the tendering stockholder.
No information is provided herein to the state, local or foreign tax
consequences of the transaction contemplated by the offer. Stockholders are
urged to consult their own tax advisors to determine the particular federal,
state, local and foreign tax consequences to them of tendering Shares pursuant
to the offer and the effect of the stock ownership attribution rules described
above.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion and at
any time or from time to time, to extend the period of time during which the
offer is open by giving oral or written notice of the extension to the
depositary and making a public announcement thereof. There can be no assurance,
however, that the Company will exercise its right to extend the offer. During
any extension, all Shares previously tendered will remain subject to the offer,
except to the extent that Shares may be withdrawn as set forth in section 3. We
also expressly reserve the right, in our sole discretion, (i) to terminate the
offer and not accept for payment any Shares not previously accepted for payment
or, subject to Rule 13e-4(f)(5) under the Exchange Act which requires us either
to pay the consideration offered or to return the Shares tendered promptly after
the termination or withdrawal of the offer, to postpone payment for Shares upon
the occurrence of any of the conditions specified in Section 6 hereof, by giving
oral or written notice of such termination to the depositary and making a public
announcement thereof and (ii) at any time, or from time to time,
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to amend the offer in any respect. Amendments to the offer may be effected by
public announcement. Without limiting the manner in which the Company may choose
to make public announcement of any extension, termination or amendment, the
Company shall have no obligation, except as otherwise required by applicable
law, to publish, advertise or otherwise communicate any such public
announcement, other than by making a release to PR Newswire, Inc., except in the
case of an announcement of an extension of the offer, in which case the Company
shall have no obligation to publish, advertise or otherwise communicate the
announcement other than by issuing a notice of the extension by press release or
other public announcement, which notice shall be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date. Material changes to information previously provided to holders
of the Shares in this offer or in documents furnished subsequent thereto will be
disseminated to holders of Shares in compliance with Rule 13e-4(e)(3)
promulgated by the SEC under the Exchange Act.
If the Company materially changes the terms of the offer or the
information concerning the offer, or if we waive a material condition of the
offer, we will extend the offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(3) under the Exchange Act. Those rules require that the minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer, other than a change in price,
change in dealer's soliciting fee or change in percentage of securities sought,
will depend on the facts and circumstances, including the relative materiality
of the terms or information. In a published release, the SEC has stated that in
its view, an offer should remain open for a minimum of five business days from
the date that notice of a material change is first published, sent or given. The
offer will continue or be extended for at least ten business days from the time
the Company publishes, sends or gives to holders of Shares a notice that we will
(a) increase or decrease the price we will pay for Shares or (b) increase,
except for an increase not exceeding 2% of the outstanding Shares, or decrease
the number of Shares we seek.
16. SOLICITATION FEES AND EXPENSES
The Company has not retained but may retain an Information Agent to
contact stockholders by mail, telephone, facsimile, telex, telegraph, other
electronic means and personal interviews, and may request brokers, dealers and
other nominee stockholders to forward materials relating to the offer to
beneficial owners. If the Company does not retain an Information Agent,
employees of the Company will handle such matters but will not receive
additional compensation for such actions.
We have retained American Securities Transfer & Trust, Inc. as
depositary in connection with the offer. The depositary will receive reasonable
and customary compensation for its services and will also be reimbursed for
certain out-of-pocket expenses. The Company has agreed to indemnify the
depositary against certain liabilities, including certain liabilities under the
federal securities laws, in connection with the offer. The depositary has not
been retained to make solicitations or recommendations in connection with the
offer.
We will not pay any fees or commissions to any broker, dealer or other
person for soliciting tenders of Shares pursuant to the offer, other than the
fee of the dealer manager. The Company will, upon request, reimburse brokers,
dealers, commercial banks and trust companies for reasonable and customary
handling and mailing expenses incurred by them in forwarding materials relating
to the offer to their customers.
17. WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements and
other information with the SEC relating to our business, financial condition and
other matters. Certain information as of particular dates concerning our
directors and officers, their remuneration, options granted to them, the
principal holders of the Company's securities and any material interest of these
persons in transactions with the Company is filed with the SEC. We have also
filed an Issuer Tender Offer Statement on Schedule TO with the SEC, which
includes certain additional information relating to the offer. The Schedule TO,
as well as such other material, may be inspected and copies may be obtained at
the SEC's public reference facilities at 450 Fifth Street, N.W., Washington,
D.C., and should also be available for inspection and copying at the regional
offices of the SEC located at 7 World Trade Center, 13th Floor, New York, New
York 10048, and Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of this material may be obtained by mail, upon
payment of the SEC's customary fees, from the SEC's Public Reference Section at
450 Fifth Street, N.W., Washington,
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D.C. 20549. The Company's Schedule TO may not be available at the SEC's regional
offices. Copies of the Schedule TO, the offer to purchase and related materials
may also be obtained by accessing the EDGAR database at the SEC's website
(www.sec.gov).
The offer is being made to all holders of Shares. The Company is not
aware of any state where the making of the offer is prohibited by administrative
or judicial action pursuant to a valid state statute. If we become aware of any
valid state statute prohibiting the making of the offer, we will make a good
faith effort to comply with the statute. If, after such good faith effort, we
cannot comply with the statute, the offer will not be made to, nor will tenders
be accepted from or on behalf of, holders of Shares in that state. In those
jurisdictions whose securities, blue sky or other laws require the offer to be
made by a licensed broker or dealer, the offer shall be deemed to be made on
behalf of the Company by one or more registered brokers or dealers licensed
under the laws of these jurisdictions.
March 21, 2000 ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Additional copies of this offer, the letter of transmittal or other
tender offer materials may be obtained from the Company and will be furnished at
the Company's expense. Any questions concerning tender procedures may be
directed to the Company as set forth below. Stockholders may also contact their
local broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the tender offer.
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
The depositary for the offer is:
For Overnight Delivery or by Hand:
American Securities Transfer & Trust, Inc.
12039 W Alameda Parkway, Suite Z-2
Lakewood, Colorado 80228
By Mail:
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201
If by facsimile transmission:
(For Eligible Institutions only)
(303-986-2444)
Any questions concerning tender procedures may be directed to the depositary.
