The Company’s Recent Settlement Proposal is
Disingenuous
Urges Shareholders to Demand Accountability
by Voting for the Concerned Shareholders of Rocky Mountain’s
Director Candidates
AB Value Management LLC, together with its affiliates (“AB
Value”), and the other participants in this solicitation
(collectively, the “Concerned Shareholders of Rocky Mountain”)
representing approximately 13.54% of the outstanding shares of
Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF) (the
“Company”), today commented on mischaracterizations in the
Company’s preliminary proxy statement and the recent settlement
proposal.
The Concerned Shareholders of Rocky Mountain believe that
shareholders should know that the Company continues to misrepresent
its interest to enhance corporate governance. Specifically,
refreshment of the Company’s Board of Directors (the “Board”) over
the past couple of years has largely been due to shareholder
pressure. In 2019, Andrew T. Berger (AB Value’s Managing Member)
and Mary Kennedy Thompson joined the Board as part of a settlement
agreement with AB Value. Tariq Farid joined the Board in December
2019 as part of a strategic alliance with Edible Arrangements, LLC,
when Mr. Berger had not yet joined the Board. Mr. Farid
subsequently resigned due to disagreements between the Company and
Edible Arrangements, LLC related to the strategic alliance and
ecommerce agreements. Meanwhile, Jeffrey R. Geygan—a Company
nominee—also joined the Board as part of a settlement agreement
with Global Value Investment Corp. (“Global Value”) in August 2021.
Absent settlement related additions, the Board has failed to
undertake refreshment on its own.
In fact, before AB Value’s campaign in 2019, the Board, which
was comprised of current Company nominees Brett Seabert and Bryan
Merryman, was marred by poor corporate governance practices. At the
Company’s 2018 Annual Meeting of Shareholders, the average Board
tenure was 19 years and four of the six directors had been on the
Board for at least 18 years. Brett Seabert was the newest director
who joined in 2017. At the time of joining the Board, Mr. Seabert
had no prior public board or related industry confectionary
experience. He had been involved with real estate development,
construction, and a casino management company.
“It is very convenient for the Company to take what we find to
be purely reactionary steps to address governance deficiencies
we’ve been championing for years, only weeks ahead of the upcoming
election contest,” commented Mr. Berger. “How can the Board expect
any shareholder to view these knee jerk efforts as sincere, when
prior to the Concerned Shareholders of Rocky Mountain’s pressure,
the Board was either unwilling or unable to muster the courage
necessary to effect changes needed at the Company?”
The following summarizes events that, in the Concerned
Shareholders of Rocky Mountain’s opinion, reveal the Company’s true
colors.
The Terms of the Company’s Settlement
Proposal Are Outrageous
The Company’s counsel recently shared with AB Value a proposed
settlement framework that failed to include any future
compositional changes to the Board (a purported “red-line” for the
Company). It included drastically off-market and off-putting
concessions for the Concerned Shareholders of Rocky Mountain,
including standstill provisions and voting commitments lasting four
years and covering three annual meetings—which in our opinion is
unheard of in this context—that would have entrenched incumbent
directors for multiple years. By contrast, Global Value’s
settlement agreement with the Company, which designated Mr. Geygan
to the Board, contains standstill provisions and voting commitments
that cover one annual meeting and last less than one year (even
though Global Value and Mr. Geygan recently sought a tender offer
for a control-like stake in the Company, have tried to buy the
Company in the past, and just weeks ago threatened to replace a
majority of the Board after their control attempts were rejected by
the Company).
Questionable Board Leadership
Consistently Demonstrates Questionable Judgments
The Company’s settlement proposal is only the latest in a string
of recent missteps by Chairperson and special committee member
Rahul Mewawalla. Mr. Mewawalla, who has no prior public board
experience, no C-level experience with a public company, and no
food and beverage experience, was the first and only candidate
brought forward as part of the Board’s ‘refreshment efforts.’ He
was not only raced through the nomination process by incumbent
directors with minimal vetting of his background and
qualifications, but was also after a mere 43 days into his first
public directorship, appointed chairperson of the Board. Since his
nomination and subsequent appointment as a director of the Board,
he has at a minimum participated in, if not overseen, the
following:
- Backing out of what had been a heavily
negotiated settlement agreement with AB Value. At the time
when AB Value had been led to believe by the Company’s outside
general counsel and CEO that the Board was on the precipice of
approving an amicable and heavily negotiated resolution with AB
Value, the Company instead issued a press release on July 21, 2021
announcing many of the very changes the Company had agreed would be
part of the settlement agreement.
- Failing to identify issues of Scott
Capdevielle’s fitness as a public company director. Although
Mr. Capdevielle had served as a director of the Company for 12
years, the Company had not identified his lack of judgment in
making highly inappropriate public statements until Mr. Berger
brought them to light on July 24, 2021. Mr. Capdevielle resigned on
July 26, 2021.
- Engaging a costly technology expert who
appears to lack consumer experience as lead consultant to identify
director candidates. Mr. Mewawalla spearheaded the Board’s
decision to hire an expensive lead consultant from Russell Reynolds
Associates to manage a director search process, despite AB Value
having already presented several highly-qualified candidates with
relevant experience. The lead consultant met with some of our
candidates and unsurprisingly, like Mr. Mewawalla, the lead
consultant has technology experience, but no food or beverage
experience.
- Packing the Board in advance of the
Company’s 2021 Annual Meeting of Shareholders (the “2021 Annual
Meeting”). The Company had ample time—over several years—to
follow through on AB Value’s calls for Board refreshment. Yet, the
first time “Board refreshment” was publicly mentioned by the
Company was on July 22, 2021—that is, less than a month after AB
Value submitted its notice of nomination to the Company. Since
then, the Company rushed to appoint two new directors, who were
identified and recruited in less than a month of hiring Russell
Reynolds Associates, which we believe to be a defensive,
reactionary decision to manage this year’s contested annual meeting
of shareholders.
Do Not Be Misled by the
Company
The Concerned Shareholders of Rocky Mountain believe that the
record shows everything the Company has done over the course of the
last several months is a direct result of pressure by AB Value. In
addition, the Concerned Shareholders of Rocky Mountain are
disappointed that, instead of acknowledging all of the efforts of
AB Value, the Company appears to have decided to punish
shareholders by refusing to place Mr. Berger on the Company’s slate
of directors for the 2021 Annual Meeting. This refusal to include
Mr. Berger was decided by the Board despite Mr. Berger having
received nearly the highest percentages of shareholder support
during the past two director elections (84.7% in 2019 “FOR” his
election and 76.8% in 2020). Only Mary Kennedy Thompson, also a
member of the Concerned Shareholders of Rocky Mountain’s slate of
director candidates, received higher support.1
In the Concerned Shareholders of Rocky Mountain’s opinion, the
Board’s decision to leave Mr. Berger off the Company’s slate of
directors is yet another example of the Board’s entrenched mindset
and actions, which include the Board’s decision to retain a
decade-long poison pill, without shareholder approval. Mr. Berger
and the Concerned Shareholders of Rocky Mountain find the Board’s
decision not to nominate Mr. Berger as a reaction to AB Value’s
consistent calls for uncomfortable, but shareholder friendly,
change, including Mr. Berger’s requests for the separation of the
CEO / chairperson roles, his questioning of former CEO Franklin
Crail’s place on the Board’s Compensation Committee as a
non-independent director, and his call for the resignation of Mr.
Capdevielle. Importantly, it was due to the continued pressure by
Mr. Berger that the Company took action on each of his requests,
which resulted in the announced retirement of Mr. Crail and
resignation of Mr. Capdevielle.
The Concerned Shareholders of Rocky Mountain’s slate of five
highly-qualified individuals—Andrew T. Berger, Mary Kennedy
Thompson, Mark Riegel, Sandra Elizabeth Taylor and Rhonda J.
Parish—was selected after an extensive evaluation of numerous
potential candidates, and has the skillsets that are urgently
needed at the Company. The majority of these candidates have served
at public companies and bring a wide array of experience: corporate
social responsibility, restaurant and confection industry
expertise, sophisticated financial analysis and judgment, and
successful track records. Perhaps most importantly, these
candidates, if elected, will consistently strive to do what is in
the best interests of ALL
shareholders.
Important Additional Information
AB Value Partners, LP and AB Value Management LLC, Andrew T.
Berger, Bradley Radoff, Rhonda J. Parish, Mark Riegel, Sandra
Elizabeth Taylor and Mary Kennedy Thompson (collectively, the
“Participants”) intend to file a definitive proxy statement and an
accompanying BLUE proxy card with the SEC to solicit proxies from
shareholders of the Company for use at the 2021 Annual Meeting. THE
PARTICIPANTS STRONGLY ADVISE ALL SHAREHOLDERS OF THE COMPANY TO
READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Such
proxy materials will be available at no charge on the SEC’s website
at http://www.sec.gov. In addition, the Participants in this proxy
solicitation will provide copies of the proxy statement without
charge, upon request. Requests for copies should be directed to the
Participants’ proxy solicitor.
Certain Information Regarding the Participants
In accordance with Rule 14a-12(a)(1)(i) under the Securities
Exchange Act of 1934, as amended, the Participants in the proxy
solicitation are: AB Value Partners, LP, AB Value Management LLC,
Andrew T. Berger, Bradley Radoff, Rhonda J. Parish, Mark Riegel,
Sandra Elizabeth Taylor and Mary Kennedy Thompson. As of the date
hereof, AB Value Partners, LP directly owns 224,855 shares of
common stock, $0.001 par value per share of the Company (“Common
Stock”). As of the date hereof, AB Value Management LLC directly
owns 235,334 shares of Common Stock. As of the date hereof, Mr.
Radoff directly owns 366,889 shares of Common Stock. As of the date
hereof, Ms. Thompson directly owns 2,000 shares of Common Stock. As
of the date hereof, none of Mr. Berger, Ms. Parish, Mr. Riegel, or
Ms. Taylor directly own any shares of Common Stock.
1 See Form 8-K filed by the Company with the SEC on January 9,
2020 and Form 8-K filed by the Company with the SEC on September
18, 2020. This excludes voting results of Tariq Farid, who no
longer serves as a director on the Board.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210907005615/en/
John Glenn Grau InvestorCom LLC (203) 295-7841
Rocky Mountain Chocolate... (NASDAQ:RMCF)
Historical Stock Chart
From Mar 2024 to Apr 2024
Rocky Mountain Chocolate... (NASDAQ:RMCF)
Historical Stock Chart
From Apr 2023 to Apr 2024