<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
--------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE> 2
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
265 Turner Drive
Durango, Colorado 81301
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 14, 2000
To our Shareholders:
The 2000 Annual Meeting of Shareholders of Rocky Mountain Chocolate
Factory, Inc. will be held on Friday, July 14, 2000 at 10:00 a.m. (local time),
at The Doubletree Hotel, 501 Camino Del Rio, in Durango, Colorado, for the
following purposes:
1. To elect six directors to serve until the fiscal 2001 Annual Meeting of
Shareholders and until their respective successors are elected and qualified.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only holders of Common Stock of record at the close of business on June 8,
2000 will be entitled to notice of and to vote at the meeting or any
adjournments thereof.
Each shareholder, even though he or she now plans to attend the meeting, is
requested to promptly mark, sign, date and return the enclosed Proxy in the
envelope provided. Any shareholder present at the meeting may withdraw his or
her Proxy and vote personally on each matter brought before the meeting.
By order of the Board of Directors
/s/ Virginia M. Perez
Virginia M. Perez
Secretary
Durango, Colorado
June 13, 2000
<PAGE> 3
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
265 Turner Drive
Durango, Colorado 81301
PROXY STATEMENT
Annual Meeting of Shareholders - July 14, 2000
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Rocky Mountain Chocolate Factory, Inc. (the
"Company") for use only at the Annual Meeting of the Company's shareholders to
be held at the time and place, and for the purposes, set forth in the
accompanying Notice of Annual Meeting of Shareholders.
It is anticipated that the Proxy Statement, together with the Proxies and
the Company's 2000 Annual Report to Shareholders, will first be mailed to the
Company's shareholders on or about June 13, 2000. A person giving the enclosed
Proxy has the power to revoke it at any time before it is exercised by (1)
delivering written notice of revocation to the Secretary of the Company, (2)
duly executing and delivering a Proxy for the Annual Meeting bearing a later
date or (3) voting in person at the Annual Meeting.
The Company will bear the cost of this solicitation of Proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation materials to beneficial owners of the Company's Common Stock, par
value $.03 per share (the "Common Stock"). In addition, the Company's officers,
directors and other regular employees, without additional compensation, may
solicit Proxies by mail, personal interview, telephone or telegraph.
VOTING SECURITIES
The close of business on June 8, 2000, has been fixed as the record date
for the determination of holders of record of the Company's Common Stock
entitled to notice of and to vote at the Annual Meeting. On the record date,
1,956,784 shares of the Company's Common Stock were outstanding and eligible to
be voted at the Annual Meeting.
For each share of Common Stock held on the record date, a shareholder is
entitled to one vote on all matters to be voted on at the Annual Meeting, except
the election of directors.
Shareholders have cumulative voting rights in the election of directors,
and there is no condition precedent to the exercise of those rights. Under
cumulative voting, each shareholder is entitled to as many votes as shall equal
the number of his or her shares multiplied by six, the number of directors to be
elected, and he or she may cast all of those votes for a single nominee or
divide them among any two or more nominees as he or she sees fit. It is the
intention of the Proxy holders to exercise voting rights in order to elect the
maximum number of nominees named below. An instruction on the Proxy to withhold
authority to vote for any nominee will be deemed an authorization to vote
cumulatively for the remaining nominees, unless otherwise indicated.
VOTING PROCEDURES
The vote required for the election of directors is a plurality of the
shares of Common Stock present or represented by proxy at the meeting and
entitled to vote thereon, provided a quorum is present. The vote required for
the approval of the other item to be acted upon at the Annual Meeting is the
affirmative vote of a majority of the shares entitled to vote on the matter and
present or represented by proxy at the meeting, provided a quorum is present. A
quorum is established by the presence or representation at the Annual Meeting of
the holders of a majority of the Company's voting shares. Under the rules of the
New York Stock Exchange, brokers who hold shares in street name have
discretionary authority to vote on certain "routine" items even if they have not
received instructions from the persons entitled to vote such shares. However,
brokers do not have authority to vote on "nonroutine" items without such
instructions. Such "broker non-votes" (shares held by brokers or nominees as to
which they have no discretionary power to vote on a particular matter and have
received no instructions from the persons entitled to vote such shares) are
counted as present and entitled to vote for purposes of determining whether a
quorum is present but are not considered entitled to vote on any nonroutine
matter to be acted upon. For matters requiring the affirmative vote of a
plurality of the shares of Common Stock present or represented at the Meeting,
such as Proposal No.
1
<PAGE> 4
1, broker non-votes would have no effect on the outcome of the vote. For matters
requiring the affirmative vote of a majority of the shares of Common Stock
present or represented at the Meeting and entitled to vote, broker non-votes
would not be counted as among the shares entitled to vote with respect to such
matters. Thus, the effect of any broker non-votes with respect to such matters
would be to reduce the number of affirmative votes required to approve the
proposals and the number of negative votes required to block such approval.
BENEFICIAL OWNERSHIP OF THE COMPANY'S EQUITY SECURITIES
The following table sets forth information, as of June 8, 2000, with
respect to the shares of Common Stock beneficially owned (i) by each person
known to the Company to be the beneficial owner of more than 5% of the Company's
Common Stock, (ii) by each director or nominee for election as a director and
each executive officer named in the Summary Compensation Table, and (iii) by all
current directors and executive officers of the Company as a group.
The number of shares beneficially owned includes shares of Common Stock
with respect to which the persons named below have either investment or voting
power. A person is also deemed to be the beneficial owner of a security if that
person has the right to acquire beneficial ownership of that security within 60
days through the exercise of an option or through the conversion of another
security. Except as noted, each beneficial owner has sole investment and voting
power with respect to the Common Stock.
Common Stock not outstanding that is subject to options or conversion
privileges is deemed to be outstanding for the purpose of computing the
percentage of Common Stock beneficially owned by the person holding such options
or conversion privileges, but is not deemed to be outstanding for the purpose of
computing the percentage of Common Stock beneficially owned by any other person.
<TABLE>
<CAPTION>
Amount and Nature
Name of Beneficial Owner of Beneficial Ownership Percent of Class
------------------------ ----------------------- ----------------
<S> <C> <C>
Clyde Wm. Engle et al. (1) 376,587 (2) 19.2%
Franklin E. Crail (1) 298,107 15.2%
Fred M. Trainor 80,000 (3) 4.1%
Clifton W. Folsom 56,716 (4) 2.9%
Jay B. Haws 45,688 (4) 2.3%
Lee N. Mortenson 38,000 (3) 1.9%
Bryan J. Merryman 30,100 (4) 1.5%
Edward L. Dudley 28,000 (4) 1.4%
Gerald A. Kien 20,000 (3) 1.0%
All executive officers and
directors as a group (9 persons) 973,198 (5) 46.2%
</TABLE>
(1) Mr. Engle's address is 4433 West Touhy Avenue, Lincolnwood, Illinois 60646.
Mr. Crail's address is the same as the Company's address.
(2) The following information was provided to the Company by Mr. Engle.
Includes 10,000 shares that Mr. Engle has the right to acquire within 60
days through the exercise of options granted pursuant to the Company's 2000
Nonqualified Stock Option Plan for Nonemployee Directors (the "2000
Director's Plan"). Of the 376,587 shares indicated as being beneficially
owned by Mr. Engle, 128,730 shares are owned by GSC Enterprises, Inc., a
corporation in which Mr. Engle owns a majority interest, and 10,000 shares
are owned beneficially by members of Mr. Engle's immediate family. Mr.
Engle disclaims beneficial ownership of the shares owned by his family
members.
2
<PAGE> 5
(3) Includes 10,000 shares that Messrs. Trainor, Kien and Mortenson each has
the right to acquire within 60 days through the exercise of options granted
pursuant to the 2000 Director's Plan. Includes 10,000 shares that Messrs.
Trainor and Kien each has the right to acquire within 60 days through the
exercise of options granted pursuant to the Company's 1990 Nonqualified
Stock Option Plan for Nonemployee Directors (the "1990 Director's Plan").
Mr. Mortenson has pledged 8,000 shares owned by him to the Company to
secure payment of certain indebtedness to the Company incurred by Mr.
Mortenson in connection with his purchase of such shares.
(4) Includes shares that these officers have the right to acquire within 60
days through the exercise of options granted pursuant to the Company's 1985
Incentive Stock Option Plan and 1995 Stock Option Plan as follows: Mr.
Dudley, 16,000 shares; Mr. Folsom, 31,000 shares; Mr. Merryman, 12,000
shares; and Mr. Haws, 29,000 shares. Mr. Dudley, Mr. Merryman and Mr.
Folsom have each pledged 8,000 shares owned by them, and Mr. Haws has
pledged 15,000 shares owned by him, to the Company to secure payment of
certain indebtedness to the Company incurred by each of them in connection
with his purchase of such shares.
(5) Includes 148,000 shares that officers and directors as a group have the
right to acquire within 60 days through the exercise of options granted
pursuant to the Company's 1985 Incentive Stock Option Plan, 1995 Stock
Option Plan, the 1990 Director's Plan and 2000 Director's Plan. The
Officers and directors have pledged an aggregate of 47,000 shares owned by
them to the Company to secure payment of certain indebtedness to the
Company incurred by them in connection with the purchase of such shares.
ITEM 1. ELECTION OF DIRECTORS
NOMINEES
The Company's By-Laws provide for no fewer than three nor more than nine
directors. The Board has previously fixed the current number of directors at
six. Directors are elected for one year. Six directors will be elected at the
Annual Meeting. All of the nominees are currently directors of the Company.
Proxies will be voted, unless authority to vote is withheld by the
shareholder, FOR the election of Messrs. Crail, Kien, Mortenson, Trainor, Engle
and Merryman to serve until the 2001 Annual Meeting of Shareholders and until
the election and qualification of their respective successors. If any such
nominee shall be unable or shall fail to accept nomination or election by virtue
of an unexpected occurrence, Proxies may be voted for such other person or
persons as shall be determined by the Proxy holders in their discretion.
Shareholders may not vote for more than six persons for election as directors at
the Annual Meeting.
Set forth below is certain information concerning each nominee for election as a
director:
<TABLE>
<CAPTION>
NAME POSITIONS WITH COMPANY AGE DIRECTOR SINCE
---- ---------------------- --- --------------
<S> <C> <C> <C>
Franklin E. Crail Chairman of the Board, Chief Executive Officer and 58 1982
President
Bryan J. Merryman Chief Operating Officer, Chief Financial Officer, 39 1999
Treasurer and Director
Gerald A. Kien Director 68 1995
Lee N. Mortenson Director 64 1987
Fred M. Trainor Director 61 1992
Clyde Wm. Engle Director 57 2000
</TABLE>
3
<PAGE> 6
Franklin E. Crail. Mr. Crail co-founded the first Rocky Mountain Chocolate
Factory store in May 1981. Since the incorporation of the Company in November
1982, he has served as its President and a director, and, from September 1981 to
January 2000 as its Treasurer. He was elected Chairman of the Board in March
1986. Prior to founding the Company, Mr. Crail was co-founder and President of
CNI Data Processing, Inc., a software firm which developed automated billing
systems for the cable television industry.
Bryan J. Merryman. Mr. Merryman joined the Company in December 1997 as Vice
President - Finance and Chief Financial Officer. Since April 1999, Mr. Merryman
has also served the Company as the Chief Operating Officer and as a Director and
since January 2000 as the Company's Treasurer. Prior to joining the Company, Mr.
Merryman was a principal in Knightsbridge Holdings, Inc. (a leveraged buyout
firm) from January 1997 to December 1997. Mr. Merryman also served as Chief
Financial Officer of Super Shops, Inc., a retailer and manufacturer of
aftermarket auto parts from July 1996 to November 1997 and was employed for more
than eleven years by Deloitte and Touche LLP, most recently as a Senior Manager.
Gerald A. Kien. Dr. Kien was first elected as a director of the Company in
August 1995. From 1993 to 1995, Dr. Kien served as President and Chief Executive
Officer of Remote Sensing Technologies, Inc., a subsidiary of Envirotest
Systems, Inc., a company engaged in the development of instrumentation for
vehicle emissions testing. From 1989 to 1993, Dr. Kien served as Chairman,
President and Chief Executive Officer of Sun Electric Corporation, a
manufacturer of automotive test equipment, and served as a director and as
Chairman of the Executive Committee of that company from 1980 to 1993. Sun
Electric merged with Snap-On Tools in 1993, and Dr. Kien remained as President
of the Sun Electric division of Snap-On Tools until his retirement in 1994. Dr.
Kien was a co-founder of the First National Bank of Hoffman Estates and remained
as a director from 1979 to 1990, and was a director of the Charter Bank and
Trust of Illinois from 1984 to 1990. He served as a director of Systems Control,
Inc. and Vehicle Test Technologies, Inc., from 1989 to 1993, both of which are
engaged in emissions testing of motor vehicles. Dr. Kien received his Ph.D. from
the University of Illinois Graduate College of Medicine in 1959.
Lee N. Mortenson. Mr. Mortenson has served on the Board of Directors of the
Company since 1987. Mr. Mortenson has served as President, Chief Operating
Officer and a Director of Telco Capital Corporation of Chicago, Illinois since
January 1984. Telco Capital Corporation is principally engaged in the
manufacturing and real estate businesses. He was President, Chief Executive
Officer and a Director of Sunstates Corporation (formerly Acton Corporation)
from May 1988 to December 1990, and he has been President, Chief Operating
Officer and a Director of Sunstates Corporation since December 1990. Sunstates
Corporation is a publicly traded company primarily engaged in real estate
development and manufacturing. Mr. Mortenson was a director of Alba-Waldensian,
Inc., which is principally engaged in the manufacturing of apparel and medical
products, from 1984 to July 1999 and served as its President and Chief Executive
Officer from February 1997 to July 1999. Mr. Mortenson has also served as a
director of NRG Inc., a leasing company, since 1987. On December 24, 1996, an
Agreed Order of Liquidation with a finding of insolvency was entered under the
Illinois Insurance Code against the principal subsidiary of Sunstates
Corporation, Coronet Insurance Company ("Coronet"), and Coronet's subsidiaries,
National Assurance Indemnity Company ("National Assurance") and Crown Casualty
Company ("Crown"), pursuant to which, among other things, all of the assets of
Coronet, National Assurance and Crown were transferred to the Office of the
Special Deputy for the purposes of winding up the affairs of such companies. On
February 27, 1997, a consent order appointing the Florida Department of
Insurance as Receiver for purposes of liquidation was entered under the Florida
Insurance Code against Casualty Insurance Company of Florida ("Casualty"), a
subsidiary of Coronet. Mr. Mortenson, prior to March 14, 1997, was a director
and President of each of Coronet, National Assurance, Crown and Casualty. On
January 24, 1997, Hickory White Company, a furniture manufacturing subsidiary of
Sunstates Corporation, filed a voluntary petition under Chapter 11 of the
Federal Bankruptcy Code. All of the assets of Hickory White Company were sold to
an unrelated party on March 11, 1997. Mr. Mortenson was a Vice President and a
director of Hickory White Company.
Fred M. Trainor. Mr. Trainor has served as a director of the Company since
August 1992. Mr. Trainor is the founder, and since 1984 has served as Chief
Executive Officer and President of AVCOR Health Care Products, Inc., Fort Worth,
Texas, a manufacturer and marketer of specialty dressings products. Prior to
founding AVCOR Health Care Products, Inc., in 1984, Mr. Trainor was a founder,
Chief Executive Officer and President of Tecnol, Inc. of Fort Worth, Texas, also
a company involved with the health care industry. Before founding Tecnol, Inc.,
Mr. Trainor was with American Hospital Supply Corporation (AHSC) for 13 years in
a number of management capacities.
4
<PAGE> 7
Clyde Wm. Engle. Mr. Engle is Chairman of the Board of Directors and
President of RDIS Corporation, Chairman of the Board of Directors and Chief
Executive Officer of Telco Capital Corporation, Chairman of the Board of
Directors of Hickory Furniture Company, Chairman of the Board of Directors and
Chief Executive Officer of Sunstates Corporation, which is primarily engaged in
automated textile equipment manufacturing, and Chairman of the Board of
Directors, President and Chief Executive Officer of GSC Enterprises, Inc., a
one-bank holding company, and Chairman of the Board of Directors and President
of its subsidiary, Bank of Lincolnwood.
INFORMATION REGARDING THE BOARD OF DIRECTORS
No family relationships exist between any director or executive officer and
any other director or executive officer of the Company.
COMMITTEE AND MEETINGS
The Board of Directors has a standing Compensation Committee and Audit
Committee. Each committee is composed of Messrs. Mortenson, Trainor and Kien.
The Compensation Committee's function is to approve remuneration arrangements
for the Company's executive officers. The Compensation Committee also approves
and administers grants of stock options under the Company's 1995 Stock Option
Plan. No further grants are permitted under the Company's 1985 Incentive Stock
Option Plan, which expired in 1995, but the Compensation Committee administers
that plan with respect to outstanding options previously granted thereunder. The
Compensation Committee also approves and administers grants of stock options
under the 2000 Director's Plan. The Audit Committee receives and reviews the
reports of the Company's independent auditors. The Compensation Committee and
Audit Committee each held one meeting during the last fiscal year. The Company
has no standing nominating committee.
During the last fiscal year, the Company's Board of Directors held twenty-two
meetings. Each director attended at least 80% of the aggregate of (i) the total
number of meetings of the Board of Directors held and (ii) the total number of
meetings held by all committees of the Board on which he served, during the
period he was a director, except that Mr. Trainor attended 72.7% of such
meetings.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF THE SIX NOMINEES NAMED ABOVE.
EXECUTIVE COMPENSATION
Report of Compensation Committee
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") on executive compensation policies for the fiscal
year ended February 29, 2000. The Committee administers the compensation program
for executive officers of the Company and makes all related decisions.
The principal elements of the compensation program for executive officers
are base salary, performance-based annual bonuses and options granted under the
Company's 1995 Stock Option Plan. The goals of the program are to ensure that a
strong relationship exists between executive compensation and the creation of
shareholder value and that executive officers are strongly motivated and
retained. The Company's compensation philosophy is to create a direct
relationship between the level of total executive officer compensation and the
Company's success in meeting its annual performance goals as represented by its
annual business plan. An additional element of this philosophy is to reward
equitably relative contribution and job performance of individual executive
officers.
5
<PAGE> 8
BASE SALARY
Annual salaries for the Company's executive officers, including the
Chairman of the Board and President are generally reviewed in May of each year
based on a number of factors, both objective and subjective, with any change
generally to be effective on June 1 of that year. Objective factors considered
include Company financial performance relative to business plan profit objective
in the immediately preceding fiscal year, although no specific formulas based on
such factors are used to determine salaries. Salary decisions are based
primarily on the Committee's subjective analysis of the factors contributing to
the Company's success and of the executive's individual contributions to that
success.
PERFORMANCE-BASED ANNUAL BONUSES
Cash bonuses based on the Company's performance are awarded to the
executive officers under an incentive compensation plan. Under the plan that
served as the basis for bonuses paid for fiscal 2000, executive officers
received a percentage of their base pay based on the overall performance of the
Company. Additional bonuses may be awarded at the discretion of the Committee in
recognition of special accomplishments. Thus, whether the executive officers'
total pay is comparable to the compensation of executives with similar
responsibilities at comparable companies may vary from year to year depending
upon the Company's performance.
STOCK OPTIONS
Awards of stock options strengthen the ability of the Company to attract,
motivate and retain executives of superior capability and more closely align the
interests of management with those of shareholders. The Committee considers on
an annual basis the grant of options to executive officers and key managers
under the Company's 1995 Stock Option Plan. The number of options granted
is generally based upon the position held by a participant and the Committee's
subjective evaluation of such participant's contribution to the Company's future
growth and profitability. The grant of options is an annual determination, but
the Committee may consider the size of past awards and the total amounts
outstanding in making such a determination.
Unlike cash, the value of a stock option will not immediately be realized
and does not result in a current expense to the Company. Stock options are
granted with an exercise price equal to the current market price of the
Company's stock and will have value only if the Company's stock price increases,
resulting in a commensurate benefit for the Company's shareholders. Although the
plan does not provide for a required vesting period, the Committee's current
practice is to generally require that options granted to employees vest pro rata
20% per year over five years.
There were 115,000 stock options awarded to executive officers or others in
fiscal 2000. Options currently held by current executive officers and directors
under the Company's option plans cover a total of 244,000 shares.
OTHER COMPENSATION
An additional element of the executive officer's compensation, which is not
performance-based, is the matching of contributions by the Company under the
Company's 401(k) plan.
The Compensation Committee believes that linking executive compensation to
corporate performance results in a better alignment of compensation with
corporate goals and shareholder interests. As performance goals are met or
exceeded, resulting in increased value to shareholders, executives are rewarded
commensurately. The Committee believes that compensation levels during 2000
adequately reflect the Company's compensation goals and policies.
June 13, 2000
6
<PAGE> 9
COMPENSATION COMMITTEE FOR FISCAL 2001:
The 2001 Compensation Committee will consist of: Lee Mortenson, Gerald A.
Kien and Fred M. Trainor.
Summary Compensation Table
The following table sets forth certain information with respect to annual
compensation for the years indicated for each executive officer of the Company
who met the minimum compensation threshold of $100,000 for inclusion in the
table (the "Named Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
-------------
Securities
Annual Compensation Underlying
---------------------------- Options/SARs All Other
Name and Principal Position Year Salary(1) Bonus(2) (#)(3) Compensation(4)
--------------------------- ---- ------------------ -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Franklin E. Crail, 2000 $165,000 $50,000 10,000 $2,475
Chairman of the Board and 1999 $161,250 -0- -0- $2,500
President 1998 $150,000 $67,500 -0- $2,250
Bryan J. Merryman, 2000 $123,673 $50,000 10,000 $1,304
Chief Operating Officer, Chief Financial 1999 $107,500 -0- -0- -0-
Officer and Director 1998 (5) $25,000 $20,000 30,000 -0-
Edward L. Dudley, 2000 $109,115 $25,000 10,000 $1,060
Vice President - Sales and Marketing 1999 $96,250 -0- -0- $1,310
1998 $85,000 $21,250 10,000 -0-
Clifton W. Folsom, 2000 $100,000 -0- 10,000 $1,442
Vice President - Franchise Support 1999 $97,500 -0- -0- -0-
1998 $90,000 $22,500 -0- $104
Jay B. Haws, 2000 $100,000 $20,000 10,000 -0-
Vice President - Creative Services 1999 $98,500 -0- -0- $1,830
1998 $94,000 $23,500 -0- $1,410
</TABLE>
(1) Includes amounts deferred at the Named Officers' election pursuant to the
Company's 401(k) Plan.
(2) Represents amounts paid as bonuses based on performance for the indicated
fiscal year, paid in the following fiscal year.
(3) Options to acquire shares of Common Stock under the 1995 Stock Option Plan.
Options granted in 1998 have ten-year terms and vest with respect to
one-fifth of the shares covered thereby annually beginning on the date of
grant. Options granted in 2000 will vest 100% following the fiscal year in
which the Company achieves $1.00 earnings per share.
(4) Represents Company contributions made or accrued on behalf of the Named
Officers under the Company's 401(k) Plan.
(5) Mr. Merryman joined the Company as an officer in December 1997.
7
<PAGE> 10
OPTION GRANTS DURING FISCAL 2000
The Company granted 50,000 stock options to Officers during fiscal 2000
pursuant to the 1995 Stock Option Plan.
Aggregated Option Exercises During Fiscal 2000 and Fiscal Year End Option Values
The following table provides information regarding the number and value of
options held by the Named Officers at fiscal year end. No options for
shares of stock were exercised by the Named Officers during fiscal 2000.
The Company does not have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at
Value Option at Fiscal Fiscal
Shares Realized Year End (#) Year End ($)(1)
Acquired on --------- --------------------------- ----------------------------
Name Exercise (#) (#) Exercisable Unexercisable Exercisable Unexercisable
----- ------------ --- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Franklin E. Crail -- -- -- 10,000 -- --
Bryan J. Merryman -- -- 12,000 28,000 -- --
Edward L. Dudley -- -- 16,000 24,000 -- --
Clifton W. Folsom -- -- 29,000 14,000 $4,000 --
Jay B. Haws -- -- 27,000 14,000 $4,000 --
</TABLE>
(1) The closing bid price of the Common Stock on The Nasdaq Stock Market on
February 29, 2000, was $4.50 per share. None of the options held by the
Named Officers were in the money on that date, except as indicated for Mr.
Folsom and Mr. Haws.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive any compensation for serving on the
Board or on committees. Directors who are not also officers or employees of the
Company are entitled to receive stock option awards under the 1990 Director's
Plan and the 2000 Director's Plan.
The 1990 Director's Plan, as amended, provides for automatic grants of
nonqualified stock options covering a maximum of 90,000 shares of Common Stock
of the Company to directors of the Company who are not also employees or
officers of the Company and who have not made an irrevocable, one-time election
to decline to participate in the plan. The 1990 Director's Plan provides that,
during the term of the 1990 Director's Plan, options will be granted
automatically to new nonemployee directors upon their election. Each such option
permits the nonemployee director to purchase 10,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date of
grant of the option. Each nonemployee director's option may be exercised in full
during the period beginning one year after the grant date of such option and
ending ten years after such grant date, unless the option expires sooner due to
termination of service or death.
The 2000 Director's Plan provides for automatic grants of nonqualified
stock options covering a maximum of 60,000 shares of Common Stock of the Company
to directors of the Company who are not also employees or officers of the
Company. The 2000 Director's Plan provides that, during the term of the 2000
Director's Plan, options will be granted automatically to new nonemployee
directors upon their election. Each such option permits the nonemployee director
to purchase 10,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant of the option. Each year
following adoption of the 2000 Director's Plan, on a date established by the
Compensation Committee, during the term of the 2000 Director's Plan, options to
purchase 1,000 shares of common stock shall be granted automatically to each
nonemployee director, if any, who is serving the Company as a director on such
date. Each nonemployee director's option may be exercised in full beginning on
the Vesting Date as determined by the Compensation Committee and ending five
years after such vesting date, unless the option expires sooner due to
termination of service or death.
8
<PAGE> 11
COMPARISON OF RETURN ON EQUITY
The following graph reflects the total return, which assumes reinvestment
of dividends, of a $100 investment in the Company's Common Stock, in the Nasdaq
U.S. Index, in the Russell 2000 Index and in a Peer Group Index of companies in
the confectionery industry, on February 28, 1995.
TOTAL SHAREHOLDER RETURNS
[FLOW CHART]
<TABLE>
<CAPTION>
BASE
PERIOD RETURN RETURN RETURN RETURN RETURN
COMPANY/INDEX NAME 1995 2/1996 2/1997 2/1998 2/1999 2/2000
------------------------------------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Rocky Mountain Chocolate Factory, Inc. 100.00 64.29 35.71 33.93 32.14 32.14
Nasdaq Index - US 100.00 139.36 166.28 227.28 296.02 602.61
Russell 2000 Index 100.00 126.64 140.33 180.00 152.89 225.17
Peer Group(l) 100.00 136.97 155.00 217.00 240.00 176.90
</TABLE>
(1) Comprised of the following companies: Hershey Foods Corporation, Imperial
Holly Corporation, Monterey Pasta Company, Paradise, Inc., Sherwood Brands,
Tootsie Roll Industries, Valhi, Inc. and Wrigley (Wm.), Jr. Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors consists of
Lee N. Mortenson, Fred M. Trainor and Gerald A. Kien. None of the foregoing
persons is or has been an officer of the Company.
CERTAIN TRANSACTIONS
Between December 22, 1999 and February 7, 2000, the Company purchased
213,470 shares of its issued and outstanding common stock on the open market at
an average price of $5.48 per share.
On March 21, 2000 the Company commenced a tender offer to acquire shares of
its common stock. Pursuant to the tender offer, which was completed on May 1,
2000, the Company acquired 447,595 shares of its issued and outstanding common
stock at $6.25 per share.
9
<PAGE> 12
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company has no knowledge that any person who was a director, executive
officer or 10% shareholder at any time during fiscal 2000 failed to file a Form
4 on a timely basis or was required to file a Form 5 for fiscal 2000 and failed
to do so, and the Company has received a written representation that a Form 5
was not required from each such person. In making these disclosures, the Company
has relied solely on written representations of its directors, executive
officers and 10% shareholders and copies of the reports filed by them with the
Securities and Exchange Commission.
RELATIONSHIP WITH INDEPENDENT
PUBLIC ACCOUNTANTS
Grant Thornton was the independent public accountant for the Company for
the year ended February 29, 2000. It is expected that representatives of Grant
Thornton will be present at the Annual Meeting to make any statement they desire
and to respond to appropriate questions.
Grant Thornton has been appointed as independent public accountant for the
Company for the fiscal year ending February 28, 2001. Shareholders are not being
asked to ratify the appointment.
SHAREHOLDER PROPOSALS
Any shareholder of the Company wishing to have a proposal considered for
inclusion in the Company's 2001 proxy solicitation materials must, in addition
to other applicable requirements, set forth the proposal in writing and file it
with the Secretary of the Company on or before May 1, 2001. The Board of
Directors of the Company will review any proposals from shareholders it receives
by that date and will determine whether any proposals will be included in its
2001 Proxy solicitation materials.
ANNUAL REPORT TO SHAREHOLDERS
The 2000 Annual Report to shareholders is being mailed to shareholders with
this Proxy Statement.
OTHER MATTERS AT THE MEETING
As of the date of this Proxy Statement, management knows of no matters not
described herein to be brought before the shareholders at the Annual Meeting.
Should any other matters properly come before the meeting, it is intended that
the persons named in the accompanying Proxy will vote thereon according to their
best judgment in the interest of the Company.
SHAREHOLDERS ARE URGED TO PROMPTLY MARK, DATE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
By Order of the Board of Directors
/s/ Bryan J. Merryman
-----------------------------------------------
Bryan J. Merryman
Chief Operating Officer/Chief Financial Officer
June 13, 2000
10
<PAGE> 13
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
265 TURNER DRIVE
DURANGO, COLORADO 81301
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints FRANKLIN E. CRAIL and VIRGINIA M. PEREZ,
and each of them, as the undersigned's attorneys and proxies, each with the
power to appoint his or her substitute, and hereby authorizes them to represent
and to vote, as directed below, all the shares of common stock of ROCKY MOUNTAIN
CHOCOLATE FACTORY, INC. (the "Company") held of record by the undersigned on
June 8, 2000, at the annual meeting of shareholders to be held on July 14, 2000
or any adjournment thereof.
Please mark boxes
[X] in blue or black ink.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S),
STRIKE A LINE THROUGH THE NOMINEE'S NAME OR WRITE A ZERO ("0") IN
THE SPACE FOLLOWING HIS NAME BELOW. TO EXERCISE CUMULATIVE VOTING
BY CASTING TWO OR MORE VOTES PER SHARE FOR ANY INDIVIDUAL
NOMINEE(S), WRITE THE NUMBER OF VOTES CAST FOR THE NOMINEE IN THE
SPACE FOLLOWING HIS NAME. EACH SHARE OF COMMON STOCK IS ENTITLED
TO SIX VOTES, IN THE AGGREGATE.)
<TABLE>
<S> <C> <C>
Franklin E. Crail ______ Bryan J. Merryman ______ Gerald A. Kien ______
Lee N. Mortenson ______ Fred M. Trainor ______ Clyde Wm. Engle ______
</TABLE>
2. Each of the above-named attorneys and proxies (or his or her substitute) is
authorized to vote in his or her discretion upon such other business as may
properly come before the meeting or any adjournment thereof.
(Continued and to be signed on reverse side.)
<PAGE> 14
This proxy when properly executed will be voted in the manner directed herein by
the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
MANAGEMENT'S NOMINEES FOR ELECTION AS DIRECTORS.
Date: , 2000
----------------------------
---------------------------------------
Signature
---------------------------------------
Signature if held jointly
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
