-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D791vkqpcFBhuuX5jUZmVwQFFA0b0Cd+t7A5pPUtSuwda23rZGUjS/qJvbiHOZxt y0z8Ql9ULFnpaTuNgmx8cg== 0000912057-97-024213.txt : 19970716 0000912057-97-024213.hdr.sgml : 19970716 ACCESSION NUMBER: 0000912057-97-024213 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970715 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKY MOUNTAIN CHOCOLATE FACTORY INC CENTRAL INDEX KEY: 0000785815 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 840910696 STATE OF INCORPORATION: CO FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-14749 FILM NUMBER: 97640551 BUSINESS ADDRESS: STREET 1: 265 TURNER DR CITY: DURANGO STATE: CO ZIP: 81301 BUSINESS PHONE: 3032590554 MAIL ADDRESS: STREET 1: 265 TURNER DRIVE CITY: DURANGO STATE: CO ZIP: 81301 10-K405/A 1 FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A Amendment No. 1 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the fiscal year ended February 28, 1997 OR - --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ COMMISSION FILE NUMBER 0-14749 ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) COLORADO 84-0910696 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 265 TURNER DRIVE, DURANGO, COLORADO 81301 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (970) 259-0554 -------------- (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT Common Stock, $.03 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At May 12, 1997, there were 2,912,299 shares of Common Stock outstanding. The aggregate market value of the Common Stock (based on the average of the closing bid and asked prices as quoted on the NASDAQ National Market System on May 12, 1997) held by non-affiliates was $5,333,231. Documents incorporated by reference: None No exhibits are filed with this Amendment. The following items of Rocky Mountain Chocolate Factory, Inc.'s Annual Report on Form 10-K for the fiscal year ended February 28, 1997 are hereby amended. Each such item is set forth herein in its entirety, as amended. No exhibits are filed with this Amendment. Page ---- PART III Item 10. Directors and Executive Officers of the Registrant...................2 Item 11. Executive Compensation...............................................5 Item 12. Security Ownership of Certain Beneficial Owners and Management.......7 -1- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and Directors of the Company are as follows: Name Age Position ---- --- -------- Franklin E. Crail . . . . . . . . . 55 Chairman of the Board, President, Treasurer and Director Gary S. Hauer . . . . . . . . . . . 52 Vice President - Manufacturing and Director Clifton W. Folsom . . . . . . . . . 43 Vice President - Franchise Support Jay B. Haws . . . . . . . . . . . . 46 Vice President - Marketing Lawrence C. Rezentes. . . . . . . . 49 Vice President - Finance Virginia M. Perez . . . . . . . . . 59 Corporate Secretary Lee N. Mortenson. . . . . . . . . . 61 Director Fred M. Trainor . . . . . . . . . . 58 Director Gerald A. Kien. . . . . . . . . . . 66 Director Everett A. Sisson . . . . . . . . . 76 Director 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 since September 1981 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. GARY S. HAUER. Mr. Hauer joined the Company in May 1996 as Vice President of Manufacturing and has served as a Director of the Company since June 1996. Mr. Hauer has served in a number of manufacturing management capacities over a 28 year career in the chocolate candy and confectionery industries, including 18 years with See's Candies, the last 10 years of which he served as plant manager. Mr. Hauer possesses a B.S. in business administration from San Jose State University. CLIFTON W. FOLSOM. Mr. Folsom has served as Vice President of Franchise Support of the Company since June 1989. He joined the Company in May 1983 as Director of Franchise Sales and Support, and was promoted in March 1985 to Vice President of Franchise Sales, a position he held until he began serving in his current capacity in June 1989. From March 1978 until joining the Company, Mr. Folsom was employed as a sales representative by Sears Roebuck & Company. JAY B. HAWS. Mr. Haws joined the Company in August 1991 as Vice President of Marketing. Since 1981, Jay had been closely associated with the Company both as a franchisee -2- and marketing/graphic design consultant. From 1986 to 1991 he was Vice-President and President of Chocolate Factory, Inc., which operated two Rocky Mountain Chocolate Factory franchises located in San Francisco, California. From 1983 to 1989 he served as Vice President of Marketing for Image Group, Inc., a marketing communications firm based in Northern California. Concurrently, Mr. Haws was co-owner of two other Rocky Mountain Chocolate Factory franchises located in Sacramento and Walnut Creek, California. From 1973 to 1983 he was principal of Jay Haws and Associates, an advertising and graphic design agency. Mr. Haws holds a B.A. in graphics design and communication from California State University. LAWRENCE C. REZENTES. Mr. Rezentes joined the Company in July 1990 as Vice President of Finance. From 1989 to April 1990, he served as Vice President of Finance for Fanamation, Inc., a designer and manufacturer of robotic inspection systems. From 1985 through 1988, he was a principal in Venture Consulting Resource, a financial and business planning consulting organization to technology-based businesses and to the venture capital community. From 1980 through 1984, Mr. Rezentes was co-founder and Vice President of Finance of Infomed Corporation, a venture capital financed pioneer in the field of computer and telecommunications-based medical diagnosis. Mr. Rezentes holds a B.S. in accounting from Fairleigh Dickinson University and an M.B.A. in finance from the University of Chicago Graduate School of Business. He is a certified public accountant. VIRGINIA M. PEREZ. Ms. Perez joined the Company in June 1996 and has served as the Company's Corporate Secretary since February, 1997. From 1992 until joining the Company, she was employed by Huettig & Schromm, Inc., a property management and development firm in Palo Alto, California as executive assistant to the president and owner. Huettig & Schromm developed, owned and managed over 1,000,000 square feet of office space in business parks and office buildings on the San Francisco peninsula. Ms. Perez is a paralegal and has held various administrative positions during her career including executive assistant to the Chairman and owner of Sunset Magazine & Books, Inc. GERALD A. KIEN. Mr. Kien was first elected as a Director of the Company in August 1995. From 1993 to 1995 Mr. 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 Mr. Kien served as Chairman, President and Chief Executive Officer of Sun Electric Corporation, a manufacturer of automotive test equipment, and has served as a Director and as Chairman of the Executive Committee of that Company since 1980. Sun Electric merged with Snap-On Tools in 1993, and Mr. Kien remained as President of the Sun Electric division of Snap-On Tools until his retirement in 1994. Mr. 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. Mr. Kien received his Ph.D. from the University of Illinois Graduate College of Medicine, in 1959. -3- 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 has been a Director of Alba-Waldensian, Inc., which is principally engaged in the manufacturing of apparel and medical products, since 1984 and has served as its President and Chief Executive Officer since February 1997. 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 is Vice President and a Director of Hickory White Company. EVERETT A. SISSON. Mr. Sisson was first elected as a Director of the Company in August 1995. Mr. Sisson is President of The American Growth Group, which is engaged in land development, investment, management services and management consulting, a position he has held since he formed the firm in 1966. Mr. Sisson served as a Director of the Century Companies of America, a company providing life insurance and related financial products, from 1962 until 1991, and Chairman of the Board from 1977 until 1983. Mr. Sisson was a Director of Coronet from 1992 through February 1997. During various periods over the past 20 years, Mr. Sisson served as a Director and member of several Board committees of Libco Corporation, Wisconsin Real Estate Investment Trust, Hickory Furniture Company, Telco Capital Corporation, Greater Heritage Corporation, Indiana Financial Investors Inc., Sunstates Corporation and Acton Corporation. FRED M. TRAINOR. Mr. Trainor has served as a Director 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 -4- with American Hospital Supply Corporation (AHSC) for thirteen years in a number of management capacities. The Board of Directors has a standing Audit Committee and Compensation Committee, each consisting of Messrs. Mortenson, Trainor, Sisson and Kien. Currently, all Directors of the Company are elected annually by the stockholders and hold office until their respective successors are elected and qualified. SECTION 16(a) COMPLIANCE The Company has no knowledge that any Director, executive officer or 10% stockholder was required to file a Form 5 for fiscal 1997 and failed to do so, and the Company has received a written representation that a Form 5 was not required from each such person other than Clyde Wm. Engle who, together with certain affiliated companies, is a 10% stockholder of the Company. In making these disclosures, the Company has relied solely on written representations of its Directors, executive officers and 10% stockholders and copies of the reports filed by them with the Securities and Exchange Commission. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth certain information with respect to annual compensation paid for the years indicated to the Company's Chief Executive Officer (the "Named Officer"). No other executive officer of the Company met the minimum compensation threshold of $100,000 for inclusion in the table. SUMMARY COMPENSATION TABLE ANNUAL ALL OTHER COMPENSATION COMPENSATION(2) ------------ ---------------- NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS --------------------------- ---- --------- ------- Franklin E. Crail, 1997 $150,000 -0- $2,250 Chairman of the Board and President 1996 $146,538 $10,000 $1,833 1995 $129,618 $31,050 $2,162
- --------------------- (1) Includes amounts deferred at the Named Officer's election pursuant to the Company's 401(k) Plan. (2) Represents Company contributions on behalf of the Named Officer under the Company's 401(k) Plan. Additional columns required by Securities and Exchange Commission rules to be included in the foregoing table, and certain additional tables required by such rules, have been omitted -5- because no compensation required to be disclosed therein was paid or awarded to the Named Officer. COMPENSATION OF DIRECTORS Directors of the Company do not receive any compensation for serving on the Board or on committees. Directors are entitled to receive stock option awards under the Company's 1990 Nonqualified Stock Option Plan for Nonemployee Directors ("the Directors' Plan"). The Directors' 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 Directors' Plan provides that during the term of the 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. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Company's Board of Directors consists of Lee N. Mortenson, Fred M. Trainor, Gerald A. Kien and Everett A. Sisson. None of the foregoing persons is or has been an officer of the Company. In 1987, the Company granted to Coronet the right to require the Company, at the Company's expense, to register for public sale the shares of Common Stock of the Company (the "Registrable Shares") acquired by Coronet pursuant to the conversion of the Company's 7% Convertible Secured Notes, all of which have previously been converted by Coronet. Such registration rights are exercisable at any time, but may not be exercised more than once in any consecutive 12-month period nor more than three times in the aggregate, unless the person exercising the rights agrees to pay all the Company's costs and expenses in connection therewith. Such registration rights have been exercised one time, in connection with the public offering of Common Stock completed in September and October, 1995. The Company also granted to Coronet "piggyback" rights to participate in registered offerings of Common Stock by the Company in certain circumstances. 724,562 of the Registrable Shares, all of which are held of record by Rocky Mountain Holdings Company (a former subsidiary of Coronet), remain outstanding. Mr. Mortenson is President and a Director of Coronet and a Director and executive officer of certain affiliated corporations of Coronet. Mr. Sisson has been a Director of Coronet since 1992 and, during various periods over the past 20 years, has served as a Director of certain affiliated corporations of Coronet. -6- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information, at May 12, 1997, with respect to (i) each person known to the Company to be the beneficial owner of more than 5% of the Company's Common Stock, (ii) the shares of the Company's Common Stock beneficially owned by each Director and nominee (which includes the Named Officer) and (iii) by Directors and executive officers of the Company as a group. The number of shares beneficially owned includes shares of Common Stock in 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 sixty (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. Rocky Mountain Holdings Company ("Holdings") has pledged to LaSalle National Bank of Chicago, Illinois, 799,357 of the shares of Common Stock indicated in the table below as being beneficially owned by Clyde Wm. Engle, representing 27.5% of the total outstanding shares as of May 12, 1997, to secure certain indebtedness to such bank. Holdings is the direct owner of the pledged shares. See footnote (2) to the table below. Holdings retained voting rights with respect to the pledged shares. Holdings has advised the Company that it is currently in default on such indebtedness to LaSalle National Bank. Any foreclosure on the indebtedness could result in a change in control of the Company, and any significant sales of Common Stock in the open market in connection therewith could adversely affect the market price of the Common Stock. The Director of Insurance of the State of Illinois, as Conservator, took possession and control of the assets and properties of Coronet and Crown on December 10, 1996 and, on December 24, 1996, an Agreed Order of Liquidation was entered ordering the complete liquidation of such companies for the benefit of their creditors, policyholders and shareholders. On February 27, 1997, the Florida Department of Insurance was appointed Receiver for purposes of liquidating Casualty for the benefit of its creditors, policyholders and shareholders. See Item 10, "Directors and Executive Officers of the Registrant," above. Casualty and Crown are the record owners of 58,760 shares and 10,730 shares, respectively, of the Company's Common Stock. Prior to November 6, 1996, Coronet owned 100% of the stock of Holdings. On November 6, 1996, Wellco Holdings Company ("Wellco") and Wellco's 90% owner, Sew Simple Systems, Inc. ("Sew Simple"), acquired approximately 90% of Holding's outstanding stock. Coronet (which owns 10% of Wellco), now owns, directly and indirectly, approximately 13% of Holding's outstanding stock. The ultimate parent company of all the corporations referred to in -7- this paragraph is RDIS Corporation, a majority of the stock of which is owned by Clyde Wm. Engle. See footnote (2) to the table below. It is the Company's understanding that the details of the liquidations of Coronet, Crown and Casualty, and of any dispositions of the shares of the Company's Common Stock that may be made in connection therewith, have not been finalized. COMMON STOCK - ------------ Amount and Name of Nature of Percent Beneficial Beneficial of Owner (1) Ownership Class - --------- --------- ----- Clyde Wm. Engle et al. 824,357 (2) 28.3% Franklin E. Crail 293,099 10.1% Gary S. Hauer 35,991 (3) 1.2% Everett A. Sisson 10,000 (4) .3% Gerald A. Kien 10,000 (4) .3% Lee N. Mortenson 12,500 (4) .4% Fred M. Trainor 20,000 (4) .7% All executive officers and Directors as a group (10 persons) 537,522 (5) 18.5% (1) Mr. Engle's address is 4433 West Touhy Avenue, Lincolnwood, Ilinois 60646. Mr. Crail's address is the same as the Company's address. (2) Of the shares indicated as being beneficially owned by Mr. Engle, 799,357 are held of record by Holdings and pledged to LaSalle National Bank. The shares held of record by Holdings may also be deemed to be beneficially owned by the following affiliates of Mr. Engle: Wellco, Sew Simple, Normandy Insurance Agency, Inc., Sunstates Corporation, Indiana Financial Investors, Inc., Hickory Furniture Company, Telco Capital Corporation and RDIS Corporation. Mr. Engle is the beneficial owner of a majority equity interest in RDIS Corporation, the ultimate parent of all the foregoing corporations. This information is based on a Schedule 13D filed on July 7, 1997 (the "Schedule 13D") by Mr. Engle and such affiliates with the Securities and Exchange Commission and on information provided to the Company by Mr. Engle and Holdings. The Schedule 13D and a Form 4 filed by Mr. Engle on March 10, 1997 indicate that Mr. Engle beneficially owns an additional 25,000 shares, of which 15,000 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. The number of shares indicated as being beneficially owned by Mr. Engle does not include 58,670 shares held of record by Casualty and 10,730 shares held of record by Crown, as described in this Item 12 above. The Schedule 13D and information received by the Company from Mr. Engle and Holdings indicate that, due to the pending liquidations of Coronet, Casualty and Crown, Mr. Engle and his affiliated companies consider their beneficial interest in such shares to be remote and have therefore ceased reporting beneficial ownership thereof. (3) Mr. Hauer has the right to acquire these shares within 60 days through the exercise of employee stock options previously granted to him. (4) Includes 10,000 shares that Messrs. Mortenson, Trainor, Sisson and Kien each has the right to acquire within 60 days through the exercise of options granted pursuant to the Directors Plan. (5) Includes shares which officers and Directors as a group have the right to acquire through the exercise of options granted pursuant to the Company's 1985 Incentive Stock Option Plan, 1995 Stock Option Plan, and the Director's Plan. -8- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. Date: July 15, 1997 By: /s/ FRANKLIN E. CRAIL ------------------------------------ Franklin E. Crail, President -9- -----END PRIVACY-ENHANCED MESSAGE-----