Appreciate the Support from Fellow
Shareholders and Recommendations from Leading Proxy Advisory Firms
– Institutional Shareholder Services and Glass Lewis
Commit to Listening to Shareholders, Forging
a Value Maximizing Path for the Company, Completing a CEO Search
Process Already Underway, Collaborating with Senior Management,
Resolving Edible Arrangements Agreement, and Strengthening
Immaculate Confection Relationship
Intend to Leverage Decades of Experience and
Implement Best-in-Class Governance Practices
Urge All Shareholders to VOTE ON THE
BLUE PROXY CARD for the Concerned
Shareholders of Rocky Mountain’s Four Highly-Qualified
Candidates
AB Value Management LLC (collectively with its affiliates, “AB
Value”), and the other participants in this solicitation
(collectively with AB Value, the “Concerned Shareholders of Rocky
Mountain”) representing approximately 14.70% of the outstanding
shares of Rocky Mountain Chocolate Factory, Inc. (the “Company”),
today delivered an open letter to the Company’s shareholders.
The full text of the letter is as follows:
Dear Fellow Shareholders:
We appreciate the support and feedback we have received from
shareholders so far. With the 2021 Annual Meeting of Shareholders
of Rocky Mountain Chocolate Factory, Inc. ((the “Company”) and such
referenced annual meeting, the “Annual Meeting”) less than a week
away, your support will be the first and most critical step toward
setting the Company on track to restore — and then maximize — the
value of your investment. This is why we are urging you to vote on
the BLUE proxy card to reconstitute the Company’s Board of
Directors (the “Board”) by voting “FOR” our four highly
qualified, independent nominees— Andrew T. Berger, Mark Riegel,
Sandra Elizabeth Taylor and Rhonda J. Parish (collectively, the
“Concerned Shareholders of Rocky Mountain Nominees”).
As the Annual Meeting draws near, shareholders should be on high
alert for last-minute scare tactics from the Board, including its
recent threats of management turnover and harm to the Immaculate
Confection relationship if a majority of directors are replaced at
the Company. AB Value Management LLC (collectively with its
affiliates, “AB Value”) has invested $4 million of our own capital
in the Company’s shares. Our interest is aligned with ALL
shareholders. We want the Company to be successful. Shareholders
should question why the presence of three new highly qualified,
independent directors, would cause management turnover. We believe
it is just a red herring.
If the Board was truly concerned about material executive
departures and the effect of Board turnover on the relationship
with the Company’s largest franchisee (the same franchisee which
the Board launched a lawsuit against in FY 2021), why did it wait
until several days before the Annual Meeting to disclose these
concerns to shareholders? If legitimate, why were these concerns
never outlined in the Company’s investor materials or proxy
statement or included as risk factors in recent financial
disclosures? We believe the answer is clear—the Board is trying to
intimidate shareholders and undermine the campaign by AB Value and
the other participants in its solicitation (collectively, the
“Concerned Shareholders of Rocky Mountain”) for long overdue
change.
The litigation settlement between the Company and Immaculate
Confection on August 4, 2021 (the “August 4th Settlement
Agreement”) contemplates that the Company will spend time with
Immaculate Confection to determine a path forward together. In a
recent letter to the Board, Brian Kerzner, President of Immaculate
Confection stated that he has had “extensive constructive
discussions with Bryan Merryman, Frank Crail and Jeff Geygan…”
following the August 4th Settlement Agreement.1 However, these
material business discussions were not shared with the full Board.
Why did the Board hide details of these discussions from
shareholders until now? The Board lacks transparency by still not
fully disclosing the terms of the August 4th Settlement Agreement.
2 Similarly, without full transparency from the Company, how can
shareholders, including us, know that the disagreement is resolved?
Directors, too, have been left in the dark as to the material
discussions following the August 4th Settlement Agreement. Despite
my seat on the Board, members of the Board have excluded me from
the dialogue with Immaculate Confection in a transparent effort to
leverage that relationship to entrench themselves at the expense of
maximizing value for shareholders.
Although the full Board signed the August 4th Settlement
Agreement, these subsequent discussions with Mr. Kerzner only
occurred with a subset of the Board. More than eight weeks have
passed since the full Board’s settlement with Immaculate
Confection, and yet the Board has excluded me as a director from
all post-settlement dialogue with Immaculate Confection. Why has a
subset of the Board continued to make commitments without including
input from all directors?
Although Mr. Kerzner claims he has never spoken with anyone from
the Concerned Shareholders of Rocky Mountain, representatives of AB
Value have in fact had discussions with Immaculate Confection,
including as recently as July 28, 2021, when Mr. Kerzner wished us
good luck with our efforts. A copy of this correspondence is
available here.
***As noted in previous letters, we are
committed to collaborating with existing management. If elected,
our Nominees will oversee the CEO search process and work with the
new CEO and the current senior management to put the Company on the
right track. Likewise, we greatly value the Company’s relationship
with Immaculate Confection and look forward to constructively
working with Immaculate Confection. If elected, our nominees will
honor the August 4th Settlement Agreement.***
We are not short-term oriented investors. Indeed, AB Value first
invested in the Company in 2018 because we believed that the shares
were both significantly undervalued and presented tremendous upside
potential that could be realized with the right strategy and
leadership. We believe the Board must be held accountable for
perpetuating some of the worst-in-class governance practices, such
as adopting a 10-year poison pill without shareholder approval, and
failing to hold management accountable for squandering shareholder
capital, deteriorating financial performance, and destruction of
shareholder value. For instance, the Company generated Total
Shareholder Return of -27% vs. +74% for Russell 3000 in the five
year period before Covid-19 (18 Feb. 2020). Given the Company’s
long history of failures, AB Value and the other participants in
this solicitation (collectively, the “Concerned Shareholders of
Rocky Mountain”) therefore feel compelled, on behalf of all
shareholders, to take the next steps to provide for a better future
at the Company by putting in place a vastly improved Board—but it
can only be done with your support on the BLUE proxy
card.
The Concerned Shareholders of Rocky Mountain are not alone in
our concern: the leading independent proxy advisory firms to
institutional investors, Institutional Shareholder Services, Inc.
(“ISS”) and Glass Lewis & Co. (“Glass Lewis”), have each
recognized the need for change and recommend that shareholders vote
on our BLUE proxy card.3 Despite Global Value Investment
Corp.’s subsequent outreach to ISS, the proxy advisory firms’
recommendations remain unchanged. ISS stated in its report that
“there are virtually no bright spots to speak of at the Company,
from share price or operational performance, to Company strategy or
acquisition strategy…”4 and Glass Lewis acknowledged that
“AB Value’s involvement appears to have had a positive impact
when it comes to improved governance....” 5 Still, we remain
deeply concerned that the Board is not taking, and as currently
constituted will not take, appropriate action to execute on the
opportunities that we believe are needed to drive shareholder
value.
This vote is about which director candidates have the
qualifications necessary to determine the best path forward for the
Company and to instill the much-needed accountability in the
boardroom. The Concerned Shareholders of Rocky Mountain have
invested considerable time and effort to select four
highly-qualified nominees—who collectively have decades of relevant
business expertise and industry-specific experience—and we believe
are the right choice to position the Company for success. Our
candidates are committed to:
- Collaborating with the remaining incumbent directors and
management to complete the CEO search process already set in motion
by the Board and address the Company’s business challenges to
restore the Company and its brand;
- Independently and objectively—and with shareholder
input—reviewing all options to maximize value;
- Honoring the August 4th Settlement Agreement with Immaculate
Confection, the Company’s largest franchisee, which I supported and
signed, with plans to further expand and strengthen the Company’s
relationship with Immaculate Confection;
- Leveraging the Concerned Shareholders of Rocky Mountain
Nominees’ decades of highly relevant director and executive
experience in the confectionary/chocolate, restaurant, franchise
and consumer industries (at such companies as Starbucks, Walmart,
Russell Stover Chocolates, DE Master Blenders/Sara Lee, Denny’s and
Ferrara Candy Company) to maximize shareholder value; and
- Inviting robust discourse in the boardroom that supports and
challenges management through best-in-class governance, including
the immediate termination of the shareholder-unfriendly poison
pill.
With your support to create fundamental change beginning in the
boardroom, there will be a new day for Rocky Mountain Chocolate
Factory. We appreciate the support from shareholders who have
already voted for the Concerned Shareholders of Rocky Mountain
Nominees on the BLUE proxy card and urge all of our fellow
shareholders to vote the BLUE proxy card today to support
the election of all four of our highly qualified nominees.
Thank you for your time, investment and consideration.
Sincerely,
Andrew T. Berger Managing Member AB Value Management LLC
Important Additional Information
AB Value Partners, LP and AB Value Management LLC, Andrew T.
Berger, Bradley Radoff, Rhonda J. Parish, Mark Riegel, and Sandra
Elizabeth Taylor (collectively, the “Participants”) have filed 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 Annual Meeting. THE PARTICIPANTS STRONGLY
ADVISE ALL SHAREHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT
AND OTHER PROXY MATERIALS BECAUSE THEY CONTAIN IMPORTANT
INFORMATION. Such proxy materials are 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
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, and Sandra Elizabeth Taylor.
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
beneficially owns 460,189 shares of Common Stock. As of the date
hereof, Mr. Radoff directly owns 440,021 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 Letter to Shareholders, dated September 30, 2021, publicly
available at
https://finance.yahoo.com/news/rocky-mountain-chocolate-factory-notifies-123000587.html.
2 We suspect that more fulsome disclosure surrounding Immaculate
Confection would also inform shareholders of the franchisee’s
business case, such as whether any royalties have even been
received by the Company from Immaculate Confection.
3 Permission to quote from the ISS and Glass Lewis reports was
neither sought nor obtained.
4 ISS Report, dated September 29, 2021.
5 Glass Lewis Proxy Paper, dated September 24, 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211001005503/en/
John Glenn Grau InvestorCom LLC (203) 295-7841
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