exv10w1






Exhibit 10.1




BUSINESS LOAN AGREEMENT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No	 	Call / Coll	 	Account	 	Officer	 	Initials
	$5,000,000.00

	 	07-31-2008
	 	07-31-2009
	 	7657418442-34
	 	 	 	 	664308	 	 	K0096	 	 






References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.




	 	 	 	 	 	 	 
	Borrower:

	 	Rocky Mountain Chocolate Factory, Inc.

265 Turner Drive

Durango.CO 81303-7941
	 	Lender:
	 	Wells Fargo Bank, National Association

Durango Main

200 West College Drive

Durango, CO 81301






THIS BUSINESS LOAN AGREEMENT dated July 31, 2008, is made and executed between Rocky Mountain
Chocolate Factory, Inc. (“Borrower”) and Wells Fargo Bank, National Association (“Lender”) on the
following terms and conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans or other financial accommodations, including
those which may be described on any exhibit or schedule attached to this Agreement. Borrower
understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying
upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B)
the granting, renewing, or extending of any Loan by Lender at all times shall be subject to
Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the
terms and conditions of this Agreement.



TERM. This Agreement shall be effective as of July 31, 2008, and shall continue in full force and
effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full,
including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or
until such time as the parties may agree in writing to terminate this Agreement.



CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each
subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s
satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.




Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the
Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3)
financing statements and all other documents perfecting Lender’s Security Interests; (4)
evidence of insurance as required below; (5) together with all such Related Documents as Lender
may require for the Loan; all in form and substance satisfactory to Lender and Lender’s
counsel.




Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to
Lender properly certified resolutions, duly authorizing the execution and delivery of this
Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such
other resolutions, authorizations, documents and instruments as Lender or its counsel, may
require.




Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other
expenses which are then due and payable as specified in this Agreement or any Related Document.




Representations and Warranties. The representations and warranties set forth in this Agreement,
in the Related Documents, and in any document or certificate delivered to Lender under this
Agreement are true and correct.




No Event of Default. There shall not exist at the time of any Advance a condition which would
constitute an Event of Default under this Agreement or under any Related Document.



REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this
Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal,
extension or modification of any Loan, and at all times any Indebtedness exists:




Organization. Borrower is a corporation for profit which is, and at all times shall be, duly
organized, validly existing, and in good standing under and by virtue of the laws of the State
of Colorado. Borrower is duly authorized to transact business in all other states in which
Borrower is doing business, having obtained all necessary filings, governmental licenses and
approvals for each state in which Borrower is doing business. Borrower maintains an office at
265 Turner Drive, Durango, CO 81303-7941. Unless Borrower has designated otherwise in writing,
the principal office is the office at which Borrower keeps its books and records including its
records concerning the Collateral. Borrower will notify Lender prior to any change in the
location of Borrower’s state of organization or any change in Borrower’s name.




Assumed Business Names. Borrower has filed or recorded all documents or filings required by law
relating to all assumed business names used by Borrower. Excluding the name of Borrower, the
following is a complete list of all assumed business names under which Borrower does business:
None.




Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the
Related Documents have been duly authorized by all necessary action by Borrower and do not
conflict with, result in a violation of, or constitute a default under (1) any provision of (a)
Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreement or other
instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or
order applicable to Borrower or to Borrower’s properties.




Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s
financial statements or in writing to Lender and as accepted by Lender, and except for property
tax liens for taxes not presently due and payable, Borrower owns and has good title to all of
Borrower’s properties free and clear of all liens and security interests, and has not executed
any security documents or financing statements relating to such properties. All of Borrower’s
properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing
statement under any other name for at least the last five (5) years.



AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement
remains in effect. Borrower will:




Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse
changes in Borrower’s financial condition, and (2) all existing and all threatened litigation,
claims, investigations, administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower or the financial
condition of any Guarantor.




Financial Records. Maintain its books and records in accordance with accounting principles
acceptable to Lender, applied on a consistent basis, and permit Lender to examine and audit
Borrower’s books and records at all reasonable times.



 









 





					
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	 	BUSINESS LOAN AGREEMENT

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Financial Statements. Furnish Lender with such financial statements and other related
information at such frequencies and in such detail as Lender may reasonably request.




Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless
specifically consented to the contrary by Lender in writing.




Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations,
including without limitation all assessments, taxes, governmental charges, levies and liens,
of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior
to the date on which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower’s properties, income, or profits. Provided
however, Borrower will not be required to pay and discharge any such assessment, tax, charge,
levy, lien or claim so long as (1) the legality of the same shall be contested in good faith
by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books
adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with GAAP.




Performance. Perform and comply, in a timely manner, with all terms, conditions, and
provisions set forth in this Agreement, in the Related Documents, and in all other instruments
and agreements between Borrower and Lender. Borrower shall notify Lender immediately in
writing of any default in connection with any agreement.




Operations. Maintain executive and management personnel with substantially the same
qualifications and experience as the present executive and management personnel; provide
written notice to Lender of any change in executive and management personnel; conduct its
business affairs in a reasonable and prudent manner.




Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations,
now or hereafter in effect, of all governmental authorities applicable to the conduct of
Borrower’s properties, businesses and operations, and to the use or occupancy of the
Collateral, including without limitation, the Americans With Disabilities Act. Borrower may
contest in good faith any such law, ordinance, or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the
Collateral are not jeopardized. Lender may require Borrower to post adequate security or a
surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.




Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all
Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit
Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books,
accounts, and records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer software programs for
the generation of such records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such records at all reasonable
times and to provide Lender with copies of any records it may request, all at Borrower’s
expense.



LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect
Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this
Agreement or any Related Documents, including but not limited to Borrower’s failure to
discharge or pay when due any amounts Borrower is required to discharge or pay under this
Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be
obligated to) take any action that Lender deems appropriate on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred
or paid by Lender for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Borrower. All such
expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable
on demand; (B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any applicable
insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note’s maturity.



CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether
under this Agreement or under any other agreement, Lender shall have no obligation to make
Loan advances or to disburse Loan proceeds if: (A) Borrower or any guarantor is in default
under the terms of this Agreement or any other agreement that Borrower or any guarantor has
with Lender; (B) Borrower or any guarantor dies, becomes incompetent or becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there
occurs a material adverse change in Borrower’s financial condition, in the financial condition
of any guarantor, or in the value of any collateral securing any Loan; or (D) any guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guaranty of
the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.



RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff
in all Borrower’s accounts with Lender (whether checking, savings, or some other account).
This includes all accounts Borrower holds jointly with someone else and all accounts Borrower
may open in the future. However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness
against any and all such accounts, and, at Lender’s option, to administratively freeze all
such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this
paragraph.



DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:




Payment Default. Borrower fails to make any payment when due under the Loan.




Other Default. Borrower fails to comply with any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents.




Default in Favor of Third Parties. Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower’s property or Borrower’s ability
to repay the Loans or perform Borrower’s obligations under this Agreement or any related
document.




False Statements. Any representation or statement made by Borrower to Lender is false in any
material respect.




Insolvency. The dissolution or termination of Borrower’s existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any
assignment for the benefit of creditors, any type of creditor workout, or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against Borrower.




Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any creditor
of Borrower or by any governmental agency against any collateral securing the Loan.



 









 





					
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	 	BUSINESS LOAN AGREEMENT

(Continued)
	 	Page 3







Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor
of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any Guaranty of the Indebtedness.




Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the
common stock of Borrower.




Insecurity. Lender in good faith believes itself insecure.



EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise
provided in this Agreement or the Related Documents, all commitments and obligations of Lender
under this Agreement immediately will terminate (including any obligation to make further Loan
Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due
and payable, all without notice of any kind to Borrower, except that in the case of an Event of
Default of the type described in the “Insolvency” subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and remedies provided in
the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by
applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of
any other remedy, and an election to make expenditures or to take action to perform an obligation
of Borrower or of any Grantor shall not affect Lender’s right to declare a default and to exercise
its rights and remedies.



FACSIMILE AND COUNTERPART. This document may be signed in any number of separate copies, each of
which shall be effective as an original, but all of which taken together shall constitute a single
document. An electronic transmission or other facsimile of this document or any related document
shall be deemed an original and shall be admissible as evidence of the document and the signer’s
execution.



ADDITIONAL SECURITY. Notwithstanding anything to the contrary in this or any related agreement, to
further secure the indebtedness and obligations of the Note and related loan documents, Borrower
pledges and grants to Lender a security interest in Borrower’s accounts with Lender, including
without limitation, checking, savings, investment, general and special accounts, and accounts held
for safekeeping, held jointly with others, and accounts opened in the future, excluding however
all IRAs, Keogh accounts, and trust accounts to the extent a security interest would be invalid or
prohibited by law.



INSURANCE. Borrower shall assure that insurance is maintained pursuant to any insurance
requirements set forth in the Agreement To Provide Insurance and /or other Related Documents, if
applicable.



ARBITRATION AGREEMENT. Arbitration — Binding Arbitration. Lender and each party to this agreement
hereby agree, upon demand by any party, to submit any Dispute to binding arbitration in accordance
with the terms of this Arbitration Program. A “Dispute” shall include any dispute, claim or
controversy of any kind, whether in contract or in tort, Legal or equitable, now existing or
hereafter arising, relating in any way to this Agreement or any related agreement incorporating
this Arbitration Program (the “Documents”), or any past, present, or future loans, transactions,
contracts, agreements, relationships, incidents or injuries of any kind whatsoever relating to or
involving Business Banking, Regional Banking, or any successor group or department of Lender.
DISPUTES SUBMITTED TO ARBITRATION ARE NOT RESOLVED IN COURT BY A JUDGE OR JURY.



A. Governing Rules. Any arbitration proceeding will (i) be governed by the Federal
Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law
provision in any of the documents between the parties; and (ii) be conducted by the AAA (American
Arbitration Association), or such other administrator as the parties shall mutually agree upon, in
accordance with the AAA’s commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs
in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures
for large, complex commercial disputes (the commercial dispute resolution procedures or the
optional procedures for large, complex commercial disputes to be referred to, as applicable, as
the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Arbitration proceedings hereunder shall be conducted at
a location mutually agreeable to the parties, or if they cannot agree, then at a location selected
by the AAA in the state of the applicable substantive law primarily governing the Credit. Any
party who fails or refuses to submit to arbitration following a demand by any other party shall
bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute.
Arbitration may be demanded at any time, and may be compelled by summary proceedings in Court. The
institution and maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party contests such action for
judicial relief. The arbitrator shall award all costs and expenses of the arbitration proceeding.
Nothing contained herein shall be deemed to be a waiver by any party that is a Bank of the
protections afforded to it under 12 U.S.C. °91 or any similar applicable state law.



B. No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement
does not limit the right of any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such
as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin,
injunctive relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right
or obligation of any party to submit any Dispute to arbitration or reference hereunder, including
those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.



C. Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in
controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to
the Rules, and who shall not render an award of greater than $5,000,000.00. Any Dispute in which
the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of
three arbitrators; provided however, that all three arbitrators must actively participate in all
hearings and deliberations. Every arbitrator must be a practicing attorney or a retired member of
the state or federal judiciary, in either case with a minimum of ten years experience in the
substantive law applicable to the subject matter of the Dispute. The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only
or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to
motions to dismiss for failure to state a claim or motions for summary adjudication. The
arbitrator shall resolve all Disputes in accordance with the applicable substantive law and may
grant any remedy or relief that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award. The arbitrator shall also
have the power to award recovery of all costs and fees, to impose sanctions and to take such other
action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal
Rules of Civil Procedure, the applicable State Rules of Civil Procedure, or other applicable law.
Judgment upon the award rendered by the arbitrator may be entered in any court having
jurisdiction.



D. Discovery. In any arbitration proceeding discovery will be permitted in accordance with
the Rules. All discovery shall be expressly limited to
matters directly relevant to the Dispute being arbitrated and must be completed no later than
20 days before the hearing date and within 180 days of the filing of the Dispute with the AAA. Any
requests for an extension of the discovery periods, or any discovery disputes, will be subject to
final determination by the arbitrator upon a showing that the request for discovery is essential
for the party’s presentation and that no alternative means for



 









 





					
	Loan No: 7657418442-34
	 	BUSINESS LOAN AGREEMENT

(Continued)
	 	Page 4






obtaining information is available.



E. Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties
shall take all action required to conclude any arbitration proceeding within 180 days of the
filing of, the Dispute with the AAA. The resolution of any Dispute shall be determined by a
separate arbitration proceeding and such Dispute shall not be consolidated with other disputes or
included in any class proceeding. No arbitrator or other party to an arbitration proceeding may
disclose the existence, content or results thereof, except for disclosures of information by a
party required in the ordinary course of its business or by applicable law or regulation. If more
than one agreement for arbitration by or between the parties potentially applies to a Dispute, the
arbitration provision most directly related to the documents between the parties or the subject
matter of the Dispute shall control. This arbitration provision shall survive termination,
amendment or expiration of any of the documents or any relationship between the parties.



F. State-Specific Provisions.



     If California law governs the Dispute, the following provision is included. Real Property
Collateral; Judicial Reference: Notwithstanding anything herein to the contrary, no Dispute shall
be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly,
in whole or in part, by any real property unless the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration. If any such Dispute is
not submitted to arbitration, the Dispute shall, at the election of any party, be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et seq., and this
general reference agreement is intended to be specifically enforceable in accordance with said
Section 638. A referee with the qualifications required herein for arbitrators shall be selected
pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall
be entered in the court in which such proceeding was commenced in accordance with California Code
of Civil Procedure Sections 644 and 645. Small Claims Court: Notwithstanding anything herein to
the contrary, each party retains the right to pursue in Small Claims Court any dispute within that
court’s jurisdiction. Further, this arbitration provision shall apply only to disputes in which
either party seeks to recover an amount of money (excluding attorneys’ fees and costs) that
exceeds the jurisdictional limit of the Small Claims Court.



     If Idaho law governs the Dispute, the following provision is included. Real Property
Collateral; Judicial Reference: Notwithstanding anything herein to the contrary, no dispute shall
be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly,
in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to
the arbitration waive any rights or benefits that might accrue to them by virtue of the single
action rule statute of Idaho, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable.



     If Montana law governs the Dispute, the following provision is included. Real Property
Collateral; Judicial Reference: Notwithstanding anything herein to the contrary, no dispute shall
be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly,
in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to
the arbitration waive any rights or benefits that might accrue to them by virtue of the single
action rule statute of Montana, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable.



     If Nevada law governs the Dispute, the following provision is included. Real Property
Collateral; Judicial Reference: Notwithstanding anything herein to the contrary, no dispute shall
be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly,
in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to
the arbitration waive any rights or benefits that might accrue to them by virtue of the single
action rule statute of Nevada, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable.



     If Utah law governs the Dispute, the following provision is included. Real Property
Collateral; Judicial Reference: Notwithstanding anything herein to the contrary, no Dispute shall
be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly,
in whole or in part, by any real property unless the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration. If any such Dispute is
not submitted to arbitration, the Dispute shall, at the election of any party, be referred to a
master in accordance with Utah Rule of Civil Procedure 53, and this general reference agreement is
intended to be specifically enforceable. A master with the qualifications required herein for
arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the
decision rendered by a master shall be entered in the court in which such proceeding was commenced
in accordance with Utah Rule of Civil Procedure 531(e).



LOAN AGREEMENT PROVISION. The following covenants apply to the loan evidenced by the Note and to
all other loans or other credit accommodations from Lender to Borrower now existing or
subsequently arising under any future confirmation letter, agreement or promissory note, excluding
any loans or financial accommodations which are not serviced by the Wells Fargo Business Banking
Group, or its successors (“Excluded Loans”). These covenants supersede and replace any prior
financial reporting and condition covenants and shall survive the payoff of the Loan, but shall
not affect any Excluded Loans or covenants which by their nature relate only to a specific credit
transaction.



COVENANTS FOR. Rocky Mountain Chocolate Factory, Inc..



FINANCIAL CONDITION. Borrower shall maintain its financial condition as follows using generally
accepted accounting principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein):



Definitions:



“Cash Flow” means the sum of net income after taxes plus depreciation expense, amortization
expense, and interest expense less the sum of dividends and distributions.



“Current Maturities of Long Term Debt” means that portion of the Borrower’s long term debt and
capital leases maturing or scheduled to be paid in the prior period.



“Current Liabilities” means the aggregate amount of Borrower’s items properly shown as current
liabilities on its balance sheet less any portion of such current liabilities that constitute
Subordinated Debt.



“EBITDA” means net income before tax plus interest expense (net of capitalized interest expense),
depreciation expense and amortization expense.



“Net Worth” means total owner’s equity.



“Subordinated Debt” means debt that is expressly subordinated to Lender in a writing acceptable to
Lender.



 









 





					
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“Tangible Net Worth” means Net Worth less any intangible assets.



“Total Liabilities” means the aggregate amount of Borrower’s items properly shown as liabilities
on its balance sheet.



Current Ratio as of the end of each month not less than 1.5000 to 1.0, with “Current Ratio”
defined as current assets divided by Current Liabilities.



Working Capital as of the end of each month not less than $3,750,000.00, with “Working Capital”
defined as current assets minus Current Liabilities.



Tangible Net Worth as of the end of each month not less than $9,000,000.00.



Total Liabilities divided by Tangible Net Worth as of the end of each quarter not greater than
1.6000 to 1.0.



Debt Coverage Ratio as of the end of each quarter on a rolling four-quarter basis not less than
1.2500 to 1.0, with “Debt Coverage Ratio” defined as the ratio of Cash Flow to the sum of Current
Maturities of Long Term Debt plus interest expense.



INTERIM FINANCIAL STATEMENTS. Borrower shall provide to Lender interim financial statements not
later than 45 days after and as of the end of each month, prepared by Borrower to include a
balance sheet as of the end of each such period, and an income statement and a statement of
changes to owner’s equity, from the beginning of the then fiscal year to the end of such period.
If Borrower has subsidiaries, interim financial statements shall be provided on a consolidated and
consolidating basis.



LINE REST REQUIREMENT. Borrower shall maintain a zero balance on the line of credit governed by
this Agreement for a minimum of 30 consecutive days during the first twelve months of the line of
credit, and during each successive twelve-month period.



ACCOUNTS RECEIVABLES ADVANCE RATES. Limitation on Advances. Amounts outstanding under any line of
credit governed by this Agreement, to a maximum of the principal remaining available, shall not
exceed 75% of Borrowers Eligible Accounts Receivable and 50% of Eligible Inventory as determined
by Lender (“Borrowing Base”). All of the foregoing shall be determined by Lender upon receipt and
review of all collateral reports and borrowing base certificates required hereunder and such other
documents and collateral information as Lender may from time to time require.



As used herein, “eligible accounts receivable” shall consist solely of trade accounts created in
the ordinary course of Borrower’s business, upon which Borrower’s right to receive payment is
absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Lender
has a perfected security interest of first priority, and shall not include:



any account which represents an obligation of an account debtor located in a foreign country,
except to the extent any such account, in Lender’s determination, is supported by a letter of
credit or insured under a policy of foreign credit insurance, in each case in form, substance and
issued by a party acceptable to Lender;



any account which represents an obligation of any account debtor when ten percent (10%) or more of
Borrower’s accounts from such account debtor are greater than 90 days past due, unless Borrower
has provided extended payment terms acceptable to Lender and such extended payment accounts are
not more than 30 days past due;



any account deemed ineligible by Lender when Lender, in its sole discretion, deems the
creditworthiness or financial condition of the account debtor, or the industry in which the
account debtor is engaged, to be unsatisfactory.



ACCOUNTS RECEIVABLE AND OTHER REPORTS. Borrower shall provide the following reports to Lender, all
in a form satisfactory to Lender:



not later than 45 days following, and as of the end of each month, a Borrowing Base
certificate.



NEGATIVE COVENANTS. Borrower further covenants that so long as Lender remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or un-liquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and
until payment in full of all obligations of Borrower subject hereto, Borrower will not without
Lender’s prior written consent:



CAPITAL EXPENDITURES. Make any additional investment in fixed assets in any fiscal year in
excess of an aggregate of $1,750,000.00.



DIVIDENDS, DISTRIBUTIONS (CORPORATION). (1) Borrower may declare and pay dividends
and distributions to its shareholders in a total amount not to exceed $4,000,000.00 in the
aggregate in any fiscal year, either in cash, stock or any other property, and in addition, (2) if
Borrower is an S corporation, Borrower may declare and pay cash dividends or distributions to its
shareholders in any fiscal year in a total amount not to exceed the minimum amount required for
each such shareholder to cover the federal and state income tax liability of such shareholder for
the immediately preceding fiscal year arising as a direct result of Borrower’s reported income for
said fiscal year, and shall provide to Lender, upon request, any documentation required by Lender
to substantiate the appropriateness of amounts paid or to be paid.



OTHER. No outside management fee.



No change in corporate headquarters, management or management ownership without 10 day notice.



Notification to bank of franchisee uncured defaults, litigation against company or intent to
acquire additional factory facilities and or other business operations.



Borrower to give bank opportunity to consider all new borrowed funds requests.



Fiscal Business Plan



Quarterly 10Q Report.



Annual 10 K Report.



DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code.
Accounting words and terms not otherwise defined inthis Agreement shall have the meanings assigned
to them in accordance with generally accepted accounting principles as in effect on the date of
this Agreement:



 









 





					
	Loan No: 7657418442-34
	 	BUSINESS LOAN AGREEMENT

(Continued)
	 	Page 6







Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to
Borrower or on Borrower’s behalf on a line of credit or multiple advance basis under the terms
and conditions of this Agreement.




Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan
Agreement may be amended or modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement from time to time.




Borrower. The word “Borrower” means Rocky Mountain Chocolate Factory, Inc. and includes all
co-signers and co-makers signing the Note and all their successors and assigns.




Collateral. The word “Collateral” means all property and assets granted as collateral security
for a Loan, whether real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security interest,
mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.




Event of Default. The words “Event of Default” mean any of the events of default set forth in
this Agreement in the default section of this Agreement.




GAAP. The word “GAAP” means generally accepted accounting principles.




Grantor. The word “Grantor” means each and all of the persons or entities granting a Security
Interest in any Collateral for the Loan, including without limitation all Borrowers granting
such a Security Interest.




Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or
all of the Loan.




Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without
limitation a guaranty of all or part of the Note.




Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other indebtedness and costs
and expenses for which Borrower is responsible under this Agreement or under any of the
Related Documents.




Lender. The word “Lender” means Wells Fargo Bank, National Association, its successors and
assigns.




Loan. The word “Loan” means any and all loans and financial accommodations from Lender to
Borrower whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or described on any
exhibit or schedule attached to this Agreement from time to time.




Note. The word “Note” means the Note executed by Rocky Mountain Chocolate Factory, Inc. in the
principal amount of $5,000,000.00 dated July 31, 2008, together with all renewals of,
extensions of, modifications of, refinancing of, consolidations of, and substitutions for the
note or credit agreement.




Related Documents. The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Loan.




Security Agreement. The words “Security Agreement” mean and include without limitation any
agreements, promises, covenants, arrangements, understandings or other agreements, whether
created by law, contract, or otherwise, evidencing, governing, representing, or creating a
Security Interest.




Security Interest. The words “Security Interest” mean, without limitation, any and all types
of collateral security, present and future, whether in the form of a lien, charge,
encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest whatsoever whether
created by law, contract, or otherwise.



BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER
AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JULY 31, 2008.



	 	 	 	 	 
	BORROWER:



ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

 	 	 
	By:  	/s/ Bryan Merryman
 	 	 
	 	Bryan Merryman, CFO/COO of Rocky Mountain 	 	 
	 	Chocolate Factory, Inc. 	 	 
	 
	LENDER:



WELLS FARGO BANK, NATIONAL ASSOCIATION

 	 	 
	By:  	/s/ Mike Field
 	 	 
	 	Authorized Signer 	 	 
	 	 	 	 



 









 






	 	 	 	 	 



ADDENDUM TO BUSINESS LOAN AGREEMENT





          THIS ADDENDUM is attached to and made a part of that certain Business Loan Agreement (the
“Agreement”) dated 7/31/08, executed by Rocky Mountain Chocolate Factory, Inc.
(“Borrower”) in favor of Wells Fargo Bank, National Association (“Bank”), executed in connection
with that certain Note in the principal amount of $5,000,000.00. This Addendum may be
attached to and shall be considered a part of the Loan Agreement, and shall supplement the Loan
Agreement. Capitalized terms not defined herein shall have the meanings defined for them in the
Agreements.



          The following provisions are hereby amended in the Agreement:



          1. Loan Proceeds on Page 2 of the Agreement is amended to now read:



          “Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations to
include stock repurchase, unless specifically consented to the contrary by Lender in
writing.”



          2. The third sentence under RIGHT OF SETOFF on Page 2 of the Agreement is amended to now
read:



          “However, this does not include any IRA or Keogh accounts, 401(k)’s, or any trust accounts
for which setoff would be prohibited by law.”



          3. ADDITIONAL SECURITY on Page 3 of the Agreement should also exclude 401(k)’s.



          IN
WITNESS WHEREOF, this Addendum has been executed this the           day of _______, 2008, to be EFFECTIVE
as of the same date as the Agreement.



	 	 	 	 	 
	Wells Fargo Bank, National Association

 	 	 
	By:  	/s/ Mike Field
 	 	 
	 	Name:  	Mike Field 	 	 
	 	Title:  	 	 	 
	 
	Rocky Mountain Chocolate Factory, Inc.

 	 	 
	By:  	/s/ Bryan Merryman
 	 	 
	 	Name:  	Bryan Merryman 	 	 
	 	Title:  	COO