Document:

exv10w4

 

Exhibit 10.4

SOLAR ENERTECH CORP.

NOTICE OF GRANT OF STOCK OPTION

(For Participants Resident in The Peoples Republic of China)

The Participant has been granted an option (the “Option”) to purchase certain shares of Stock of
Solar EnerTech Corp. pursuant to the Solar EnerTech Corp. 2007 Equity Incentive Plan (the “Plan”),
as follows:

	 	 	 	 	 
	Participant:

	 	                    
	 	Employee ID:                     
	 
	 	 	 	 
	Date of Grant:

	 	                    	 	 
	 
	 	 	 	 
	Number of Option Shares:

	 	                    	 	 
	 
	 	 	 	 
	Exercise Price Per Share:

	 	$                    	 	 
	 
	 	 	 	 
	Vesting Commencement Date:

	 	                    	 	 
	 
	 	 	 	 
	Option Expiration Date:	 	The tenth anniversary of the Date of Grant.
	 
	 	 	 	 
	Vested Shares:	 	Except as provided in the Stock Option Agreement and provided the Participant’s
Service has not terminated prior to the applicable date, the number of Vested Shares
(disregarding any resulting fractional share) as of any date is determined by
multiplying the Number of Option Shares by the “Vested Ratio” determined as of such
date as follows:

	 	 	 	 	 	 	 
	 	 	 	 	Vested Ratio
	 
	 	Prior to first anniversary of Vesting Commencement Date	 	 	0	 
	 
	 	 	 	 	 	 
	 
	 	On first anniversary of Vesting Commencement Date (the “Initial Vesting Date”)	 	 	1/4	 
	 
	 	 	 	 	 	 
	 
	 	Plus	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	For each additional full month of Participant’s Service from Initial Vesting Date until the Vested Ratio equals 1/1, an additional	 	 	1/48	 
	 
	 	 	 	 	 	 
	Local Law:	 	The laws, rules and regulations of The Peoples Republic of China, of which the
Participant is a resident.

By their signatures below, the Company and the Participant agree that the Option is governed by
this Grant Notice and by the provisions of the Plan and the Stock Option Agreement, both of which
are attached to and made a part of this document. The Participant acknowledges receipt of copies
of the Plan and the Stock Option Agreement, represents that the Participant has read and is
familiar with their provisions, and hereby accepts the Option subject to all of their terms and
conditions.

	 	 	 	 	 
	SOLAR ENERTECH CORP.	 	PARTICIPANT
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 
	 	 
	 

	 	 	 	Signature
	 
	 	 	 	 
	Its:
	 	 	 	 
	 

	 
	 	 
	 

	 	 	 	Date
	 
	 	 	 	 
	Address:
	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Address
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 
	ATTACHMENTS:

	 	2007 Equity Incentive Plan, as amended to the Date of Grant; Stock Option Agreement
and Exercise Notice

 

 

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
THE U.S. SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION AND
MAY NOT BE OFFERED OR SOLD IN THE U.S. OR TO U.S. PERSONS (OTHER THAN DISTRIBUTORS) (AS DEFINED IN
REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933). THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, A DISPOSITION IN ACCORDANCE WITH THE PROVISIONS
OF REGULATION S, RULE 144, PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED
UNDER THE U.S. SECURITIES ACT OF 1933 OR ANY STATE AND APPLICABLE FOREIGN SECURITIES LAWS.

HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
U.S. SECURITIES ACT OF 1933.

THE OPTION ACQUIRED PURSUANT TO THIS AGREEMENT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S.
PERSON UNLESS REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.

SOLAR ENERTECH CORP.

STOCK OPTION AGREEMENT

(For Participants Resident in The Peoples Republic of China)

     Solar Enertech Corp. has granted to the Participant named in the Notice of Grant of Stock
Option (the “Grant Notice”) to which this Stock Option Agreement (the “Option Agreement”) is
attached an option (the “Option”) to purchase certain shares of Stock upon the terms and conditions
set forth in the Grant Notice and this Option Agreement. The Option has been granted pursuant to
and shall in all respects be subject to the terms and conditions of the Solar Enertech Corp. 2007
Equity Incentive Plan (the “Plan”), as amended to the Date of Grant, the provisions of which are
incorporated herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges
receipt of and represents that the Participant has read and is familiar with the Grant Notice, this
Option Agreement and the Plan, (b) accepts the Option subject to all of the terms and conditions of
the Grant Notice, this Option Agreement and the Plan and (c) agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any questions arising
under the Grant Notice, this Option Agreement or the Plan.

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     1. Definitions and Construction.

          1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Grant Notice or the Plan.

          1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.

     2. Certain Conditions of the Option.

          2.1 Compliance with Local Law. The Participant agrees that the Participant will not acquire
shares pursuant to the Option or transfer, assign, sell or otherwise deal with such shares except
in compliance with the laws and regulations of the People’s Republic of China (“Local Law”).

          2.2 Employment Conditions. In accepting the Option, the Participant acknowledges that:

               (a) Any notice period mandated under Local Law shall not be treated as Service for the purpose
of determining the vesting of the Option; and the Participant’s right to exercise the Option after
termination of Service, if any, will be measured by the date of termination of the Participant’s
active Service and will not be extended by any notice period mandated under Local Law. Subject to
the foregoing and the provisions of the Plan, the Company, in its sole discretion, shall determine
whether the Participant’s Service has terminated and the effective date of such termination.

               (b) The Plan is established voluntarily by the Company. It is discretionary in nature and it
may be modified, amended, suspended or terminated by the Company at any time, unless otherwise
provided in the Plan and this Option Agreement.

               (c) The grant of the Option is voluntary and occasional and does not create any contractual or
other right to receive future grants of Options, or benefits in lieu of Options, even if Options
have been granted repeatedly in the past.

               (d) All decisions with respect to future Option grants, if any, will be at the sole discretion
of the Company.

               (e) The Participant’s participation in the Plan shall not create a right to further Service
with any Participating Company and shall not interfere with the ability of any Participating
Company to terminate the Participant’s Service at any time, with or without cause.

               (f) The Participant is voluntarily participating in the Plan.

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               (g) The Option is an extraordinary item that does not constitute compensation of any kind for
Service of any kind rendered to any Participating Company, and which is outside the scope of the
Participant’s employment contract, if any.

               (h) The Option is not part of normal or expected compensation or salary for any purpose,
including, but not limited to, calculating any severance, resignation, termination, redundancy,
end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar
payments.

               (i) In the event that the Participant is not an employee of the Company, the Option grant will
not be interpreted to form an employment contract or relationship with the Company; and furthermore
the Option grant will not be interpreted to form an employment contract with any other
Participating Company.

               (j) The future value of the underlying shares is unknown and cannot be predicted with
certainty. If the underlying shares do not increase in value, the Option will have no value. If
the Participant exercises the Option and obtains shares, the value of those shares acquired upon
exercise may increase or decrease in value, even below the Exercise Price.

               (k) No claim or entitlement to compensation or damages arises from termination of the Option
or diminution in value of the Option or shares purchased through exercise of the Option resulting
from termination of the Participant’s Service (for any reason whether or not in breach of Local
Law) and the Participant irrevocably releases the Company and each other Participating Company from
any such claim that may arise. If, notwithstanding the foregoing, any such claim is found by a
court of competent jurisdiction to have arisen then, by signing this Option Agreement, the
Participant shall be deemed irrevocably to have waived the Participant’s entitlement to pursue such
a claim.

          2.3 Data Privacy Consent.

               (a) The Participant hereby explicitly and unambiguously consents to the collection, use and
transfer, in electronic or other form, of the Participant’s personal data as described in this
document by and among the members of the Participating Company Group for the exclusive purpose of
implementing, administering and managing the Participant’s participation in the Plan.

               (b) The Participant understands that the Participating Company Group holds certain personal
information about the Participant, including, but not limited to, the Participant’s name, home
address and telephone number, date of birth, social insurance number or other identification
number, salary, nationality, job title, any shares or directorships held in the Company, details of
all Options or any other entitlement to shares awarded, canceled, exercised, vested, unvested or
outstanding in the Participant’s favor, for the purpose of implementing, administering and managing
the Plan (“Data”). The Participant understands that Data may be transferred to any third parties
assisting in the implementation, administration and management of the Plan, that these recipients
may be located in the Participant’s country or elsewhere, and that the recipient’s country may have
different data privacy laws and protections

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than the Participant’s country. The Participant understands that he or she may request a list
with the names and addresses of any potential recipients of the Data by contacting the
Participant’s local human resources representative. The Participant authorizes the recipients to
receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes
of implementing, administering and managing the Participant’s participation in the Plan, including
any requisite transfer of such Data as may be required to a broker or other third party with whom
the Participant may elect to deposit any shares acquired upon exercise of the Option. The
Participant understands that Data will be held only as long as is necessary to implement,
administer and manage the Participant’s participation in the Plan. The Participant understands
that he or she may, at any time, view Data, request additional information about the storage and
processing of Data, require any necessary amendments to Data or refuse or withdraw the consents
herein, in any case without cost, by contacting in writing the Participant’s local human resources
representative. The Participant understands, however, that refusing or withdrawing the
Participant’s consent may affect the Participant’s ability to participate in the Plan. For more
information on the consequences of the Participant’s refusal to consent or withdrawal of consent,
the Participant understands that he or she may contact the Participant’s local human resources
representative.

     3. Administration.

          All questions of interpretation concerning this Option Agreement shall be determined by the
Committee. All determinations by the Committee shall be final and binding upon all persons having
an interest in the Option as provided by the Plan. Any Officer shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, or election.

     4. Exercise of the Option.

          4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable
on and after the Initial Vesting Date and prior to the termination of the Option (as provided in
Section 6) in an amount not to exceed the number of Vested Shares less the number of shares
previously acquired upon exercise of the Option. In no event shall the Option be exercisable for
more shares than the Number of Option Shares, as adjusted pursuant to Section 9.

          4.2 Method of Exercise. Exercise of the Option shall be by means of electronic or written
notice (the “Exercise Notice”) in a form authorized by the Company. An electronic Exercise Notice
must be digitally signed or authenticated by the Participant in such manner as required by the
notice and transmitted to the Company or an authorized representative of the Company (including a
third-party administrator designated by the Company). In the event that the Participant is not
authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by
a written Exercise Notice addressed to the Company, which shall be signed by the Participant and
delivered in person, by certified or registered mail, return receipt requested, by confirmed
facsimile transmission, or by such other means as the Company may permit, to the Company, or an
authorized representative of the Company (including a third-party administrator designated by the
Company). Each Exercise Notice, whether electronic or written, must state the Participant’s
election to exercise the Option, the number of whole shares of Stock

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for which the Option is being exercised and such other representations and agreements as to
the Participant’s investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. Further, each Exercise Notice must be received by the Company
prior to the termination of the Option as set forth in Section 6 and must be accompanied by full
payment of the aggregate Exercise Price for the number of shares of Stock being purchased. The
Option shall be deemed to be exercised upon receipt by the Company of such electronic or written
Exercise Notice and the aggregate Exercise Price.

          4.3 Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) provided that at the
time of exercise, the offer and sale of shares of Stock pursuant to the Plan is registered on a
then effective registration statement on Form S-8 under the Securities Act, solely by means of a
Cashless Exercise, as defined in Section 4.3(b)(i), or (ii) at any other time, solely by means of a
Net Exercise, as defined in Section 4.3(b)(ii).

               (b) Limitations on Forms of Consideration.

                    (i) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed notice
together with irrevocable instructions to a broker in a form acceptable to the Company providing
for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of
the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure
approved by the Company and with the provisions of Regulation T as promulgated from time to time by
the Board of Governors of the Federal Reserve System.

                    (ii) Net Exercise. A “Net Exercise” means a procedure by which the Participant will be issued
a number of whole shares of Stock upon the exercise of an Option determined in accordance with the
following formula:

                    N = X(A-B)/A, where

“N” = the number of shares of Stock to be issued to the
Participant upon exercise of the Option;

“X” = the total number of shares with respect to which the
Participant has elected to exercise the Option;

“A” = the Fair Market Value of one (1) share of Stock determined
on the exercise date; and

“B” = the exercise price per share (as defined in the
Participant’s Award Agreement)

          4.4 Tax Withholding. Regardless of any action taken by the Company or any other Participating
Company with respect to any or all income tax, social insurance, payroll tax,

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payment on account or other tax-related withholding (the “Tax Obligations”), the Participant
acknowledges that the ultimate liability for all Tax Obligations legally due by the Participant is
and remains the Participant’s responsibility and that the Company (a) makes no representations or
undertakings regarding the treatment of any Tax Obligations in connection with any aspect of the
Option, including the grant, vesting or exercise of the Option, the subsequent sale of shares
acquired pursuant to such exercise, or the receipt of any dividends and (b) does not commit to
structure the terms of the grant or any other aspect of the Option to reduce or eliminate the
Participant’s liability for Tax Obligations. At the time of exercise of the Option, the
Participant shall pay or make adequate arrangements satisfactory to the Company to satisfy all
withholding obligations of the Company and any other Participating Company. In this regard, at the
time the Option is exercised, in whole or in part, or at any time thereafter as requested by the
Company or any other Participating Company, the Participant hereby authorizes withholding of all
applicable Tax Obligations from payroll and any other amounts payable to the Participant, and
otherwise agrees to make adequate provision for withholding of all applicable Tax Obligations, if
any, by each Participating Company which arise in connection with the Option. Alternatively, or in
addition, if permissible under applicable law, including Local Law, the Company or any other
Participating Company may (i) sell or arrange for the sale of shares acquired by the Participant to
satisfy the Tax Obligations, and/or (ii) withhold in shares, provided that only the amount of
shares necessary to satisfy the minimum withholding amount required by applicable law, including
Local Law, is withheld. Finally, the Participant shall pay to the Company or any other
Participating Company any amount of the Tax Obligations that any such company may be required to
withhold as a result of the Participant’s participation in the Plan that cannot be satisfied by the
means previously described. The Company shall have no obligation to process the exercise of the
Option or to deliver shares until the Tax Obligations as described in this Section have been
satisfied by the Participant.

          4.5 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby
authorizes the Company, in its sole discretion, to deposit for the benefit of the Participant with
any broker with which the Participant has an account relationship of which the Company has notice
any or all shares acquired by the Participant pursuant to the exercise of the Option. Except as
provided by the preceding sentence, a certificate for the shares as to which the Option is
exercised shall be registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of United States federal or state or Local Law with respect to such
securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities laws, including Local
Law, or other law or regulations or the requirements of any stock exchange or market system upon
which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act shall at the time of exercise of the Option be in
effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in
accordance with the terms of an applicable exemption from the registration requirements of the
Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE

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SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to
the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the Option, the Company
may require the Participant to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.

          4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.

     5. Nontransferability of the Option.

          During the lifetime of the Participant, the Option shall be exercisable only by the
Participant or the Participant’s guardian or legal representative. The Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution. Following the death of the
Participant, the Option, to the extent provided in Section 7, may be exercised by the Participant’s
legal representative or by any person empowered to do so under the deceased Participant’s will or
under the then applicable laws of descent and distribution.

     6. Termination of the Option.

          The Option shall terminate and may no longer be exercised after the first to occur of (a) the
close of business on the Option Expiration Date, (b) the close of business on the last date for
exercising the Option following termination of the Participant’s Service as described in Section 7,
or (c) a Change in Control to the extent provided in Section 8.

     7. Effect of Termination of Service.

          7.1 Option Exercisability. The Option shall terminate immediately upon the Participant’s
termination of Service to the extent that it is then unvested and shall be exercisable after the
Participant’s termination of Service to the extent it is then vested only during the applicable
time period as determined below and thereafter shall terminate.

               (a) Disability. If the Participant’s Service terminates because of the Disability of the
Participant, the Option, to the extent unexercised and exercisable for Vested Shares on the date on
which the Participant’s Service terminated, may be exercised by the Participant (or the
Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Participant’s Service terminated, but in any event no later than
the Option Expiration Date.

               (b) Death. If the Participant’s Service terminates because of the death of the Participant,
the Option, to the extent unexercised and exercisable for Vested Shares on the

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date on which the Participant’s Service terminated, may be exercised by the Participant’s
legal representative or other person who acquired the right to exercise the Option by reason of the
Participant’s death at any time prior to the expiration of twelve (12) months after the date on
which the Participant’s Service terminated, but in any event no later than the Option Expiration
Date. The Participant’s Service shall be deemed to have terminated on account of death if the
Participant dies within three (3) months after the Participant’s termination of Service.

               (c) Termination for Cause. If the Participant’s Service is terminated for Cause or if,
following the Participant’s termination of Service and during any period in which the Option
otherwise would remain exercisable, the Participant engages in any act that would constitute Cause,
the Option shall terminate in its entirety and cease to be exercisable immediately upon such
termination of Service or act.

               (d) Other Termination of Service. If the Participant’s Service terminates for any reason,
except Disability, death or Cause, the Option, to the extent unexercised and exercisable for Vested
Shares by the Participant on the date on which the Participant’s Service terminated, may be
exercised by the Participant at any time prior to the expiration of three (3) months after the
date on which the Participant’s Service terminated, but in any event no later than the Option
Expiration Date.

          7.2 Extension if Exercise Prevented by Law or Insider Trading Policy. Notwithstanding the
foregoing, other than termination of Service for Cause, if the exercise of the Option within the
applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6 or a
sale of shares pursuant to a Cashless Exercise of the Option would violate the provisions of the
Insider Trading Policy, the Option shall remain exercisable until thirty (30) days after the date
such exercise or sale, as the case may be, would no longer be prevented by such provisions, but in
any event no later than the Option Expiration Date.

     8. Effect of Change in Control.

          In the event of a Change in Control, except to the extent that the Committee determines to
cash out the Option in accordance with Section 10.1(c) of the Plan, the surviving, continuing,
successor, or purchasing entity or parent thereof, as the case may be (the “Acquiror”), may,
without the consent of the Participant, assume or continue in full force and effect the Company’s
rights and obligations under all or any portion of the Option or substitute for all or any portion
of the Option a substantially equivalent option for the Acquiror’s stock. For purposes of this
Section, the Option or any portion thereof shall be deemed assumed if, following the Change in
Control, the Option confers the right to receive, subject to the terms and conditions of the Plan
and this Option Agreement, for each share of Stock subject to such portion of the Option
immediately prior to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share of Stock on the
effective date of the Change in Control was entitled; provided, however, that if such consideration
is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror,
provide for the consideration to be received upon the exercise of the Option, for each share of
Stock subject to the Option, to consist solely of common stock of the Acquiror equal in Fair Market
Value to the per share consideration received by holders of Stock pursuant to the Change in
Control. The Option shall terminate and cease to be outstanding effective as of

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the time of consummation of the Change in Control to the extent that the Option is neither
assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of
the date of the Change in Control.

     9. Adjustments for Changes in Capital Structure.

          Subject to any required action by the stockholders of the Company, in the event of any change
in the Stock effected without receipt of consideration by the Company, whether through merger,
consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of
shares, or similar change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other than Stock (excepting
normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock,
appropriate and proportionate adjustments shall be made in the number, Exercise Price and kind of
shares subject to the Option, in order to prevent dilution or enlargement of the Participant’s
rights under the Option. For purposes of the foregoing, conversion of any convertible securities
of the Company shall not be treated as “effected without receipt of consideration by the Company.”
Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to
the nearest whole number, and the Exercise Price shall be rounded up to the nearest whole cent. In
no event may the Exercise Price be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The Committee in its sole discretion, may also make such adjustments
in the terms of the Option to reflect, or related to, such changes in the capital structure of the
Company or distributions as it deems appropriate. All adjustments pursuant to this Section shall
be determined by the Committee, and its determination shall be final, binding and conclusive.

     10. Rights as a Stockholder, Director, Employee or Consultant.

          The Participant shall have no rights as a stockholder with respect to any shares covered by
the Option until the date of the issuance of the shares for which the Option has been exercised (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date the shares are issued, except as provided in
Section 9. If the Participant is an Employee, the Participant understands and acknowledges that,
except as otherwise provided in a separate, written employment agreement between a Participating
Company and the Participant, the Participant’s employment is “at will” and is for no specified
term. Nothing in this Option Agreement shall confer upon the Participant any right to continue in
the Service of a Participating Company or interfere in any way with any right of the Participating
Company Group to terminate the Participant’s Service as a Director, an Employee or Consultant, as
the case may be, at any time.

     11. Representations and Warranties.

          In connection with the receipt of the Option and any acquisition of shares upon the exercise
thereof (collectively, the “Securities”), the Participant hereby agrees, represents and warrants as
follows:

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          11.1 Investment Intent. The Participant is acquiring the Securities solely for the
Participant’s own account for investment and not with a view to or for sale in connection with any
distribution of the Securities or any portion thereof and not with any present intention of
selling, offering to sell or otherwise disposing of or distributing the Securities or any portion
thereof in any transaction other than a transaction exempt from registration under the Securities
Act. The Participant further represents that the entire legal and beneficial interest of the
Securities is being acquired, and will be held, for the account and benefit of the Participant only
and neither in whole nor in part for any other person.

          11.2 Absence of Solicitation. The Participant was not presented with or solicited by any form
of general solicitation or general advertising, including, but not limited to, any advertisement,
article, notice, or other communication published in any newspaper, magazine, or similar media, or
broadcast over television, radio or similar communications media, or presented at any seminar or
meeting whose attendees have been invited by any general solicitation or general advertising.

          11.3 Residence / Not a U.S. Person. The Participant’s principal residence is located at the
address indicated beneath the Participant’s signature on the Grant Notice. The Participant is not a
U.S. person (as defined in Regulation S promulgated under the Securities Act), and the Option will
not be exercised on behalf of, for the benefit of, or for the account of a U.S. person.

          11.4 No Exercise within the United States. The Option may not be exercised within the United
States, and the Securities may not be delivered within the United States upon exercise, unless
registered under the Securities Act or an exemption from such registration is available.

          11.5 Information Concerning the Company. The Participant is aware of the Company’s business
affairs and financial condition and has acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. The Participant further
represents and warrants that the Participant has discussed the Company and its plans, operations
and financial condition with its Officers, has received all such information as the Participant
deems necessary and appropriate to enable the Participant to evaluate the financial risk inherent
in acquiring the Securities and has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in respect thereof.

          11.6 Economic Risk. The Participant realizes that his acquisition of the Securities will be a
highly speculative investment and that the Participant is able, without impairing his or her
financial condition, to hold the Securities for an indefinite period of time and to suffer a
complete loss on the Participant’s investment.

          11.7 Capacity to Protect Interests. The Participant has (i) a preexisting personal or
business relationship with the Company or any of its Officers, directors, or controlling persons,
consisting of personal or business contacts of a nature and duration to enable the Participant to
be aware of the character, business acumen and general business and financial

11

 

circumstances of the person with whom such relationship exists, or (ii) such knowledge and
experience in financial and business matters as to make the Participant capable of evaluating the
merits and risks of an investment in the Securities and to protect the Participant’s own interests
in the transaction, or (iii) both such relationship and such knowledge and experience.

          11.8 Restricted Securities. The Participant understands and acknowledges that:

               (a) The issuance of the Securities to the Participant has not been registered under the
Securities Act, and the Securities must be held indefinitely unless a transfer of the Securities is
subsequently registered under the Securities Act, the transfer or sale of the securities is in
accordance with Regulation S promulgated under the Securities Act or Rule 144 promulgated under the
Securities Act or another exemption from such registration is available.

               (b) The Company is under no obligation to register the Securities.

               (c) The Participant hereby agrees not to engage in hedging transactions with regard to the
Securities unless in compliance with the Securities Act.

               (d) The Company will make a notation in its records of the aforementioned restrictions on
transfer and legends.

          11.9 Disposition Under Rule 144. The Participant understands that any shares acquired upon
exercise of the Option will be restricted securities within the meaning of Rule 144 promulgated
under the Securities Act; that the exemption from registration under Rule 144 will not be available
in any event for at least one year from the date of acquisition of the shares, and even then will
not be available unless (a) a public trading market then exists for the Common Stock of the
Company, (b) adequate information concerning the Company is then available to the public, and (c)
other terms and conditions of Rule 144 are complied with; and that any sale of the shares may be
made only in limited amounts in accordance with such terms and conditions. There can be no
assurance that the requirements of Rule 144 will be met, or that the shares will ever be salable.

          11.10 Further Limitations on Disposition. Without in any way limiting the Participant’s
representations and warranties set forth above, the Participant further agrees that the Participant
will in no event make any disposition of all or any portion of any shares which the Participant
acquires upon exercise of the Option unless:

               (a) There is then in effect a Registration Statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with said Registration Statement;
or

               (b) The Participant will have notified the Company of the proposed disposition and furnished
the Company with a detailed statement of the circumstances surrounding the proposed disposition,
and either:

12

 

                    (i) The Participant will have furnished the Company with an opinion of the Participant’s own
counsel to the effect that such disposition will not require registration of such shares under the
Securities Act or any state and applicable foreign securities laws, and such opinion of the
Participant’s counsel will have been concurred in by counsel for the Company and the Company will
have advised the Participant of such concurrence; or

                    (ii) The disposition is made in compliance with Rule 144 or Regulation S after the Participant
has furnished the Company such detailed statement and after the Company has had a reasonable
opportunity to discuss the matter with the Participant.

               11.11 Reliance by Company. The Participant understands that the Option and any shares
acquired upon exercise of the Option have not been qualified under the Corporate Securities Law of
1968, as amended, of the State of California by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the Participant’s
representations as expressed herein. The Participant understands that the Company is relying on
the Participant’s representations and warrants that the Company is entitled to rely on such
representations and that such reliance is reasonable.

     12. Legends.

          12.1 The Company may at any time place legends referencing any applicable federal, state or
foreign securities law, including Local Law, restrictions on all certificates representing shares
of stock subject to the provisions of this Option Agreement. The Participant shall, at the request
of the Company, promptly present to the Company any and all certificates representing shares
acquired pursuant to the Option in the possession of the Participant in order to carry out the
provisions of this Section.

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR SOLD IN THE U.S. OR TO U.S. PERSONS (OTHER THAN DISTRIBUTORS) (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933), UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH REGULATION S OR RULE 144, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT OR ANY STATE AND APPLICABLE FOREIGN SECURITIES
LAWS. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE U.S. SECURITIES ACT OF 1933.”

          12.2 The Participant is hereby on notice that the Company may refuse to register on the books
of the Company (or on the records of a duly authorized transfer agent of the

13

 

Company) any transfer, sale, assignment or hypothecation of the Securities not made in
accordance with (i) registration under the Securities Act (ii) pursuant to Regulation S under the
Securities Act, (iii) Rule 144 under the Securities Act or (iv) another available exemption from
registration under the Securities Act.

     13. Miscellaneous Provisions.

          13.1 Termination or Amendment. The Committee may terminate or amend the Plan or the Option at
any time; provided, however, that except as provided in Section 8 in connection with a Change in
Control, no such termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Participant unless such termination or amendment is
necessary to comply with any applicable law or government regulation. No amendment or addition to
this Option Agreement shall be effective unless in writing.

          13.2 Further Instruments. The parties hereto agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent of this Option
Agreement.

          13.3 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.

          13.4 Delivery of Documents and Notices. Any document relating to participation in the Plan or
any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given (except to the extent that this Option Agreement provides for effectiveness only
upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail
address, if any, provided for the Participant by a Participating Company, or upon deposit in the
U.S. Post Office or foreign postal service, by registered or certified mail, or with a nationally
recognized overnight courier service, with postage and fees prepaid, addressed to the other party
at the address of such party set forth in the Grant Notice or at such other address as such party
may designate in writing from time to time to the other party.

               (a) Description of Electronic Delivery. The Plan documents, which may include but do not
necessarily include: the Plan, the Grant Notice, this Option Agreement, the Plan Prospectus, and
any reports of the Company provided generally to the Company’s stockholders, may be delivered to
the Participant electronically. In addition, the Participant may deliver electronically the Grant
Notice and Exercise Notice called for by Section 4.2 to the Company or to such third party involved
in administering the Plan as the Company may designate from time to time. Such means of electronic
delivery may include but do not necessarily include the delivery of a link to a Company intranet or
the Internet site of a third party involved in administering the Plan, the delivery of the document
via e-mail or such other means of electronic delivery specified by the Company.

               (b) Consent to Electronic Delivery. The Participant acknowledges that the Participant has
read Section 13.4(a) of this Option Agreement and consents to the electronic delivery of the Plan
documents and the delivery of the Grant Notice and Exercise

14

 

Notice, as described in Section 13.4(a). The Participant acknowledges that he or she may
receive from the Company a paper copy of any documents delivered electronically at no cost to the
Participant by contacting the Company by telephone or in writing. The Participant further
acknowledges that the Participant will be provided with a paper copy of any documents if the
attempted electronic delivery of such documents fails. Similarly, the Participant understands that
the Participant must provide the Company or any designated third party administrator with a paper
copy of any documents if the attempted electronic delivery of such documents fails. The
Participant may revoke his or her consent to the electronic delivery of documents described in
Section 13.4(a) or may change the electronic mail address to which such documents are to be
delivered (if Participant has provided an electronic mail address) at any time by notifying the
Company of such revoked consent or revised e-mail address by telephone, postal service or
electronic mail. Finally, the Participant understands that he or she is not required to consent to
electronic delivery of documents described in Section 13.4(a).

          13.5 Integrated Agreement. The Grant Notice, this Option Agreement and the Plan, together
with any the Superseding Agreement, if any, shall constitute the entire understanding and agreement
of the Participant and the Participating Company Group with respect to the subject matter contained
herein and supersede any prior agreements, understandings, restrictions, representations, or
warranties among the Participant and the Participating Company Group with respect to such subject
matter. To the extent contemplated herein, the provisions of the Grant Notice, the Option
Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and
effect.

          13.6 Applicable Law. This Option Agreement shall be governed by the laws of the State of
California as such laws are applied to agreements between California residents entered into and to
be performed entirely within the State of California. For purposes of litigating any dispute that
arises directly or indirectly from the relationship of the parties as evidenced by this Option
Agreement, the parties hereby submit to and consent to the jurisdiction of the State of California
and agree that such litigation shall be conducted only in the courts of the County of Santa Clara,
California, or the federal courts of the United States for the Northern District of California, and
no other courts, where this Option Agreement is made and/or performed.

          13.7 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument.

15

 

Participant:                    

Date:                    

STOCK OPTION EXERCISE NOTICE

Solar Enertech Corp.

Attention: Stock Administration

Ladies and Gentlemen:

     1. Option. I was granted an option (the “Option”) to purchase shares of the common
stock (the “Shares”) of Solar Enertech Corp. (the “Company”) pursuant to the Company’s 2007 Equity
Incentive Plan (the “Plan”), my Notice of Grant of Stock Option (the “Grant Notice”) and my Stock
Option Agreement (the “Option Agreement”) as follows:

	 	 	 	 	 
	Date of Grant:
	 	 	                    	 
	 
	 	 	 	 
	Number of Option Shares:
	 	 	                    	 
	 
	 	 	 	 
	Exercise Price per Share:
	 	$	                    	 

     2. Exercise of Option. I hereby elect to exercise the Option to purchase the
following number of Shares, all of which are Vested Shares in accordance with the Grant Notice and
the Option Agreement:

	 	 	 	 	 
	Total Shares Purchased:
	 	 	                    	 
	 
	 	 	 	 
	Total Exercise Price (Total Shares X Price per Share)
	 	$	                    	 

     3. Payments. I enclose payment in full of the total exercise price for the Shares in
the following form(s), as authorized by my Option Agreement:

	 	 	 	 	 
	TM Cashless Exercise:
	 	Contact Plan Administrator
	 
	 	 	 	 
	TM Net Exercise:
	 	Contact Plan Administrator

     4. Tax Withholding. I authorize payroll withholding and otherwise will make adequate
provision for the Tax Obligations, as described in the Option Agreement. I elect to pay the Tax
Obligations, if any, as follows:

(Contact Plan Administrator for amount of tax due.)

	 	 	 	 	 
	TM Check:
	 	$	                
           	 
	 
	 	 	 	 
	TM Payroll Withholding:
	 	Contact Plan Administrator
	 
	 	 	 	 
	TM Cashless Exercise:
	 	Contact Plan Administrator
	 
	 	 	 	 
	TM Share Withholding:
	 	Contact Plan Administrator

 

     5. Participant Information.

	 	 	 	 	 
	 

	 	My address is:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	 

	 	      
My Tax Identification Number is:	 	 
	 

	 	 	 	 

     6. Not a U.S. Person. I certify that I am not a U.S. person (as defined in Regulation
S promulgated under the Securities Act of 1933, as amended) and the Option is not being exercised
on behalf of a U.S. person.

     7. Binding Effect. I agree that the Shares are being acquired in accordance with and
subject to the terms, provisions and conditions of the Grant Notice, the Option Agreement and the
Plan, to all of which I hereby expressly assent. This Agreement shall inure to the benefit of and
be binding upon my heirs, executors, administrators, successors and assigns.

	 	 	 
	 

	 	Very truly yours,
	 
	 	 
	 

	 	 
	 

	 	(Signature)

	 	 	 	 	 
	Receipt of the above is hereby acknowledged.	 	 
	 
	 	 	 	 
	SOLAR ENERTECH CORP.	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Title:
	 	 	 	 
	 

	 	 

	 	 
	Dated:
	 	 	 	 
	 

	 	 

	 	 

2exv10w1

 

Exhibit 10.1

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
	 	 	3	 
	5.3. Signs
	 	 	3	 
	5.4. Equipment
	 	 	4	 
	5.5. Electronic Communications
	 	 	4	 
	5.6. Permits and Licenses
	 	 	4	 
	5.7. Anti-Terrorism Representation
	 	 	5	 
	5.8. Commencement of Operations
	 	 	5	 
	 
	 	 	 	 
	6. TRAINING
	 	 	5	 
	6.1. Initial Training Program
	 	 	5	 
	6.2. Length of Training
	 	 	5	 
	6.3. Additional Training
	 	 	5	 
	 
	 	 	 	 
	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
	 	 	7	 
	9.1. Franchisor’s Services
	 	 	7	 
	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
	 	 	11	 
	11.3. Royalty Payments
	 	 	11	 
	11.4. Authorization for Prearranged Payments by Electronic Transfer
	 	 	11	 

 

 

	 	 	 	 	 
	12. ADVERTISING
	 	 	12	 
	12.1. Approval of Advertising
	 	 	12	 
	12.2. Local Advertising
	 	 	12	 
	12.3. Marketing and Promotion Fee
	 	 	13	 
	12.4. Regional Advertising Programs
	 	 	13	 
	12.5. Marketing Services
	 	 	13	 
	 
	 	 	 	 
	13. QUALITY CONTROL
	 	 	14	 
	13.1. Compliance with Operations Manual
	 	 	14	 
	13.2. Standards and Specifications
	 	 	14	 
	13.3. Inspections
	 	 	14	 
	13.4. Restrictions on Services and Products
	 	 	14	 
	13.5. Approved Suppliers
	 	 	14	 
	13.6. Request to Change Supplier
	 	 	15	 
	13.7. Approval of Intended Supplier
	 	 	15	 
	 
	 	 	 	 
	14. TRADEMARKS, TRADE NAMES AND PROPRIETARY INTERESTS
	 	 	15	 
	14.1. Marks
	 	 	15	 
	14.2. No Use of Other Marks
	 	 	15	 
	14.3. Licensed Methods
	 	 	15	 
	14.4. Effect of Termination
	 	 	16	 
	14.5. Mark Infringement
	 	 	16	 
	14.6. Franchisee’s Business Name
	 	 	16	 
	14.7. Change of Marks
	 	 	16	 
	14.8. Creative Ownership
	 	 	16	 
	14.9. Non-Disparagement
	 	 	17	 
	 
	 	 	 	 
	15. REPORTS, RECORDS AND FINANCIAL STATEMENTS
	 	 	17	 
	15.1. Franchisee Reports
	 	 	17	 
	15.2. Annual Financial Statements
	 	 	17	 
	15.3. Verification
	 	 	17	 
	15.4. Books and Records
	 	 	17	 
	15.5. Audit of Books and Records
	 	 	18	 
	15.6. Failure to Comply with Reporting Requirements
	 	 	18	 
	15.7. Shopping Service
	 	 	18	 
	 
	 	 	 	 
	16. TRANSFER
	 	 	18	 
	16.1. Transfer by Franchisee
	 	 	18	 
	16.2. Pre-Conditions to Franchisee’s Transfer
	 	 	18	 
	16.3. Franchisor’s Approval of Transfer
	 	 	19	 
	16.4. Right of First Refusal
	 	 	20	 
	16.5. Types of Transfers
	 	 	20	 
	16.6. Transfer by the Franchisor
	 	 	20	 
	16.7. Franchisee’s Death or Disability
	 	 	20	 
	 
	 	 	 	 
	17. TERM AND EXPIRATION
	 	 	21	 
	17.1. Term
	 	 	21	 
	17.2. Continuation
	 	 	21	 
	17.3. Rights Upon Expiration
	 	 	21	 
	17.4. Exercise of Option for Successor Franchise
	 	 	21	 
	17.5. Conditions of Refusal
	 	 	22	 

 

 

	 	 	 	 	 
	18. DEFAULT AND TERMINATION
	 	 	22	 
	18.1. Termination by Franchisor — Effective Upon Notice
	 	 	22	 
	18.2. Termination by Franchisor — Thirty Days Notice
	 	 	23	 
	18.3. Franchisor’s Remedies
	 	 	24	 
	18.4. Right to Purchase
	 	 	24	 
	18.5. Obligations of Franchisee Upon Termination or Expiration
	 	 	25	 
	18.6. State and Federal Law
	 	 	26	 
	 
	 	 	 	 
	19. BUSINESS RELATIONSHIP
	 	 	26	 
	19.1. Independent Businesspersons
	 	 	26	 
	19.2. Payment of Third Party Obligations
	 	 	26	 
	19.3. Indemnification
	 	 	27	 
	 
	 	 	 	 
	20. RESTRICTIVE COVENANTS
	 	 	27	 
	20.1. Non-Competition During Term
	 	 	27	 
	20.2. Post-Termination Covenant Not to Compete
	 	 	28	 
	20.3. Confidentiality of Proprietary Information
	 	 	28	 
	20.4. Confidentiality Agreement
	 	 	28	 
	 
	 	 	 	 
	21. INSURANCE
	 	 	28	 
	21.1. Insurance Coverage
	 	 	28	 
	21.2. Proof of Insurance Coverage
	 	 	29	 
	 
	 	 	 	 
	22. MISCELLANEOUS PROVISIONS
	 	 	29	 
	22.1. Governing Law/Consent to Venue and Jurisdiction
	 	 	29	 
	22.2. Cumulative Rights
	 	 	29	 
	22.3. Modification
	 	 	29	 
	22.4. Entire Agreement
	 	 	29	 
	22.5. Delegation by the Franchisor
	 	 	30	 
	22.6. Effective Date
	 	 	30	 
	22.7. Review of Agreement
	 	 	30	 
	22.8. Attorneys’ Fees
	 	 	30	 
	22.9. Injunctive Relief
	 	 	30	 
	22.10. No Waiver
	 	 	30	 
	22.11. No Right to Set Off
	 	 	30	 
	22.12. Invalidity
	 	 	30	 
	22.13. Notices
	 	 	30	 
	22.14. Payment of Taxes
	 	 	30	 
	22.15. Acknowledgement
	 	 	31	 

 

 

     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                     , 2007, 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 and sold by the Franchisor (“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 confections made

 

 

in the Store, including caramel-covered apples and candy-covered apples (“Store Candy”) prepared in
accordance with recipes and processes 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. Smaller Stores,
regardless of their configuration, are referred to as “Kiosks” or “Kiosk Stores” in this Agreement
and all references to “Stores” shall be deemed to 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 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

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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 5.8 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 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.

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 or if the Franchisee relocates its Store at any time during the term
of this Agreement, the Franchisee shall pay the Franchisor $2,500 for the Franchisor’s review and
approval of the new Store design.

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

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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.

5.5. Electronic Communications. The Franchisee shall obtain and maintain computer
hardware, software and an Internet connection meeting the Franchisor’s standards and specifications
as they may exist from time to time. The Franchisee agrees that the Franchisor may assign an
electronic mail address to the Franchisee and the Franchisee agrees to use such address to access
messages and information posted by the Franchisor and other ROCKY MOUNTAIN CHOCOLATE FACTORY
franchise owners. The Franchisor may post information about the Franchisee’s Store on the
Franchisor’s intranet system for comparative analysis purposes. The Franchisee agrees to
participate in the Franchisor’s electronic intranet system and to abide by the terms of use
governing it. Information on the Franchisor’s intranet system and the terms of use governing the
Franchisor’s intranet system are deemed to be incorporated into the terms of the Operations Manual
and any violations of the terms of use will be treated as a violation of the rules governing the
Operations Manual.

5.6. 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 5.6 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

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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.

5.7. Anti-Terrorism Representation. The Franchisee represents to the Franchisor that it
and all persons or entities holding any legal or beneficial interest whatsoever in the Franchisee
are not included in, owned by, controlled by, acting for or on behalf of, providing assistance,
support, sponsorship, or services of any kind to, or otherwise associated with any of the persons
or entities referred to or described in Executive Order 13224-Blocking Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, as amended.

5.8. 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 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,

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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
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

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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 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.

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          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 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

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     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
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.

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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.

          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.

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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 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 certain 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

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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 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.

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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 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, implementing and administering gift card and customer
loyalty card programs, 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 Franchisee may utilize such services, if they are offered,
at the

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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 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

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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.

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.

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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 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,

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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.

14.9. Non-Disparagement. The Franchisee agrees that it shall not take any action or make
any statements to any third parties that would constitute a criticism, denigration or disparagement
of the Franchisor or its Licensed Methods or would tend to be injurious to the reputation or
goodwill of the Franchisor or its Marks, or which in any manner may interfere with the business
affairs or business relations 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

     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.

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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 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 nor purport to do so without
the Franchisor’s prior written consent which may be withheld in the Franchisor’s reasonable
discretion. The Franchisee acknowledges that prior to approving any transfer, the Franchisor may
impose reasonable conditions on the Franchisee and its purported transferee including but not
limited to those conditions listed in Section 16.2. 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 ownership of the
Franchisee entity; (3) the Store governed by this Agreement; or (4) all or a substantial portion of
the assets of the Store. The term “transfer” shall include an assignment, sale, gift or other
disposition, including those transfers described in Sections 16.5 and 16.7 and
those resulting from a divorce, insolvency, corporate or partnership dissolution proceeding,
merger, change of control, operation of law or, in the event of the death of the Franchisee, or an
owner of the Franchisee by will, declaration of or transfer in trust or under the laws of intestate
succession. For the purposes of this Article 16, “change of control” of a Franchisee that
is an entity shall mean a transfer, new issuance or assignment of 25% or more of the Franchisee’s
beneficial equity ownership interests.

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:

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     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;

     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.

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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 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,

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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.

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 sentence, but
notifies the Franchisor of its

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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 22.13, 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 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

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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;

     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

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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:

     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

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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
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;

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     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.

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

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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:

     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 with either of the following attributes: (i) a business deriving a total of
10% or more of its gross receipts from the sale, processing or manufacturing of one or a
combination of any of the following: boxed chocolate candies; or products which are the same as or
substantially similar to Store Candy; or products made with recipes, or processes, included in the
Operations Manual; or (ii) a business devoting a total of 10% or more of its retail display space
to one or a combination of the following: boxed chocolate candies; or products which are the same
as or substantially similar to Store Candy; or products made with

27

 

recipes, or processes, included in the Operations Manual; 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.

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.

28

 

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, 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

29

 

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.

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.

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

30

 

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:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Bryan J. Merryman, Chief Operating Officer
	 
	 	 	 	 
	 

	 	 	 	FRANCHISEE:
	 
	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	Individually
	 
	 	 	 	 
	 

	 	 	 	AND:
	 

	 	 	 	(if a corporation or partnership)
	 
	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 
	 	 

31

 

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 inSection 4.1 of the Agreement, shall be: $                    .

     Fully executed this ___day of                     , 2007.

	 	 	 	 	 
	 

	 	ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Bryan J. Merryman, Chief Operating Officer
	 	 
	 
	 	 	 	 
	 

	 	FRANCHISEE:	 	 
	 
	 
	 	 	 	 
	 

	 	 

Individually
	 	 
	 
	 	 	 	 
	 

	 	AND:	 	 
	 
	 
	 	 	 	 
	 

	 	 

Company Name
	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

 

 

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

 

 

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:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

Bryan J. Merryman, Chief Operating Officer
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	FRANCHISEE:	 	 
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

Individually
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	AND:	 	 
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 

 

 

EXHIBIT V

TO THE FRANCHISE AGREEMENT

PERMIT, LICENSE AND CONSTRUCTION CERTIFICATE

     Franchisor and Franchisee are parties to a Franchise Agreement dated                     , 2007 for
the development and operation of ROCKY MOUNTAIN CHOCOLATE FACTORY Store located at
                                                                           
      (the “Franchised Location”). In accordance with Section 5.6
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:	 	 
	 
	 	 	 	 
	 

	 	 

Company Name
	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

 

 

EXHIBIT VI

TO FRANCHISE AGREEMENT

CONFIDENTIALITY AND NONCOMPETITION AGREEMENT

     AGREEMENT, dated                     , 2007, 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                     , 2007, (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 operating, or granting franchises or licenses to others to
operate, a retail, wholesale, distribution or manufacturing business with either of the following
attributes: (i) a business deriving a total of 10% or more of its gross receipts from the sale,
processing or manufacturing of one or a combination of any of the following: boxed chocolate
candies; or products which are the same as or substantially similar to Store Candy; or products
made with recipes, or processes, included in the

 

 

Operations Manual; or (ii) a business devoting a total of 10% or more of its retail display space to one or a combination of the following: boxed chocolate candies; or products which are the same as or
substantially similar to Store Candy; or products made with recipes, or processes, included in the
Operations Manual.

     (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.	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

2

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