Document:

exv4w1

 

EXHIBIT 4.1

	ROCKY MOUNTAIN CHOCOLATE FACTORY SEE REVERSE
FOR CERTAIN DEFINITION

	incorporated under the laws of the state of colorado
COMMON STOCK
CUSIP 774678 40 3

	SEE REVERSE FOR CERTAIN DEFINITIONS

	THIS CERTIFIES THAT S P E C I M E N

	Is The Owner of

	FULLY PAID AND NON-ASSESSABLE SHARES OF $.03 PAR VALUE COMMON
STOCK OF ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

	transferable only on the books of the Corporation by the holder hereof, in person or by
attorney upon surrender of this certificate properly endorsed. This certificate and the
            shares represented hereby are issued and shall be held subject to all the provisions of the
Corporation’s Articles of Incorporation, as amended, to all of which the holder by acceptance
hereof assents. This certificate is not valid until countersigned by the Transfer Agent and
Registrar.

	WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly
authorized officers.

	Dated:

	SECRETARY

	PRESIDENT
[SEAL]

 

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

     The Corporation will furnish without charge to each stockholder who so requests the
Corporation’s Articles of Incorporation, as amended, and the Statement of Resolution Establishing
Series of Shares of $1.00 Cumulative Convertible Preferred Stock, which set forth the designations
and amounts, and the voting powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, in respect of each class of stock and series thereof. Such request may be
made to the Corporation or the Transfer Agent.

     Keep this certificate in a safe place. If it is lost, stolen or destroyed the Corporation may
require a bond of indemnity as a condition to the issuance of a replacement certificate.

     This certificate also evidences and entitles the holder hereof to certain rights as set forth
in a Rights Agreement dated as of May 18, 1999, as it may be amended from time to time (the
“Rights Agreement”), between Rocky Mountain Chocolate Factory, Inc. and American Securities
Transfer & Trust, Inc., as Rights Agent, the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of Rocky Mountain
Chocolate Factory, Inc. Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be evidenced by this
certificate. Rocky Mountain Chocolate Factory, Inc. will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt of a written request therefor. Under
certain circumstances, as set forth in the Rights Agreement, Rights beneficially owned by an
Acquiring Person or its Affiliates or Associates (as such terms are defined in the Rights
Agreement) and by any subsequent holder of such Rights are null and void and nontransferable.

     The following abbreviations when used in the inscription on the face of this certificate,
shall be construed as though they were written out in full according to applicable laws or
regulations:

	 	 	 	 	 	 	 	 	 
	 	 	TEN COM	 	-as tenants in common	 	UNIF GIFT MIN ACT-                      Custodian
                    
	 

	 	TEN ENT
	 	-as tenants by the entireties
	 	                (Cust)
	 	(Minor)
	 	 	JT TEN	 	-as joint tenants with right of	 	under Uniform Gifts to Minors
	 	 	 	 	  survivorship and not as tenants	 	Act
                                        

	 

	 	 	 	   in common
	 	                (State)	 	 

Additional abbreviations may also be used though not in the above list.

 

 

For Value Received,   
                
               
               
               
                
  hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

	 	 	 	 	 	 
	 	 

	 	 	 	 
	 	 

	 
	 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE. OF ASSIGNEE)

	 

	 

	 

	 

	 

      
               
                
               
               
               
                
               
               
               
               
               
               
            Shares
of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute
and appoint

      
               
                
               
               
               
                
               
               
               
                
               
               
            attorney-in-fact
to transfer the said stock on the books of the within-named Corporation, with full power of substitution in the premises.

Dated     
                                        
                    

	 	 	 	 	 
	 
	 	 	 	 
	 	 	 

	 
	 	 	 	 
	 	 	 

	 

	 	NOTICE:
	 	the signature(s) to this assignment must correspond with the name(s) as
written upon the face of the certificate in every particular, without alteration or enlargement or any change whatsoever

Signature(s) Guaranteed:exv10w1

 

EXHIBIT 10.1

FORM OF EMPLOYMENT AGREEMENT

     This Restated Employment Agreement (“Agreement”), dated as of
                    , 1999 is between Rocky Mountain Chocolate Factory, Inc., a Colorado corporation
 (“Employer”), and
                     (“Employee”).

R E C I T A L S:

     A. Employee is employed by Employer, and Employer and Employee have entered into a written
agreement dated as of April 8, 1998 (the “Prior Agreement”), to specify the terms and conditions of
Employee’s employment with Employer.

     B. Employer and Employee desire to replace the Prior Agreement with this Agreement.

     C. Employer considers the maintenance of a sound management team essential to protecting and
enhancing its best interests and those of its stockholders, and Employee is a key executive of
Employer and an integral member of its management team.

     NOW, THEREFORE, in consideration of Employee’s past and future
employment with Employer and other good and valuable consideration, the parties agree as follows:

     SECTION 1. Employment. Employer hereby employs Employee, and Employee hereby accepts
employment, upon the terms and subject to the conditions hereinafter set forth.

     SECTION 2. Duties. Employee shall be employed as
                                        
, or such other position to which he may be appointed by the Board of
Directors. Employee agrees to devote his full time and best efforts to the performance of the
duties attendant to his executive position with Employer. Such duties shall include, but not be
limited to, those set forth on Exhibit A hereto.

     SECTION 3. Term. The initial term of employment of Employee hereunder shall commence on the
date of this Agreement (the “Commencement Date”) and continue until                     , 2000, unless earlier
terminated pursuant to Section 6 or Section 10. The term of employment of Employee hereunder will
be automatically extended on a month-to-month basis after the end of the initial term unless either
Employer or Employee shall give the other written notice of its election not to renew this
Agreement at least 30 days prior to the end of the initial one-year term or at least 20 days prior
to the end of any calendar month thereafter.

     SECTION 4. Compensation and Benefits. In consideration for the services of Employee hereunder,
Employer shall compensate Employee as follows:

     (a) Base Salary. Until the termination of Employee’s employment hereunder, Employer shall pay
Employee, semi-monthly in arrears, a base salary at an annual rate of not less than
$                    
(as it may be increased from time to time, the “Base Salary”). The Base
Salary as then in effect may not be decreased at any time during the term of Employee’s employment
hereunder and shall be reviewed annually by Employer. Any increase in the Base Salary shall be in
the sole discretion of the Compensation Committee of the Board of Directors of the Company.

     (b) Management Incentive Bonus. Employee shall be eligible to receive from Employer such
annual incentive bonuses as may be determined by the Compensation

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Committee of the Board of Directors or as may be provided in incentive bonus plans adopted from
time to time by Employer.

     (c) Vacation. Employee shall be entitled to 10 days of paid vacation per year at the
reasonable and mutual convenience of Employer and Employee. Unless otherwise approved by the
Compensation Committee of the Board of Directors of the Company, accrued vacation not taken in any
calendar year shall not be carried forward or used in any subsequent calendar year.

     (d) Insurance Benefits. Employer shall provide accident, health, dental, disability and life
insurance for Employee under the group accident, health, dental, disability and life insurance
plans maintained by Employer for its full-time, salaried employees.

     SECTION 5. Expenses. The parties anticipate that in connection with the services to be
performed by Employee pursuant to the terms of this Agreement, Employee will be required to make
payments for travel, entertainment of business associates and similar expenses. Employer shall
reimburse Employee for all reasonable expenses of types authorized by Employer and incurred by
Employee in the performance of his duties hereunder. Employee shall comply with such budget
limitations and approval and reporting requirements with respect to expenses as Employer may
establish from time to time.

     SECTION 6. Termination.

     (a) General. Employee’s employment hereunder shall commence on the Commencement Date and
continue until the end of the term specified in Section 3, except that the employment of Employee
hereunder shall terminate prior to such time in accordance with the following:

     (i) Death or Disability. Upon the death of Employee during the term of his employment
hereunder or, at the option of Employer, in the event of Employee’s Disability, upon 30 day’
notice to Employee.

     (ii) For Cause. For “Cause” immediately upon written notice by Employer to Employee. A
termination shall be for Cause if

     (1) Employee commits a criminal act involving moral turpitude;

     (2) Employee commits a material breach of any of the covenants, terms and
provisions hereof or an act of gross negligence or willful misconduct resulting in a
material loss or detriment to Employer; or

     (3) Employee fails on a continuing basis, in the judgment of the President of
Employer, adequately to perform his duties as an officer of Employer, and such
failure is not cured within 20 days after he receives notice of such failure from
the President of Employer.

     (iii) Without Cause. Without Cause upon notice by Employer to Employee. Without
limiting the foregoing, for purposes of Section 6(b)(ii) Employee’s employment hereunder
shall be deemed to have been terminated by Employer without Cause pursuant to this Section
6(a)(iii) (a) upon the expiration of the term of Employee’s employment specified in
Section 3, if Employer has given the notice of nonrenewal contemplated by the last
sentence of Section 3, or (b) if Employee’s employment is Constructively Terminated by
Employer.

          (b) Severance Pay and Bonuses.

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     (i) Termination Upon Death or Disability. Employee shall not be entitled to any
severance pay or other compensation upon termination of his employment hereunder pursuant
to Section 6(a)(i) except for the following (which shall be paid promptly after
termination, except as specified in subsection (4) below):

     (1) his Base Salary accrued but unpaid as of the date of termination;

     (2) unpaid expense reimbursements under Section 5 for expenses incurred in
accordance with the terms hereof prior to termination;

     (3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer’s policies and procedures
then in effect; and

     (4) any bonus to which Employee would have been entitled for the Bonus
Period if he were still employed hereunder on the last day of the Bonus Period.
Any such bonus shall be paid to Employee (or to his estate, as the case may be)
at the same time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus Period. In the
event the determination of Employee’s bonus in respect of the Bonus Period
involves any subjective assessment, such assessment shall be made in a manner
most favorable to Employee. The term “Bonus Period” means the full fiscal year
or other applicable bonus period during which Employee’s employment hereunder
was terminated (or during which Employee became Disabled, in the event of a
termination for Disability).

     (ii) Termination Without Cause, Separation Payments. In the event Employee’s
employment hereunder is terminated pursuant to Section 6(a)(iii), Employer shall pay
Employee Separation Payments as Employee’s sole remedy in connection with such
termination. “Separation Payments” are payments made at the monthly rate of Employee’s
Base Salary in effect immediately preceding the date of termination. Separation Payments
shall be made for 12 months after the date of termination (the “Separation Payment
Period”) and shall be paid by Employer in equal monthly payments in arrears. Separation
Payments shall be reduced by the amount of any personal services income earned by Employee
from other sources during the Separation Payment Period. Separation Payments shall be made
for the number of months specified above without regard to the number of months remaining
in the term of this Agreement. Notwithstanding the foregoing, Employer’s obligation to
make, and Employee’s right to receive, Separation Payments shall terminate immediately
upon any violation by Employee of any covenant contained in Section 8 or 9 hereof.
Employer shall also promptly pay Employee the following:

     (1) his Base Salary accrued but unpaid as of the date of termination;

     (2) unpaid expense reimbursements under Section 5 for expenses incurred in
accordance with the terms hereof prior to termination; and

     (3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer’s policies and procedures
then in effect.

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This Section 6(b)(ii) is subject to the provisions of Section 10(j) dealing with the
coordination of payments in the event of a Change In Control.

     (iii) Termination For Cause, Voluntary Termination. Employee shall not be entitled to
Separation Payments or any other severance pay or other compensation upon termination of
his employment hereunder pursuant to Section 6(a)(ii), or upon Employee’s voluntary
termination of his employment hereunder, except for the following (which shall be paid
promptly after termination):

     (1) his Base Salary accrued but unpaid as of the date of termination;

     (2) unpaid expense reimbursements under Section 5 for expenses incurred in
accordance with the terms hereof prior to termination; and

     (3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer’s policies and procedures
then in effect.

     (c) Acceleration of Options. In the event Employee’s employment
hereunder is terminated pursuant to Section 6(a)(iii), all Options granted to Employee under the
Option Plan and outstanding at the time of such termination shall be fully vested and shall become
immediately exercisable upon such termination, and shall thereafter be exercisable by Employee in
accordance with the terms thereof and the applicable provisions of the Plan. The Board of Directors
or the Compensation Committee of the Board of Directors of the Company shall take such action as
shall be necessary to authorize and provide for the foregoing.

     SECTION 7. Inventions; Assignment.

     (a) Inventions Defined. All rights to discoveries, inventions, improvements, designs, work
product and innovations (including without limitation all data and records pertaining thereto) that
relate to the business of Employer, whether or not specifically within Employee’s duties or
responsibilities and whether or not patentable, copyrightable or reduced to writing, that Employee
may discover, invent, create or originate during the term of his employment hereunder or otherwise,
and for a period of six months thereafter, either alone or with others and whether or not during
working hours or by the use of the facilities of Employer (“Inventions”), shall be the exclusive
property of Employer. Employee shall promptly disclose all Inventions to Employer, shall execute at
the request of Employer any assignments or other documents Employer may deem necessary to protect
or perfect its rights therein, and shall assist Employer, at Employer’s expense, in obtaining,
defending and enforcing Employer’s rights therein. Employee hereby appoints Employer as his
attorney-in-fact to execute on his behalf any assignments or other documents deemed necessary by
Employer to protect or perfect its rights to any Inventions.

     (b) Covenant to Assign and Cooperate. Without limiting the generality of the foregoing,
Employee shall assign and transfer, and does hereby assign and transfer, to Employer the world-wide
right, title and interest of Employee in the Inventions. Employee agrees that Employer may file
copyright registrations and apply for and receive patents (including without limitation Letters
Patent in the United States) for the Inventions in Employer’s name in such countries as
may be determined solely by Employer. Employee shall communicate to Employer all facts known to
Employee relating to the Inventions and shall cooperate with Employer’s reasonable requests in
connection with vesting title to the Inventions and related copyrights and patents exclusively in
Employer and in connection with

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obtaining, maintaining, protecting and enforcing Employer’s exclusive copyrights and patent rights
in the Inventions.

     (c) Successors and Assigns. Employee’s obligations under this Section 7 shall inure to the
benefit of Employer and its successors and assigns and shall survive the expiration of the term of
this Agreement for such time as may be necessary to protect the proprietary rights of Employer in
the Inventions.

     (d) Consideration and Expenses. Employee shall perform his obligations under this Section 7 at
Employer’s expense, but without any additional or special compensation therefor.

     SECTION 8. Confidential Information.

     (a) Acknowledgment of Proprietary Interest. Employee acknowledges that all Confidential
Information is a valuable, special and unique asset of Employer’s business, access to and knowledge
of which are essential to the performance of Employee’s duties hereunder. Employee acknowledges the
proprietary interest of Employer in all Confidential Information. Employee agrees that all
Confidential Information learned by Employee during his employment with Employer or otherwise,
whether developed by Employee alone or in conjunction with others or otherwise, is and shall remain
the exclusive property of Employer. Employee further acknowledges and agrees that his disclosure of
any Confidential Information will result in irreparable injury and damage to Employer.

     (b) Confidential Information Defined. “Confidential Information” means all confidential and
proprietary information of Employer, written, oral or computerized, as it may exist from time to
time, including without limitation(i) information derived from reports, investigations,
experiments, research and work in progress, (ii) methods of operation, (iii) market data,(iv)
proprietary computer programs and codes, (v) drawings, designs, plans and proposals, (vi) marketing
and sales programs, (vii) franchisee and supplier lists and any other information about Employer’s
relationships with others, (viii) historical financial information and financial projections, (ix)
pricing, product rotation and similar formulae and policies, (x) all other concepts, ideas,
materials and information prepared or performed for or by Employer and (xi) all information related
to the business, products, purchases or sales of Employer or any of its franchisees, suppliers and
customers, other than information that is made publicly available by Employer.

     (c) Covenant Not To Divulge Confidential Information. Employer is entitled to prevent the
disclosure of Confidential Information. As a portion of the consideration for the employment of
Employee and for the compensation being paid to Employee by Employer, Employee agrees at all times
during the term of his employment hereunder and thereafter to hold in strict confidence and not to
disclose or allow to be disclosed to any person, firm or corporation, other than to persons engaged
by Employer to further the business of Employer, and not to use except in the pursuit of the
business of Employer, the Confidential Information, without the prior written consent of Employer.
This Section 8 shall survive and continue in full force and effect in accordance with its terms
after, and will not be deemed to be terminated by, any termination of this Agreement or of
Employee’s employment with Employer for any reason.

     (d) Return of Materials at Termination. In the event of any termination or cessation of his
employment with Employer for any reason, Employee shall promptly deliver to Employer all property
of Employer, including without limitation all documents, data and other information containing,
derived from or otherwise pertaining to Confidential Information. Employee shall not take or retain
any property of Employer, including without limitation any documents, data or other information, or
any reproduction or excerpt thereof, containing, derived from or pertaining to any Confidential
Information. The obligation of confidentiality set

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forth in this Section 8 shall continue notwithstanding Employee’s delivery of such documents, data
and information to Employer.

     SECTION 9. Noncompetition.

     (a) Covenant Not To Compete. Employee acknowledges that during the term of his employment
Employer has agreed to provide to him, and he shall receive from Employer, special training and
knowledge, including without limitation the Confidential Information. Employee acknowledges that
the Confidential Information is valuable to Employer and, therefore, its protection and maintenance
constitutes a legitimate interest to be protected by Employer by the enforcement of the covenant
not to compete contained in this Section 9. Employee also acknowledges that such covenant not to
compete is ancillary to other enforceable agreements of the parties, including without limitation
the agreements regarding Confidential Information in Section 8 and the agreements regarding the
payment of Separation Payments and other severance pay and of the Termination Payment in Section 6
and Section 10, respectively. Therefore, during the term of this Agreement and for a period of two
years (unless extended pursuant to the terms of this Section 9) after termination of Employee’s
employment hereunder (including, without limitation, a Triggering Termination as defined in Section
10), Employee shall not directly or indirectly

     (i) engage, alone or as a shareholder, partner, member, manager, director, officer,
employee of or consultant to any other business organization that engages or is planning
to engage, anywhere in the United States or Canada or in any other geographic area in or
with respect to which Employee has any duties or responsibilities during the term of his
employment with Employer, in any business activities that relate to the manufacture or
retail sale of chocolate candy, including but not limited to the sale through franchisees
(the “Designated Industry”); or

     (ii) solicit or encourage any director, officer, employee of or consultant to
Employer to end his relationship with Employer or commence any such relationship with any
competitor of Employer.

     Notwithstanding the foregoing, (1) Employee’s noncompetition obligations hereunder shall not
preclude Employee from owning less than five percent of the voting power or economic interest in
any publicly traded corporation conducting business activities in the Designated Industry and (2)
an entity shall not be deemed to be engaged in the Designated Industry unless its revenue from the
manufacture and/or retail sale of chocolate candy (including sales through franchisees) represents
25% or more of its total revenue for its full fiscal quarter immediately preceding the date of
termination of Employee’s
employment hereunder (or the date of his association with such entity, if earlier) or any of the
eight immediately subsequent fiscal quarters of such entity.

     (b) Extension of Duration; Survival. If Employee violates any covenant contained in this
Section 9, Employer shall not, as a result of such violation or the time involved in obtaining
legal or equitable relief therefor, be deprived of the benefit of the full period of any such
covenant. Accordingly, the covenants of Employee contained in this Section 9 shall be deemed to
have the duration specified in Section 9(a), which period shall be extended by a number of days
equal to the sum of (i) the total number of days Employee is in violation of any of the covenants
contained in this Section 9 prior to the commencement of any litigation relating thereto and (ii)
the total number of days the parties are involved in such litigation, through the date of entry by
a court of competent jurisdiction of a final judgment enforcing the covenants of Employee in this
Section 9. This Section 9 shall survive and continue in full force and effect in accordance with
its terms after, and will not be deemed to be terminated by, any termination of this Agreement or
of Employee’s employment with Employer for any reason.

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     (c) Severability. If at any time the provisions of this Section 9 are determined to be invalid
or unenforceable by reason of being vague or unreasonable as to area, duration or scope of
activity, this Section 9 shall be considered divisible and shall be immediately amended to only
such area, duration and scope of activity as shall be determined to be reasonable and enforceable
by the court or other body having jurisdiction over the matter, and Employee agrees that this
Section 9 as so amended shall be valid and binding as though any invalid or unenforceable provision
had not been included herein.

     SECTION 10. Termination of Employment in Connection With a Change In Control.

     (a) Applicability. Employer recognizes that the possibility of a Change In Control of Employer
may result in the departure or distraction of management to the detriment of Employer and its
stockholders, and Employer has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of key members of Employer’s management team,
including Employee, to their assigned duties. Accordingly, the provisions of this Section 10 shall
apply in lieu of all conflicting provisions in this Agreement in the event Employee’s employment
with Employer is terminated in a Triggering Termination. Each of the following events constitutes a
“Triggering Termination” when Employee’s employment with Employer is:

     (i) terminated by Employer or Employee for any reason other than death, or for no
reason, or terminated upon the expiration of Employee’s initial or any renewal term of
employment specified in Section 3, within the 12-month period following a Change In
Control;

     (ii) terminated by Employer for any reason other than the commission of a felony by
Employee, or terminated upon the expiration of Employee’s initial or any renewal term of
employment specified in Section 3, during an Applicable Period;

     (iii) Constructively Terminated by Employer during an Applicable Period; or

     (iv) terminated in an Agreement Termination pursuant to this Section 10(a)(iv).

     (1) An “Agreement Termination” shall occur when Employee’s employment
hereunder is terminated by Employee in anticipation of a Change In Control to
the extent that his continued employment with Employer is not pursuant to the
terms of this Agreement (other than as provided herein with respect to an
Agreement Termination) and thereafter is only on an at-will basis. Employee’s
determination to effect an Agreement Termination must be based on a good faith
judgment of Employee and any two or more Concurring Persons, in light of the
circumstances as then known or understood by them, that a Change In Control is
going to occur within five business days, but it is not required as a condition
to such good faith judgment that:

     (I) Employee or any Concurring Person conduct any investigation
or consult with any other person or group (except only for Employee’s
requirement to obtain the concurrence or approval of Concurring
Persons);

     (II) no condition remains to be satisfied before the Change In
Control can occur; or

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     (III) the Board of Directors of Employer has taken any action to
approve or facilitate the Change In Control.

     (2) The concurrence or approval of the Concurring Persons is limited to the
occurrence and timing of the Change In Control and is not made regarding the
propriety of Employee’s effecting an Agreement Termination.

     (3) In consideration of the right to effect an Agreement Termination and
receive a Termination Payment and Gross Up Payment prior to a Change In Control,
Employee agrees that, upon (and notwithstanding) his exercise of such right and
the payment to him of the Termination Payment and Gross Up Payment, he shall
continue, without interruption until such Change In Control occurs (unless his
at-will employment with Employer is sooner terminated or Constructively
Terminated by Employer, as described in Sections 10(a)(ii) and (iii), or
Employee dies or his employment with Employer is terminated due to Disability),
to devote his full time and best efforts as an at-will employee of Employer to
the performance of the same duties that he performed for Employer, holding the
same office or position with Employer as he held before the Agreement
Termination, but without the right to any compensation from Employer for such
continued performance (except as provided below in Section 10(a)(iv)(4)(I)).
Employee’s obligation set forth in the preceding sentence is referred to herein
as the “Continued Performance Obligation.”

     (4) Employee shall have no obligation to comply with Section 8(d) until he
has no further Continued Performance Obligation. If the anticipated Change In
Control does not occur within ten business days after Employee’s receipt of a
Termination Payment and Gross Up Payment following the exercise of his right to
effect an Agreement Termination, then

     (I) such Agreement Termination shall be void and ineffective, and
Employee’s employment under all the terms of this Agreement (including
without limitation his compensation and benefits, duties, position and
rights regarding any other actual or expected Change In Control) shall
be deemed to have continued without interruption; and

     (II) Employee shall, and Employee hereby agrees to, repay to
Employer within two business days the full Termination Payment and
Gross Up Payment received by Employee (together with interest, if any,
actually earned on the funds while in Employee’s control).

     (5) If Employee fails to satisfy his Continued Performance Obligation, and
such failure continues for more than one business day after receipt by Employee
of written otice from Employer of such failure, then

     (I) such Agreement Termination shall be void and ineffective, and
Employee shall be deemed to have voluntarily terminated his employment
hereunder before a Change In Control; and

     (II) Employee shall repay to Employer within one business day
after his receipt of such notice the full Termination Payment and
Gross Up Payment received by

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Employee (together with interest, if any, actually earned on the funds
while in Employee’s control).

     (b) Termination Payment.

     (i) Amount.

     (1) Upon the occurrence of a Triggering Termination, Employer shall pay Employee a
lump sum payment in cash equal to 2.99 times the sum of the following items:

     (I) Employee’s annualized base compensation determined by using the highest
annual base compensation rate in effect at any time during Employee’s employment
with Employer; and

     (II) two times the Target Bonus that would be payable to Employee by
Employer for the bonus period in which the Change In Control occurred; provided
that the amount determined under this Section 10(b)(i)(l)(II) shall not be less
than 25% of the amount determined under Section 10(b)(i)(l)(I);

     (2) The term “Termination Payment” shall include the amounts described above in
Section 10(b)(i)(1) plus the following amounts described in this Section 10(b)(i)(2):

     (I) Employee’s Base Salary accrued but unpaid as of the date of the
Triggering Termination;

     (II) reimbursement under Section 5 for unpaid expenses incurred in the
performance of his duties hereunder prior to the date of the Triggering
Termination;

     (III) any other benefit accrued but unpaid as of the date of the Triggering
Termination; and

     (IV) $18,000, which represents the estimated cost to Employee of obtaining
accident, health, dental, disability and life insurance coverage for the
18-month period following the expiration of his continuation (COBRA) rights;
provided that this Section 10(b)(i)(2)(IV) shall be applied without regard to,
and the amount payable under this Section 10(b)(i)(2)(IV) is in addition to, any
continuation (COBRA) rights or conversion rights under any plan provided by
Employer, which rights are not affected by any provision hereof.

     (ii) Time for Payment; Interest. Employer shall pay the Termination Payment to
Employee concurrently with the Triggering Termination or, if the Triggering Termination
occurs before the Change In Control, concurrently with the Change In Control. Employer’s
obligation to pay to Employee any amounts under this Section 10, including without
limitation the Termination Payment and any Gross Up Payment due under Section 10(d), shall
bear interest at the rate of 18% per annum or, if different, the maximum rate allowed by
law until paid by Employer, and all accrued and unpaid interest shall bear interest at the
same rate, all of which interest shall be compounded daily.

     (iii) Payment Authority. Any officer of Employer (other than Employee) is authorized
to issue and execute a check, initiate a wire transfer or otherwise effect payment on
behalf of Employer to satisfy Employer’s obligations to pay all amounts due to Employee
under this Section 10.

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     (iv) Termination. Employer’s obligation to pay the Termination Payment shall not be
affected by the manner in which Employee’s employment hereunder is terminated. Without
limiting the generality of the foregoing, Employer shall be obligated to pay the
Termination Payment and any Gross Up Payment regardless of whether Employee’s termination
of employment is voluntary, involuntary, for cause, without cause, in violation of any
employment agreement or other agreement in effect at the time of the Change In Control
(except as provided in Section 10(a)(iv)(5)(I) with respect to Employee’s failure to
satisfy his Continued Performance Obligation in the event of an Agreement Termination) or
due to Employee’s retirement or Disability. Employee’s notice of his termination of
employment hereunder in connection with a Change In Control may be made by any means and
to any officer of Employer (other than Employee).

     (c) Change In Control. A “Change In Control” means a change in control of Employer after the
date of this Agreement in any one of the following circumstances: (i) there shall have occurred an
event that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A (or in response to any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not Employer is then
subject to such reporting requirement; (ii) any “person” (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) (an “Acquiring Person”) shall have become the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Employer
representing 20% or more of the combined voting power of Employer’s then outstanding voting
securities (a “Share Acquisition”); (iii) Employer is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a consequence of which members of the Board
of Directors in office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors thereafter; or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of Directors (including for
this purpose any new director whose election or nomination for election by Employer’s stockholders
was approved by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to constitute at least a majority
of the Board of Directors; provided, however, that an event described in clause (i) or (ii) shall
not be deemed a Change In Control if such event is approved, prior to its occurrence or within 60
days thereafter by at least two-thirds of the members of the Board of Directors in office
immediately prior to such occurrence. In addition to the foregoing, a Change In Control shall be
deemed to have occurred if, after the occurrence of a Share Acquisition that has been approved by a
two-thirds vote of the Board as contemplated in the proviso to the preceding sentence, the
Acquiring Person shall have become the beneficial owner, directly or indirectly, of securities of
Employer representing an additional 5% or more of the combined voting power of Employer’s then
outstanding voting securities (a “Subsequent Share Acquisition”) without the approval prior thereto
or within 60 days thereafter of at least two-thirds of the members of the Board of Directors who
were in office immediately prior to such Subsequent Share Acquisition and were not appointed,
nominated or recommended by, and do not otherwise represent the interests of, the Acquiring Person
on the Board. Each subsequent acquisition by an Acquiring Person of securities of Employer
representing an additional 5% or more of the combined voting power of Employer’s then outstanding
voting securities shall also constitute a Subsequent Share Acquisition (and a Change In Control
unless approved as contemplated by the preceding sentence) if the approvals contemplated by this
paragraph were given with respect to the initial Share Acquisition and all prior Subsequent Share
Acquisitions by such Acquiring Person. The Board approvals contemplated by the two preceding
sentences and by the proviso to the first sentence of this paragraph may contain such conditions as
the members of the Board granting such approval may deem advisable and appropriate, the subsequent
failure or violation of which shall result in the rescission of such approval and cause a Change In
Control to be deemed to have occurred as of the date of the Share Acquisition or Subsequent Share
Acquisition, as the case may be. Notwithstanding

10

 

the foregoing, a Change In Control shall not be deemed to have occurred for purposes of clause (ii)
of the first sentence of this paragraph with respect to any Acquiring Person meeting the
requirements of clauses (i) and (ii) of Rule 13d-l(b)(1) promulgated under the Exchange Act.

     (d) Gross Up Payment.

     (i) Excess Parachute Payment. If Employee incurs the tax (the “Excise Tax”) imposed
by Section 4999 of the Code on “excess parachute payments” within the meaning of Section
280G(b)(1) of the Code as the result of any payments or distributions by Employer to or
for the benefit of Employee (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise) or as a result of the acceleration
of vesting of Options, Restricted Stock or other rights (collectively, the “Payments”), or
if Employee would incur the Excise Tax if the Change In Control satisfied the requirements
of Section 280G(b)(2)(A)(i) of the Code, then without regard to whether the Change In
Control in fact satisfies the requirements of Section 280G(b)(2)(A)(i) of the Code,
Employer shall pay to Employee an amount (the “Gross Up Payment”) such that the net amount
retained by Employee, after deduction of (1) any Excise Tax owed, or that would be owed if
the Change In Control satisfied the requirements of Section 280G(b)(2)(A)(i) of the Code,
upon any Payments (other than payments provided by this Section 10(d)(i)) and (2) any
federal, state and local income and employment taxes owed (together with penalties and
interest) and Excise Tax owed, or that would be owed if the Change In Control satisfied
the requirements of Section 280G(b)(2)(A)(i) of the Code, upon the payments provided by
this Section 10(d)(i), shall be equal to the amount of the Payments (other than payments
provided by this Section 10(d)(i)).

     (ii) Applicable Rates. For purposes of determining the Gross Up Payment amount, Employee
shall be deemed:

     (1) to pay federal income taxes at the highest marginal rate of federal
income taxation applicable to individual taxpayers in the calendar year in which
the Gross Up Payment is made (which rate shall be adjusted as necessary to take
into account the effect of any reduction in deductions, exemptions or credits
otherwise available to Employee had the Gross Up Payment not been received);

     (2) to pay additional employment taxes as a result of the receipt of the
Gross Up Payment in an amount equal to the highest marginal rate of employment
taxes applicable to wages; provided that if any employment tax is applied only
up to a specified maximum amount of wages, such limit shall be taken into
account for purposes of such calculation; and

     (3)to pay state and local income taxes at the highest marginal rates of
taxation in the state and locality of Employee’s residence on the date of the
Triggering Termination, net of the maximum reduction in federal income taxes
that could be obtained from deduction of such state and local taxes.

     (iii) Determination of Gross Up Payment Amount. The determination of the Gross Up
Payment amount shall be made, at Employer’s expense, by Grant Thornton LLP or another
nationally recognized public accounting firm selected by Employee (in either case, the
“Accountants”). If the Excise Tax amount payable by Employee, based upon a
“Determination,” is different from the Excise Tax amount computed by the Accountants for
purposes of determining the Gross Up Payment amount, then appropriate adjustments to the
Gross Up Payment amount shall be made in the manner provided in Section 10(d)(iv). For
purposes of determining the Gross Up Payment amount

11

 

prior to any Determination of the Excise Tax amount, the following assumptions shall be
utilized:

     (1) that portion of the Termination Payment that is attributable to the
items described in Sections 10(b)(i)(1)(I), (II), (III) and Section
10(b)(i)(2)(IV), and the Gross Up Payment, shall be treated as Parachute
Payments;

     (2) no portion of any payment made pursuant to Sections 10(b)(i)(2)(I),
(II) or (III) or Section 11(c) shall be treated as a Parachute Payment;

     (3) the amount payable to Employee pursuant to Section 10(l) shall be

     (I) deemed to be equal to 15% of the amount determined under
Section 10(b)(i)(1)(I);

     (II) deemed to have been paid immediately following the Change In
Control;

     (III) deemed to include the additional amount payable under
Section 10(l), if any, for additional taxes payable by Employee as a
result ofxthe receipt of the payment described in Section 10(l); and

     (IV) treated 100% as a Parachute Payment;

     (4) it shall be assumed that all of the payments that could potentially be
made to Employee pursuant to the Consulting Agreement shall be made, and all of
such payments shall be treated as Parachute Payments; provided that nothing in
this Section 10(d)(iii)(4) shall limit or reduce the payment of any amount
similar to the Gross Up Payment under the Consulting Agreement;

     (5) the “ascertainable fair market value” (as set forth in Prop. Treas.
Reg. Section 1.280G-1, Q&A 13) of the Options, the vesting of which was
accelerated by the Change In Control as provided in the Option Plan and as
further provided in Section 10(j), shall be equal to the product of (I) and(II)
as set forth below:

     (I) the number of shares covered by such Options; and

     (II) the difference between:

     a. the fair market value per share of the underlying
common stock as of the date of the Change In Control; and

     b. the exercise price per share of stock subject to
such Options; and

     (6) for purposes of applying the rules set forth in Prop. Treas. Reg.
Section 1.280G-1, Q&A 24(c) to a payment described in Prop. Treas. Reg. Section
1.280G-1, Q&A 24(b), the amount reflecting the lapse of the obligation to
continue performing services shall be equal to the minimum amount allowed for
such payment as set forth in Prop. Treas. Reg. Section 1.280G-1, Q&A 24(c)(2)
(or if Prop. Treas. Reg. Section 1.280G-1 has been superseded by temporary or
final regulations, the minimum amount

12

 

provided for in any temporary or final regulations that supersede Prop. Treas.
Reg. Section 1.280G-1 and that are applicable to the Termination Payment, Gross
Up Payment, or both).

     (iv) Time For Payment. Employer shall pay the estimated Gross Up Payment amount in
cash to Employee concurrent with the payment of the Termination Payment. Employee and
Employer agree to reasonably cooperate in the determination of the actual Gross Up Payment
amount. Further, Employee and Employer agree to make such adjustments to the estimated
Gross Up Payment amount as may be necessary to equal the actual Gross Up Payment amount
based upon a Determination, which in the case of Employee shall refer to refunds of prior
overpayments and in the case of Employer shall refer to makeup of prior underpayments.

     (e) Term. Notwithstanding the provisions of Section 3, if a Change In Control occurs prior to
the date on which Employee’s employment hereunder is terminated pursuant to Section 3, Sections 10,
11 and 12 shall continue in effect until the date of termination pursuant to Section 3 or the date
that is 12 months after the date of the Change In Control, whichever is later.

     (f) Consulting Agreement. To preserve a sound and vital management team for the Company during
the period immediately following a Change In Control, Employee agrees that, in the event of a
Triggering Termination, Employee shall enter into a Consulting Agreement (the “Consulting
Agreement”) in the form attached hereto as Exhibit B if requested by the Board of Directors of the
Company within 30 days after the Change In Control. If Employee breaches his obligation under the
preceding sentence by declining to enter into a Consulting Agreement, as liquidated damages for
such breach and not as a penalty, Employee shall pay to Employer the amount that Employee otherwise
would have received as compensation from Employer under the Consulting Agreement assuming Employee
fully performed his obligations thereunder.

     (g) No Duty to Mitigate Damages. Employee’s rights and privileges under this Section 10 shall
be considered severance pay in consideration of his past service and his continued service to
Employer from the Commencement Date, and his entitlement thereto shall neither be governed by any
duty to mitigate his damages by seeking further employment nor offset by any compensation that he
may receive from future employment.

     (h) No Right To Continued Employment. This Section 10 shall not give
Employee any right of continued employment or any right to compensation or benefits from Employer
except the rights specifically stated herein.

     (i) Exercise of Stock Options. Employee may hold options (“Options”)issued under the Option
Plan that become immediately exercisable upon a Change In Control. Employer shall take no action to
facilitate a transaction involving a Change In Control unless it has taken such action as may be
necessary to ensure that Employee has the opportunity to exercise all Options he may then hold, at
a time and in a manner that shall give Employee the opportunity to sell or exchange the securities
of Employer acquired upon exercise of his Options, if any (the “Acquired Securities”), at the
earliest time and in the most advantageous manner any holder of the same class of securities as the
Acquired Securities is able to sell or exchange such securities in connection with such Change In
Control. Employer acknowledges that its covenants in the preceding sentence (the “Covenants”) are
reasonable and necessary in order to protect the legitimate interests of Employer in maintaining
Employee as one of its employees and that any violation of the Covenants by Employer would result
in irreparable injuries to Employee, and Employer therefore acknowledges that in the event of any
violation of the Covenants by Employer or its directors, officers or employees, or any of their
respective agents, Employee shall be entitled to obtain from any court of competent jurisdiction
temporary, preliminary and permanent injunctive relief in order to (i) obtain specific performance
of the Covenants, (ii) obtain specific

13

 

performance of the exercise of his Options and the sale or exchange of the Acquired Securities in
the advantageous manner contemplated above or (iii) prevent violation of the Covenants; provided
that nothing in this Agreement shall be deemed to prejudice Employee’s rights to damages for
violation of the Covenants.

     (j) Coordination With Other Payments.

     (i) After the termination of Employee’s employment hereunder:

     (1) if Employee is entitled to receive Separation Payments; and

     (2) Employee subsequently becomes entitled to receive a Termination
Payment, Gross Up Payment or both, then

     (ii) prior to the disbursement of the Termination Payment and Gross Up Payment:

     (1) the payment date of all unpaid Separation Payments shall be accelerated
to the payment date of the Termination Payment and such Separation Payments
shall be made (in this event, Employer waives any requirement that Employee
reduce the Separation Payments by the amount of any income earned by Employee
thereafter); and

     (2) the Termination Payment shall be reduced by the amount of the
Separation Payments so accelerated and made.

     (k) Outplacement Services. If Employee becomes entitled to receive a Termination Payment under
this Section 10, Employer agrees to reimburse Employee for any outplacement consulting fees and
expenses incurred by Employee during any Applicable Period and during the two-year period following
the Change In Control; provided that the aggregate amount reimbursed by Employer shall not exceed
15% of Employee’s Base Salary in effect immediately prior to the Triggering Termination. In
addition and as to each reimbursement payment, to the extent that any reimbursement under this
Section 10(l) is subject to federal, state or local income taxes, Employer shall pay Employee an
additional amount such that the net amount retained by Employee, after deduction of any federal,
state and local income tax on the reimbursement and such additional amount, shall be equal to the
reimbursement payment. All amounts under this Section 10(l) shall be paid by Employer within 15
days after Employee’s presentation to Employer of any statements of such amounts and thereafter
shall bear interest at the rate of 18% per annum or, if different, the maximum rate allowed by law
until paid by Employer, and all accrued and unpaid interest shall bear interest at the same rate,
all of which interest shall be compounded daily.

     SECTION 11. General.

     (a) Notices. Except as provided in Section 10(b)(iv), all notices and other communications
hereunder shall be in writing or by written telecommunication, and shall be deemed to have been
duly given if delivered personally or if mailed by certified mail, return receipt requested or by
written telecommunication, to the relevant address set forth below, or to such other address as the
recipient of such notice or communication shall
have specified to the other party in accordance with this Section 11(a):

	 	 	 
	If to Employer, to:

	 	with a copy to:
	 
	 	 
	Rocky Mountain Chocolate Factory, Inc.

	 	Thompson & Knight, P.C.
	265 Turner Drive

	 	1700 Pacific Avenue, Suite 3300
	Durango, Colorado 81301

	 	Dallas, Texas 75201
	Attention: President

	 	Attention: Kenn W. Webb

14

 

	 	 	 
	Facsimile Number: (970) 382-7366

	 	Facsimile Number: (214) 969-1751

If to Employee, to:

53 Silver Mountain Road

P. O. Box 3671

Durango, Colorado 81302

     (b) Withholding; No Offset. All payments required to be made to Employee by Employer shall be
subject to the withholding of such amounts, if any, relating to federal, state and local taxes as
may be required by law. No payments under Section 10 shall be subject to offset or reduction
attributable to any amount Employee may owe to Employer or any other person.

     (c) Legal and Accounting Costs. Employer shall pay all attorney’ and accountant’ fees and
costs incurred by Employee as a result of any breach by Employer of its obligations under this
Agreement, including without limitation all such costs incurred in contesting or disputing any
determination made by Employer under Section 10 or in connection with any tax audit or proceeding
to the extent attributable to the application of Section 4999 of the Code to any payment under
Section 10. Reimbursements of such costs shall be made by Employer within 15 days after Employee’s
presentation to Employer of any statements of such costs and thereafter shall bear interest at the
rate of 18% per annum or, if different, the maximum rate allowed by law until paid by Employer, and
all accrued and unpaid interest shall bear interest at the same rate, all of which interest shall
be compounded daily.

     (d) Equitable Remedies. Each of the parties hereto acknowledges and agrees that upon any
breach by Employee of his obligations under any of Sections 7, 8 and 9, Employer shall have no
adequate remedy at law and accordingly shall be entitled to specific performance and other
appropriate injunctive and equitable relief.

     (e) Severability. If any provision of this Agreement is held to be illegal, invalid or
unenforceable, such provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof, and
the remaining provisions hereof shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu
of such illegal, invalid or unenforceable provision, there shall be added automatically as part of
this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

     (f) Waivers. No delay or omission by either party in exercising any
right, power or privilege hereunder shall impair such right, power or privilege, nor shall any
single or partial exercise of any such right, power or privilege preclude any further exercise
thereof or the exercise of any other right, power or privilege.

     (g) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall
be deemed an original, and all of which together shall constitute one and the same instrument.

     (h) Captions. The captions in this Agreement are for convenience of reference only and shall
not limit or otherwise affect any of the terms or provisions hereof.

     (i) Reference to Agreement. Use of the words “herein,” “hereof,” “hereto,” “hereunder” and the
like in this Agreement refer to this Agreement only as a whole and not to any particular section or
subsection of this Agreement, unless otherwise noted.

15

 

     (j) Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties and shall be enforceable by the personal representatives and heirs of Employee and the
successors and assigns of Employer. This Agreement may be assigned by Employer to a legal
successor-in-interest of Employer or to a wholly owned subsidiary to which substantially all the
business and operations of Employer are transferred. If Employee dies while any amounts would still
be payable to him hereunder, such amounts shall be paid to Employee’s estate. This Agreement is not
otherwise assignable by Employee or Employer.

     (k) Entire Agreement. This Agreement contains the entire understanding of the parties, and
supersedes all prior agreements and understandings, relating to the subject matter hereof and may
not be amended except by a written instrument hereafter signed by each of the parties hereto.

     (1) Governing Law. This Agreement and the performance hereof shall be construed and governed
in accordance with the laws of the State of Colorado, without regard to its choice of law
principles.

     (m) Gender and Number. The masculine gender shall be deemed to denote the feminine or neuter
genders, the singular to denote the plural, and the plural to denote the singular, where the
context so permits.

     (n) Assistance in Litigation. During the term of this Agreement and for a period of two years
thereafter, Employee shall, upon reasonable notice, furnish such information and proper assistance
to Employer as may reasonably be required by Employer in connection with any litigation in which
Employer is, or may become, a party and with respect to which Employee’s particular knowledge or
experience would be useful. Employer shall reimburse Employee for all reasonable out-of-pocket
expenses incurred by Employee in rendering such assistance. The provisions of this Section 11(n)
shall continue in effect notwithstanding termination of Employee’s employment hereunder for any
reason.

     (o) Legal Fees. Employer shall pay and be responsible for all legal fees, costs of litigation
and other expenses that Employee may incur as a result of Employer’s failure to perform under this
Agreement or as a result of Employer, any Acquiring Person or any affiliate of Employer seeking to
terminate this Agreement other than in accordance with the terms hereof or contesting the validity
or enforceability of this Agreement.

     SECTION 12. Definitions. As used in this Agreement, the following terms will have the
following meanings:

     (a) Accountants has the meaning ascribed to it in Section 10(d)(iii).

     (b) Acquired Securities has the meaning ascribed to it in Section 10(i).

     (c) Acquiring Person has the meaning ascribed to it in Section 10(c).

     (d) Agreement has the meaning ascribed to it in the introductory paragraph of this document.

     (e) Agreement Termination has the meaning ascribed to it in Section 10(a)(iv)(1). References
in this Agreement to termination of Employee’s employment with Employer, in any form, shall be
deemed to include (whether or not so expressed) an Agreement Termination.

     (f) Applicable Period means, with respect to any Change In Control, the period of 90 days
immediately preceding the Change In Control.

     (g) Base Salary has the meaning ascribed to it in Section 4(a).

16

 

     (h) Cause has the meaning ascribed to it in Section 6(a)(ii).

     (i) Change In Control has the meaning ascribed to it in Section 10(c).

     (j) Code means the Internal Revenue Code of 1986, as amended.

     (k) Commencement Date has the meaning ascribed to it in Section 3.

     (l) A Concurring Person is an individual who is the Chairman of the Board of Directors of the
Company or a member of the Compensation Committee of the Board of Directors of the Company (or, if
no Compensation Committee exists, or there are fewer than two members of the Compensation
Committee, a nonemployee member of the Board of Directors of the Company) at the time in question.

     (m) Confidential Information has the meaning ascribed to it in Section
8(b).

     (n) Constructively Terminated with respect to an Employee’s employment with Employer will be
deemed to have occurred if Employer

     (i) demotes Employee to a lesser position, either in title or responsibility (whether
or not there is a change in title), than the highest position held by Employee with
Employer at any time during Employee’s employment with Employer;

     (ii) decreases Employee’s compensation below the highest level in effect at any time
during Employee’s employment with Employer or reduces Employee’s benefits and perquisites
below the highest levels in effect at any time during Employee’s employment with Employer
(other than as a result of any amendment or termination of any employee or group or other
executive benefit plan, which amendment or termination is applicable to all executives of
Employer);

     (iii) requires Employee to relocate to a principal place of business more than 25
miles from the principal place of business occupied by Employer on the first day of an
Applicable Period; or

     (iv) requests or proposes to amend this Agreement, if the proposed amendment would
have any of the effects contemplated by clauses (i), (ii) or (iii) above or otherwise
impose any additional burdens or obligations on, or diminish any rights of, Employee.

     (o) Consulting Agreement has the meaning ascribed to it in Section 10(f).

     (p) Continued Performance Obligation has the meaning ascribed to it in Section 10(a)(iv)(3).

     (q) Covenants has the meaning ascribed to it in Section 10(i).

     (r) Designated Industry has the meaning ascribed to it in Section 9(a)(i)(1).

     (s) Determination has the meaning ascribed to such term in Section 1313(a) of the Code.

     (t) Disability with respect to Employee shall be deemed to have occurred whenever Employee is
rendered unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death or that has
lasted or can be expected to last for a continuing period of not less than 12 months. In the case
of any dispute, the determination of Disability will be made by a licensed physician selected by
Employer, which physician’s decision will be final and binding.

17

 

     (u) Employee has the meaning ascribed to it in the introductory paragraph of this Agreement.

     (v) Employer has the meaning ascribed to it in the introductory paragraph of this Agreement.

     (w) Exchange Act has the meaning ascribed to it in Section 10(c).

     (x) Excise Tax has the meaning ascribed to it in Section 10(d)(i).

     (y) Gross Up Payment has the meaning ascribed to it in Section 10(d)(i).

     (z) Inventions has the meaning ascribed to it in Section 7(a).

     (aa) Option Plan means, collectively, the Incentive Stock Option Plan of Rocky Mountain
Chocolate Factory, Inc. and the Rocky Mountain Chocolate Factory, Inc. 1995 Stock Option Plan, as
amended from time to time.

     (bb) Options has the meaning ascribed to it in Section 10(i).

     (cc) Parachute Payments has the meaning ascribed to it in Section 280G(b)(2) of the Code.

     (dd) Payments has the meaning ascribed to it in Section 10(d)(i).

     (ee) Separation Payment Period has the meaning ascribed to it in Section 6(b)(ii).

     (ff) Separation Payments has the meaning ascribed to it in Section 6(b)(ii).

     (gg) Share Acquisition has the meaning ascribed to it in Section 10(c).

     (hh) Subsequent Share Acquisition has the meaning ascribed to it in
Section 10(c).

     (ii) Target Bonus means, with respect to each Employee, the dollar amount that is equal to the
established percentage of such Employee’s Base Salary that would be paid to Employee under any
incentive bonus plan of Employer assuming the measurement criteria contained in such plan with
respect to Employee were achieved for the bonus period in which the Change In Control occurred.

     (jj) Termination Payment has the meaning ascribed to it in Section 10(b)(i)(2).

     (kk) Triggering Termination has the meaning ascribed to it in Section
10(a).

EXECUTED as of the date and year first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Franklin E. Crail, President and	 	 
	 

	 	 	 	Chief Executive Officer	 	 

18

 

Exhibit A

     The duties to be performed by Employee pursuant to this Agreement
include the following:

[To be supplied by Company]

19

 

Exhibit B

CONSULTING AGREEMENT

     This
Consulting Agreement (“Agreement”), dated as of                      ___, ___ (“Effective
Date”), is between Rocky Mountain Chocolate Factory, Inc., a Colorado corporation (the “Company”),
and                     (“Consultant”).

R E C I T A L S:

     A. Consultant was formerly employed by the Company as an executive officer.

     B. Consultant and the Company previously entered into an Employment Agreement, dated as of
April 8, 1998 (“Employment Agreement”), under which Consultant is obligated to enter into this
Agreement at the request of the Board of Directors of the Company under certain circumstances.

     C. The Board of Directors of the Company has requested that Consultant
enter into this Agreement and Consultant is willing to do so.

     NOW, THEREFORE, for and in consideration of the mutual promises contained in this Agreement,
and on the terms and subject to the conditions set forth in this Agreement, the parties agree as
follows:

     SECTION 1. Duties. The Company retains Consultant to provide, and Consultant agrees to render,
such consulting and advisory services as may be requested from time to time by the Company’s Board
of Directors. Consultant agrees to devote his attention, skills and best efforts to the performance
of his duties under this Agreement. Consultant shall not be obligated, however, to devote more than
30 hours per month to the discharge of his responsibilities under this Agreement. Consultant shall
be an independent contractor, not an employee of the Company, during the term of this Agreement.

     SECTION 2. Term. The term for providing consulting services under this Agreement commences on
the Effective Date and continues, unless earlier terminated pursuant to Section 5, until 180 days
after the date of the Change In Control, as defined in the Employment Agreement.

     SECTION 3. Compensation. In consideration for the services provided by Consultant, the Company
shall pay to Consultant an amount equal to one-half of his annual base compensation considered for
purposes of Section 10(b)(i)(l)(I) of the Employment Agreement, which amount shall be paid in six
equal monthly installments, with the first installment due and payable on the Effective Date.

     SECTION 4. Expenses. The parties anticipate that Consultant, in connection with the services
to be performed by him under this Agreement, will incur expenses for travel, lodging and similar
items. The Company shall advance the estimated amount of such expenses to Consultant and shall,
within 15 days after Consultant’s presentation to the Company of reasonable documentation the
actual expenses, reimburse Consultant for all expenses incurred by Consultant in the performance of
his duties under this Agreement that have not been so advanced.

     SECTION 5. Early Termination.

     (a) Events of Early Termination. This Agreement may terminate prior to
the expiration of the term specified in Section 2 as follows:

     (i) Death. Upon the death of Consultant during the term hereof.

20

 

     (ii) For Cause. For “Cause” immediately upon written notice by the Company to
Consultant. For purposes of this Agreement, a termination shall be for Cause if:

     (I) Consultant commits an unlawful or criminal act involving moral
turpitude; or

     (II) Consultant (A) fails to obey lawful and proper written directions
delivered to Consultant by the Company’s Board of Directors; or (B) commits a
material breach of any of the covenants, terms and provisions of this Agreement
and such failure or breach continues uncured for more than 30 days after receipt
by Consultant of written notice from the Company of such failure or breach.

     (b) Payments Upon Early Termination. Consultant shall not be entitled
to any compensation upon termination of this Agreement pursuant to this Section 5 except for his
compensation accrued but unpaid as of the date of such termination and unpaid expense
reimbursements under Section 4 for expenses incurred in accordance with the terms hereof prior to
such termination.

     SECTION 6. General.

     (a) Notices. All notices and other communications hereunder shall be in writing or by written
telecommunication and shall be deemed to have been duly given if delivered personally or if mailed
by certified mail, return receipt requested or by written telecommunication, to the relevant
address set forth below, or to such other address as the recipient of such notice or communication
shall have specified to the other party hereto in accordance with this Section 6(a):

	 	 	 
	If to the Company, to:

	 	with a copy to:
	 
	 	 
	Rocky Mountain Chocolate Factory, Inc.

	 	Thompson & Knight, P.C.
	265 Turner Drive

	 	1700 Pacific Avenue, Suite 3300
	Durango, Colorado 81301

	 	Dallas, Texas 75201
	Attention: President

	 	Attention: Kenn W. Webb
	Facsimile Number: (970) 382-7366

	 	Facsimile Number: (214) 969-1751

If to Consultant, to:

53 Silver Mountain Road

P. O. Box 3671

Durango, Colorado 81302

     (b) Severability. If any provision of this Agreement is held to be illegal, invalid or
unenforceable, such provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof, and
the remaining provisions hereof shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu
of such illegal, invalid or unenforceable provision, there shall be added automatically as part of
this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

     (c) Waivers. No delay or omission by either party hereto in exercising any right, power or
privilege hereunder shall impair such right, power or privilege, nor shall any single or partial
exercise of any such right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.

21

 

     (d) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall
be deemed an original, and all of which together shall constitute one and the same instrument.

     (e) Captions. The captions in this Agreement are for convenience of reference only and shall
not limit or otherwise affect any of the terms or provisions hereof.

     (f) Reference to Agreement. Use of the words “hereof,” “hereto,” “hereunder” and the like in
this Agreement refer to this Agreement as a whole and not to any particular section or subsection
of this Agreement, unless otherwise noted.

     (g) Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties and shall be enforceable by the personal representatives and heirs of Consultant and the
successors of the Company. If Consultant dies while any amounts would still be payable to him
hereunder, such amounts shall be paid to Consultant’s estate. This Agreement is not otherwise
assignable by Consultant or by the Company.

     (h) Entire Agreement. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating to the subject matter
hereof and may not be amended except by a written instrument hereafter signed by each of the
parties hereto.

     (i) Governing Law. This Agreement and the performance hereof shall be construed and governed
in accordance with the laws of the State of Colorado, without regard to its choice of law
principles.

     (j) Gender and Number. The masculine gender shall be deemed to denote
the feminine or neuter genders, the singular to denote the plural, and the

plural to denote the singular, where the context so permits.

EXECUTED as of the date and year first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Bryan J. Merryman	 	 

22

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