S-8

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

(Exact name of Registrant as specified in its charter)

Colorado
(State or other jurisdiction of incorporation or organization) 84-0910696
(I.R.S. Employer Identification No.)

265 Turner Drive
Durango, Colorado 81303
(Address of principal executive offices, including zip code)

2000 NONQUALIFIED STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
OF ROCKY MOUNTAIN CHOCOLATE FACTORY
(Full title of the plan)

Franklin E. Crail
President , Chief Executive Officer, and Chairman
Rocky Mountain Chocolate Factory, Inc.
265 Turner Drive
Durango, Colorado 81303
(970) 259-0554
(Name, address and telephone number, including area code, of agent for service)

Copies to:

Donald Salcito, Esq.
Sean C. Stewart, Esq.
Perkins Coie LLP
1899 Wynkoop St., Suite 700
Denver, Colorado 80202-1043
(303) 291-2300

CALCULATION OF REGISTRATION FEE

			Proposed Maximum		Proposed Maximum
Title of Securities	Amount to Be		Offering Price Per		Aggregate Offering		Amount of
to Be Registered	Registered(1)		Share(2)		Price(2)		Registration Fee
Common Stock, par value $.03 per share		80,000	$	11.32	$	905,600	$	74.00

(1)	Includes an indeterminate number of additional shares that may be necessary to adjust the number of shares reserved for issuance pursuant to the plan as a result of any stock split, stock dividend or similar adjustment of the Registrant’s outstanding common stock after the date of the plan.
(2)	Pursuant to Rules 457(c) and 457(h)(1) under the Securities Act of 1933 and solely for the purpose of calculating the registration fee, the proposed maximum offering price per share under the Plan is estimated to be $11.32 based on the average of the high ($11.32) and low ($11.31) sales prices per share of Rocky Mountain Chocolate Factory, Inc.’s common stock on the NasdaqNM on October 22, 2003.

TABLE OF CONTENTS

PART I INFORMATION REQUIRED SECTION 10(a) PROSPECTUS
	Item 1. PLAN INFORMATION*
	Item 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*
PART II INFORMATION REQUIRED IN REGISTRATION STATEMENT
	Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
	Item 4. DESCRIPTION OF SECURITIES
	Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
	Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
	Item 7. EXEMPTION FROM REGISTRATION CLAIMED
	Item 8. EXHIBITS
	Item 9. UNDERTAKINGS
SIGNATURES
POWER OF ATTORNEY
INDEX TO EXHIBITS
EX-5.1 Opinion of Perkins Coie LLP
EX-23.1 Consent of Grant Thornton LLP
EX-99.1 2000 Nonqualified Stock Option Plan

PART I
INFORMATION REQUIRED SECTION 10(a) PROSPECTUS

Item 1. PLAN INFORMATION*

Item 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*

* Information required by Part I to be contained in the Section 10(a) Prospectus is omitted from this Registration Statement in accordance with Rule 428 under the Securities Act of 1933, as amended, and the Note to Part I of Form S-8. The document(s) containing the information specified by Part I will be sent or given to employees as specified by Rule 428(b)(1).

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PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The following documents filed with the Securities and Exchange Commission (the “Commission”) are hereby incorporated by reference in this Registration Statement:

(a)	The Registrant’s Annual Report on Form 10-K for the fiscal year ended February 28, 2003;
(b)	The Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2003;
(c)	The Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2003;
(d)	The Registrant’s Current Report on Form 8-K filed July 2, 2003;
(e)	The Registrant’s Current Report on Form 8-K filed October 2, 2003; and
(f)	The description of the Common Stock contained in the Registration Statement on Form 8-A of the Registrant heretofore filed by the Company with the Commission, including any amendment or report filed for the purpose of updating such description.

     All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof, and prior to the filing of a post-effective amendment which indicates that the securities offered hereby have been sold or which deregister the securities covered hereby then remaining unsold, shall also be deemed to be incorporated by reference into this Registration Statement and to be a part hereof commencing on the respective dates on which such documents are filed.

Item 4. DESCRIPTION OF SECURITIES

              Not applicable.

Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL

              None.

Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article XII of the Company’s Articles of Incorporation, as amended, provides as follows:

     The personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director is limited to the full extent provided by Colorado law.

     Pursuant to Section 7-108-402 of the Colorado Business Corporation Act, the Company is prohibited from eliminating or limiting the personal liability of a director to the Company or to its shareholders for monetary damages for any breach of the director’s duty of loyalty to the Company or to its shareholders, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, distributions made in violation of the Company’s Articles of Incorporation or Colorado law, any transaction from which the director directly or indirectly received an improper personal benefit or any act occurring before this Article of the Company’s Articles of Incorporation became effective (August 9, 1989).

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     Article IX of the Company’s Bylaws provides that the Company shall indemnify directors, officers, employees and agents in accordance with Colorado law. The Bylaws also authorize the Company to purchase and maintain insurance on behalf of such persons regardless of whether the Company would have the power to indemnify for the liability insured against.

     Article 109 of the Colorado Business Corporation Act allows a corporation to indemnify its officers, directors, employees and agents against liability incurred because such person is or was an officer, director, employee or agent if such person, (i) conducted himself or herself in good faith; (ii) reasonably believed, (x) in the case of conduct in an official capacity with the corporation, that his or her conduct was in the best interests of the corporation (or employee benefit plan, if applicable), or (y) in all other cases, that his or her conduct was at least not opposed to the corporation’s best interests; and (iii) in the case of any criminal proceeding, such person had no reasonable cause to believe the conduct was unlawful.

     A corporation is prohibited from indemnifying an officer, director, employee or agent if such person was adjudged liable to the corporation or was adjudged liable on the basis that he or she derived an improper personal benefit.

     A corporation is required to indemnify an officer, director, employee or agent if such person was wholly successful, on the merits or otherwise, in defense of any proceeding to which such person was a party, against reasonable expenses incurred by him or her in connection with the proceeding.

     Article 109 also contains provisions relating to the advancement of expenses, petitioning the court for indemnification, authorization of indemnification by disinterested parties and notice to shareholders of indemnification.

     Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable

Item 7. EXEMPTION FROM REGISTRATION CLAIMED

     Not applicable.

Item 8. EXHIBITS

Exhibit
Number	Description
5.1	Opinion of Perkins Coie LLP regarding legality of the Common Stock being registered
23.1	Consent of Grant Thornton LLP
23.2	Consent of Perkins Coie LLP (included in opinion filed as Exhibit 5.1)
24.1	Power of Attorney (see signature page)
99.1	2000 Nonqualified Stock Option Plan For Nonemployee Directors of Rocky Mountain Chocolate Factory

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Item 9. UNDERTAKINGS

A.     The undersigned Registrant hereby undertakes:

     (1)  To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

     (i) To include any prospectus required by Section 10(a)(3) of the Securities Act;

     (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and

     (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;

provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement.

     (2)  That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (3)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

B.     The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

C.     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Durango, State of Colorado, on the 23rd day of October, 2003.

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
By:   Name: Title:	/s/ Franklin E. Crail Franklin E. Crail President, Chief Executive Officer, and Chairman of the Board

POWER OF ATTORNEY

     Each person whose individual signature appears below hereby authorizes Franklin E. Crail, Bryan J. Merryman, or any of them, as attorneys-in-fact with full power of substitution, to execute in the name and on the behalf of each person, individually and in each capacity stated below, and to file, any and all post-effective amendments to this Registration Statement.

     Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated below on the 23rd day of October, 2003.

Signature	Title
/s/ Franklin E. Crail Franklin E. Crail	President, Chief Executive Officer, and Chairman of the Board
/s/ Bryan J. Merryman Bryan J. Merryman	Chief Operating Officer, Chief Financial Officer, Treasurer (principal financial and accounting officer) and Director
/s/ Gerald A. Kien Gerald A. Kien	Director
/s/ Lee N. Mortenson Lee N. Mortenson	Director
/s/ Fred M. Trainor Fred M. Trainor	Director
/s/ Clyde Wm. Engle Clyde Wm. Engle	Director

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INDEX TO EXHIBITS

Exhibit
Number	Description
5.1	Opinion of Perkins Coie LLP regarding legality of the Common Stock being registered
23.1	Consent of Grant Thornton LLP
23.2	Consent of Perkins Coie LLP (included in opinion filed as Exhibit 5.1)
24.1	Power of Attorney (see signature page)
99.1	2000 Nonqualified Stock Option Plan For Nonemployee Directors of Rocky Mountain Chocolate Factory

EX-5.1 3 d09879exv5w1.htm EX-5.1 OPINION OF PERKINS COIE LLP

EXHIBIT 5.1

OPINION

October 22, 2003

Rocky Mountain Chocolate Factory
265 Turner Drive
Durango, CO 81303

Re: Registration Statement on Form S-8 of Shares of Common Stock, par value $.03 per
share, of Rocky Mountain Chocolate Factory, Inc.

Ladies and Gentlemen:

We have acted as counsel to you in connection with the preparation of a Registration Statement on Form S-8 (the “Registration Statement”) under the Securities Act of 1933, as amended (“the Act”), which you are filing with the Securities and Exchange Commission with respect to up to 80,000 shares of common stock (as adjusted pursuant to Section 9 of the Plan (as defined below) due to the stock split of Rocky Mountain Chocolate Factory common stock effective March 4, 2002), par value $.03 per share, which may be issued pursuant to the 2000 Nonqualified Stock Option Plan for Nonemployee Directors of Rocky Mountain Chocolate Factory (the “Plan”).

We have examined the Registration Statement and such documents and records of Rocky Mountain Chocolate Factory, Inc. as we have deemed necessary for the purpose of this opinion. In giving this opinion, we are assuming the authenticity of all instruments presented to us as originals, the conformity with originals of all instruments presented to us as copies and the genuineness of all signatures.

Based upon and subject to the foregoing, we are of the opinion that any original issuance shares that may be issued pursuant to the Plan have been duly authorized and that, upon the due execution by Rocky Mountain Chocolate Factory, Inc. of any certificates representing the shares, the registration by its registrar of such shares and the sale thereof by Rocky Mountain Chocolate Factory, Inc. in accordance with the terms of the Plan, and the receipt of consideration therefor in accordance with the terms of the Plan, such shares will be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act.

Very truly yours,

/s/ Perkins Coie LLP

Perkins Coie LLP

EX-23.1 4 d09879exv23w1.htm EX-23.1 CONSENT OF GRANT THORNTON LLP

EXHIBIT 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our reports dated April 18, 2003 accompanying the financial statements of Rocky Mountain Chocolate Factory, Inc. appearing in the 2003 Annual Report of the Company to its shareholders and accompanying the schedules included in the Annual Report on Form 10-K for the year ended February 28, 2003, which are incorporated by reference in this Registration Statement. We consent to the incorporation by reference in the Registration Statement of the aforementioned reports.

Grant Thornton LLP

/s/ Grant Thornton LLP

Dallas, Texas
October 20, 2003

EX-99.1 5 d09879exv99w1.htm EX-99.1 2000 NONQUALIFIED STOCK OPTION PLAN

EXHIBIT 99.1

2000 NONQUALIFIED STOCK OPTION PLAN

FOR NONEMPLOYEE DIRECTORS

OF

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.

     Section 1. Purpose. It is the purpose of the Plan to promote the interests of Rocky Mountain Chocolate Factory, Inc., a Colorado corporation (the “Company”), and its stockholders by attracting and retaining qualified Nonemployee Directors by giving them the opportunity to acquire a proprietary interest in the Company and an increased personal interest in its continued success and progress. The Options granted under the Plan shall not be qualified as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

     Section 2. Definitions. As used herein the following terms have the following meanings:

     (a) “Affiliate” means any parent or subsidiary corporation of the Company within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934, as amended; provided, however, that an entity shall not be deemed a parent of the Company unless such entity owns at least 50% of the outstanding voting securities of the Company.

     (b) “Board” means the Board of Directors of the Company.

     (c) “Committee” means the Committee described in Section 4 hereof.

     (d) “Common Stock” means the Common Stock, par value $0.03 per share, of the Company.

     (e) A “Corporate Change” shall be deemed to have occurred for purposes of the Plan, upon (a) the dissolution or liquidation of the Company; (b) a reorganization, merger or consolidation of the Company with one or more corporations (other than a merger or consolidation effecting a reincorporation of the Company in another state or any other merger or consolidation in which the shareholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Company and their proportionate interests therein immediately prior to the merger or consolidation) (collectively, a “Corporate Change Merger”); (c) the sale of all or substantially all of the assets of the Company; or (d) the occurrence of a Change in Control. A “Change in Control” shall be deemed to have occurred for purposes of the Plan if (a) individuals who were directors of the Company immediately prior to a Control Transaction shall cease, within two years of such Control Transaction, to constitute a majority of the Board (or of the Board of Directors of any successor to the Company or to a company which has acquired all or substantially all its assets) other than by reason of an increase in the size of the membership of the applicable Board that is approved by at least a majority of the individuals who were directors of the Company immediately prior to such Control Transaction or (b) any entity, person or Group acquires shares of the Company in a

transaction or series of transactions that result in such entity, person or Group directly or indirectly owning beneficially 50% or more of the outstanding shares of Common Stock. As used herein, “Control Transaction” means (a) any tender offer for or acquisition of capital stock of the Company pursuant to which any person, entity or Group directly or indirectly acquires beneficial ownership of 20% or more of the outstanding shares of Common Stock, (b) any Corporate Change Merger of the Company, (c) any contested election of directors of the Company or (d) any combination of the foregoing, any one of which results in a change in voting power sufficient to elect a majority of the Board. As used herein, “Group” means persons who act “in concert” as described in Sections 13(d)(3) and/or 14(d)(2) of the Exchange Act.

     (f) “Fair Market Value” means, unless the Committee determines otherwise in good faith, the closing sale price of the Common Stock on the last market trading day preceding the date in question (or, if there was no reported sale on such date, on the last preceding day on which any sale occurred) as reported on the Nasdaq National Market or any national stock exchange or other stock market on which the Common Stock is then traded, or if the Common Stock is not listed or admitted to trading on the Nasdaq National Market or any national stock exchange but is quoted as an over-the-counter security on Nasdaq or any similar system then in use, “Fair Market Value” shall mean the average of the closing high bid and low asked quotations on such system for the Common Stock on the last market trading day preceding the date in question.

     (g) “Nonemployee Director” means an individual who (i) is now, or hereafter becomes, a member of the Board of Directors of the Company, and (ii) is neither an employee nor an officer of the Company or of an Affiliate of the Company. For purposes of this Plan, “employee” shall mean an individual whose wages are subject to the withholding of federal income tax under Section 3401 of the Code, and “officer” shall mean an individual elected or appointed by the Board of Directors or chosen in such other manner as may be prescribed in the Bylaws of the Company or an Affiliate to serve as such except that for purposes of this Plan, the Chairman of the Board shall not be deemed to be an officer of the Company solely by virtue of his or her election to and service in that position.

     (h) “Option” means any option to purchase shares of Common Stock granted pursuant to the provisions of the Plan.

     (i) “Optionee” means a Nonemployee Director who has been granted an Option under the Plan.

     (j) “Plan” means this 2000 Nonqualified Stock Option Plan for Nonemployee Directors of Rocky Mountain Chocolate Factory, Inc.

     Section 3. Number of Shares. Options may be granted by the Company from time to time under the Plan to purchase an aggregate of 60,000 shares of Common Stock. If an Option expires or terminates for any reason without having been exercised in full, the unpurchased shares subject to such expired or terminated Option shall again be available for purposes of the Plan. The shares may be authorized but unissued or reacquired shares of Common Stock.

     Section 4. Administration of the Plan. The Plan shall be administered by the Compensation Committee appointed by the Board (the “Committee”). Each member of the Committee shall be appointed by and shall serve at the pleasure of the Board. The Board shall have the sole continuing authority to appoint members of the Committee both in substitution for members previously

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appointed and to fill vacancies however caused. The following provisions shall apply to the administration of the Plan:

     (a) A majority of the members of the Committee shall constitute a quorum and any action taken by a majority of the members of the Committee present at any duly called meeting at which a quorum is present (as well as any action unanimously approved in writing) shall constitute action by the Committee.

     (b) The Committee may appoint a Secretary (who need not be a member of the Committee) who shall keep minutes of its meetings. The Committee may make such rules and regulations for the conduct of its business as it may determine.

     (c) The Committee shall have full authority subject to the express provisions of the Plan to interpret the Plan and any Option granted hereunder, to provide, modify and rescind rules and regulations relating to the Plan, to determine the terms and provisions of each Option and the form of each option agreement evidencing an Option granted under the Plan and to make all other determinations and perform such actions as the Committee deems necessary or advisable to administer the Plan. In addition, the Committee shall have full authority, subject to the express provisions of the Plan, to determine the Nonemployee Directors to whom Options shall be granted, the time or date of grant of each such Option, the number of shares subject thereto, and the price at which such shares may be purchased, and the nature and extent of restrictions, if any, on such shares. In making such determinations, the Committee may take into account such facts as the Committee in its discretion shall deem appropriate to carry out the purposes of the Plan.

     (d) No member of the Committee or the Board shall be liable for any action taken or determination made in good faith with respect to the Plan or any Option granted hereunder.

     Section 5. Grant of Options. Options to purchase 10,000 shares of Common Stock shall be granted initially, as of the effective date of the Plan, to each nonemployee director who was serving the Company as a director on January 25, 2000, the date on which the Board of Directors approved and recommended the adoption of the Plan and the grant of Options to the nonemployee directors then in office (the “Establishment Date”), and who is continuing to serve the Company as a director on the Effective Date. Thereafter, during the term of the Plan, an Option to purchase 10,000 shares of Common Stock shall be granted automatically to each new nonemployee director as of the date on which such director is first elected or appointed to serve as a director of the Company. Each year following the adoption of the Plan, on a date established by the Committee, during the term of the Plan, Options to purchase 1,000 shares of Common Stock shall be granted automatically to each nonemployee director, if any, who is serving the Company as a director on such date.

     Section 6. Option Price and Payment. The purchase price per share of Common Stock under each Option shall be determined by the Committee in its discretion, but in no event shall such price be less than 100% of the Fair Market Value per share of Common Stock on the date the Option is granted. Upon exercise of an Option, the purchase price shall be paid in full in cash or by such of the following methods as the Committee may specify at the time of grant and as shall be included in the option agreement: (i) by personal check of the Optionee; (ii) by the delivery of shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the aggregate exercise price of the shares as to which the Option is being exercised; (iii) by means of a broker-assisted exercise whereby the Optionee delivers to the Company, together with a properly executed exercise notice, such other documentation as the Committee and the broker assisting in the transaction shall require to effect an exercise of the Option, a sale of the shares of Common Stock acquired upon exercise and the delivery to the Company of the proceeds of such sale in full payment of the exercise price; or (iv) any

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combination of the foregoing methods of payment. The proceeds of a sale of Common Stock upon exercise of an Option shall constitute general funds of the Company. Upon exercise of an Option, the Optionee will be required to pay to the Company the amount of federal, state or local taxes, if any, required by law to be withheld in connection with such exercise.

     Section 7. Option Period and Terms of Exercise of Options. Each Option granted under the Plan shall vest and become exercisable on such date or dates (each, a “Vesting Date”) as the Committee shall determine. Except as otherwise provided herein, each Option granted under the Plan shall be exercisable during such period commencing on the Vesting Date(s) of such Option as the Committee shall determine; provided, however, that the otherwise unexpired portion of any Option shall expire and become null and void upon the expiration of five years from the date such Option was granted. Anything herein to the contrary notwithstanding, the otherwise unexpired portion of any Option granted hereunder shall expire and become null and void immediately upon an Optionee’s termination of service as a director of the Company by reason of such Optionee’s fraud, dishonesty or performance of other acts detrimental to the Company or an Affiliate (as determined by the Committee in its sole discretion). The unvested portion of any Option shall expire and become null and void upon the termination of the Optionee’s service as a director of the Company for any reason (including without limitation a failure by the Board of Directors to nominate, or by the stockholders to re-elect, the Optionee as a director). Under the provisions of any option agreement evidencing an Option, the Committee may limit the number of shares purchasable thereunder in any period or periods of time during which the Option is exercisable and may impose such other terms and conditions upon the exercise of an Option as are not inconsistent with the terms of the Plan; provided, however, that the Committee, in its discretion, may accelerate the exercise date of any such Option consistent with the terms of the Plan.

     Section 8. Limited Transferability of Options. An Option granted under the Plan shall be exercisable only by the Optionee or by a person or entity to which the Optionee is permitted to transfer the Option in accordance with this Section 8. An Option granted under the Plan shall be transferable by the Optionee only as follows:

     (a) By will or the laws of descent and distribution upon the death of the Optionee;

     (b) By gift or a domestic relations order to a “family member” of the Optionee, as such term is defined in the instructions to Form S-8 under the Securities Act of 1933, as amended, including without limitation trusts in which family members of the Optionee have more than 50% of the beneficial interest, foundations in which such family members control the management of assets, and any other entity in which such family members or the Optionee own more than 50% of the voting interests; or

     (c) To an entity in which more than 50% of the voting interests are owned by the Optionee or the Optionee’s family members in exchange for an interest or interests in that entity.

     As a condition to any such transfer, each permitted transferee shall execute an agreement satisfactory to the Company agreeing to be bound by the terms and provisions of this Plan and the Optionee’s original option agreement relating to the Option.

     Section 9. Adjustments Upon Changes in Common Stock. In the event the Company shall effect a split of the Common Stock or dividend payable in Common Stock, or in the event the outstanding Common Stock shall be combined into a smaller number of shares, the maximum number of shares as to which Options maybe granted under the Plan shall be decreased or increased proportionately. In the event that before delivery by the Company of all of the shares of Common

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Stock for which any Option has been granted under the Plan, the Company shall have effected such a split, dividend or combination, the shares still subject to such Option shall be increased or decreased proportionately and the purchase price per share shall be decreased or increased proportionately so that the aggregate purchase price for all of the shares then subject to such Option shall remain the same as immediately prior to such split, dividend or combination.

     In the event of a reclassification of Common Stock not covered by the foregoing, or in the event of a liquidation or reorganization (including a merger, consolidation, spin-off or sale of assets) of the Company, including a transaction which the Company is not the survivor, the Board shall make such adjustments, if any, as it may deem appropriate in the number, purchase price and kind of shares covered by the unexercised portions of Options theretofore granted under the plan. The provisions of this Section shall only be applicable if, an only to the extent that, the application thereof does not conflict with any valid governmental statute, regulation or rule.

     Section 10. Corporate Change. Notwithstanding anything contained in the Plan to the contrary, in the event of a Corporate Change, unless otherwise provided in the related Option Agreement, all Options then outstanding shall become exercisable in full and all restrictions imposed on any Common Stock that may be delivered pursuant to the exercise of such Options shall be deemed satisfied.

     Section 11. Amendment and Termination of the Plan. Subject to the right of the Board to terminate the Plan prior thereto, the Plan shall terminate at the expiration of ten years from January 25, 2000, the date of adoption of the Plan by the Board. No Options may be granted after termination of the Plan. The Board may alter or amend the Plan in any respect, except that no termination or amendment of the Plan shall adversely affect the rights of an Optionee under a previously granted Option, except with the consent of such Optionee.

     Section 12. Modification of Options. Subject to the terms and conditions of and within the limitations of the Plan, the Committee may modify, extend or renew outstanding Options granted under the Plan, or accept the surrender of Options outstanding hereunder (to the extent not theretofore exercised) and authorize the granting of new Options in substitution therefor. Notwithstanding the foregoing, no modification of an Option shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option theretofore granted to such Optionee.

     Section 13. Requirements of Law. The granting of Options and the issuance of Common Stock upon the exercise of an Option shall be subject to all applicable laws, rules and regulations and to such approval by governmental agencies as may be required.

     Section 14. Investment Letter. If the Company so elects, the Company’s obligation to deliver Common Stock with respect to an Option shall be conditioned upon its receipt from the Optionee to whom such Common Stock is to be delivered of an executed investment letter containing such representations and agreements as the Committee may determine to be necessary or advisable in order to enable the Company to issue and deliver such Common Stock to such Optionee in compliance with the Securities Act of 1933 and other applicable federal, state or local securities laws or regulations.

     Section 15. Effective Date of the Plan. The Plan shall be effective as of the date of its adoption by the Board; provided, however, that the Plan and each Option granted or to be granted hereunder is conditional on and shall be of no force and effect, and no Option shall be exercised, unless and until shareholder approval of the Plan by the affirmative vote of the holders of a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting of shareholders of the Company duly held not later than the date of the next annual meeting of shareholders.

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     IN WITNESS WHEREOF, this Plan has been executed on, and is effective as of, this 25th day of January, 2000.

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
By:	/s/ Franklin E Crail Franklin E. Crail, President

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