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EXHIBIT 99.3
FORM OF INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement"), made and entered
into as of the day of April, 1998, by and between ROCKY MOUNTAIN CHOCOLATE
FACTORY, INC., a Colorado corporation (the "Corporation"), and ________________
("Officer").
W I T N E S S E T H:
WHEREAS, it is essential to the Corporation to retain and attract as
officers the most capable persons available;
WHEREAS, Officer is an officer of the Corporation;
WHEREAS, both the Corporation and Officer recognize the risk of
litigation and other claims being asserted against officers of public companies;
and
WHEREAS, in recognition of Officer's need for substantial protection
against personal liability in order to maintain continued service to the
Corporation in an effective manner and to provide Officer with specific
contractual assurance that the protection will be available to Officer, the
Corporation desires to provide in this Agreement for the indemnification of and
the advancement of expenses to Officer to the full extent permitted by law, as
set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and mutual agreements
contained herein, including Officer's continued service to the Corporation, the
Corporation and Officer hereby agree as follows:
Section 1. Definitions. The following terms, as used herein, shall have
the following respective meanings:
"C.B.C.A." means the Colorado Business Corporation Act, as currently in
effect or as amended from time to time.
"Change In Control" means a change in control of the Corporation after
the date of this Agreement in any one of the following circumstances: (a) 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 the Corporation is
then subject to such reporting requirement; (b) 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 the Corporation
representing 20% or more of the combined voting power of the Corporation's then
outstanding
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voting securities (a "Share Acquisition"); (c) the Corporation 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 (d) 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 the Corporation'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 (a) or (b) shall not be deemed a Change In
Control if such event is approved, prior to its occurrence or within 60 days
thereafter, by at least two-thirds of the members of the Board of Directors in
office immediately prior to such occurrence. In addition to the foregoing, a
Change In Control shall be deemed to have occurred if, after the occurrence of a
Share Acquisition that has been approved by a two-thirds vote of the Board as
contemplated in the proviso to the preceding sentence, the Acquiring Person
shall have become the beneficial owner, directly or indirectly, of securities of
the Corporation representing an additional 5% or more of the combined voting
power of the Corporation'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 the Corporation representing an additional
5% or more of the combined voting power of the Corporation'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 (b) 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.
"Expenses" shall include reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating or being or preparing to be a witness in a
Proceeding.
"Independent Counsel" means a law firm, or member of a law firm, that
is experienced in matters of corporation law and neither presently is, nor in
the five years previous to his or her selection or appointment has been,
retained to represent: (a) the Corporation or Officer in any matter material to
either such party, (b) any other party to the Proceeding giving rise to a claim
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for indemnification hereunder or (c) the beneficial owners, directly or
indirectly, of securities of the Corporation representing 5% or more of the
combined voting power of the Corporation's then outstanding voting securities.
"Matter" is a claim, a material issue, or a substantial request for
relief.
"Proceeding" includes any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal, including
without limitation one initiated by Officer pursuant to Section 10 of this
Agreement to enforce his rights under this Agreement.
Section 2. Indemnification. The Corporation shall indemnify, and
advance Expenses to, Officer to the fullest extent permitted by applicable law
in effect on the date of the effectiveness of this Agreement, and to such
greater extent as applicable law may thereafter permit. The rights of Officer
provided under the preceding sentence shall include, but not be limited to, the
right to be indemnified to the fullest extent permitted by ss. 7-109-102(4) and
(5) of the C.B.C.A. in Proceedings by or in the right of the Corporation and to
the fullest extent permitted by ss. 7-109- 102(1)-(3) of the C.B.C.A. in all
other Proceedings, in each case as permitted by ss. 7-109-107(b) of the C.B.C.A.
To the fullest extent permitted by applicable law, such right to be indemnified
shall survive and continue following the termination of Officer's service as an
officer of the Corporation, with respect to conduct and actions taken, and
decisions made, by Officer in his capacity as an officer of the Corporation. The
provisions set forth below in this Agreement are provided in furtherance, and
not by way of limitation, of the obligations expressed in this Section 2.
Section 3. Expenses Related to Proceedings. If Officer is, by reason of
his status as an officer of the Corporation, a witness in or a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Officer is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to any Matter in
such Proceeding, the Corporation shall indemnify Officer against all Expenses
actually and reasonably incurred by him or on his behalf relating to each
Matter. The termination of any Matter in such a Proceeding by dismissal, with or
without prejudice, shall be deemed to be a successful result as to such Matter.
Section 4. Advancement of Expenses. The Corporation shall pay or
reimburse Officer for the Expenses incurred by Officer in advance of the final
disposition of a Proceeding within ten days after Officer requests such payment
or reimbursement, to the fullest extent permitted by, and subject to compliance
with, xx.xx. 0-000-000 and 0-000-000(b) of the C.B.C.A.
Section 5. Request for Indemnification. To obtain indemnification
Officer shall submit to the Corporation a written request with such information
as is reasonably available to Officer. The Secretary of the Corporation shall
promptly advise the Board of Directors of such request.
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Section 6. Determining Entitlement to Indemnification if No Change In
Control. If there has been no Change In Control at the time the request for
Indemnification is sent, Officer's entitlement to indemnification shall be
determined in accordance with xx.xx. 0-000-000 and 7-109- 107(b) of the C.B.C.A.
If entitlement to indemnification is to be determined by Independent Counsel,
the Corporation shall furnish notice to Officer within ten days after receipt of
the request for indemnification, specifying the identity and address of
Independent Counsel. Officer may, within 14 days after receipt of such written
notice of selection, deliver to the Corporation a written objection to such
selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of Independent
Counsel and the objection shall set forth with particularity the factual basis
of such assertion. If there is an objection to the selection of Independent
Counsel, either the Corporation or Officer may petition any court of competent
jurisdiction for a determination that the objection is without a reasonable
basis and/or for the appointment of Independent Counsel selected by the court.
Section 7. Determining Entitlement to Indemnification if Change In
Control. If there has been a Change In Control at the time the request for
indemnification is sent, Officer's entitlement to indemnification shall be
determined in a written opinion by Independent Counsel selected by Officer.
Officer shall give the Corporation written notice advising of the identity and
address of the Independent Counsel so selected. The Corporation may, within
seven days after receipt of such written notice of selection, deliver to Officer
a written objection to such selection. Officer may, within five days after the
receipt of such objection from the Corporation, submit the name of another
Independent Counsel and the Corporation may, within seven days after receipt of
such written notice of selection, deliver to Officer a written objection to such
selection. Any objection is subject to the limitations in Section 6 of this
Agreement. Officer may petition any court of competent jurisdiction for a
determination that the Corporation's objection to the first and/or second
selection of Independent Counsel is without a reasonable basis and/or for the
appointment as Independent Counsel of a person selected by the court.
Section 8. Procedures of Independent Counsel. If there has been a
Change In Control before the time the request for indemnification is sent by
Officer, Officer shall be presumed (except as otherwise expressly provided in
this Agreement) to be entitled to indemnification upon submission of a request
for indemnification in accordance with Section 5 of this Agreement, and
thereafter the Corporation shall have the burden of proof to overcome the
presumption in reaching a determination contrary to the presumption. The
presumption shall be used by Independent Counsel as a basis for a determination
of entitlement to indemnification unless the Corporation provides information
sufficient to overcome such presumption by clear and convincing evidence or the
investigation, review and analysis of Independent Counsel convinces him or her
by clear and convincing evidence that the presumption should not apply.
Except in the event that the determination of entitlement to
indemnification is to be made by Independent Counsel, if the person or persons
empowered under Section 6 or 7 of this Agreement to determine entitlement to
indemnification shall not have made and furnished to Officer in writing a
determination within 60 days after receipt by the Corporation of the request
therefor, the requisite determination of entitlement to indemnification shall be
deemed to have been made and Officer shall be entitled to such indemnification
unless Officer knowingly
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misrepresented a material fact in connection with the request for
indemnification or such indemnification is prohibited by law. The termination of
any Proceeding or of any Matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not
(except as otherwise expressly provided in this Agreement) of itself adversely
affect the right of Officer to indemnification or create a presumption that (a)
Officer did not act in good faith and in a manner that he reasonably believed,
in the case of conduct in his official capacity as an officer of the
Corporation, to be in the best interests of the Corporation or in all other
cases that his conduct was at least not opposed to the Corporation's best
interests, or (b) with respect to any criminal Proceeding, that Officer had
reasonable cause to believe that his conduct was unlawful.
Section 9. Expenses of Independent Counsel. The Corporation shall pay
any and all reasonable fees and expenses of Independent Counsel incurred acting
pursuant to this Agreement and in any proceeding to which it is a party or
witness in respect of its investigation and written report and shall pay all
reasonable fees and expenses incident to the procedures in which such
Independent Counsel was selected or appointed. No Independent Counsel may serve
if a timely objection has been made to his or her selection until a court has
determined that such objection is without a reasonable basis.
Section 10. Trial De Novo. In the event that (a) a determination is
made pursuant to Section 6 or 7 of this Agreement that Officer is not entitled
to indemnification under this Agreement, (b) advancement of Expenses is not
timely made pursuant to Section 4 of this Agreement, (c) Independent Counsel has
not made and delivered a written opinion determining the request for
indemnification (i) within 90 days after being appointed by a court, (ii) within
90 days after objections to his or her selection have been overruled by a court
or (iii) within 90 days after the time for the Corporation or Officer to object
to his or her selection or (d) payment of indemnification is not made within
five days after a determination of entitlement to indemnification has been made
or deemed to have been made pursuant to Section 6, 7 or 8 of this Agreement,
Officer shall be entitled to an adjudication in any court of competent
jurisdiction of his entitlement to such indemnification or advancement of
Expenses. In the event that a determination shall have been made that Officer is
not entitled to indemnification, any judicial proceeding (including any
arbitration) commenced pursuant to this Section 10 shall be conducted in all
respects as a de novo trial on the merits, and Officer shall not be prejudiced
by reasons of that adverse determination. If a Change In Control shall have
occurred, in any judicial proceeding commenced pursuant to this Section 10, the
Corporation shall have the burden of proving that Officer is not entitled to
indemnification or advancement of Expenses, as the case may be. If a
determination shall have been made or deemed to have been made that Officer is
entitled to indemnification, the Corporation shall be bound by such
determination in any judicial proceeding commenced pursuant to this Section 10,
or otherwise, unless Officer knowingly misrepresented a material fact in
connection with the request for indemnification, or such indemnification is
prohibited by law.
The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Section 10 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Corporation is bound by all provisions of
this Agreement. In the event that Officer, pursuant to this Section 10, seeks a
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judicial adjudication to enforce his rights under, or to recover damages for
breach of, this Agreement, Officer shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all
Expenses actually and reasonably incurred by him in such judicial adjudication,
but only if he prevails therein. If it shall be determined in such judicial
adjudication that Officer is entitled to receive part but not all of the
indemnification or advancement of Expenses sought, the Expenses incurred by
Officer in connection with such judicial adjudication shall nevertheless be paid
by the Corporation.
Section 11. Non-Exclusivity. The rights of indemnification and to
receive advancement of Expenses as provided by this Agreement shall not be
deemed exclusive of any other rights to which Officer may at any time be
entitled under applicable law, the Certificate of Incorporation, Bylaws, a vote
of stockholders, a resolution of the Board of Directors or otherwise. No
amendment or modification of this Agreement or any provision hereof shall be
effective as to Officer for acts, events and circumstances that occurred, in
whole or in part, before such amendment or modification. The provisions of this
Agreement shall continue as to Officer notwithstanding any termination of his
status as an officer of the Corporation and shall inure to the benefit of his
heirs, executors and administrators.
Section 12. Insurance and Subrogation. To the extent the Corporation
maintains an insurance policy or policies providing liability insurance for
directors or officers of the Corporation or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Corporation, Officer shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of coverage available for any such director or officer under such
policy or policies.
In the event of any payment hereunder, the Corporation shall be
subrogated to the extent of such payment to all the rights of recovery of
Officer, who shall execute all papers required and take all action necessary to
secure such rights, including execution of such documents as are necessary to
enable the Corporation to bring suit to enforce such rights.
The Corporation shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if, and to the extent that,
Officer has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
Section 13. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby; and, to the
fullest extent possible, the provisions of this Agreement shall be construed so
as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
Section 14. Circumstances When Officer is Not Entitled to
Indemnification. Officer shall not be entitled to indemnification or advancement
of Expenses under this Agreement with respect to any Proceeding, or any Matter
therein, brought or made by Officer against the Corporation, other than a
Proceeding, or Matter therein, brought by Officer to enforce his rights under
this Agreement and in which Officer is successful, in whole or in part.
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Section 15. Notices. Any communication required or permitted to the
Corporation shall be addressed to the Secretary of the Corporation and any such
communication to Officer shall be given in writing by depositing the same in the
United States mail, with postage thereon prepaid, addressed to the person to
whom such notice is directed at the address of such person on the records of the
Corporation, and such notice shall be deemed given at the time when the same
shall be so deposited in the United States mail.
Section 16. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO,
WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 17. Consent to Jurisdiction. THE CORPORATION AND OFFICER EACH
HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF THE COURTS OF THE STATE OF
COLORADO FOR ALL PURPOSES IN CONNECTION WITH ANY ACTION OR PROCEEDING WHICH
ARISES OUT OF OR RELATES TO THIS AGREEMENT AND AGREE THAT ANY ACTION INSTITUTED
UNDER THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF THE STATE OF
COLORADO.
Section 18. Amendment. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto.
IN WITNESS WHEREOF, the Corporation and Officer have executed this
Agreement as of the day and year first above written.
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
By:
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Xxxxxxxx X. Xxxxx
President and Chief Executive Officer
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(Officer)
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