Document:

<PAGE>

================================================================================

                            TECUMSEH PRODUCTS COMPANY

                          -----------------------------
                           AMENDMENT AND WAIVER NO. 1
                           TO NOTE PURCHASE AGREEMENT
                          -----------------------------

                            DATED AS OF JUNE 30, 2005

          $300,000,000 4.66% SENIOR GUARANTEED NOTES DUE MARCH 5, 2011

================================================================================

<PAGE>

                            TECUMSEH PRODUCTS COMPANY

                                  $300,000,000
                 4.66% SENIOR GUARANTEED NOTES DUE MARCH 5, 2011

              AMENDMENT AND WAIVER NO. 1 TO NOTE PURCHASE AGREEMENT

                                                             As of June 30, 2005

TO EACH OF THE CURRENT NOTEHOLDERS
NAMED IN ANNEX 1 HERETO:

Ladies and Gentlemen:

      TECUMSEH PRODUCTS COMPANY, a Michigan corporation (together with any
successors and assigns, the "COMPANY"), hereby agrees with each of you as
follows:

1.    PRIOR ISSUANCE OF NOTES, ETC.

      The Company issued and sold three hundred million dollars ($300,000,000)
in aggregate principal amount of its 4.66% Senior Guaranteed Notes due March 5,
2011 (the "NOTES", such term to include any such notes issued in substitution
therefor pursuant to Section 13 of the Note Purchase Agreement) pursuant to the
Note Purchase Agreement dated as of March 5, 2003 between the Company and the
purchasers named in Schedule A thereto (the "EXISTING NOTE PURCHASE AGREEMENT"
and, as may be amended pursuant to this Agreement and as may be further amended,
restated or otherwise modified from time to time, the "NOTE PURCHASE
AGREEMENT"). The Company represents and warrants to each of you that the
register kept by the Company for the registration and transfer of the Notes
indicates that each of the Persons named in Annex 1 hereto (collectively, the
"CURRENT NOTEHOLDERS") is currently a holder of the aggregate principal amount
of the Notes indicated in such Annex.

2.    REQUEST FOR CONSENT TO AMENDMENTS

      The Company requests that each of the Current Noteholders agree to the
amendments (the "AMENDMENTS") to, and waiver of certain rights (the "WAIVER")
under, the Existing Note Purchase Agreement provided for by this Agreement.

3.    WARRANTIES AND REPRESENTATIONS

      To induce the Current Noteholders to enter into this Agreement and to
agree to the Amendments and the Waiver, the Company warrants and represents to
you as follows (it being agreed, however, that nothing in this Section 3 shall
affect any of the warranties and representations previously made by the Company
in or pursuant to the Existing Note Purchase Agreement, and that all of such
other warranties and representations, as well as the warranties and
representations in this Section 3, shall survive the effectiveness of the
Amendments and the Waiver).

<PAGE>

      3.1   NO MATERIAL ADVERSE CHANGE.

      Since the date of the financial statements of the Company filed with the
Securities and Exchange Commission with the Company's Quarterly Report on Form
10-Q for the period ended March 31, 2005, and except as reflected in or
contemplated by the financial forecasts provided to the Current Noteholders on
June 16, 2005 (the "PROJECTIONS"), and except for the Default or Event of
Default waived in Section 4.2 of this Agreement, there has been no change in the
business operations, profits, financial condition, properties or business
prospects of the Company except changes that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.

      3.2   FULL DISCLOSURE.

      Neither the financial statements and other certificates previously
provided to the Current Noteholders pursuant to the provisions of the Existing
Note Purchase Agreement nor the statements made in this Agreement nor the
Projections furnished by or on behalf of the Company to the Current Noteholders
in connection with the proposal and negotiation of the Amendments, taken as a
whole, contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein and herein, taken as a whole,
not misleading. There is no fact relating to any event or circumstance that has
occurred or arisen since June 16, 2005 that the Company has not disclosed to the
Current Noteholders in writing that has had or, so far as the Company can now
reasonably foresee, could reasonably be expected to have, a Material Adverse
Effect.

      3.3   INTENT.

      Neither the Company nor any Subsidiary is entering into the transaction
contemplated by this Agreement with any intent to hinder, delay or defraud
either current creditors or future creditors of the Company.

      3.4   NO DEFAULTS.

      No event has occurred and no condition exists that, upon the execution and
delivery of this Agreement and the effectiveness of the Amendments and the
Waiver, would constitute a Default or an Event of Default.

      3.5   TRANSACTION IS LEGAL AND AUTHORIZED; OBLIGATIONS ARE ENFORCEABLE.

            (a) The execution and delivery of this Agreement by the Company and
      compliance by the Company with all of its respective obligations
      hereunder:

                  (i) is within the corporate powers of the Company;

                  (ii) is legal and does not conflict with, result in any breach
            in any of the provisions of, constitute a default under, or result
            in the creation of any Lien upon any Property of the Company or any
            Subsidiary under the provisions of, any agreement, charter
            instrument, bylaw or other instrument to which it is a party or by
            which it or any of its Property may be bound; and

                  (iii) does not give rise to a right or option of any other
            Person under any agreement or other instrument, which right or
            option could reasonably be expected to have a Material Adverse
            Effect.

<PAGE>

            (b) This Agreement has been duly authorized by all necessary action
      on the part of the Company and has been executed and delivered by one or
      more duly authorized officers of the Company, and each constitutes a
      legal, valid and binding obligation of the Company, enforceable in
      accordance with its terms, except that such enforceability may be:

                  (i) limited by applicable bankruptcy, reorganization,
            arrangement, insolvency, moratorium or other similar laws affecting
            the enforceability of creditors' rights generally; and

                  (ii) subject to the availability of equitable remedies.

      3.6   CERTAIN LAWS.

      The execution and delivery of this Agreement by the Company and the
consummation of the transaction contemplated hereby:

            (a) is not subject to regulation under the Investment Company Act of
      1940, as amended, the Public Utility Holding Company Act of 1935, as
      amended, the Transportation Acts, as amended, or the Federal Power Act, as
      amended, and

            (b) does not violate any provision of any statute or other rule or
      regulation of any Governmental Authority applicable to the Company or any
      Subsidiary.

      3.7   GOVERNMENTAL CONSENT.

      Neither the Company or any Subsidiary thereof, nor the nature of any of
its or their respective businesses or Properties, is such so as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority on the part of the Company as a condition to
the execution and delivery of this Agreement.

      3.8   FEES.

      Neither the Company nor any Subsidiary thereof has paid (or promised to
pay) any amendment fee or any other direct or indirect compensation to any party
to the Credit Agreement or to any other creditor of the Company or any
Subsidiary in connection with the transactions contemplated hereby.

      3.9   AMENDMENT TO CREDIT AGREEMENT.

      The Company has delivered to each of the Current Noteholders a true and
correct copy of the Credit Agreement and any and all amendments, modifications
and waivers in respect thereof.

4.    AMENDMENTS; WAIVER

      4.1   AMENDMENTS TO EXISTING NOTE PURCHASE AGREEMENT.

      Subject to Section 4.3, the Existing Note Purchase Agreement is hereby
amended in the manner specified in Exhibit A to this Agreement.

<PAGE>

      4.2   WAIVER.

      Subject to Section 4.3 from the period through and including August 8,
2005, the Current Noteholders hereby waive compliance by the Company with the
provisions of Section 10.3 of the Existing Note Purchase Agreement as at the end
of the fiscal quarter ended June 30, 2005. Notwithstanding the foregoing in no
event will the Company incur, or permit any Subsidiary to incur, during the
Temporary Waiver Period any Indebtedness (other than Indebtedness under existing
working capital credit facilities in accordance with the terms thereof on June
30, 2005, including the maximum amounts to be borrowed thereunder), if after
giving effect thereto, the Company would not be in compliance with the
provisions of Section 10.3 of the Existing Note Purchase Agreement without
giving effect to the Waiver contemplated hereby.

      4.3 EFFECTIVENESS OF AMENDMENTS AND WAIVER.

      The Amendments contemplated by Section 4.1 and Exhibit A and the Waiver
contemplated by Section 4.2 shall, in accordance with Section 17.1 of the
Existing Note Purchase Agreement, become effective (the date of such
effectiveness is herein referred to as the "EFFECTIVE DATE"), if at all, at such
time as the Company and the Required Holders shall have indicated their written
consent to such Amendments and such Waiver by executing and delivering the
applicable counterparts of this Agreement. It is understood that any Current
Noteholder may withhold its consent for any reason or for no reason, and that,
without limitation of the foregoing, any Current Noteholder hereby makes the
granting of its consent contingent upon satisfaction of each of the following
conditions:

            (a) the Company shall have (i) paid all unpaid fees and
      disbursements of Chapman & Cutler reflected in invoices presented on or
      before the date hereof and (ii) established a retainer for legal fees with
      Bingham McCutchen LLP, special counsel to the Current Noteholders, in the
      aggregate amount of $100,000 and pursuant to documentation satisfactory to
      such special counsel; and

            (b) the Company shall have paid $200,000 to Conway, Del Genio, Gries
      & Co. LLC ("CONWAY"), financial advisor to the Current Noteholders,
      pursuant to a retainer arrangement satisfactory to the Company, the
      Required Holders and Conway.

            (c) the Company shall have delivered to each of the Current
      Noteholders a true and correct copy of any amendment or waiver to the
      Credit Agreement entered into on or prior to the date hereof.

Any such amendment or waiver entered into in connection with the transaction
contemplated hereby shall be in form and substance satisfactory to the Required
Holders provided execution and delivery of this Agreement by the Required
Holders shall be deemed to be an affirmation that such amendment or waiver is so
satisfactory.

      4.4   NO OTHER AMENDMENTS; CONFIRMATION.

      Except as expressly provided herein, (a) no terms or provisions of any
agreement are modified or changed by this Agreement, (b) the terms of this
Agreement shall not operate as a waiver by any Current Noteholder of, or
otherwise prejudice any Current Noteholder's rights, remedies or powers under,
the Existing Note Purchase Agreement or any other Financing Document or under
any applicable law, and (c)

<PAGE>

the terms and provisions of the Existing Note Purchase Agreement and each other
Financing Document shall continue in full force and effect.

5.    DEFINED TERMS

      Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to them in the Existing Note Purchase Agreement.

6.    EXPENSES

      Whether or not any of the Amendments or the Waiver becomes effective, the
Company will promptly (and in any event within thirty (30) days of receiving any
statement or invoice therefor) pay all fees, expenses and costs relating to this
Agreement, including, but not limited to, (a) the reasonable cost of reproducing
this Agreement and the other documents delivered in connection herewith and (b)
the reasonable fees and disbursements of the Current Noteholders' special
counsel, Bingham McCutchen LLP, incurred in connection with the preparation,
negotiation and delivery of this Agreement. The fees of Conway will be paid by
the Company pursuant to the retainer arrangement referenced to in Section
4.3(b). This Section 6 shall not be construed to limit the Company's obligations
under Section 15.1 of the Note Purchase Agreement.

7.    MISCELLANEOUS

      7.1   PART OF NOTE PURCHASE AGREEMENT, FUTURE REFERENCES, ETC.

      (a) This Agreement shall be construed in connection with and as a part of
the Existing Note Purchase Agreement and, except as expressly amended by this
Agreement, all terms, conditions and covenants contained in the Existing Note
Purchase Agreement and the other Financing Documents are hereby ratified and
shall be and remain in full force and effect. Any and all notices, requests,
certificates and other instruments executed and delivered after the execution
and delivery of this Agreement may refer to the Note Purchase Agreement without
making specific reference to this Agreement, but nevertheless all such
references shall include this Agreement unless the context otherwise requires.

      7.2   GOVERNING LAW.

      THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF MICHIGAN, UNITED STATES OF AMERICA,
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.

      7.3   DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.

      Two (2) or more duplicate originals hereof may be signed by the parties,
each of which shall be an original but all of which together shall constitute
one and the same instrument. This Agreement may be executed in one or more
counterparts and shall become effective at the time provided in Section 4.3
hereof, and each set of counterparts that, collectively, show execution by the
Company and each consenting Current Noteholder shall constitute one duplicate
original.

<PAGE>

      7.4   BINDING EFFECT.

      This Agreement shall be binding upon and shall inure to the benefit of the
Company and the Current Noteholders and their respective successors and assigns.

   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE IS SIGNATURE PAGE.]

<PAGE>

      If this Agreement is satisfactory to you, please so indicate by signing
the applicable acceptance on a counterpart hereof and returning such counterpart
to the Company, whereupon this Agreement shall become binding among the Company
and you in accordance with its terms.

                                           Very truly yours,

                                           TECUMSEH PRODUCTS COMPANY

                                           By: /s/ JAMES S. NICHOLSON
                                               ---------------------------------
                                           Name: James S. Nicholson
                                           Title: Vice President, Treasurer and
                                                      Chief Financial Officer

Accepted:

NEW YORK LIFE INSURANCE COMPANY

By: /s/ R. EDWARD FERGUSON
    ------------------------------
Name: R. Edward Ferguson
Title: Vice President

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
BY: NEW YORK LIFE INVESTMENT MANAGEMENT LLC, ITS INVESTMENT MANAGER

By: /s/ R. EDWARD FERGUSON
    ------------------------------
Name: R. Edward Ferguson
Title: Vice President

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
    INSTITUTIONALLY OWNED LIFE INSURANCE SEPARATE ACCOUNT
BY: NEW YORK LIFE INVESTMENT MANAGEMENT LLC, ITS INVESTMENT MANAGER

By: /s/ R. EDWARD FERGUSON
    ------------------------------
Name: R. Edward Ferguson
Title: Vice President

STATE FARM LIFE INSURANCE COMPANY

By: /s/ JOHN S. CONCKLIN
    ------------------------------
Name: John S. Concklin
Title: Vice President - Common Stocks

By: /s/ JEFFREY T. ATTWOOD
    ------------------------------
Name: Jeffrey T. Attwood
Title: Investment Officer

<PAGE>

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

By: /s/ JOHN S. CONCKLIN
    ------------------------------
Name: John S. Concklin
Title: Vice President - Common Stocks

By: /s/ JEFFREY T. ATTWOOD
    ------------------------------
Name: Jeffrey T. Attwood
Title: Investment Officer

GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY

By: /s/ MORIAN C. MOOERS
    ------------------------------
Name: Morian C. Mooers
Title:  Investment Officer

GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK

By: /s/ MORIAN C. MOOERS
    ------------------------------
Name: Morian C. Mooers
Title: Investment Officer

EMPLOYERS REINSURANCE CORPORATION
By: GE ASSET MANAGEMENT INCORPORATED, its Investment Manager

By: GENWORTH FINANCIAL ASSET MANAGEMENT, LLC, its Investment Advisor

By: /s/ MORIAN C. MOOERS
    ------------------------------
Name: Morian C. Mooers
Title: Assistant Vice President

FIRST COLONY LIFE INSURANCE COMPANY

By: /s/ MORIAN C. MOOERS
    ------------------------------
Name: Morian C. Mooers
Title: Investment Officer

GE LIFE AND ANNUITY ASSURANCE COMPANY

By: /s/ MORIAN C. MOOERS
    ------------------------------
Name: Morian C. Mooers
Title: Investment Officer

<PAGE>

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

By: /s/ TAD ANDERSON
    ---------------------------
Name: Tad Anderson
Title: Ass't. V.P., Investments

By: /s/ J.G. LOWERY
    --------------------------
Name: J.G. Lowery
Title: Ass't. V.P., Investments

LONDON LIFE INSURANCE COMPANY

By: /s/ B.R. ALLISON
    --------------------------
Name: B.R. Allison
Authorized Signatory

By: /s/ D.B.E. AYERS
    -------------------------
Name: D.B.E. Ayers
Authorized Signatory

THE GREAT-WEST LIFE ASSURANCE COMPANY

By: /s/ B.R. ALLISON
    -------------------------
Name: B.R. Allison
Authorized Signatory

By: /s/ D.B.E. AYERS
    -------------------------
Name: D.B.E. Ayers
Authorized Signatory

LONDON LIFE AND CASUALTY (BARBADOS) CORPORATION
BY: ORCHARD CAPITAL MANAGEMENT, LLC, AS INVESTMENT ADVISER

By: /s/ TAD ANDERSON
    -------------------------
Name: Tad Anderson
Title: Ass't. V.P., Investments

By: /s/ J.G. LOWERY
    -------------------------
Name: J.G. Lowery
Title: Ass't. V.P., Investments

<PAGE>

PACIFIC LIFE INSURANCE COMPANY
(NOMINEE:  MAC & CO.)

By: /s/ DAVID C. PATCH
    -------------------------
Name: David C. Patch
Title: Assistant Vice President

By: /s/ DIANE W. DALES
    -------------------------
Name: Diane W. Dales
Title: Assistant Secretary

JEFFERSON-PILOT LIFE INSURANCE COMPANY

By: /s/ JAMES E. MCDONALD, JR.
    --------------------------
Name: James E. McDonald, Jr.
Title: Vice President

JEFFERSON PILOT FINANCIAL INSURANCE COMPANY

By: /s/ JAMES E. MCDONALD, JR.
    --------------------------
Name: James E. McDonald, Jr.
Title: Vice President

JEFFERSON PILOT LIFEAMERICA INSURANCE COMPANY

By: /s/ JAMES E. MCDONALD, JR.
    --------------------------
Name:  James E. McDonald, Jr.
Title:  Vice President

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
BY: BABSON CAPITAL MANAGEMENT LLC, AS INVESTMENT ADVISER

By:
    ----------------------------
Name:
Title:

C.M. LIFE INSURANCE COMPANY
BY: BABSON CAPITAL MANAGEMENT LLC, AS INVESTMENT SUB-ADVISER

By:
    ----------------------------
Name:
Title:

MASSMUTUAL ASIA LIMITED
BY: BABSON CAPITAL MANAGEMENT LLC, AS INVESTMENT ADVISER

By:
    ----------------------------
Name:
Title:

<PAGE>

ALLSTATE LIFE INSURANCE COMPANY

By: /s/ ROBERT B. BODETT
    -------------------------
Name: Robert B. Bodett

By: /s/ JERRY D. ZINKULA
    -------------------------
Name: Jerry D. Zinkula

Authorized Signatories

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK

By: /s/ ROBERT B. BODETT
    -------------------------
Name: Robert B. Bodett

By: /s/ JERRY D. ZINKULA
    -------------------------
Name: Jerry D. Zinkula

Authorized Signatories

AMERICAN HERITAGE LIFE INSURANCE COMPANY

By: /s/ ROBERT B. BODETT
    -------------------------
Name: Robert B. Bodett

By: /s/ JERRY D. ZINKULA
    -------------------------
Name: Jerry D. Zinkula

Authorized Signatories

NATIONWIDE LIFE INSURANCE COMPANY
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
NATIONWIDE MUTUAL INSURANCE COMPANY

By: /s/ MARK W. POEPPELMAN
    -------------------------
Name: Mark W. Poeppelman
Authorized Signatory

TRANSAMERICA LIFE INSURANCE COMPANY

By: /s/ BILL HENRICKSEN
    -------------------------
Name: Bill Henricksen
Title: Vice President

TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY

By: /s/ BILL HENRICKSEN
    -------------------------
Name: Bill Henricksen
Title: Vice President

<PAGE>

TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY

By: /s/ BILL HENRICKSEN
    -------------------------
Name: Bill Henricksen
Title: Vice President

HARTFORD LIFE INSURANCE COMPANY
BY: HARTFORD INVESTMENT SERVICES, INC., AS AGENT AND ATTORNEY-IN-FACT

By: /s/ EVA KONOPKA
    -------------------------
Name: Eva Konopka
Title: Senior Vice President

HARTFORD UNDERWRITERS INSURANCE COMPANY
BY: HARTFORD INVESTMENT SERVICES, INC., AS AGENT AND ATTORNEY-IN-FACT

By: /s/ EVA KONOPKA
    -------------------------
Name: Eva Konopka
Title: Senior Vice President

AMERICAN UNITED LIFE INSURANCE COMPANY

By: /s/ MICHAEL BULLOCK
    -------------------------
Name: Michael Bullock
Title: V.P. Private Placements

PIONEER MUTUAL LIFE INSURANCE COMPANY
BY: AMERICAN UNITED LIFE INSURANCE COMPANY, ITS AGENT

By: /s/ MICHAEL BULLOCK
    -------------------------
Name: Michael Bullock
Title: V.P. Private Placements

THE STATE LIFE INSURANCE COMPANY
BY: AMERICAN UNITED LIFE INSURANCE COMPANY, ITS AGENT

By: /s/ MICHAEL BULLOCK
    -------------------------
Name: Michael Bullock
Title: V.P. Private Placements

AMERITAS LIFE INSURANCE CORP.
BY: AMERITAS INVESTMENT ADVISORS, INC., AS AGENT

By: /s/ ANDREW S. WHITE
    -------------------------
Name: Andrew S. White
Title: Vice President, Fixed Income Securities

<PAGE>

ACACIA NATIONAL LIFE INSURANCE COMPANY
BY: AMERITAS INVESTMENT ADVISORS, INC., AS AGENT

By: /s/ ANDREW S. WHITE
    -------------------------
Name: Andrew S. White
Title: Vice President, Fixed Income Securities

AMERITAS VARIABLE LIFE INSURANCE COMPANY
BY: AMERITAS INVESTMENT ADVISORS, INC., AS AGENT

By: /s/ ANDREW S. WHITE
    -------------------------
Name: Andrew S. White
Title: Vice President, Fixed Income Securities

<PAGE>

      The undersigned Guarantors hereby acknowledge and agree to the terms and
provisions contained herein and consent to the Company's execution hereof:

MP PUMPS, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

TECUMSEH INVESTMENTS INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

TECUMSEH COMPRESSOR COMPANY

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

LITTLE GIANT PUMP CO.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

DOUGLAS HOLDINGS, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

TECUMSEH POWER COMPANY

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

CONVERGENT TECHNOLOGIES INTERNATIONAL, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

EVERGY, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

<PAGE>

EUROMOTOR, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

TECUMSEH PUMP COMPANY

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

MANUFACTURING DATA SYSTEMS, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

DOUGLAS PRODUCTS, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

HAYTON PROPERTY COMPANY, LLC

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

FASCO INDUSTRIES, INC.

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

VON WEISE GEAR COMPANY

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

TECUMSEH CANADA HOLDING COMPANY

By: /s/ JAMES S. NICHOLSON
    -------------------------
Name: James S. Nicholson
Title: Vice President and Treasurer

<PAGE>

                                     ANNEX 1

                    CURRENT NOTEHOLDERS AND PRINCIPAL AMOUNTS

<TABLE>
<CAPTION>
                                                                    OUTSTANDING PRINCIPAL AMOUNT
                  NAME OF CURRENT NOTEHOLDER                       OF NOTES HELD AT JUNE 30, 2005
--------------------------------------------------------------     ------------------------------
<S>                                                                <C>
New York Life Insurance Company                                                   $ 23,333,333.33
New York Life Insurance and Annuity Corporation                                   $ 13,750,000.00
New York Life Insurance and Annuity Corporation                                   $    416,666.67
    Institutionally Owned Life Insurance Separate Account

State Farm Life Insurance Company                                                 $ 31,666,667.00
State Farm Life and Accident Assurance Company                                    $  1,666,667.00
Hare & Co.                                                                        $ 12,500,000.00
(as nominee for General Electric Capital Assurance Company)
Hare & Co.                                                                        $  4,166,667.00
(as nominee for GE Capital Life Assurance Company of New York)
Cudd & Co.                                                                        $  4,166,667.00
(as nominee for Employers Reinsurance Corporation)
Hare & Co.                                                                        $  4,166,667.00
(as nominee for First Colony Life Insurance Company)
Hare & Co.                                                                        $  4,166,667.00
(as nominee for GE Life and Annuity Assurance Company)
Great-West Life & Annuity Insurance Company                                       $ 12,500,000.00
London Life Insurance Company                                                     $  8,333,333.33
Mac & Co.                                                                         $  4,166,666.67
(as nominee for The Great-West Life Assurance Company)
London Life and Casualty (Barbados) Corporation                                   $  4,166,666.67
Mac & Co. (as nominee for Pacific Life Insurance Company)                         $ 20,833,333.33
Jefferson-Pilot Life Insurance Company                                            $  7,500,000.00
Jefferson Pilot Financial Insurance Company                                       $  5,833,325.00
Jefferson Pilot LifeAmerica Insurance Company                                     $  3,333,333.00
Massachusetts Mutual Life Insurance Company                                       $ 13,583,325.00
C.M. Life Insurance Company                                                       $  2,666,666.67
Gerlach & Co. (as nominee for MassMutual Asia)                                    $    416,666.67
Allstate Life Insurance Company                                                   $ 10,000,000.00
Allstate Life Insurance Company of New York                                       $  4,166,667.00
American Heritage Life Insurance Company                                          $  2,500,000.00
Nationwide Life Insurance Company                                                 $  7,500,000.00
Nationwide Life and Annuity Insurance Company                                     $  6,250,000.00
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                    OUTSTANDING PRINCIPAL AMOUNT
                  NAME OF CURRENT NOTEHOLDER                       OF NOTES HELD AT JUNE 30, 2005
--------------------------------------------------------------     ------------------------------
<S>                                                                <C>
Nationwide Mutual Insurance Company                                               $  2,916,666.67
Transamerica Life Insurance Company                                               $  6,250,000.00
Transamerica Occidental Life Insurance Company                                    $  3,125,000.00
Transamerica Life Insurance and Annuity Company                                   $  3,125,000.00
Hartford Life Insurance Company                                                   $  6,666,667.00
Hartford Underwriters Insurance Company                                           $  3,333,333.00
American United Life Insurance Company                                            $  6,250,000.00
Pioneer Mutual Life Insurance Company                                             $    625,000.00
The State Life Insurance Corp.                                                    $    625,000.00
Ameritas Life Insurance Corp.                                                     $  1,666,666.67
Salkeld & Co.                                                                     $    833,333.33
(as nominee for Acacia National Life Insurance Company)
Ameritas Variable Life Insurance Company                                          $    833,333.33
</TABLE>

<PAGE>

                                                                       EXHIBIT A

                 AMENDMENTS TO EXISTING NOTE PURCHASE AGREEMENT

1.       Section 10.6 of the Existing Note Purchase Agreement is hereby amended
      and restated in its entirety to read as follows:

      "SECTION 10.6. PRIORITY DEBT. The Company will not, at any time, permit
      Priority Debt to exceed 20% of Consolidated Net Worth determined as of the
      end of the most recently ended fiscal quarter of the Company.
      Notwithstanding the foregoing, the Company will not, and will not permit
      any Subsidiary to, incur any Priority Debt (other than Indebtedness under
      existing working capital credit facilities in accordance with the terms
      thereof on June 30, 2005, including the maximum amounts permitted to be
      borrowed thereunder) at any time during the Temporary Waiver Period and
      after the expiration of the Temporary Waiver Period if the Required
      Holders and the Company shall not have agreed to a further waiver or
      amendment of the provisions of Section 10.3 of the Note Purchase Agreement
      as at the end of the Temporary Waiver Period."

2.       Section 10.8 of the Existing Note Purchase Agreement is hereby amended
      by adding the following sentence at the end thereof:

      "Notwithstanding the foregoing the Company will not, or will not permit
      any Subsidiary to, incur any Priority Debt (other than Indebtedness under
      existing working capital credit facilities in accordance with the terms
      thereof on June 30, 2005, including the maximum amounts permitted to be
      borrowed thereunder) at any time during the Temporary Waiver Period or at
      any time when a Default or Event of Default exists or would be created
      thereby."

3.       Section 10.10 of the Existing Note Purchase Agreement is hereby amended
      by adding the following sentences at the end thereof:

      "Notwithstanding the foregoing at no time during the Temporary Waiver
      Period will the Company make, or permit any Subsidiary to make, any Asset
      Disposition (other than the sale of all of the registered shares of
      Kulthorn Kirby Public Company held by the Company so long as (i) the
      aggregate net proceeds thereof does not exceed $6,000,000 and (ii) all
      such net proceeds are applied to a Special Debt Prepayment Application).
      As used in this Section 10.10 "Special Debt Prepayment Application" means,
      with respect to any Transfer of such registered shares, the application by
      the Company of cash in an amount equal to the Net Sales Amount with
      respect to such Transfer to pay Senior Debt, provided that in the course
      of making such application the Company shall offer to prepay, at par, each
      outstanding Note in principal amount which equals the Ratable Portion for
      such Note together with interest accrued thereon as of the date of payment
      (which offer shall be in writing and shall offer to prepay the Ratable
      Portion of the Notes on a date which is not less than 30 days after the
      date of the notice of offer). If any holder of a Note fails to accept in
      writing such offer of prepayment within 15 days of receipt of the notice
      of offer, then, for purposes of the preceding sentence only, the Company
      nevertheless will be deemed to have paid Senior Debt in an amount equal to
      the Ratable Portion for such Note. "Ratable Portion" for any Note on any
      date means an amount equal to the product of (x) the Net Sales Amount
      being so applied to the payment of Senior Debt multiplied by (y) a
      fraction the numerator of which is the outstanding principal amount of
      such Note on such date and the denominator of which is the aggregate
      outstanding principal amount of Senior Debt on such date."

<PAGE>

4.       A new Section 10.12 is hereby added to the Existing Note Purchase
      Agreement to follow Section 10.11 to read as follows:

      "SECTION 10.12. RESTRICTED PAYMENTS. The Company will not, and will not
      permit any Subsidiary to, make any Restricted Payment at any time during
      the Temporary Waiver Period and after the expiration of the Temporary
      Waiver Period if the Required Holders and the Company shall not have
      agreed to a further waiver or amendment of the provisions of Section 10.3
      of the Note Purchase Agreement as at the end of the Temporary Waiver
      Period."

5.       A new section 10.13 is hereby added to the Existing Note Purchase
      Agreement to follow Section 10.12 to read as follows:

      "SECTION 10.13. TEMPORARY WAIVER RESTRICTION. At no time during the
      Temporary Waiver Period will the Company, or any Subsidiary (a) repay or
      prepay any Indebtedness (other than (i) regularly scheduled payments in
      the ordinary course of business pursuant to the terms of such Indebtedness
      in effect on June 30, 2005 and (ii) payments of principal under the Credit
      Agreement so long as the outstanding principal balance due thereunder
      remains no less than the outstanding principal balance thereunder at the
      close of business on June 30, 2005), (b) acquire, either directly or by
      merger or otherwise, the assets or capital stock of any ongoing business
      or (c) transfer any assets to a Special Purpose Subsidiary."

6.       Schedule B to the Existing Note Purchase Agreement is hereby amended by
      adding the following new definitions to appear in their proper
      alphabetical order:

      ""DISTRIBUTION" means, in respect of any corporation, association or other
      business entity:

            (a) dividends or other distributions or payments on capital stock or
      other equity interest of such corporation, association or other business
      entity (except distributions in such stock or other equity interest); and

            (b) the redemption or acquisition of such stock or other equity
      interests or of warrants, rights or other options to purchase such stock
      or other equity interests (except when solely in exchange for such stock
      or other equity interests).

      "FIRST AMENDMENT" means the First Amendment and Waiver No. 1 to Note
      Purchase Agreement dated as of June 30, 2005 by and among the Company and
      the Required Holders.

      "FIRST AMENDMENT EFFECTIVE DATE" means the Effective Date (as such term is
      defined in the First Amendment).

      "RESTRICTED PAYMENT" means any Distribution in respect of the Company or
      any Subsidiary (other than on account of capital stock or other equity
      interests of a Subsidiary owned legally and beneficially by the Company or
      another Subsidiary), including, without limitation, any Distribution
      resulting in the acquisition by the Company of Securities which would
      constitute treasury stock.

                                      -2-
<PAGE>

      "TEMPORARY WAIVER PERIOD" means the period commencing on the First
      Amendment Effective Date through August 8, 2005."

                                      -3-exv10w4

 

Exhibit 10.4

	 	 	 	 	 

ROCKY MOUNTAIN CHOCOLATE FACTORY

FRANCHISE AGREEMENT

	 	 	 
	 

	 	Franchisee:                                                                            
	 

	 	Date:                                                                                      
	 

	 	Franchised Location:                                                             
	 

	 	                                                                                               

 

 

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

FRANCHISE AGREEMENT

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	1.	 	PURPOSE	 	 	1	 
	 	 	 	 	 	 	 
	2.	 	GRANT OF FRANCHISE	 	 	1	 
	 

	 	 	2.1.	 	 	Grant of Franchise
	 	 	1	 
	 

	 	 	2.2.	 	 	Scope of Franchise Operations
	 	 	1	 
	 	 	 	 	 	 	 
	3.	 	FRANCHISED LOCATION AND DESIGNATED AREA	 	 	2	 
	 

	 	 	3.1.	 	 	Franchised Location
	 	 	2	 
	 

	 	 	3.2.	 	 	Limitation on Franchise Rights; Relocation
	 	 	2	 
	 

	 	 	3.3.	 	 	Franchisor’s Reservation of Rights
	 	 	2	 
	 	 	 	 	 	 	 
	4.	 	INITIAL FRANCHISE FEE	 	 	3	 
	 

	 	 	4.1.	 	 	Initial Franchise Fee
	 	 	3	 
	 	 	 	 	 	 	 
	5.	 	DEVELOPMENT OF FRANCHISED LOCATION	 	 	3	 
	 

	 	 	5.1.	 	 	Approval of Lease
	 	 	3	 
	 

	 	 	5.2.	 	 	Conversion and Design
	 	 	4	 
	 

	 	 	5.3.	 	 	Signs
	 	 	4	 
	 

	 	 	5.4.	 	 	Equipment
	 	 	4	 
	 

	 	 	5.5.	 	 	Permits and Licenses
	 	 	5	 
	 

	 	 	5.6.	 	 	Commencement of Operations
	 	 	5	 
	 	 	 	 	 	 	 
	6.	 	TRAINING	 	 	5	 
	 

	 	 	6.1.	 	 	Initial Training Program
	 	 	5	 
	 

	 	 	6.2.	 	 	Length of Training
	 	 	6	 
	 

	 	 	6.3.	 	 	Additional Training
	 	 	6	 
	 	 	 	 	 	 	 
	7.	 	DEVELOPMENT ASSISTANCE	 	 	6	 
	 

	 	 	7.1.	 	 	Franchisor’s Development Assistance
	 	 	6	 
	 	 	 	 	 	 	 
	8.	 	OPERATIONS MANUAL	 	 	7	 
	 

	 	 	8.1.	 	 	Operations Manual
	 	 	7	 
	 

	 	 	8.2.	 	 	Confidentiality of Operations Manual Contents
	 	 	7	 
	 

	 	 	8.3.	 	 	Changes to Operations Manual
	 	 	7	 
	 	 	 	 	 	 	 
	9.	 	OPERATING ASSISTANCE	 	 	8	 
	 

	 	 	9.1.	 	 	Franchisor’s Services
	 	 	8	 
	 

	 	 	9.2.	 	 	Additional Franchisor Services
	 	 	8	 
	 	 	 	 	 	 	 
	10.	 	FRANCHISEE’S OPERATIONAL COVENANTS	 	 	8	 
	 

	 	 	10.1.	 	 	Store Operations
	 	 	8	 
	 	 	 	 	 	 	 
	11.	 	ROYALTIES	 	 	11	 
	 

	 	 	11.1.	 	 	Monthly Royalty
	 	 	11	 
	 

	 	 	11.2.	 	 	Gross Retail Sales
	 	 	12	 
	 

	 	 	11.3.	 	 	Royalty Payments
	 	 	12	 
	 

	 	 	11.4.	 	 	Authorization for Prearranged Payments by Electronic Transfer
	 	 	12	 
	 	 	 	 	 	 	 
	12.	 	ADVERTISING	 	 	13	 
	 

	 	 	12.1.	 	 	Approval of Advertising
	 	 	13	 
	 

	 	 	12.2.	 	 	Local Advertising
	 	 	13	 
	 

	 	 	12.3.	 	 	Marketing and Promotion Fee
	 	 	13	 

 

 

	 	 	 	 	 	 	 	 	 	 	 

	 

	 	 	12.4.	 	 	Regional Advertising Programs
	 	 	14	 
	 

	 	 	12.5.	 	 	Marketing Services
	 	 	14	 
	 	 	 	 	 	 	 
	13.	 	QUALITY CONTROL	 	 	15	 
	 

	 	 	13.1.	 	 	Compliance with Operations Manual
	 	 	15	 
	 

	 	 	13.2.	 	 	Standards and Specifications
	 	 	15	 
	 

	 	 	13.3.	 	 	Inspections
	 	 	15	 
	 

	 	 	13.4.	 	 	Restrictions on Services and Products
	 	 	15	 
	 

	 	 	13.5.	 	 	Approved Suppliers
	 	 	16	 
	 

	 	 	13.6.	 	 	Request to Change Supplier
	 	 	16	 
	 

	 	 	13.7.	 	 	Approval of Intended Supplier
	 	 	16	 
	 	 	 	 	 	 	 
	14.	 	TRADEMARKS, TRADE NAMES AND PROPRIETARY INTERESTS	 	 	16	 
	 

	 	 	14.1.	 	 	Marks
	 	 	16	 
	 

	 	 	14.2.	 	 	No Use of Other Marks
	 	 	17	 
	 

	 	 	14.3.	 	 	Licensed Methods
	 	 	17	 
	 

	 	 	14.4.	 	 	Effect of Termination
	 	 	17	 
	 

	 	 	14.5.	 	 	Mark Infringement
	 	 	17	 
	 

	 	 	14.6.	 	 	Franchisee’s Business Name
	 	 	17	 
	 

	 	 	14.7.	 	 	Change of Marks
	 	 	18	 
	 

	 	 	14.8.	 	 	Creative Ownership
	 	 	18	 
	 	 	 	 	 	 	 
	15.	 	REPORTS, RECORDS AND FINANCIAL STATEMENTS	 	 	18	 
	 

	 	 	15.1.	 	 	Franchisee Reports
	 	 	18	 
	 

	 	 	15.2.	 	 	Annual Financial Statements
	 	 	19	 
	 

	 	 	15.3.	 	 	Verification
	 	 	19	 
	 

	 	 	15.4.	 	 	Books and Records
	 	 	19	 
	 

	 	 	15.5.	 	 	Audit of Books and Records
	 	 	19	 
	 

	 	 	15.6.	 	 	Failure to Comply with Reporting Requirements
	 	 	19	 
	 

	 	 	15.7.	 	 	Shopping Service
	 	 	20	 
	 	 	 	 	 	 	 
	16.	 	TRANSFER	 	 	20	 
	 

	 	 	16.1.	 	 	Transfer by Franchisee
	 	 	20	 
	 

	 	 	16.2.	 	 	Pre-Conditions to Franchisee’s Transfer
	 	 	20	 
	 

	 	 	16.3.	 	 	Franchisor’s Approval of Transfer
	 	 	21	 
	 

	 	 	16.4.	 	 	Right of First Refusal
	 	 	21	 
	 

	 	 	16.5.	 	 	Types of Transfers
	 	 	22	 
	 

	 	 	16.6.	 	 	Transfer by the Franchisor
	 	 	22	 
	 

	 	 	16.7.	 	 	Franchisee’s Death or Disability
	 	 	22	 
	 	 	 	 	 	 	 
	17.	 	TERM AND EXPIRATION	 	 	23	 
	 

	 	 	17.1.	 	 	Term
	 	 	23	 
	 

	 	 	17.2.	 	 	Continuation
	 	 	23	 
	 

	 	 	17.3.	 	 	Rights Upon Expiration
	 	 	23	 
	 

	 	 	17.4.	 	 	Exercise of Option for Successor Franchise
	 	 	23	 
	 

	 	 	17.5.	 	 	Conditions of Refusal
	 	 	24	 
	 	 	 	 	 	 	 
	18.	 	DEFAULT AND TERMINATION	 	 	24	 
	 

	 	 	18.1.	 	 	Termination by Franchisor — Effective Upon Notice
	 	 	24	 
	 

	 	 	18.2.	 	 	Termination by Franchisor — Thirty Days Notice
	 	 	25	 
	 

	 	 	18.3.	 	 	Franchisor’s Remedies
	 	 	26	 
	 

	 	 	18.4.	 	 	Right to Purchase
	 	 	26	 
	 

	 	 	18.5.	 	 	Obligations of Franchisee Upon Termination or Expiration
	 	 	27	 
	 

	 	 	18.6.	 	 	State and Federal Law
	 	 	28	 

 

 

	 	 	 	 	 	 	 	 	 	 	 
	19.	 	BUSINESS RELATIONSHIP	 	 	29	 
	 

	 	 	19.1.	 	 	Independent Businesspersons
	 	 	29	 
	 

	 	 	19.2.	 	 	Payment of Third Party Obligations
	 	 	29	 
	 

	 	 	19.3.	 	 	Indemnification
	 	 	29	 
	 	 	 	 	 	 	 
	20.	 	RESTRICTIVE COVENANTS	 	 	29	 
	 

	 	 	20.1.	 	 	Non-Competition During Term
	 	 	29	 
	 

	 	 	20.2.	 	 	Post-Termination Covenant Not to Compete
	 	 	30	 
	 

	 	 	20.3.	 	 	Confidentiality of Proprietary Information
	 	 	30	 
	 

	 	 	20.4.	 	 	Confidentiality Agreement
	 	 	31	 
	 	 	 	 	 	 	 
	21.	 	INSURANCE	 	 	31	 
	 

	 	 	21.1.	 	 	Insurance Coverage
	 	 	31	 
	 

	 	 	21.2.	 	 	Proof of Insurance Coverage
	 	 	31	 
	 	 	 	 	 	 	 
	22.	 	MISCELLANEOUS PROVISIONS	 	 	31	 
	 

	 	 	22.1.	 	 	Governing Law/Consent to Venue and Jurisdiction
	 	 	31	 
	 

	 	 	22.2.	 	 	Cumulative Rights
	 	 	32	 
	 

	 	 	22.3.	 	 	Modification
	 	 	32	 
	 

	 	 	22.4.	 	 	Entire Agreement
	 	 	32	 
	 

	 	 	22.5.	 	 	Delegation by the Franchisor
	 	 	32	 
	 

	 	 	22.6.	 	 	Effective Date
	 	 	32	 
	 

	 	 	22.7.	 	 	Review of Agreement
	 	 	33	 
	 

	 	 	22.8.	 	 	Attorneys’ Fees
	 	 	33	 
	 

	 	 	22.9.	 	 	Injunctive Relief
	 	 	33	 
	 

	 	 	22.10.	 	 	No Waiver
	 	 	33	 
	 

	 	 	22.11.	 	 	No Right to Set Off
	 	 	33	 
	 

	 	 	22.12.	 	 	Invalidity
	 	 	33	 
	 

	 	 	22.13.	 	 	Notices
	 	 	33	 
	 

	 	 	22.14.	 	 	Payment of Taxes
	 	 	34	 
	 

	 	 	22.15.	 	 	Acknowledgement
	 	 	34	 

	 	 	EXHIBITS
	 
	I.	 	Addendum to Franchise Agreement — Location Approval
	 
	II.	 	Personal Guaranty
	 
	III.	 	Statement of Ownership
	 
	IV.	 	Addendum to Franchise Agreement Related to the Authorization of Prearranged Payments
	 
	V.	 	Permit, License and Construction Certificate
	 
	VI.	 	Confidentiality and Noncompetition Agreement

 

 

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

FRANCHISE AGREEMENT

     THIS AGREEMENT (the “Agreement”) is made this ___day of ___, 20___, by and
between ROCKY MOUNTAIN CHOCOLATE FACTORY, INC., a Colorado corporation, located at 265 Turner
Drive, Durango, Colorado 81303 (the “Franchisor”)
and ______, located at ______(the “Franchisee”), who, on the basis of the following
understandings and agreements, agree as follows:

1. PURPOSE

     1.1 The Franchisor has developed methods for establishing, operating and promoting retail
stores selling gourmet chocolates and other premium confectionery products (“ROCKY MOUNTAIN
CHOCOLATE FACTORY Stores” or “Stores”) using the service mark “ROCKY MOUNTAIN CHOCOLATE FACTORY”
and related trade names and trademarks (“Marks”) and the Franchisor’s proprietary methods of doing
business (the “Licensed Methods”).

     1.2. The Franchisor grants the right to others to develop and operate ROCKY MOUNTAIN CHOCOLATE
FACTORY Stores, under the Marks and pursuant to the Licensed Methods.

     1.3. The Franchisee desires to establish a ROCKY MOUNTAIN CHOCOLATE FACTORY Store at a
location identified herein or to be later identified, and the Franchisor desires to grant the
Franchisee the right to operate a ROCKY MOUNTAIN CHOCOLATE FACTORY Store at such location under the
terms and conditions which are contained in this Agreement.

2. GRANT OF FRANCHISE

2.1. Grant of Franchise.

     The Franchisor grants to the Franchisee, and the Franchisee accepts from the Franchisor, the
right to use the Marks and Licensed Methods in connection with the establishment and operation of a
ROCKY MOUNTAIN CHOCOLATE FACTORY Store, at the location described in Article 3 of this
Agreement. The Franchisee agrees to use the Marks and Licensed Methods, as they may be changed,
improved, and further developed by the Franchisor from time to time, only in accordance with the
terms and conditions of this Agreement.

2.2. Scope of Franchise Operations.

     The Franchisee agrees at all times to faithfully, honestly and diligently perform the
Franchisee’s obligations hereunder, and to continuously exert best efforts to promote the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store. The Franchisee agrees to utilize the Marks and Licensed Methods
to operate all aspects of the business franchised hereunder in accordance with the methods and
systems developed and prescribed from time to time by the Franchisor, all of which are a part of
the Licensed Methods. The Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY Store shall offer such
products and services as the Franchisor shall designate and shall be restricted from manufacturing,
offering or selling any products or services not previously approved by the Franchisor in writing.
The Franchisee is required to devote a minimum of 50% of all retail display space to ROCKY MOUNTAIN
CHOCOLATE FACTORY brand assorted bulk chocolates and boxed and packaged candies. The Franchisee’s
ROCKY MOUNTAIN CHOCOLATE FACTORY Store must feature ROCKY

 

 

MOUNTAIN CHOCOLATE FACTORY brand candy manufactured by the Franchisor or its designees (“Factory
Candy”) and related nonconfectionery items (“Items”) approved by the Franchisor in writing.
Depending on the retail environment and the configuration of the Store, the Franchisee may also be
permitted to make, offer and sell store-made candies (“Store Candy”) prepared in accordance with
recipes and techniques set forth in the Operations Manual, as that term is defined in Section
8.1. Some Stores do not offer Store Candy.

3. FRANCHISED LOCATION AND DESIGNATED AREA

3.1. Franchised Location.

     The Franchisee is granted the right and franchise to own and operate one ROCKY MOUNTAIN
CHOCOLATE FACTORY Store at the address and location which shall be set forth in Exhibit I,
attached hereto (“Franchised Location”). The type of Store configuration shall also be set forth in
Exhibit I, attached hereto. Some smaller Stores are designated as “Kiosks” or “Kiosk
Stores” in this Agreement and all references to “Stores” include Kiosk Stores.

3.2. Limitation on Franchise Rights; Relocation.

     The rights that are hereby granted to the Franchisee are for the specific Franchised Location
and cannot be transferred to an alternative Franchised Location, or any other location, without the
prior written approval of the Franchisor. If the Franchisee has operated a ROCKY MOUNTAIN CHOCOLATE
FACTORY Store for not less than 12 months and desires to relocate it to an alternative site, the
Franchisee must set forth its reasons for requesting the relocation in writing to the Franchisor,
along with a proposed new location. The Franchisor will have 30 days from receipt of the
Franchisee’s written request to respond. If the Franchisor approves the relocation and the proposed
new location, and if the ownership of the Franchisee does not change in any respect from the
ownership of the Franchisee before the relocation, then the Franchisee may move its Store to the
new approved location, provided that the Franchisee signs the Franchisor’s then current form of
Franchise Agreement and opens the Store at the new location within 12 months after the Store closes
at its former Franchised Location. In addition, the Franchisee will be required to pay a
nonrefundable design fee of $2,500 to the Franchisor for the Franchisor’s Store designers to design
the layout of the Franchisee’s new Store location. A similar design fee will also apply if the
Franchisee requests design assistance in remodeling its Store at any time during the term of this
Agreement. See Section 5.2 below. The Marks and Licensed Methods are licensed to the
Franchisee for the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store only at the Franchised
Location; therefore, the Franchisee may not operate food carts, participate in food festivals or
offer any other type of off-site food services using the Marks and Licensed Methods without the
prior written consent of the Franchisor, in which case the Franchisor and the Franchisee shall
execute an addendum to this Agreement relating to the operation of “Satellite Stores” (if this
Agreement governs the operation of a traditional Store, any Satellite Store(s) shall be governed by
separate Franchise Agreements) or “Temporary Stores.”

3.3. Franchisor’s Reservation of Rights. 

     The Franchisee acknowledges that the franchise granted hereunder is non-exclusive and that the
Franchisor retains the rights, among others: (1) to use, and to license others to use, the Marks
and Licensed Methods for the operation of ROCKY MOUNTAIN CHOCOLATE FACTORY Stores, Kiosk Stores,
Satellite Stores and Temporary Stores, at any location other than at the Franchised Location; (2)
to use the Marks and Licensed Methods to identify services and products, promotional and marketing
efforts or related items, and to identify products and services similar to those which the
Franchisee will sell, but made available through alternative channels of distribution other than
through traditional ROCKY

2

 

MOUNTAIN CHOCOLATE FACTORY Stores, at any location other than at the Franchised Location,
including, but not limited to, through Satellite Stores, Temporary Stores, Kiosk Stores, by way of
mail order, (including electronic mail order), the Internet, catalog, television, retail store
display or through the wholesale sale of its products to unrelated retail outlets or to candy
distributors or outlets located in stadiums, arenas, airports, turnpike rest stops or supermarkets;
and (3) to use and license the use of other proprietary marks or methods in connection with the
sale of products and services similar to those which the Franchisee will sell or in connection with
the operation of retail stores selling gourmet chocolates or other premium confectionery products,
at any location other than at the Franchised Location, which stores are the same as, or similar to,
or different from a traditional ROCKY MOUNTAIN CHOCOLATE FACTORY Store or a Satellite Store, a
Temporary Store or a Kiosk Store, on any terms and conditions as the Franchisor deems advisable,
and without granting the Franchisee any rights therein.

4. INITIAL FRANCHISE FEE

4.1. Initial Franchise Fee.

     In consideration for the right to develop and operate one ROCKY MOUNTAIN CHOCOLATE FACTORY
Store, the Franchisee agrees to pay to the Franchisor an initial franchise fee in the amount set
forth in Exhibit I attached hereto, all of which is due and payable on the date the
Franchisee signs this Agreement. The Franchisee acknowledges and agrees that the initial franchise
fee represents payment for the initial grant of the rights to use the Marks and Licensed Methods,
that the Franchisor has earned the initial franchise fee upon receipt thereof and that the fee is
under no circumstances refundable to the Franchisee after it is paid, except as set forth in
Section 5.6 of this Agreement. If a transfer occurs, no initial franchise fee shall be due
at the time that the Franchisee transfers the Store to another party, but a transfer fee will apply
as set forth in Section 16.2 of this Agreement.

5. DEVELOPMENT OF FRANCHISED LOCATION

5.1. Approval of Lease.

     The Franchisee shall obtain the Franchisor’s prior written approval before executing any lease
or purchase agreement for the Franchised Location. Any lease for the Franchised Location shall, at
the option of the Franchisor, contain provisions including: (1) allowing for assignment of the
lease to the Franchisor in the event that this Agreement is terminated or not renewed for any
reason; (2) giving the Franchisor the right to cure any default by the Franchisee under such lease;
and/or (3) providing the Franchisor with the right, exercisable upon and as a condition of the
approval of the Franchised Location, to execute the lease agreement or other document providing
entitlement to the use of the Franchised Location in its own name or jointly with the Franchisee as
lessee and, upon the exercise of such option, the Franchisor shall provide the Franchisee with the
right to use the premises as its sublessee, assignee, or other similar capacity upon the same terms
and conditions as obtained by the Franchisor. The Franchisor may choose to hire a third party
professional to negotiate the Franchisee’s lease and the Franchisee agrees to reimburse the
Franchisor for its actual costs associated with any such negotiation. The Franchisee shall deliver
a copy of the signed lease for the Franchised Location to the Franchisor within 15 days of its
execution. The Franchisee acknowledges that approval of a lease for the Franchised Location by the
Franchisor does not constitute a recommendation, endorsement or guarantee by the Franchisor of the
suitability of the location or the lease and the Franchisee should take all steps necessary to
ascertain whether such location and lease are acceptable to the Franchisee.

3

 

5.2. Conversion and Design.

     The Franchisee acknowledges that the layout, design, decoration and color scheme of ROCKY
MOUNTAIN CHOCOLATE FACTORY Stores are an integral part of the Franchisor’s proprietary Licensed
Methods and accordingly, the Franchisee shall convert, design and decorate the Franchised Location
in accordance with the Franchisor’s plans and specifications which are contained in a Design and
Construction Manual that is considered, for the purposes of this Agreement, to be a part of the
Operations Manual, defined in Section 8.1. The Franchisee shall hire an architect/designer
to prepare written plans for the Store’s layout and construction, which plans shall be submitted to
the Franchisor for its prior written approval. Throughout the term of this Agreement, the
Franchisee shall also obtain the Franchisor’s written consent to any remodeling or decoration of
the premises before remodeling or decorating begins, recognizing that such remodeling, decoration
and any related costs are the Franchisee’s sole responsibility. If the Franchisee remodels its
Store at any time during the term of this Agreement, the Franchisee shall pay the Franchisor $2,500
for the Franchisor’s design services.

5.3. Signs.

     The Franchisee shall purchase or otherwise obtain for use at the Franchised Location and in
connection with the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, signs which comply with the standards
and specifications of the Franchisor as set forth in the Operations Manual, as that term is defined
in Section 8.1. It is the Franchisee’s sole responsibility to insure that any signs comply
with applicable local ordinances, building codes and zoning regulations. Any modifications to the
Franchisor’s standards and specifications for signs that must be made due to local ordinances,
codes or regulations shall be submitted to the Franchisor for prior written approval. The
Franchisee acknowledges the Marks, or any other name, symbol or identifying marks on any signs
shall only be used in accordance with the Franchisor’s standards and specifications and only with
the prior written approval of the Franchisor.

5.4. Equipment. 

     The Franchisee shall purchase or otherwise obtain for use at the Franchised Location and in
connection with the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, equipment of a type and in an amount
which complies with the standards and specifications of the Franchisor. The Franchisee acknowledges
that the type, quality, configuration, capability and/or performance of the equipment are all
standards and specifications which are a part of the Licensed Methods and therefore such equipment
must be purchased, leased, or otherwise obtained in accordance with the Franchisor’s standards and
specifications and only from suppliers or other sources approved by the Franchisor. The Franchisee
must purchase a facsimile machine and connect it to a phone line that is separate from the main
phone number for the Store. The Franchisee shall equip the Store with an integrated store
information system (“System”), computer hardware and software, printers and other designated
equipment consistent with the standards and specifications of the Franchisor. The Franchisor
requires that it be given reasonable access to information and data regarding the Franchisee’s
ROCKY MOUNTAIN CHOCOLATE FACTORY Store by computer modem with a separate phone line dedicated to
such modem, or by another form of electronic transmission. The Franchisee must purchase and
maintain throughout the term of this Agreement a maintenance and support agreement for the System
with the Franchisor’s designated supplier. The Franchisor also requires the Franchisee to obtain
and maintain an account with an Internet service provider that meets the Franchisor’s standards and
specifications to facilitate electronic communication.

4

 

5.5. Permits and Licenses.

     The Franchisee agrees to obtain all such permits and certifications as may be required for the
lawful construction and operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store together with all
certifications from government authorities having jurisdiction over the site, that all requirements
for construction and operation have been met, including without limitation, zoning, access, sign,
health, safety requirements, building and other required construction permits, licenses to do
business and fictitious name registrations, sales tax permits, health and sanitation permits and
ratings and fire clearances. The Franchisee agrees to obtain all customary contractors’ sworn
statements and partial and final lien waivers for construction, remodeling, decorating and
installation of equipment at the Franchised Location. The Franchisee shall sign and deliver to the
Franchisor the Permit, License and Construction Certificate set forth as Exhibit V to this
Agreement, to confirm Franchisee’s compliance with the Americans with Disabilities Act and other
provisions of this Section 5.5 not later than 30 days prior to the date the Store begins
operating. Copies of all inspection reports, warnings, certificates and ratings issued by any
governmental entity during the term of this Agreement in connection with the conduct of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store which indicates the Franchisee’s failure to meet or maintain the
highest governmental standards, or less than full compliance by the Franchisee with any applicable
law, rule or regulation, shall be forwarded to the Franchisor within five days of the Franchisee’s
receipt thereof.

5.6. Commencement of Operations.

     Unless otherwise agreed in writing by the Franchisor and the Franchisee, the Franchisee has
180 days from the date of this Agreement within which to complete the initial training program,
described in Section 6.1 of this Agreement, develop the Franchised Location and commence
operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. Failure to commence operations within
this time frame shall constitute grounds for termination under Article 18 of this
Agreement. If this Agreement is terminated by the Franchisor for failure to commence operation of
the Store within applicable time limits, $5,000 of the initial franchise fee will be refunded to
the Franchisee. The Franchisor will extend the time in which the Franchisee has to commence
operations for a reasonable period of time in the event factors beyond the Franchisee’s reasonable
control prevent the Franchisee from meeting this development schedule, so long as the Franchisee
has made reasonable and continuing efforts to comply with such development obligations and the
Franchisee requests, in writing, an extension of time in which to have its ROCKY MOUNTAIN CHOCOLATE
FACTORY Store established before such development period lapses. However, notwithstanding the
Franchisor’s written agreement to extend the Franchisee’s development period, if more than 270 days
elapse between the date of this Agreement and the commencement of operation of the Store, the
Franchisor reserves the right, in its sole discretion, to require the Franchisee to execute the
Franchisor’s then current form of Franchise Agreement or an amendment to this Agreement to conform
this Agreement with the terms of the then current Franchise Agreement.

6. TRAINING

6.1. Initial Training Program.

     After the Franchisee executes a lease for the Franchised Location, the Franchisee or, if the
Franchisee is not an individual, the person designated by the Franchisee to assume primary
responsibility for the management of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, (“General
Manager”) is required to attend and successfully complete the initial training program which is
offered by the Franchisor at one of the Franchisor’s designated training facilities. Up to three
individuals are eligible to participate in the Franchisor’s initial training program without charge
of a tuition or fee. The

5

 

Franchisee shall be responsible for any and all traveling and living expenses incurred in
connection with attendance at the training program. At least one individual must successfully
complete the initial training program prior to the Franchisee’s commencement of operation of its
ROCKY MOUNTAIN CHOCOLATE FACTORY Store.

6.2. Length of Training.

     The initial training program shall consist of 7 days of instruction at a location designated
by the Franchisor; provided, however, that the Franchisor reserves the right to waive a portion of
the training program or alter the training schedule, if in the Franchisor’s sole discretion, the
Franchisee or General Manager has sufficient prior experience or training.

6.3. Additional Training.

     From time to time, the Franchisor may present seminars, conventions or continuing development
programs or conduct meetings for the benefit of the Franchisee. The Franchisee or its General
Manager shall be required to attend any ongoing mandatory seminars, conventions, programs or
meetings as may be offered by the Franchisor. The Franchisor shall give the Franchisee at least 30
days prior written notice of any ongoing seminar, convention or program that is deemed mandatory.
The Franchisor shall not require that the Franchisee attend any ongoing training more often than
once a year. All mandatory training will be offered without charge of a tuition or fee; provided,
however, the Franchisee will be responsible for all traveling and living expenses which are
associated with attendance at the same.

7. DEVELOPMENT ASSISTANCE

7.1. Franchisor’s Development Assistance.

     The Franchisor shall provide the Franchisee with assistance in the initial establishment of
the ROCKY MOUNTAIN CHOCOLATE FACTORY Store as follows:

     a. Provision of the initial training program to be conducted at the Franchisor’s
designated training facilities or at another location designated by the Franchisor, as
described in Article 6 above.

     b. Provision of written guidelines for a Franchised Location that shall include,
without limitation, specifications for space requirements and build out. The Franchisee
acknowledges that the Franchisor shall have no other obligation to provide assistance in the
selection and approval of a Franchised Location other than the provision of such written
specifications and approval or disapproval of a proposed Franchised Location, which approval
or disapproval shall be based on information submitted to the Franchisor in a form
sufficient to assess the proposed location as may be required by the Franchisor, in the
Franchisor’s sole discretion, and on information gathered by the Franchisor.

     c. Direction regarding the required conversion, design and decoration of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store premises, plus specifications concerning signs, seasonal
graphics, music, decor and equipment.

     d. Direction regarding the selection of suppliers of equipment, seasonal graphics,
music, items and materials used and inventory offered for sale in connection with the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store. The Franchisor will determine the Franchisee’s initial
inventory of Factory Candy that the Franchisee will purchase, depending on the size and

6

 

configuration of the Store. After execution of this Agreement, the Franchisor will
provide the Franchisee with a list of approved suppliers, if any, of such equipment, items,
seasonal graphics, music, materials and inventory and, if available, a description of any
national or central purchase and supply agreements offered by such approved suppliers for
the benefit of ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees.

     e. Provision of an Operations Manual in accordance with Section 8.1 below.

     f. As the Franchisor may reasonably schedule, and depending on availability of
personnel, the Franchisor will make available to the Franchisee at or close to the opening
of the Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY Store, a representative (“Site
Representative”) who will be present for up to five days beginning approximately three days
prior to the opening of the Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY Store. If the
Franchisee’s Store opens on or near a holiday, however, the Site Representative shall not
begin the in-Store assistance until three days after the holiday. Holidays shall include,
but not be limited to, New Years Day, Valentines Day, Easter, Memorial Day, Fourth of July,
Labor Day, Thanksgiving, Hanukkah and Christmas. There will be no charge to the Franchisee
for this service provided by the Franchisor. The Site Representative will assist the
Franchisee’s employees in opening the Store, unless in the Franchisor’s determination, the
Franchisee or the General Manager have sufficient prior training or experience.

8. OPERATIONS MANUAL

8.1. Operations Manual.

     The Franchisor agrees to loan to the Franchisee one or more manuals, technical bulletins,
cookbooks and recipes and other written materials (collectively referred to as “Operations Manual”)
covering Factory Candy ordering, Store Candy manufacturing, processing and stocking and other
operating and in-store marketing techniques for the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The
Franchisee agrees that it shall comply with the Operations Manual as an essential aspect of its
obligations under this Agreement, that the Operations Manual shall be deemed to be incorporated
herein by reference and failure by the Franchisee to substantially comply with the Operations
Manual may be considered by the Franchisor to be a breach of this Agreement.

8.2. Confidentiality of Operations Manual Contents.

     The Franchisee agrees to use the Marks and Licensed Methods only as specified in the
Operations Manual. The Operations Manual is the sole property of the Franchisor and shall be used
by the Franchisee only during the term of this Agreement and in strict accordance with the terms
and conditions hereof. The Franchisee shall not duplicate the Operations Manual nor disclose its
contents to persons other than its employees or officers who have signed the form of
Confidentiality and Noncompetition Agreement attached hereto as Exhibit VI and incorporated
herein by reference. The Franchisee shall return the Operations Manual to the Franchisor upon the
expiration, termination or transfer of this Agreement.

8.3. Changes to Operations Manual.

     The Franchisor reserves the right to revise the Operations Manual from time to time as it
deems necessary to update or change operating and marketing techniques, standards and
specifications for all components of the Licensed Methods and approved Factory Candy, Items and
Store Candy offered by Stores. The Franchisee, within 30 days of receiving any updated
information, shall in turn update its copy of the Operations Manual as instructed by the Franchisor
and shall conform its operations with the

7

 

updated provisions within a reasonable time after receipt of such updated information. The
Franchisee acknowledges that a master copy of the Operations Manual maintained by the Franchisor at
its principal office shall be controlling in the event of a dispute relative to the content of any
Operations Manual.

9. OPERATING ASSISTANCE

9.1. Franchisor’s Services.

     The Franchisor agrees that, during the Franchisee’s operation of the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store, the Franchisor shall make available to the Franchisee the following services:

     a. Upon the reasonable request of the Franchisee, consultation by telephone and
electronic mail regarding the continued operation and management of a ROCKY MOUNTAIN
CHOCOLATE FACTORY Store and advice regarding the retail services, product quality control,
inventory issues, customer relations issues and similar advice.

     b. Access to advertising and promotional materials as may be developed by the
Franchisor, the cost of which may be passed on to the Franchisee at the Franchisor’s option.

     c. On-going updates of information and programs regarding the candy industry, the ROCKY
MOUNTAIN CHOCOLATE FACTORY concept and related Licensed Methods, including, without
limitation, information about special or new products which may be developed and made
available to ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees.

     d. Depending on availability, allow replacement or additional General Managers to
attend the initial training program. The Franchisor reserves the right to charge a tuition
or fee in an amount payable in advance, commensurate with the Franchisor’s then current
published prices for such training. The Franchisee shall be responsible for all travel and
living expenses incurred by its personnel during the training program. Further, the
availability of the training program shall be subject to space considerations and prior
commitments to new ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees.

9.2. Additional Franchisor Services.

     Although not obligated to do so, upon the reasonable request of the Franchisee, the Franchisor
may make its employees or designated agents available to the Franchisee for on-site advice and
assistance in connection with the on-going operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store
governed by this Agreement. In the event that the Franchisee requests such additional assistance
and the Franchisor agrees to provide the same, the Franchisor reserves the right to charge the
Franchisee for all travel, lodging, living expenses, telephone charges and other identifiable
expenses associated with such assistance, plus a fee based on the time spent by each employee on
behalf of the Franchisee, which fee will be charged in accordance with the then current daily or
hourly rates being charged by the Franchisor for assistance.

10. FRANCHISEE’S OPERATIONAL COVENANTS

10.1. Store Operations.

     The Franchisee acknowledges that it is solely responsible for the successful operation of its
ROCKY MOUNTAIN CHOCOLATE FACTORY Store and that the continued successful operation

8

 

thereof is, in part, dependent upon the Franchisee’s compliance with this Agreement and the
Operations Manual. In addition to all other obligations contained in this Agreement and in the
Operations Manual, the Franchisee covenants that:

     a. The Franchisee shall maintain clean, efficient and high quality ROCKY MOUNTAIN
CHOCOLATE FACTORY Store operations and shall operate the business in accordance with the
Operations Manual and in such a manner as not to detract from or adversely reflect upon the
name and reputation of the Franchisor and the goodwill associated with the ROCKY MOUNTAIN
CHOCOLATE FACTORY name and Marks.

     b. The Franchisee will operate its ROCKY MOUNTAIN CHOCOLATE FACTORY Store in compliance
with all applicable laws, health department regulations and other ordinances. In connection
therewith, the Franchisee will be solely and fully responsible for obtaining any and all
licenses to operate the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The Franchisee shall
promptly forward to the Franchisor copies of all health department, fire department,
building department and other similar reports of inspections as and when they become
available.

     c. The Franchisee and all persons who work behind the counter at the Store in any
capacity, whether or not they are employees of the Franchisee (“Personnel”), shall conduct
themselves in such a manner so as to promote a good image to the public and to the business
community. At no time shall any of the Personnel engage in unreasonable or disrespectful
behavior toward anyone, including using offensive or rude language or gestures. The
Franchisee shall at all times require its Personnel to follow the Code of Conduct as set
forth in the Operations Manual.

     d. The Franchisee acknowledges that proper management of the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store is important and shall insure that the Franchisee or a designated General
Manager who has completed the Franchisor’s initial training program be responsible for the
management of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store after commencement of Store
operations and be present at the Franchised Location during operation of the Store.

     e. The Franchisee shall offer only authorized products and services as are more fully
described in the vendor lists which are a part of the Operations Manual, which may include,
without limitation, Factory Candy, Store Candy, Items and other authorized confectionery
food and beverage products. Further, the Franchisee shall operate the Store using only
those supplies, equipment, ingredients, signs, décor, music and methods which are described
in the Operations Manual. The Franchisee shall offer only the types of products and
services as from time to time may be prescribed by the Franchisor and shall refrain from
offering any other types of products or services, from or through the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store, including, without limitation, filling “Wholesale Orders,” defined
below, selling Factory Candy, Store Candy, Items or other authorized products through the
Internet, or catering or other off-premises sales, without the prior written consent of the
Franchisor. “Wholesale Orders” are defined as those orders or sales where the principal
purpose of the purchase is for resale, not consumption, or any sale other than those sold
over the counter at a price other than that price charged to the general public; provided,
however, that volume discounted sales made on the premises at the Franchised Location to a
single purchaser, not for resale, and discounted sales made on the premises at the
Franchised Location to charitable organizations for fund-raising purposes shall be

9

 

permitted. Factory Candy, Store Candy and Items shall never be sold in containers or
bags other than those approved and supplied by the Franchisor or other supplier approved by
the Franchisor.

     f. The Franchisee shall promptly pay when due all taxes and other obligations owed to
third parties in the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, including
without limitation, unemployment and sales taxes, and any and all accounts or other
indebtedness of every kind incurred by the Franchisee in the conduct of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store. In the event of a bona fide dispute as to the liability for taxes
assessed or other indebtedness, the Franchisee may contest the validity or the amount of the
tax or indebtedness in accordance with procedures of the taxing authority or applicable law;
however, in no event shall the Franchisee permit a tax sale or seizure by levy or execution
or similar writ or warrant, or attachment by a creditor to occur against the premises of the
Franchised Location, or any improvement thereon.

     g. The Franchisee shall subscribe for and maintain not fewer than two or three separate
telephone numbers for its ROCKY MOUNTAIN CHOCOLATE FACTORY Store at the Franchised Location,
depending on the size and configuration of the Store or Kiosk. One number shall be used
exclusively for voice communication, the second shall be used exclusively for the modem that
is included in the System. If a third telephone number is required, it shall be used
exclusively for a facsimile machine. The telephone number and, if applicable, the facsimile
machine number, shall be listed and identified exclusively with the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store in all official telephone directories and in all advertising in which such
numbers appear and shall be separate and distinct from all other telephone numbers
subscribed for by the Franchisee.

     h. The Franchisee shall comply with all agreements with third parties related to the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store including, in particular, all provisions of any lease
for the Franchised Location.

     i. The Franchisee and all employees of the Franchisee shall adhere to strict grooming
and dress code guidelines, as described in the Code of Conduct set forth in the Operations
Manual, while on duty at the Franchised Location. The Franchisee is required, at the
Franchisee’s expense, to purchase specified apparel from suppliers approved by the
Franchisor. All General Managers, employees of the Franchisee, the Franchisee and its
owners shall wear the specified apparel at all times while working at the Franchised
Location. The Franchisor has the right, in its sole and absolute discretion, to change or
modify such grooming and dress code guidelines in the Operations Manual.

     j. The Franchisee agrees to renovate, refurbish, remodel or replace, at its own
expense, the personal property and equipment used in the operation of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store, when reasonably required by the Franchisor in order to comply with
the image, standards of operation and performance capability established by the Franchisor
from time to time. If the Franchisor changes its image or standards of operation, it shall
give the Franchisee a reasonable period of time within which to comply with such changes.

     k. The Franchisee shall be responsible for training all of its Personnel who work in
any capacity in the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The Franchisee must conduct its
Personnel training in the manner and according to the standards as prescribed in the
Operations Manual. All Personnel who do not satisfactorily complete the training shall not
work in any capacity in the Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY Store.

10

 

     l. The Franchisee shall at all times during the term of this Agreement own and control
the ROCKY MOUNTAIN CHOCOLATE FACTORY Store authorized hereunder. The Franchisee shall not
operate any other business or profession from or through the Store. If the Franchisee is an
entity, the entity shall only operate the ROCKY MOUNTAIN CHOCOLATE FACTORY Store governed by
this Agreement and no other business, unless the Franchisee receives the Franchisor’s prior
written approval. Upon request of the Franchisor, the Franchisee shall promptly provide
satisfactory proof of such ownership to the Franchisor. The Franchisee represents that the
Statement of Ownership, attached hereto as Exhibit III and by this reference
incorporated herein, is true, complete, accurate and not misleading, and, in accordance with
the information contained in the Statement of Ownership, the controlling ownership of the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store is held by the Franchisee. The Franchisee shall
promptly provide the Franchisor with a written notification if the information contained in
the Statement of Ownership changes at any time during the term of this Agreement and shall
comply with the applicable transfer provisions contained in Article 16 herein. In
addition, if the Franchisee is an entity, all of the owners of the Franchisee shall sign the
Personal Guaranty attached hereto as Exhibit II.

     m. The Franchisee shall at all times during the term of this Agreement keep its ROCKY
MOUNTAIN CHOCOLATE FACTORY Store open during the business hours designated by the Franchisor
from time to time in the Operations Manual.

     n. Unless notified in writing otherwise by the Franchisor, all Factory Candy and
related products shall be sold and shipped to the Franchisee on a net 30-day basis, or
according to the then current payment terms set by the Franchisor or its designated
suppliers. The Franchisor reserves the right to charge interest at the rate of 1.5% per
month if the Franchisee fails to pay for its orders on time and the Franchisor reserves the
right to discontinue shipment of Factory Candy and related products to the Franchisee if the
Franchisee is repeatedly delinquent in paying for its Factory Candy and related products, in
the Franchisor’s sole discretion. The Franchisee may be required to “prepay” Factory Candy
orders, notwithstanding the payment policy set forth above, in the event of poor payment
performance. The Franchisor reserves the right to change payment terms and policies at any
time. The Franchisor also reserves the right to change the price for Factory Candy and
related products from time to time as may be set forth in the most recent price bulletin
sent to all franchisees or the then current Operations Manual.

11. ROYALTIES

11.1. Monthly Royalty.

     The Franchisee agrees to pay to the Franchisor a monthly royalty (“Royalty”) equal to 5% of
its Gross Retail Sales generated from or through its ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The
Franchisee also agrees to pay a quarterly Royalty based on Adjusted Gross Retail Sales during each
calendar quarter. The amount of monthly Royalty paid during each quarter shall be credited toward
the amount of quarterly Royalty owed. Within 15 days following the end of each calendar quarter,
the Franchisor shall calculate the amount of the Franchisee’s Adjusted Gross Retail Sales during
the previous quarter and the Franchisee shall owe the Franchisor a quarterly Royalty equal to 10%
of its Adjusted Gross Retail Sales. “Adjusted Gross Retail Sales” shall be calculated as the amount
of “Gross Retail Sales,” defined in Section 11.2 below, minus a fixed dollar amount for
each pound of Factory Candy purchased from the Franchisor and minus a multiple of the wholesale
price, as specified by the Franchisor, on certain Store Candy ingredients, packaging and other
products and supplies purchased from the Franchisor during the previous calendar quarter. The
Franchisor reserves the right to change the

11

 

fixed dollar amount per pound of Factory Candy and the multiple of the wholesale price from time to
time, in the Franchisor’s sole discretion. The Franchisee shall be notified of any credits from or
amounts owing to the Franchisor for the quarterly Royalty based on Adjusted Gross Retail Sales.
Any credits or amounts owed will be added to or deducted from the following month’s monthly Royalty
payment. If the Franchisee owns other ROCKY MOUNTAIN CHOCOLATE FACTORY Stores governed by other
franchise agreements that calculate Royalties differently than described above, the Franchisor
reserves the right to adjust the calculation of Adjusted Gross Retail Sales based on variances in
other Stores’ past and current purchases.

11.2. Gross Retail Sales.

     “Gross Retail Sales” shall be defined as receipts and income of any kind from all products or
services sold from or through the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, including any such sale
of products or services made for cash or upon credit, or partly for cash and partly for credit,
regardless of collection of charges for which credit is given, less returns for which refunds are
made, provided that the refund shall not exceed the sales price and exclusive of discounts, sales
taxes and other taxes, amounts received in settlement of a loss of merchandise, shipping expenses
paid by the customer and discount sales to corporations or to charities for fund-raising purposes.
“Gross Retail Sales” shall also include the fair market value of any services or products received
by the Franchisee in barter or in exchange for its services and products.

11.3. Royalty Payments.

     The Franchisee agrees that Royalty payments shall be paid monthly and sent to the Franchisor,
post-marked no later than the 15th of each month based on Gross Retail Sales for the immediately
preceding month. Royalty payments shall be accompanied by monthly reports, as more fully described
in Article 15 hereof, and standard transmittal forms containing information regarding the
Franchisee’s Gross Retail Sales and such additional information as may be requested by the
Franchisor. The Franchisor reserves the right to require Royalty payments be made on a weekly or
bi-weekly basis if the Franchisee does not timely or fully submit the required payments or reports.
The Franchisor shall have the right to verify such Royalty payments from time to time as it deems
necessary, in any reasonable manner. In the event that the Franchisee fails to pay any Royalties
within 14 days after they are due, the Franchisee shall, in addition to such Royalties, pay a late
charge equivalent to 18% of the late Royalty payment; provided, however, in no event shall the
Franchisee be required to pay a late payment at a rate greater than the maximum interest rate
permitted by applicable law. If the Franchisee pays Royalties with a check returned for
non-sufficient funds more than one time in any calendar year, in addition to all other remedies
which may be available, the Franchisor shall have the right to require that Royalty payments be
made by certified or cashier’s checks.

11.4. Authorization for Prearranged Payments by Electronic Transfer.

     The Franchisor reserves the right to require that Royalty payments, late charges and payment
of the Marketing and Promotion Fee and late charges (as set forth in Section 12.3 below) be
made by means of electronic funds transfer and the Franchisee agrees to provide the information
necessary to implement such transfer payments within 30 days of receiving notice that such a
program is being implemented. By signing this Agreement, the Franchisee authorizes the Franchisor
to initiate debit entries and/or credit correction entries to the Franchisee’s checking or savings
account indicated on the Addendum to this Agreement related to the Authorization of Prearranged
Payments attached to this Agreement as Exhibit IV, and authorizes the depository named on
Exhibit IV (“Depository”) to debit such account pursuant to the Franchisor’s instructions.
The Franchisee shall complete the form attached as Exhibit IV with the information
requested. This authority is to remain in full force and effect until Depository has received

12

 

joint written notification from the Franchisor and the Franchisee of the Franchisee’s termination
of such authority in such time and in such manner as to afford Depository a reasonable opportunity
to act on it. Notwithstanding the foregoing, Depository shall provide the Franchisor and the
Franchisee with 30 days’ prior written notice of the termination of this authority. If an
erroneous debit entry is initiated to the Franchisee’s account, the Franchisee shall have the right
to have the amount of such entry credited to such account by Depository, if (a) within 15 calendar
days following the date on which Depository sent to the Franchisee a statement of account or a
written notice pertaining to such entry or (b) 45 days after posting, whichever occurs first, the
Franchisee shall have sent to Depository a written notice identifying such entry, stating that such
entry was in error and requesting Depository to credit the amount thereof to such account. These
rights are in addition to any rights the Franchisee may have under federal and state banking laws.

12. ADVERTISING

12.1. Approval of Advertising.

     The Franchisee shall obtain the Franchisor’s prior written approval of all advertising or
other marketing or promotional programs published by any method, including print, broadcast and
electronic media, regarding the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, including, without
limitation, “Yellow Pages” advertising, newspaper ads, flyers, brochures, coupons, direct mail
pieces, specialty and novelty items, radio, television, Internet and World Wide Web advertising.
The Franchisee acknowledges and agrees that the Franchisor may disapprove of any advertising,
marketing or promotional programs submitted to the Franchisor, for any reason, in the Franchisor’s
sole discretion. The Franchisee shall also obtain the Franchisor’s prior written approval of all
promotional materials provided by vendors. The proposed written advertising or a description of
the marketing or promotional program shall be submitted to the Franchisor at least 10 days prior to
publication, broadcast or use. The Franchisee acknowledges that advertising and promoting the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store in accordance with the Franchisor’s standards and
specifications is an essential aspect of the Licensed Methods, and the Franchisee agrees to comply
with all advertising standards and specifications. The Franchisee shall display all required
promotional materials, signs, point of purchase displays and other marketing materials in its ROCKY
MOUNTAIN CHOCOLATE FACTORY Store in the manner prescribed by the Franchisor. The Franchisee shall
not, under any circumstances, use handwritten signs in the operation of its Store.

12.2. Local Advertising. 

     The Franchisor reserves the right to require the Franchisee to spend up to 1% of monthly Gross
Retail Sales on local advertising to create public awareness of the Franchisee’s ROCKY MOUNTAIN
CHOCOLATE FACTORY Store. The Franchisee will submit to the Franchisor an accounting of the amounts
spent on advertising within 30 days following the end of each calendar quarter. If the Franchisor
requires its franchisees to advertise locally as described above, all Franchisor-owned Stores will
be required to spend money for local advertising on an equal percentage basis with all franchised
Stores. If the Franchisee’s lease requires it to advertise locally, the Franchisor may, in its
sole discretion, count such expenditures toward the Franchisee’s local advertising expenditure
required by this Section 12.2. The Franchisee shall obtain the Franchisor’s prior written
approval of all written advertising and promotional materials before publication, in accordance
with Section 12.1 above.

12.3. Marketing and Promotion Fee.

     The Franchisee shall pay to the Franchisor, in addition to Royalties, a fee of 1% of the total
amount of the Franchisee’s Gross Retail Sales (“Marketing and Promotion Fee”). The Marketing and

13

 

Promotion Fee shall be in addition to and not in lieu of the Franchisee’s expenditures for local
advertising, as described in Section 12.2 above. The following terms and conditions will
apply:

     a. The Marketing and Promotion Fee shall be payable concurrently with the payment of
the Royalties, and transmitted to the Franchisor in accordance with Section 11.3
above, for all Marketing and Promotion Fees for the immediately preceding month.

     b. The Marketing and Promotion Fees will be subject to the same late charges as the
Royalties, in an amount and manner set forth in Section 11.3 above.

     c. Upon written request by the Franchisee, the Franchisor will make available to the
Franchisee, no later than 120 days after the end of each fiscal year, an annual financial
statement which indicates how the Marketing and Promotion Fees have been spent.

     d. The Marketing and Promotion Fees will be administered by the Franchisor, in its sole
discretion, and may be used for production and placement of point of purchase advertising,
in-store signage, in-store promotions, media advertising, direct mailings, brochures,
collateral material advertising, surveys of advertising effectiveness, packaging
development, logo, design or other advertising or public relations expenditures relating to
advertising the Franchisee’s products and services.

     e. The Franchisor may reimburse itself for independent audits, reasonable accounting,
bookkeeping, reporting and legal expenses, taxes and other reasonable direct and indirect
expenses as may be incurred by the Franchisor or its authorized representatives in
connection with the programs funded by the Marketing and Promotion Fees. The Franchisor
will not be liable for any act or omission with respect to such Marketing and Promotion Fees
that is consistent with this Agreement and is done in good faith.

12.4. Regional Advertising Programs.

     Although not obligated to do so, the Franchisor reserves the right to allocate up to 50% of
the Marketing and Promotion Fees as may be collected in accordance with Section 12.3 above
toward a regional advertising program for the benefit of ROCKY MOUNTAIN CHOCOLATE FACTORY
franchisees located within a particular region. The Franchisor has the right, in its sole
discretion, to determine the composition of all geographic territories and market areas for the
implementation of such regional advertising and promotion campaigns and to require that the
Franchisee participate in such regional advertising programs as and when they may be established by
the Franchisor. If a regional advertising program is implemented on behalf of a particular region
by the Franchisor, the Franchisor, to the extent reasonably calculable, will only use contributions
from ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees within such region for the particular regional
advertising program. The Franchisor also reserves the right to establish a co-operative for a
particular region to enable the co-operative to self-administer the regional advertising program.
If a regional advertising co-operative is established by the Franchisor, the Franchisee agrees that
it will participate in it. If the Franchisor creates a regional advertising program, either as a
co-operative or otherwise, the Franchisor has the right to charge the program for the actual costs
of forming and administering the program.

12.5. Marketing Services.

     The Franchisor may, in its sole discretion, offer marketing and merchandising services to the
Franchisee at rates that are competitive with those charged by third parties offering similar
services. The

14

 

Franchisee may utilize such services, if they are offered, at the Franchisee’s option. Services
offered by the Franchisor may include marketing consulting, graphic design, copywriting,
advertising, public relations and merchandising consultations.

13. QUALITY CONTROL

13.1. Compliance with Operations Manual.

     The Franchisee agrees to maintain and operate the ROCKY MOUNTAIN CHOCOLATE FACTORY Store in
compliance with this Agreement and the standards and specifications contained in the Operations
Manual, as the same may be modified from time to time by the Franchisor.

13.2. Standards and Specifications.

     The Franchisor will make available to the Franchisee standards and specifications for products
and services offered at or through the ROCKY MOUNTAIN CHOCOLATE FACTORY Store and specifically, for
the recipes for Store Candy, display cases, uniforms, materials, forms, menu boards, items and
supplies used in connection with the Store. The Franchisor reserves the right to change standards
and specifications for services and products offered at or through the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store and for the recipes for Store Candy, display cases, uniforms, materials, forms, items
and supplies used in connection with the Store upon 30 days prior written notice to the Franchisee.
The Franchisee shall strictly adhere to all of the Franchisor’s current standards and
specifications for the ROCKY MOUNTAIN CHOCOLATE FACTORY Store as prescribed from time to time.

13.3. Inspections.

     The Franchisor shall have the right to examine the Franchised Location, including the
inventory, products, equipment, materials and supplies, to ensure compliance with all standards and
specifications set by the Franchisor. The Franchisor shall conduct such inspections during regular
business hours and the Franchisee may be present at such inspections. The Franchisor, however,
reserves the right to conduct the inspections without prior notice to the Franchisee.

13.4. Restrictions on Services and Products.

     The Franchisee will be required to purchase all of its Factory Candy for its ROCKY MOUNTAIN
CHOCOLATE FACTORY Store from the Franchisor or its designee. Factory Candy shall consist of any and
all varieties from time to time made available to the Franchisor’s franchisees by the Franchisor
and its designated suppliers. The parties hereby acknowledge the uniqueness and importance of
Factory Candy being prepared by the Franchisor or its designee in order to maintain the uniformity,
quality and uniqueness of Factory Candy, and therefore the Franchisor and its designees are hereby
appointed the Franchisee’s exclusive source of Factory Candy. The Franchisee is prohibited from
offering or selling any products or services not authorized by Franchisor, including, without
limitation, operating a catering or wholesale business or offering Factory Candy, Items, Store
Candy or other authorized products for sale on the Internet, as part of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store. However, if the Franchisee proposes to offer, conduct or utilize any
products, services, materials, forms, items or supplies for use in connection with or sale through
the ROCKY MOUNTAIN CHOCOLATE FACTORY Store which are not previously approved by the Franchisor as
meeting its specifications, the Franchisee shall first notify the Franchisor in writing requesting
approval. The Franchisor may, in its sole discretion, for any reason whatsoever, elect to withhold
such approval. In order to make such determination, the Franchisor may require submission of
specifications, information, or samples of such

15

 

products, services, materials, forms, items or supplies. The Franchisor will advise the Franchisee
within a reasonable time whether such products, services, materials, forms, items or supplies meet
its specifications.

13.5. Approved Suppliers.

     The Franchisee shall purchase all products, services, supplies and materials required for the
operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store licensed herein, from manufacturers,
suppliers or distributors designated by the Franchisor or, if there is no designated supplier for a
particular product, service, supply or material, from such other suppliers who meet all of the
Franchisor’s specifications and standards as to quality, composition, finish, appearance and
service, and who shall adequately demonstrate their capacity and facilities to supply the
Franchisee’s needs in the quantities, at the times, and with the reliability requisite to an
efficient operation.

13.6. Request to Change Supplier.

     In the event the Franchisee desires to purchase products, services, supplies or materials from
manufacturers, suppliers or distributors other than those previously approved by the Franchisor,
the Franchisee shall, prior to purchasing any such products, services, supplies or materials, give
the Franchisor a written request by certified mail, return receipt requested, to change supplier.
In the event the Franchisor rejects the Franchisee’s requested new manufacturer, supplier or
distributor, the Franchisor must, within 60 days of the receipt of the Franchisee’s request to
change supplier, notify the Franchisee of its rejection. Failure to notify the Franchisee within
such time period shall not constitute approval or a waiver of objections. The Franchisor may
continue from time to time to inspect any manufacturer’s, supplier’s, or distributor’s facilities
and products to assure proper production, processing, storing and transportation of products,
services, supplies or materials to be purchased from the manufacturer, supplier or distributor by
the Franchisee. Permission for such inspection shall be a condition of the continued approval of
such manufacturer, supplier or distributor.

13.7. Approval of Intended Supplier.

     The Franchisor may at its sole discretion, for any reason whatsoever, elect to withhold
approval of the manufacturer, supplier or distributor; however, in order to make such
determination, the Franchisor may require that samples from a proposed new supplier be delivered to
the Franchisor for testing prior to approval and use. A charge not to exceed the actual cost of
the test may be made by the Franchisor and shall be paid by the Franchisee.

14. TRADEMARKS, TRADE NAMES AND PROPRIETARY INTERESTS

14.1. Marks.

     The Franchisee hereby acknowledges that the Franchisor has the sole right to license and
control the Franchisee’s use of the ROCKY MOUNTAIN CHOCOLATE FACTORY service mark and other of the
Marks, and that such Marks shall remain under the sole and exclusive ownership and control of the
Franchisor. The Franchisee acknowledges that it has not acquired any right, title or interest in
such Marks except for the right to use such Marks in the operation of its ROCKY MOUNTAIN CHOCOLATE
FACTORY Store as it is governed by this Agreement. Except as permitted in the Operations Manual,
the Franchisee agrees not to use any of the Marks as part of an electronic mail address, or on any
sites on the Internet or World Wide Web and the Franchisee agrees not to use or register any of the
Marks as a domain name on the Internet.

16

 

14.2. No Use of Other Marks.

     The Franchisee further agrees that no service mark other than “ROCKY MOUNTAIN CHOCOLATE
FACTORY” or such other Marks as may be specified by the Franchisor shall be used in the marketing,
promotion or operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store.

14.3. Licensed Methods.

     The Franchisee hereby acknowledges that the Franchisor owns and controls the distinctive plan
for the establishment, operation and promotion of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store and
all related licensed methods of doing business, previously defined as the “Licensed Methods”, which
include, but are not limited to, gourmet chocolate specialty recipes and cooking methods,
confectionery ordering, processing, manufacturing, stocking and inventory control, technical
equipment standards, order fulfillment methods and customer relations, marketing techniques,
written promotional materials, advertising, and accounting systems, all of which constitute trade
secrets of the Franchisor, and the Franchisee acknowledges that the Franchisor has valuable rights
in and to such trade secrets. The Franchisee further acknowledges that it has not acquired any
right, title or interest in the Licensed Methods except for the right to use the Licensed Methods
in the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store as it is governed by this Agreement.

14.4. Effect of Termination.

     In the event this Agreement is terminated for any reason, the Franchisee shall immediately
cease using any of the Licensed Methods and Marks, trade names, trade dress, trade secrets,
copyrights or any other symbols used to identify the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, and
all rights the Franchisee had to the same shall automatically terminate. The Franchisee agrees to
execute any documents of assignment as may be necessary to transfer any rights the Franchisee may
possess in and to the Marks.

14.5. Mark Infringement.

     The Franchisee agrees to notify the Franchisor in writing of any possible infringement or
illegal use by others of a trademark the same as or confusingly similar to the Marks which may come
to its attention. The Franchisee acknowledges that the Franchisor shall have the right, in its
sole discretion, to determine whether any action will be taken on account of any possible
infringement or illegal use. The Franchisor may commence or prosecute such action in the
Franchisor’s own name and may join the Franchisee as a party thereto if the Franchisor determines
it to be reasonably necessary for the continued protection and quality control of the Marks and
Licensed Methods. The Franchisor shall bear the reasonable cost of any such action, including
attorneys’ fees. The Franchisee agrees to fully cooperate with the Franchisor in any such
litigation.

14.6. Franchisee’s Business Name.

     The Franchisee acknowledges that the Franchisor has a prior and superior claim to the ROCKY
MOUNTAIN CHOCOLATE FACTORY trade name. The Franchisee shall not use the phrase or two or more of
the words “ROCKY MOUNTAIN CHOCOLATE FACTORY” or abbreviations thereof in the legal name of its
corporation, partnership or any other business entity used in conducting the business provided for
in this Agreement. The Franchisee also agrees not to register or attempt to register a trade name
using the phrase or two or more of the words “ROCKY MOUNTAIN CHOCOLATE FACTORY” or abbreviations
thereof in the Franchisee’s name or that of any other person or business entity, without the prior
written consent of the Franchisor. When this Agreement is terminated, the Franchisee shall

17

 

execute any assignment or other document the Franchisor requires to transfer to itself any rights
the Franchisee may possess in a trade name utilizing any or all of the words “ROCKY MOUNTAIN
CHOCOLATE FACTORY,” any abbreviations thereof or any other Mark owned by the Franchisor. The
Franchisee further agrees that it will not identify itself as being “Rocky Mountain Chocolate
Factory, Inc.” or as being associated with the Franchisor in any manner other than as a franchisee
or licensee. The Franchisee further agrees that in all advertising and promotion and promotional
materials it will display its business name only in obvious conjunction with the phrase “ROCKY
MOUNTAIN CHOCOLATE FACTORY Licensee” or “ROCKY MOUNTAIN CHOCOLATE FACTORY Franchisee” or with such
other words and in such other phrases as may from time to time be prescribed in the Operations
Manual, in the Franchisor’s sole discretion.

14.7. Change of Marks.

     In the event that the Franchisor, in its sole discretion, shall determine it necessary to
modify or discontinue use of any proprietary Marks, or to develop additional or substitute marks,
the Franchisee shall, within a reasonable time after receipt of written notice of such a
modification or discontinuation from the Franchisor, take such action, at the Franchisee’s sole
expense, as may be necessary to comply with such modification, discontinuation, addition or
substitution.

14.8. Creative Ownership.

     All copyrightable works created by the Franchisee or any of its owners, officers or employees
in connection with the Store shall be the sole property of the Franchisor. The Franchisee assigns
all proprietary rights, including copyrights, in these works to the Franchisor without additional
consideration. The Franchisee hereby assigns and will execute such additional assignments or
documentation to effectuate the assignment of all intellectual property, inventions, copyrights and
trade secrets developed in part or in whole in relation to the Store, during the term of this
Agreement, as the Franchisor may deem necessary in order to enable it, at its expense, to apply
for, prosecute and obtain copyrights, patents or other proprietary rights in the United States and
in foreign countries or in order to transfer to the Franchisor all right, title, and interest in
said property. The Franchisee shall promptly disclose to the Franchisor all inventions,
discoveries, improvements, recipes, creations, patents, copyrights, trademarks and confidential
information relating to the Store which it or any of its owners, officers or employees has made or
may make solely, jointly or commonly with others and shall promptly create a written record of the
same. In addition to the foregoing, the Franchisee acknowledges and agrees that any improvements or
modifications, whether or not copyrightable, directly or indirectly related to the Store, shall be
deemed to be a part of the Licensed Methods and shall inure to the benefit of the Franchisor.

15. REPORTS, RECORDS AND FINANCIAL STATEMENTS

15.1. Franchisee Reports.

     The Franchisee shall establish and maintain at its own expense a bookkeeping and accounting
system which conforms to the specifications which the Franchisor may prescribe from time to time,
including the Franchisor’s current “Standard Code of Accounts” as described in the Operations
Manual. The Franchisee shall supply to the Franchisor such reports in a manner and form as the
Franchisor may from time to time reasonably require, including:

     a. Monthly summary reports, in a form as may be prescribed by the Franchisor, mailed to
the Franchisor postmarked no later than the 15th day of the month and containing information
relative to the previous month’s operations; and

18

 

     b. Quarterly financial statements, prepared in accordance with generally accepted
accounting principles (“GAAP”), and consisting of a profit and loss statement and balance
sheet for the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, mailed to the Franchisor postmarked no
later than the 15th day following the end of the calendar quarter, based on operating
results of the prior quarter, which shall be submitted in a form approved by the Franchisor
and shall be certified by the Franchisee to be correct.

The Franchisor reserves the right to disclose data derived from such reports, without identifying
the Franchisee, except to the extent identification of the Franchisee is required by law.

15.2. Annual Financial Statements.

     The Franchisee shall, within 90 days after the end of its fiscal year, provide to the
Franchisor annual unaudited financial statements, compiled or reviewed by an independent certified
public accountant acceptable to and approved by the Franchisor and prepared in accordance with
GAAP, and state and federal income tax returns prepared by a certified public accountant. If these
financial statements or tax returns show an underpayment of any amounts owed to the Franchisor,
these amounts shall be paid to the Franchisor concurrently with the submission of the statements or
returns.

15.3. Verification.

     Each report and financial statement to be submitted to the Franchisor hereunder shall be
signed and verified by the Franchisee.

15.4. Books and Records.

     The Franchisee shall maintain all books and records for its ROCKY MOUNTAIN CHOCOLATE FACTORY
Store in accordance with GAAP, consistently applied, and preserve these records for at least five
years after the fiscal year to which they relate.

15.5. Audit of Books and Records.

     The Franchisee shall permit the Franchisor to inspect and audit the books and records of the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store at any reasonable time, at the Franchisor’s expense. If any
audit discloses a deficiency in amounts for payments owed to the Franchisor pursuant to this
Agreement, then such amounts shall become immediately payable to the Franchisor by the Franchisee,
with interest from the date such payments were due at the lesser of 11/2% per month or the maximum
rate allowed by law. In addition, if it is found by such audit that the Gross Retail Sales of the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store have been understated by five percent (5%) or more during
the period audited, the Franchisee shall pay all reasonable costs and expenses the Franchisor
incurred in connection with such audit.

15.6. Failure to Comply with Reporting Requirements.

     If the Franchisee fails to prepare and submit any statement or report as required under this
Article 15, then the Franchisor shall have the right to treat the Franchisee’s failure as
good cause for termination of this Agreement. In addition to all other remedies available to the
Franchisor, in the event that the Franchisee fails to prepare and submit any statement or report
required under this Article 15 for two consecutive reporting periods, the Franchisor shall
be entitled to make an audit, at the expense of the Franchisee, of the Franchisee’s books, records
and accounts, including the Franchisee’s bank accounts, which in any way pertain to the Gross
Retail Sales or the Adjusted Gross Retail Sales of the ROCKY

19

 

MOUNTAIN CHOCOLATE FACTORY Store. The statements or reports not previously submitted shall be
prepared by or under the direction and supervision of an independent certified public accountant
selected by the Franchisor.

15.7. Shopping Service.

     The Franchisor reserves the right to use third party shopping services from time to time to
evaluate the conduct of the Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY Store, including such
things as customer service, cleanliness, merchandising and proper use of registers. The Franchisor
may use such shopping services to inspect the Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY Store
at any time at the Franchisor’s expense, without prior notification to the Franchisee. The
Franchisor may make the results of any such service evaluation available to the Franchisee, in the
Franchisor’s sole discretion.

16. TRANSFER

16.1. Transfer by Franchisee.

     The franchise granted herein is personal to the Franchisee and, except as stated below, the
Franchisor shall not allow or permit any transfer, assignment, subfranchise or conveyance of this
Agreement or any interest hereunder. As used in this Agreement, the term “transfer” includes the
Franchisee’s voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition
of any interest in: (1) this Agreement; (2) the Franchisee entity; (3) the Store governed by this
Agreement; or (4) all or a substantial portion of the assets of the Store.

16.2. Pre-Conditions to Franchisee’s Transfer.

     The Franchisee shall not engage in a transfer unless the Franchisee obtains the Franchisor’s
written consent and the Franchisee and the proposed transferee comply with the following
requirements:

     a. All amounts due and owing pursuant to this Agreement by the Franchisee to the
Franchisor or its affiliates or to third parties whose debts or obligations the Franchisor
has guaranteed on behalf of the Franchisee, if any, are paid in full;

     b. The proposed transferee agrees to operate the Store as a ROCKY MOUNTAIN CHOCOLATE
FACTORY Store and agrees to satisfactorily complete the initial training program described
in this Agreement, which training must be completed to the Franchisor’s satisfaction prior
to the effectiveness of the transfer;

     c. The proposed transferee agrees to execute the then current form of Franchise
Agreement which shall supersede this Agreement in all respects. If a new Franchise
Agreement is signed, the terms thereof may differ from the terms of this Agreement;
provided, however, the transferee will not be required to pay any initial franchise fee;

     d. The Franchisee provides written notice to the Franchisor 30 days’ prior to the
proposed effective date of the transfer, and includes information reasonably detailed to
enable the Franchisor to evaluate the terms and conditions of the proposed transfer and
which at a minimum includes a written offer from the proposed transferee;

20

 

     e. The proposed transferee provides information to the Franchisor sufficient for the
Franchisor to assess the proposed transferee’s business experience, aptitude and financial
qualification, and the Franchisor approves the proposed transferee as a franchisee;

     f. The Franchisee executes a general release, in a form satisfactory to the Franchisor,
of any and all claims against the Franchisor, its affiliates and their respective officers,
directors, employees and agents;

     g. The Franchisee or the proposed transferee pay a nonrefundable transfer fee of $5,000
before the proposed transferee attends the initial training program; provided, however, that
no transfer fee will be charged for a transfer by the Franchisee to a corporation
wholly-owned by the Franchisee, between partners of a partnership Franchisee or to a spouse
of a Franchisee upon the death or disability of the Franchisee;

     h. The Franchisee remodels the Store and upgrades equipment, including installing the
Franchisor’s then current System, fixtures, furnishings and signage, if the Franchisor so
requires; and

     i. The Franchisee agrees to abide by all post-termination covenants set forth herein,
including, without limitation, the covenant not to compete in Section 20.2 below.

16.3. Franchisor’s Approval of Transfer.

     The Franchisor has 30 days from the date of the written notice to approve or disapprove in
writing, of the Franchisee’s proposed transfer, which approval shall not be unreasonably withheld.
The Franchisee acknowledges that the proposed transferee shall be evaluated for approval by the
Franchisor based on the same criteria as is currently being used to assess new franchisees of the
Franchisor and that the Franchisor shall provide such proposed transferee, if appropriate, with
such disclosures as may be required by state or federal law. If the Franchisee and its proposed
transferee comply with all conditions for transfer set forth herein and the Franchisor has not
given the Franchisee notice of its approval or disapproval within such period, approval is deemed
granted.

16.4. Right of First Refusal.

     In the event the Franchisee wishes to engage in a transfer, the Franchisee agrees to grant to
the Franchisor a 30 day right of first refusal to purchase such rights, interest or assets on the
same terms and conditions as are contained in the written notice set forth in Section
16.2.d; provided, however, the following additional terms and conditions shall apply:

     a. The 30 day right of first refusal period will run concurrently with the period in
which the Franchisor has to approve or disapprove the proposed transferee;

     b. The right of first refusal will be effective for each proposed transfer and any
material change in the terms or conditions of the proposed transfer shall be deemed a
separate offer on which the Franchisor shall have a new 30 day right of first refusal;

     c. If the consideration or manner of payment offered by a proposed transferee is such
that the Franchisor may not reasonably be required to furnish the same, then the Franchisor
may purchase the interest which is proposed to be sold for the reasonable cash equivalent.
If the parties cannot agree within a reasonable time on the cash consideration, each of the
Franchisor and the Franchisee shall designate an independent appraiser who, in turn, shall
designate a third

21

 

independent appraiser. The third appraiser’s determination will be binding upon the
parties. All expenses of the appraiser shall be paid for equally between the Franchisor and
the Franchisee; and

     d. If the Franchisor chooses not to exercise its right of first refusal, the Franchisee
shall be free to complete the transfer subject to compliance with Sections 16.2 and
16.3 above. Absence of a reply to the Franchisee’s notice of a proposed transfer
within the 30-day period may be deemed a waiver of such right of first refusal.

16.5. Types of Transfers.

     The Franchisee acknowledges that the Franchisor’s right to approve or disapprove of a proposed
transfer as provided for above, shall apply (1) if the Franchisee is a partnership, corporation or
other business association, (i) to the addition or deletion of a partner, shareholder or members of
the association or the transfer of any ownership interest among existing partners, shareholders or
members; (ii) to any proposed transfer of 25% or more of the interest (whether stock, partnership
interest or membership interest) to a third party, whether such transfer occurs in a single
transaction or several transactions; and (2) if the Franchisee is an individual, to the transfer
from such individual or individuals to a corporation or other entity controlled by them, in which
case the Franchisor’s approval will be conditioned upon: (i) the continuing personal guarantee of
the individual (or individuals) for the performance of obligations under this Agreement; and (ii) a
limitation on the corporation’s or other entity’s business activity to that of operating the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store and related activities provided that with respect to such
transfer, the Franchisor’s right of first refusal to purchase shall not apply and the Franchisor
will not charge any transfer fee.

16.6. Transfer by the Franchisor.

     This Agreement is fully assignable by the Franchisor and shall inure to the benefit of any
assignee or other legal successor in interest, and the Franchisor shall in such event be fully
released from the same.

16.7. Franchisee’s Death or Disability.

     Upon the death or permanent disability of the Franchisee (or individual owning 25% or more of,
or controlling the Franchisee entity), the personal representative of such person shall transfer
the Franchisee’s interest in this Agreement or such interest in the Franchisee entity to an
approved third party. Such disposition of this Agreement or such interest (including, without
limitation, transfer by bequest or inheritance) shall be completed within a reasonable time, not to
exceed 120 days from the date of death or permanent disability (unless extended by probate
proceedings), and shall be subject to all terms and conditions applicable to transfers contained in
this Article 16. Provided, however, that for purposes of this Section 16.7, there
shall be no transfer fee charged by the Franchisor. Failure to transfer the interest within said
period of time shall constitute a breach of this Agreement. For the purposes hereof, the term
“permanent disability” shall mean a mental or physical disability, impairment or condition that is
reasonably expected to prevent or actually does prevent the Franchisee (or the owner of 25% or more
of, or controlling, the Franchisee entity) from supervising the management and operation of the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store for a period of 120 days from the onset of such disability,
impairment or condition.

22

 

17. TERM AND EXPIRATION

17.1. Term.

     The term of this Agreement begins on the date this Agreement is fully executed and ends ten
years later, unless sooner terminated as provided herein.

17.2. Continuation.

     If, for any reason, the Franchisee continues to operate the Store beyond the term of this
Agreement or any subsequent renewal period, it shall be deemed to be on a month-to-month basis
under the terms of this Agreement and subject to termination upon 30 days notice or as required by
law. If said holdover period exceeds 90 days, this Agreement is subject to immediate termination
unless applicable law requires a longer period. Upon termination after any holdover period, the
Franchisee and those in active concert with the Franchisee, including family members, officers,
directors, partners and managing agents, are subject to the terms of Articles 20 and
22 and Section 18.5 of this Agreement and all other applicable post-termination
obligations contained in this Agreement.

17.3. Rights Upon Expiration.

     At the end of the initial term hereof the Franchisee shall have the option to renew its
franchise rights for one additional ten year term, by acquiring successor franchise rights, if the
Franchisor does not exercise its right not to offer a successor franchise in accordance with
Section 17.5 below and if the Franchisee:

     a. At least 30 days prior to expiration of the term, executes the form of Franchise
Agreement then in use by the Franchisor;

     b. Has complied with all provisions of this Agreement during the current term,
including the payment on a timely basis of all Royalties and other fees due hereunder.
“Compliance” shall mean, at a minimum, that the Franchisee has not received any written
notification from the Franchisor of breach hereunder more than four times during the term
hereof;

     c. Upgrades and/or remodels the ROCKY MOUNTAIN CHOCOLATE FACTORY Store and its
operations at the Franchisee’s sole expense (the necessity of which shall be in the sole
discretion of the Franchisor) to conform with the then current Operations Manual;

     d. Executes a general release, in a form satisfactory to the Franchisor, of any and all
claims against the Franchisor and its affiliates, and their respective officers, directors,
employees and agents arising out of or relating to this Agreement; and

     e. Pays a successor franchise fee of (i) $2,500 if a new Franchise Agreement is
executed by the Franchisee within 30 days of receipt of the new Franchise Agreement, or (ii)
$5,000 if the new Franchise Agreement is signed more than 30 days after receipt of the new
Franchise Agreement.

17.4. Exercise of Option for Successor Franchise.

     The Franchisee may exercise its option for a successor franchise by giving written notice of
such exercise to the Franchisor not less than 90 days prior to the scheduled expiration of this
Agreement. If the Franchisee fails to provide such notice to the Franchisor within the time frame
set forth in the preceding

23

 

sentence, but notifies the Franchisor of its desire to obtain a successor franchise prior to the
expiration of the then-current term of this Agreement, the Franchisee shall pay the Franchisor a
penalty of $1,000 for every 30-day period that the Franchisee was late, plus attorneys’ and
administrative fees and expenses attributable to such late renewal. The Franchisee’s successor
franchise rights shall become effective by signing the Franchise Agreement then currently being
offered to new franchisees of the Franchisor.

17.5. Conditions of Refusal.

     The Franchisor shall not be obligated to offer the Franchisee a successor franchise upon the
expiration of this Agreement if the Franchisee fails to comply with any of the above conditions of
renewal. In such event, except for failure to execute the then current Franchise Agreement or pay
the successor franchise fee, the Franchisor shall give notice of expiration at least 180 days prior
to the expiration of the term, and such notice shall set forth the reasons for such refusal to
offer successor franchise rights. Upon the expiration of this Agreement, the Franchisee shall
comply with the provisions of Section 18.5 below.

18. DEFAULT AND TERMINATION

18.1. Termination by Franchisor — Effective Upon Notice.

     The Franchisor shall have the right, at its option, to terminate this Agreement and all rights
granted the Franchisee hereunder, without affording the Franchisee any opportunity to cure any
default (subject to any state laws to the contrary, where state law shall prevail), effective upon
receipt of notice by the Franchisee, addressed as provided in Section 22.12, upon the
occurrence of any of the following events:

     a. Abandonment. If the Franchisee ceases to operate the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store or otherwise abandons the ROCKY MOUNTAIN CHOCOLATE FACTORY Store for
a period of five consecutive days, or any shorter period that indicates an intent by the
Franchisee to discontinue operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, unless
and only to the extent that full operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store is
suspended or terminated due to fire, flood, earthquake or other similar causes beyond the
Franchisee’s control and not related to the availability of funds to the Franchisee;

     b. Insolvency; Assignments. If the Franchisee becomes insolvent or is
adjudicated a bankrupt; or any action is taken by the Franchisee, or by others against the
Franchisee under any insolvency, bankruptcy or reorganization act, (this provision may not
be enforceable under federal bankruptcy law, 11 U.S.C. §§ 101 et seq.), or if the
Franchisee makes an assignment for the benefit of creditors, or a receiver is appointed by
the Franchisee;

     c. Unsatisfied Judgments; Levy; Foreclosure. If any material judgment (or
several judgments which in the aggregate are material) is obtained against the Franchisee
and remains unsatisfied or of record for 30 days or longer (unless a supersedeas or other
appeal bond has been filed); or if execution is levied against the Franchisee’s business or
any of the property used in the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store and
is not discharged within five days; or if the real or personal property of the Franchisee’s
business shall be sold after levy thereupon by any sheriff, marshal or constable;

     d. Criminal Conviction. If the Franchisee is convicted of a felony, a crime
involving moral turpitude, or any crime or offense that is reasonably likely, in the sole
opinion of

24

 

the Franchisor, to materially and unfavorably affect the Licensed Methods, Marks,
goodwill or reputation thereof;

     e. Failure to Make Payments. If the Franchisee fails to pay any amounts due
the Franchisor or affiliates, including any amounts which may be due as a result of any
subleases or lease assignments between the Franchisee and the Franchisor, within 10 days
after receiving notice that such fees or amounts are overdue;

     f. Misuse of Marks. If the Franchisee misuses or fails to follow the
Franchisor’s directions and guidelines concerning use of the Franchisor’s Marks and fails to
correct the misuse or failure within ten days after notification from the Franchisor;

     g. Unauthorized Disclosure. If the Franchisee intentionally or negligently
discloses to any unauthorized person the contents of or any part of the Franchisor’s
Operations Manual or any other trade secrets or confidential information of the Franchisor;

     h. Repeated Noncompliance. If the Franchisee has received two previous notices
of default from the Franchisor and is again in default of this Agreement at any time during
the term of this Agreement, regardless of whether the previous defaults were cured by the
Franchisee, provided, however, that following the Franchisee’s receipt of three notices of
default, the Franchisor reserves the right to assess a penalty in the amount of the then
current initial franchise fee payable within 10 days of receipt of notice related thereto,
in lieu of immediately terminating the Franchise Agreement, on the condition that a fourth
notice of default may result in immediate termination of the Franchise Agreement; or

     i. Unauthorized Transfer. If the Franchisee sells, transfers or otherwise
assigns the Franchise, an interest in the Franchise or the Franchisee entity, this
Agreement, the ROCKY MOUNTAIN CHOCOLATE FACTORY Store or a substantial portion of the assets
of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store owned by the Franchisee without complying with
the provisions of Article 16 above.

18.2. Termination by Franchisor — Thirty Days Notice.

     The Franchisor shall have the right to terminate this Agreement (subject to any state laws to
the contrary, where state law shall prevail), effective upon 30 days written notice to the
Franchisee, if the Franchisee breaches any other provision of this Agreement and fails to cure the
default during such 30-day period. In that event, this Agreement will terminate without further
notice to the Franchisee, effective upon expiration of the 30-day period. Defaults shall include,
but not be limited to, the following:

     a. Failure to Maintain Standards. The Franchisee fails to maintain the
then-current operating procedures and adhere to the specifications and standards established
by the Franchisor as set forth herein or in the Operations Manual or otherwise communicated
to the Franchisee;

     b. Deceptive Practices. The Franchisee engages in any unauthorized business or
practice or sells any unauthorized product or service under the Franchisor’s Marks or under
a name or mark which is confusingly similar to the Franchisor’s Marks;

     c. Failure to Obtain Consent. The Franchisee fails, refuses or neglects to
obtain the Franchisor’s prior written approval or consent as required by this Agreement;

25

 

     d. Failure to Comply with Manual. The Franchisee fails or refuses to comply
with the then-current requirements of the Operations Manual; or

     e. Breach of Related Agreement. The Franchisee defaults under any term of the
lease, sublease or lease assignment for the Franchised Location, any equipment lease or any
other agreement material to the ROCKY MOUNTAIN CHOCOLATE FACTORY Store or any other
Franchise Agreement between the Franchisor and the Franchisee and such default is not cured
within the time specified in such lease, sublease, other agreement or other Franchise
Agreement. Provided, however, so long as financing from the United States Small Business
Administration remains outstanding, the Franchisee will be given the same opportunity to
cure defaults under any agreement between the Franchisor or its affiliates and the
Franchisee, as the Franchisee is given under this Agreement

Notwithstanding the foregoing, if the breach is curable, but is of a nature which cannot be
reasonably cured within such 30-day period and the Franchisee has commenced and is continuing to
make good faith efforts to cure the breach during such 30-day period, the Franchisee shall be given
an additional reasonable period of time to cure the same, and this Agreement shall not
automatically terminate without written notice from the Franchisor.

18.3. Franchisor’s Remedies.

     a. Failure to Pay. In addition to all other remedies that may be exercised by
the Franchisor upon a default by the Franchisee under the terms of this Agreement, the
Franchisor reserves the right to collect amounts due from the Franchisee to any third party
and to pay the third party directly. If the Franchisor collects any such amounts, the
Franchisor may, in its sole discretion, charge the Franchisee an administrative fee to
reimburse the Franchisor for its costs of collecting and paying such amounts. Any
administrative fee charged would not exceed 15% of the total amount of money collected.
Additionally, in the event this Agreement is terminated by the Franchisor prior to its
expiration as set forth in Sections 18.1 or 18.2 above, the Franchisee
acknowledges and agrees that in addition to all other available remedies, the Franchisor
shall have the right to recover lost future Royalties during any period in which the
Franchisee fails to pay such Royalties through and including the remainder of the then
current term of this Agreement.

     b. Liquidated Damages. Franchisee acknowledges that, if there is any act in
violation of Sections 18.1 or 18.2 of this Agreement, it will be impossible
to determine with specificity the damage to Franchisor. Therefore, for purposes of this
Agreement, as liquidated damages and not as a penalty, for each day that Franchisee is in
violation of Sections 18.1 or 18.2 of this Agreement, Franchisee shall pay
to Franchisor the sum of $500.

18.4. Right to Purchase.

     Upon termination or expiration of this Agreement for any reason, the Franchisor shall have the
option to purchase some or all of the assets of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, which
may include, at the Franchisor’s option, all of the Franchisee’s interest, if any, in and to the
real estate upon which the ROCKY MOUNTAIN CHOCOLATE FACTORY Store is located, and all buildings and
other improvements thereon, including leasehold interests, at fair market value, less any amount
apportioned to the goodwill of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store which is attributable to
the Franchisor’s Marks and Licensed Methods, and less any amounts owed to the Franchisor by the
Franchisee. The following additional terms shall apply to the Franchisor’s exercise of this
option:

26

 

     a. The Franchisor’s option hereunder shall be exercisable by providing the Franchisee
with written notice of its intention to exercise the option given to the Franchisee no later
than the effective date of termination, in the case of termination, or at least 90 days
prior to the expiration of the term of the franchise, in the case of non-renewal. Such
notice shall include a description of the assets the Franchisor will purchase.

     b. In the event that the Franchisor and the Franchisee cannot agree to a fair market
value for the assets of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, then the fair market
value shall be determined by an independent third party appraisal. The Franchisor and the
Franchisee shall each select one independent, qualified appraiser, and the two so selected
shall select a third appraiser, all three to determine the fair market value of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store. The purchase price shall be the median of the fair market
values as determined by the three appraisers.

     c. The Franchisor and the Franchisee agree that the terms and conditions of this right
and option to purchase may be recorded, if deemed appropriate by the Franchisor, in the real
property records and the Franchisor and the Franchisee further agree to execute such
additional documentation as may be necessary and appropriate to effectuate such recording.

     The closing for the purchase of the assets of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store will
take place no later than 60 days after the termination or nonrenewal date. The Franchisor will pay
the purchase price in full at the closing, or, at its option, in five equal consecutive monthly
installments with interest at a rate of 10% per annum. The Franchisee must sign all documents of
assignment and transfer as are reasonably necessary for purchase of the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store by the Franchisor.

     In the event that the Franchisor does not exercise the Franchisor’s right to purchase the
assets of the Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY Store as set forth above, the
Franchisee will be free to keep or to sell, after such termination or expiration, to any third
party, all of the assets of its ROCKY MOUNTAIN CHOCOLATE FACTORY Store; provided, however, that all
appearances of the Marks are first removed in a manner approved in writing by the Franchisor. The
Franchisor will only be obligated to purchase any assets of the ROCKY MOUNTAIN CHOCOLATE FACTORY
Store in the event and to the extent it is required by applicable state or federal law.

18.5. Obligations of Franchisee Upon Termination or Expiration.

     The Franchisee is obligated upon termination or expiration of this Agreement to immediately:

     a. Pay to the Franchisor all Royalties, other fees, and any and all amounts or accounts
payable then owed the Franchisor or its affiliates pursuant to this Agreement, or pursuant
to any other agreement, whether written or oral, including subleases and lease assignments,
between the parties;

     b. Cease to identify itself as a ROCKY MOUNTAIN CHOCOLATE FACTORY Franchisee or
publicly identify itself as a former Franchisee or use any of the Franchisor’s trade
secrets, signs, symbols, devices, trade names, trademarks, or other materials.

     c. Immediately cease to identify the Franchised Location as being, or having been,
associated with the Franchisor, and immediately cease using any proprietary mark of the

27

 

Franchisor or any mark in any way associated with the ROCKY MOUNTAIN CHOCOLATE FACTORY
Marks and Licensed Methods;

     d. Deliver to the Franchisor all Factory Candy, Store Candy and Items of inventory that
bear the ROCKY MOUNTAIN CHOCOLATE FACTORY trade name or logo, signs, sign-faces, advertising
materials, forms and other materials bearing any of the Marks or otherwise identified with
the Franchisor and obtained by and in connection with this Agreement;

     e. Immediately deliver to the Franchisor the Operations Manual and all other
information, documents and copies thereof which are proprietary to the Franchisor;

     f. Promptly take such action as may be required to cancel all fictitious or assumed
names or equivalent registrations relating to its use of any Marks which are under the
exclusive control of the Franchisor or, at the option of the Franchisor, assign the same to
the Franchisor;

     g. Notify the telephone company and all telephone directory publishers of the
termination or expiration of the Franchisee’s right to use any telephone number and any
regular, classified or other telephone directory listings associated with any Mark and to
authorize transfer thereof to the Franchisor or its designee. The Franchisee acknowledges
that, as between the Franchisee and the Franchisor, the Franchisor has the sole rights to
and interest in all telephone, telecopy or facsimile machine numbers and directory listings
associated with any Mark. The Franchisee authorizes the Franchisor, and hereby appoints the
Franchisor and any of its officers as the Franchisee’s attorney-in-fact, to direct the
telephone company and all telephone directory publishers to transfer any telephone, telecopy
or facsimile machine numbers and directory listings relating to the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store to the Franchisor or its designee, should the Franchisee fail or refuse to do
so, and the telephone company and all telephone directory publishers may accept such
direction or this Agreement as conclusive of the Franchisor’s exclusive rights in such
telephone numbers and directory listings and the Franchisor’s authority to direct their
transfer;

     h. Abide by all restrictive covenants set forth in Article 20 of this
Agreement;

     i. Sign a general release, in a form satisfactory to the Franchisor, of any and all
claims against the Franchisor, its affiliates and their respective officers, directors,
employees and agents; and

     j. If applicable, take such action as may be required to remove from the Internet all
sites referring to the Franchisee’s former ROCKY MOUNTAIN CHOCOLATE FACTORY Store or any of
the Marks and to cancel or assign to the Franchisor, in the Franchisor’s sole discretion,
all rights to any domain names for any sites on the Internet that refer to the Franchisee’s
former ROCKY MOUNTAIN CHOCOLATE FACTORY Store or any of the Marks.

18.6. State and Federal Law.

     THE PARTIES ACKNOWLEDGE THAT IN THE EVENT THE TERMS OF THIS AGREEMENT REGARDING TERMINATION OR
EXPIRATION ARE INCONSISTENT WITH APPLICABLE STATE OR FEDERAL LAW, SUCH LAW SHALL GOVERN THE
FRANCHISEE’S RIGHTS REGARDING TERMINATION OR EXPIRATION OF THIS AGREEMENT.

28

 

19. BUSINESS RELATIONSHIP

19.1. Independent Businesspersons.

     The parties agree that each of them are independent businesspersons, that their only
relationship is by virtue of this Agreement and that no fiduciary relationship is created
hereunder. Neither party is liable or responsible for the other’s debts or obligations, nor shall
either party be obligated for any damages to any person or property directly or indirectly arising
out of the operation of the other party’s business authorized by or conducted pursuant to this
Agreement. The Franchisor and the Franchisee agree that neither of them will hold themselves out
to be the agent, employer or partner of the other and that neither of them has the authority to
bind or incur liability on behalf of the other.

19.2. Payment of Third Party Obligations.

     The Franchisor shall have no liability for the Franchisee’s obligations to pay any third
parties, including without limitation, any product vendors, or any sales, use, service, occupation,
excise, gross receipts, income, property or other tax levied upon the Franchisee, the Franchisee’s
property, the ROCKY MOUNTAIN CHOCOLATE FACTORY Store or upon the Franchisor in connection with the
sales made or business conducted by the Franchisee (except any taxes the Franchisor is required by
law to collect from the Franchisee with respect to purchases from the Franchisor).

19.3. Indemnification.

     The Franchisee agrees to indemnify, defend and hold harmless the Franchisor, its subsidiaries
and affiliates, and their respective shareholders, directors, officers, employees, agents,
successors and assignees, (the “Indemnified Parties”) against, and to reimburse them for all
claims, obligations and damages described in this Section 19.3, any and all third party
obligations described in Section 19.2 and any and all claims and liabilities directly or
indirectly arising out of the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store or arising
out of the use of the Marks and Licensed Methods in any manner not in accordance with this
Agreement. For purposes of this indemnification, claims shall mean and include all obligations,
actual and consequential damages and costs reasonably incurred in the defense of any claim against
the Indemnified Parties, including, without limitation, reasonable accountants’, attorneys’ and
expert witness fees, costs of investigation and proof of facts, court costs, other litigation
expenses and travel and living expenses. The Franchisor shall have the right to defend any such
claim against it. This indemnity shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.

20. RESTRICTIVE COVENANTS

20.1. Non-Competition During Term.

     The Franchisee acknowledges that, in addition to the license of the Marks hereunder, the
Franchisor has also licensed commercially valuable information which comprises and is a part of the
Licensed Methods, including without limitation, recipes, operations, marketing, advertising and
related information and materials and that the value of this information derives not only from the
time, effort and money which went into its compilation, but from the usage of the same by all the
franchisees of the Franchisor using the Marks and Licensed Methods. The Franchisee therefore
agrees that other than the ROCKY MOUNTAIN CHOCOLATE FACTORY Store licensed herein, neither the
Franchisee nor any of the Franchisee’s officers, directors, shareholders or partners, nor any
member of his or their immediate families, shall during the term of this Agreement:

29

 

     a. have any direct or indirect controlling interest as a disclosed or beneficial owner
in a “Competitive Business” as defined below;

     b. perform services as a director, officer, manager, employee, consultant,
representative, agent or otherwise for a Competitive Business; or

     c. divert or attempt to divert any business related to, or any customer or account of
the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, the Franchisor’s business or any other ROCKY
MOUNTAIN CHOCOLATE FACTORY franchisee’s business, by direct inducement or otherwise, or
divert or attempt to divert the employment of any employee of the Franchisor or another
franchisee licensed by the Franchisor to use the Marks and Licensed Methods, to any
Competitive Business by any direct inducement or otherwise.

The term “Competitive Business” as used in this Agreement shall mean any business operating, or
granting franchises or licenses to others to operate, a retail, wholesale, distribution or
manufacturing business deriving more than 10% of its gross receipts from the sale, processing or
manufacturing of chocolate candies and other non-chocolate confectionery items, Items or other
products which are offered in ROCKY MOUNTAIN CHOCOLATE FACTORY Stores and which constitute 10% or
more of the Gross Retail Sales of any ROCKY MOUNTAIN CHOCOLATE FACTORY Store; provided, however,
the Franchisee shall not be prohibited from owning securities in a Competitive Business if such
securities are listed on a stock exchange or traded on the over-the-counter market and represent 5%
or less of that class of securities issued and outstanding.

20.2. Post-Termination Covenant Not to Compete.

     Upon termination or expiration of this Agreement for any reason, the Franchisee and its
officers, directors, shareholders, and/or partners agree that, for a period of two years commencing
on the effective date of termination or expiration, or the date on which the Franchisee ceases to
conduct business, whichever is later, neither Franchisee nor its officers, directors, shareholders,
and/or partners shall have any direct or indirect interest (through a member of any immediate
family of the Franchisee or its Owners or otherwise) as a disclosed or beneficial owner, investor,
partner, director, officer, employee, consultant, representative or agent or in any other capacity
in any Competitive Business, defined in Section 20.1 above, located or operating within a
10-mile radius of the Franchised Location or within a 10-mile radius of any other franchised or
company-owned ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The restrictions of this Section shall not be
applicable to the ownership of shares of a class of securities listed on a stock exchange or traded
on the over-the-counter market that represent 5% or less of the number of shares of that class of
securities issued and outstanding. The Franchisee and its officers, directors, shareholders,
and/or partners expressly acknowledge that they possess skills and abilities of a general nature
and have other opportunities for exploiting such skills. Consequently, enforcement of the
covenants made in this Section will not deprive them of their personal goodwill or ability to earn
a living.

20.3. Confidentiality of Proprietary Information.

     The Franchisee shall treat all information it receives which comprises or is a part of the
Licensed Methods licensed hereunder as proprietary and confidential and will not use such
information in an unauthorized manner or disclose the same to any unauthorized person without first
obtaining the Franchisor’s written consent. The Franchisee acknowledges that the Marks and the
Licensed Methods have valuable goodwill attached to them, that the protection and maintenance
thereof is essential to the Franchisor and that any unauthorized use or disclosure of the Marks and
Licensed Methods will result in irreparable harm to the Franchisor.

30

 

20.4. Confidentiality Agreement.

     The Franchisor requires that the Franchisee cause each of its officers, directors, partners,
shareholders, and General Manager, and, if the Franchisee is an individual, immediate family
members, to execute a confidentiality and noncompetition agreement containing the above
restrictions, in the form attached hereto as Exhibit VI and incorporated herein by
reference.

21. INSURANCE

21.1. Insurance Coverage.

     The Franchisee shall procure, maintain and provide evidence of (i) comprehensive general
liability insurance for the Franchised Location and its operations with a limit of not less than
$1,000,000 combined single limit, or such greater limit as may be required as part of any lease
agreement for the Franchised Location; (ii) automobile liability insurance covering all employees
of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store with authority to operate a motor vehicle in an
amount not less than $1,000,000 or, with the prior written consent of the Franchisor, such lesser
amount as may be available at a commercially reasonable rate, but in no event less than any
statutorily imposed minimum coverage; (iii) unemployment and worker’s compensation insurance with a
broad form all-states endorsement coverage sufficient to meet the requirements of the law; and (iv)
all-risk personal property insurance in an amount equal to at least 100% of the replacement costs
of the contents and tenant improvements located at the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. All
of the required policies of insurance shall name the Franchisor as an additional insured and shall
provide for a 30-day advance written notice to the Franchisor of cancellation.

21.2. Proof of Insurance Coverage.

     The Franchisee will provide proof of insurance to the Franchisor prior to commencement of
operations at its ROCKY MOUNTAIN CHOCOLATE FACTORY Store. This proof will show that the insurer
has been authorized to inform the Franchisor in the event any policies lapse or are cancelled. The
Franchisor has the right to change the minimum amount of insurance the Franchisee is required to
maintain by giving the Franchisee prior reasonable notice, giving due consideration to what is
reasonable and customary in the similar business. The Franchisee’s failure to comply with the
insurance provisions set forth herein shall be deemed a material breach of this Agreement. In the
event of any lapse in insurance coverage, in addition to all other remedies, the Franchisor shall
have the right to demand that the Franchisee cease operations of the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store until coverage is reinstated, or, in the alternative, pay any delinquencies in
premium payments and charge the same back to the Franchisee.

22. MISCELLANEOUS PROVISIONS

22.1. Governing Law/Consent to Venue and Jurisdiction.

     Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15
U.S.C. §§1051 et seq.) or other federal law, this Agreement shall be interpreted under the
laws of the state of Colorado and any disputes between the parties shall be governed by and
determined in accordance with the substantive laws of the state of Colorado, which laws shall
prevail in the event of any conflict of law. The Franchisee and the Franchisor have negotiated
regarding a forum in which to resolve any disputes that may arise between them and have agreed to
select a forum in order to promote stability in their relationship. Therefore, if a claim is
asserted in a legal proceeding involving the Franchisee, its officers, directors, partners or
managers (collectively, “Franchisee Affiliates”) and the Franchisor, its officers,

31

 

directors or sales employees (collectively, “Franchisor Affiliates”), all parties agree that the
exclusive venue for disputes between them shall be in the state courts in La Plata County, Colorado
and federal courts located in Colorado and each waive any objections they may have to the personal
jurisdiction of or venue in the state courts in La Plata County and federal courts located in
Colorado. The Franchisor, the Franchisor Affiliates, the Franchisee and the Franchisee Affiliates
each waive their rights to a trial by jury.

22.2. Cumulative Rights.

     The rights and remedies of the Franchisor and the Franchisee hereunder are cumulative and no
exercise or enforcement by either of them of any right or remedy hereunder shall preclude the
exercise or enforcement by either of them of any other right or remedy hereunder which they are
entitled by law to enforce.

22.3. Modification.

     The Franchisor and/or the Franchisee may modify this Agreement only upon execution of a
written agreement between the two parties. The Franchisee acknowledges that the Franchisor may
modify its standards and specifications and operating and marketing techniques set forth in the
Operations Manual unilaterally under any conditions and to the extent in which the Franchisor, in
its sole discretion, deems necessary to protect, promote, or improve the Marks and the quality of
the Licensed Methods, but under no circumstances will such modifications be made arbitrarily
without such determination.

22.4. Entire Agreement.

     This Agreement, including all exhibits and addenda hereto, contains the entire agreement
between the parties and supersedes any and all prior agreements concerning the subject matter
hereof. The Franchisee agrees and understands that the Franchisor shall not be liable or obligated
for any oral representations or commitments made prior to the execution hereof or for claims of
negligent or fraudulent misrepresentation based on any such oral representations or commitments and
that no modifications of this Agreement shall be effective except those in writing and signed by
both parties. The Franchisor does not authorize and will not be bound by any representation of any
nature other than those expressed in this Agreement. The Franchisee further acknowledges and
agrees that no representations have been made to it by the Franchisor regarding projected sales
volumes, market potential, revenues, profits of the Franchisee’s ROCKY MOUNTAIN CHOCOLATE FACTORY
Store, or operational assistance other than as stated in this Agreement or in any disclosure
document provided by the Franchisor or its representatives.

22.5. Delegation by the Franchisor.

     From time to time, the Franchisor shall have the right to delegate the performance of any
portion or all of its obligations and duties hereunder to third parties, whether the same are
agents of the Franchisor or independent contractors which the Franchisor has contracted with to
provide such services. The Franchisee agrees in advance to any such delegation by the Franchisor
of any portion or all of its obligations and duties hereunder.

22.6. Effective Date.

     This Agreement shall not be effective until accepted by the Franchisor as evidenced by dating
and signing by an officer of the Franchisor.

32

 

22.7. Review of Agreement.

     The Franchisee acknowledges that it had a copy of this Agreement in its possession for a
period of time not fewer than 10 full business days, during which time the Franchisee has had the
opportunity to submit same for professional review and advice of the Franchisee’s choosing prior to
freely executing this Agreement.

22.8. Attorneys’ Fees.

     In the event of any dispute between the parties to this Agreement, including any dispute
involving an officer, director, employee or managing agent of a party to this Agreement, in
addition to all other remedies, the non-prevailing party will pay the prevailing party all costs
and expenses, including reasonable attorneys’ fees, incurred by the prevailing party in any legal
action, arbitration or other proceeding as a result of such dispute.

22.9. Injunctive Relief. 

     Nothing herein shall prevent the Franchisor or the Franchisee from seeking injunctive relief
to prevent irreparable harm, in addition to all other remedies. If the Franchisor seeks an
injunction, the Franchisor will not be required to post a bond in excess of $500.

22.10. No Waiver.

     No waiver of any condition or covenant contained in this Agreement or failure to exercise a
right or remedy by the Franchisor or the Franchisee shall be considered to imply or constitute a
further waiver by the Franchisor or the Franchisee of the same or any other condition, covenant,
right, or remedy.

22.11. No Right to Set Off.

     The Franchisee shall not be allowed to set off amounts owed to the Franchisor for Royalties,
fees or other amounts due hereunder, against any monies owed to Franchisee, nor shall the
Franchisee in any event withhold such amounts due to any alleged nonperformance by the Franchisor
hereunder, which right of set off is hereby expressly waived by the Franchisee.

22.12. Invalidity.

     If any provision of this Agreement is held invalid by any tribunal in a final decision from
which no appeal is or can be taken, such provision shall be deemed modified to eliminate the
invalid element and, as so modified, such provision shall be deemed a part of this Agreement as
though originally included. The remaining provisions of this Agreement shall not be affected by
such modification.

22.13. Notices.

     All notices required to be given under this Agreement shall be given in writing, by certified
mail, return receipt requested, or by an overnight delivery service providing documentation of
receipt, at the address set forth in the first paragraph of this Agreement or at such other
addresses as the Franchisor or the Franchisee may designate from time to time, and shall be
effectively given when deposited in the United States mail, postage prepaid, or when received via
overnight delivery, as may be applicable.

33

 

22.14. Payment of Taxes.

     The Franchisee shall reimburse the Franchisor, or its affiliates and designees, promptly and
when due, the amount of all sales taxes, use taxes, personal property taxes and similar taxes
imposed upon, required to be collected or paid by the Franchisor, or its affiliates or designees,
on account of services or goods furnished by the Franchisor, its affiliates or designees, to the
Franchisee through sale, lease or otherwise, or on account of collection by the Franchisor, its
affiliates or designees, of the initial franchise fee, Royalties, Marketing and Promotion Fees or
any other payments made by the Franchisee to the Franchisor required under the terms of this
Agreement.

22.15. Acknowledgement.

     BEFORE SIGNING THIS AGREEMENT, THE FRANCHISEE SHOULD READ IT CAREFULLY WITH THE ASSISTANCE OF
LEGAL COUNSEL. THE FRANCHISEE ACKNOWLEDGES THAT:

     (A) THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES SUBSTANTIAL RISKS AND
DEPENDS UPON THE FRANCHISEE’S ABILITY AS AN INDEPENDENT BUSINESS PERSON AND ITS ACTIVE
PARTICIPATION IN THE DAILY AFFAIRS OF THE BUSINESS, AND

     (B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO THE POTENTIAL SUCCESS
OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY TO BE ACHIEVED, AND

     (C) NO STATEMENT, REPRESENTATION OR OTHER ACT, EVENT OR COMMUNICATION, EXCEPT AS SET FORTH IN
THIS DOCUMENT, AND IN ANY OFFERING CIRCULAR SUPPLIED TO THE FRANCHISEE, IS BINDING ON THE
FRANCHISOR IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above set
forth.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ROCKY MOUNTAIN CHOCOLATE
FACTORY, INC.
	 
	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	FRANCHISEE:
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Individually
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	AND:
	 	 	 	 	 	 	(if a corporation or partnership)
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Company Name
	Date:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	(6/1/05)	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 	 	 

34

 

EXHIBIT I

TO FRANCHISE AGREEMENT

ADDENDUM TO ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

FRANCHISE AGREEMENT

     1. Franchised Location. The Franchised Location, set forth in Section 3.1 of
the Agreement shall be:                                                                                                                                                                                      and the Store
configuration shall be:                                                                                                     .

     2. Initial Franchise Fee. The amount of the initial franchise fee, set forth in
Section 4.1 of the Agreement, shall be: $                                                            .

     Fully executed this ___day of                     , 2005.

	 	 	 	 	 
	 	 	ROCKY MOUNTAIN CHOCOLATE
FACTORY, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	FRANCHISEE:
	 
	 	 	 	 
	 	 	 
	 	 	Individually
	 
	 	 	 	 
	 

	 	AND:	 	 
	 
	 	 	 	 
	 	 	(if a corporation or partnership)
	 
	 	 	 	 
	 	 	 
	 	 	Company Name
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

 

 

EXHIBIT II

TO FRANCHISE AGREEMENT

GUARANTY AND ASSUMPTION OF FRANCHISEE’S OBLIGATIONS

     In consideration of, and as an inducement to, the execution of the above Franchise Agreement
(the “Agreement”) by Rocky Mountain Chocolate Factory, Inc. (“the Franchisor”), each of the
undersigned hereby personally and unconditionally:

     Guarantees to the Franchisor and its successors and assigns, for the term of this Agreement,
including renewals thereof, that the franchisee, as that term is defined in the Agreement
(“Franchisee”), shall punctually pay and perform each and every undertaking, agreement and covenant
set forth in the Agreement; and

     Agrees to be personally bound by, and personally liable for the breach of, each and every
provision in the Agreement.

Each of the undersigned waives the following:

     1. Acceptance and notice of acceptance by the Franchisor of the foregoing undertaking;

     2. Notice of demand for payment of any indebtedness or nonperformance of any obligations
hereby guaranteed;

     3. Protest and notice of default to any party with respect to the indebtedness or
nonperformance of any obligations hereby guaranteed;

     4. Any right he or she may have to require that any action be brought against Franchisee or
any other person as a condition of liability; and

     5. Any and all other notices and legal or equitable defenses to which he or she may be
entitled.

Each of the undersigned consents and agrees that:

     1. His or her direct and immediate liability under this guaranty shall be joint and several;

     2. He or she shall render any payment or performance required under the Agreement upon demand
if Franchisee fails or refuses punctually to do so;

     3. Such liability shall not be contingent or conditioned upon pursuit by the Franchisor of any
remedies against Franchisee or any other person; and

     4. Such liability shall not be diminished, relieved or otherwise affected by any extension of
time, credit or other indulgence which the Franchisor may from time to time grant to Franchisee or
to any other person, including without limitation the acceptance of any partial payment or
performance, or the compromise or release of any claims, none of which shall in any way modify or
amend this guaranty, which shall be continuing and irrevocable during the term of the Agreement,
including renewals thereof.

 

 

     IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature effective on the
same day and year as the Agreement was executed.

	 	 	 
	WITNESS	 	GUARANTOR(S)
	 	 	 
	 
	 	 
	 	 	 
	 
	 	 
	 	 	 
	 
	 	 
	 	 	 
	 
	 	 

2

 

EXHIBIT III

TO FRANCHISE AGREEMENT

STATEMENT OF OWNERSHIP

	 	 	 
	Franchisee:
	 	 
	 

	 	 

	 	 	 
	Trade Name (if different from above):
	 	 
	 

	 	 

Form of Ownership

(Check One)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	Limited
	                    

	 	Individual
	 	                    
	 	Partnership
	 	                    
	 	Corporation
	 	                    
	 	Liability
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	Company

If a Partnership, provide name and address of each partner showing percentage owned, whether active
in management, and indicate the state in which the partnership was formed.

If a Limited Liability Company, provide name and address of each member and each manager showing
percentage owned and indicate the state in which the Limited Liability Company was formed.

If a Corporation, give the state and date of incorporation, the names and addresses of each officer
and director, and list the names and addresses of every shareholder showing what percentage of
stock is owned by each.

	 	 	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

Franchisee acknowledges that this Statement of Ownership applies to the ROCKY MOUNTAIN CHOCOLATE
FACTORY Store authorized under the Franchise Agreement.

Use additional sheets if necessary. Any and all changes to the above information must be reported
to the Franchisor in writing.

	 	 	 	 	 
	 

	 	 	 	 
	Date

	 	 	 	Signature
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Print Name

 

 

EXHIBIT IV

TO FRANCHISE AGREEMENT

ADDENDUM TO

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

FRANCHISE AGREEMENT RELATED TO AUTHORIZATION

OF PREARRANGED PAYMENTS

(DIRECT DEBITS)

     1. Prearranged Payments. Under the terms of Section 11.4 of the Agreement,
the Franchisee authorizes the Franchisor to initiate debit entries and/or credit correction entries
to the Franchisee’s checking and/or savings account identified below and authorizes the depository
identified below (“Depository”) to debit such account pursuant to the Franchisor’s instructions.

	 	 	 	 	 	 
	 

	 	 	 	 
	Depository

	 	 	 	Branch	 
	 
	 	 	 	 	 
	 

	 	 	 	 
	City

	 	 	 	State	Zip Code
	 
	 	 	 	 
	 
	Bank Transit/ABA Number	 	 	 	 	Account Number

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ROCKY MOUNTAIN CHOCOLATE
FACTORY, INC.
	 
	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	FRANCHISEE:
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Individually
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	AND:
	 	 	 	 	 	 	(if a corporation or partnership)
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Company Name
	Date:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 	 	 

 

 

EXHIBIT V

TO THE FRANCHISE AGREEMENT

PERMIT, LICENSE AND CONSTRUCTION CERTIFICATE

     Franchisor and Franchisee are parties to a Franchise Agreement dated                     , 2005 for
the development and operation of ROCKY MOUNTAIN CHOCOLATE FACTORY Store located at
                                                                                                     (the “Franchised Location”). In
accordance with Section 5.5 of the Franchise Agreement, Franchisee certifies to Franchisor
that the Franchised Location complies with all applicable federal, state and local laws, statutes,
codes, rules, regulations and standards including, but not limited to, the federal Americans with
Disabilities Act and any similar state or local laws. The Franchisee has obtained all such permits
and certifications as may be required for the lawful construction and operation of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store, together with all certifications from government authorities
having jurisdiction over the site that all requirements for construction and operation have been
met, including without limitation, zoning, access, sign, health, safety requirements, building and
other required construction permits, licenses to do business, sales tax permits, health and
sanitation permits and ratings and fire clearances. The Franchisee has obtained all customary
contractors’ sworn statements and partial and final lien waivers for construction, remodeling,
decorating and installation of equipment at the Franchised Location. The Franchisee acknowledges
that it is an independent contractor and that the requirement of this certification does not
constitute ownership, control, leasing or operation of the Store or the Franchised Location by the
Franchisor, but rather provides notice to Franchisor that the Franchisee has complied with all
applicable laws. The Franchisee asserts that Franchisor may justifiably rely on the information
contained in this certificate.

	 	 	 	 	 
	 	 	FRANCHISEE:
	 
	 	 	 	 
	 	 	 
	 	 	Individually
	 
	 	 	 	 
	 

	 	AND:	 	 
	 
	 	 	 	 
	 	 	(if a corporation or partnership)
	 
	 	 	 	 
	 	 	 
	 	 	Company Name
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

 

 

EXHIBIT VI

TO FRANCHISE AGREEMENT

CONFIDENTIALITY AND NONCOMPETITION AGREEMENT

     AGREEMENT, dated                     , 2005, by and between Rocky Mountain
Chocolate Factory, Inc. (“Franchisor”) and                                                             ,
a(n) [directors, officer, partner, principal, employee, agent
or stockholder] of                                          (the “Franchisee”). All capitalized terms not
otherwise defined herein shall have the meanings set forth in the Franchise Agreement, defined
below.

     The Franchisor has granted to the Franchisee, pursuant to that certain Franchise Agreement
dated                     , 2005 (the “Franchise Agreement”), the right to operate a ROCKY MOUNTAIN
CHOCOLATE FACTORY Store. The undersigned, in consideration of the receipt and/or use of the
Operations Manual and other information proprietary to the Franchisor, including but not limited to
methods, strategies and techniques developed by the Franchisor relating to operations, marketing,
training, advertising, trade secrets, recipes and other confidential data (collectively referred to
as “Proprietary Information”), agrees with the Franchisor as follows:

     (1) The undersigned acknowledges that the Operations Manual and other Proprietary Information
now or hereafter provided to Franchisee by the Franchisor is proprietary to the Franchisor and must
be held in the utmost and strictest confidence.

     (2) The undersigned represents and agrees that the undersigned will not, without the prior
written consent of the Franchisor, either:

     (i) Duplicate or otherwise reproduce the Operations Manual or other Proprietary
Information;

     (ii) Deliver or make available the Operations Manual or other Proprietary Information
to any person other than an authorized representative of the Franchisor;

     (iii) Discuss or otherwise disclose the contents of the Operations Manual or other
Proprietary Information to any person other than an authorized representative of the
Franchisor; or

     (iv) Use the Operations Manual or other Proprietary Information to his, her or its
commercial advantage other than in connection with the operation of the franchise created
and granted by the Franchise Agreement.

     (3) While the Franchise Agreement is in effect, neither the undersigned, nor any member of his
or her immediate family, shall engage in, or participate as an owner, officer, partner, director,
agent, employee, shareholder or otherwise in any other Competitive Business without having first
obtained the Franchisor’s written consent. For the purposes of this Agreement, “Competitive
Business” shall mean any business deriving more than 10% of its gross sales receipts from the sale,
processing or manufacturing of chocolate candies and other non-chocolate confectionery items, Items
or other products offered in ROCKY MOUNTAIN CHOCOLATE FACTORY Stores and which constitute 10% or
more of the Gross Retail Sales of any ROCKY MOUNTAIN CHOCOLATE FACTORY Store.

 

 

     (4) The undersigned has acquired from the Franchisor confidential information regarding
Franchisor’s trade secrets and franchised methods which, in the event of a termination of the
Franchise Agreement, could be used to injure the Franchisor. As a result, neither the undersigned,
nor any member of his or her immediate family, shall, for a period of 2 years from the date of
termination, transfer or expiration of the Franchise Agreement, without having first obtained the
Franchisor’s written consent, engage in or participate as an owner, officer, partner, director,
agent, employee, shareholder or otherwise in any Competitive Business which is located or
operating, as of the date of such termination, transfer or expiration, within a 10-mile radius of
the Franchisee’s former Franchised Location as defined in the Franchise Agreement, or within a
10-mile radius of any other franchised or company-owned ROCKY MOUNTAIN CHOCOLATE FACTORY Store,
unless such right is granted pursuant to a separate agreement with the Franchisor.

     (5) The undersigned agrees that during the term of the Franchise Agreement, and for a period
of 2 years thereafter, it shall in no way divert or attempt to divert the business of customers, or
interfere with the business relationship established with customers of the Franchisee’s ROCKY
MOUNTAIN CHOCOLATE FACTORY Store or of any Competitive Business.

     IN WITNESS WHEREOF, this Agreement has been executed by the undersigned as of the date set
forth above.

	 	 	 	 	 
	 	 	AGREED TO BY:
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	ROCKY MOUNTAIN CHOCOLATE
FACTORY, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}]]