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EXHIBIT 99.2
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
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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 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
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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.
(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
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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.
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
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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 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,
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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 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
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(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.
(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.
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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
(III) the Board of Directors of Employer has
taken any action to approve or facilitate the Change
In Control.
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(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
notice 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
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Payment received by 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
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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.
(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
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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 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:
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(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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 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 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 of
the receipt of the payment described in Section
10(l); and
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14
(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 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.
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15
(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 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
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(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. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President Attention: ▇▇▇▇ ▇. ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
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If to Employee, to:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(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.
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(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.
(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).
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(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).
(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);
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(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.
(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).
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(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
------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and
Chief Executive Officer
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Exhibit A
The duties to be performed by Employee pursuant to this Agreement
include the following:
[To be supplied by Company]
23
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
24
of 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.
(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. ▇▇▇▇▇▇▇▇ & Knight, P.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President Attention: ▇▇▇▇ ▇. ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
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If to Consultant, to:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(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.
(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.
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(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
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